<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 17, 1996
REGISTRATION NO. 333
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ELCOM TECHNOLOGIES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PENNSYLVANIA 3651 23-2736299
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
78 GREAT VALLEY PARKWAY
MALVERN, PA 19355
(610) 408-0130
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
LOUIS J. PETRIELLO, ESQUIRE
CORPORATE COUNSEL
ELCOM TECHNOLOGIES CORPORATION
78 GREAT VALLEY PARKWAY
MALVERN, PENNSYLVANIA 19355
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
RAMON R. OBOD, ESQUIRE ROBERT MEAD JONES JR., ESQUIRE
PAUL T. PORRINI, ESQUIRE DRINKER BIDDLE & REATH
FOX, ROTHSCHILD, O'BRIEN & FRANKEL PHILADELPHIA NATIONAL BANK BLDG.
2000 MARKET STREET, 10TH FLOOR 1345 CHESTNUT STREET
PHILADELPHIA, PA 19103 PHILADELPHIA, PA 19107-3496
(215) 299-2000 (215) 988-2700
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par
value................. 2,415,000 $10.00 $24,150,000 $7,399
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Includes 315,000 shares that the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457(a) of the Securities Act of
1933.
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 SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1996
PROSPECTUS
2,100,000 SHARES
[LOGO OF ELCOM TECHNOLOGIES APPEARS HERE]
COMMON STOCK
-----------
Of the 2,100,000 shares of Common Stock offered hereby, 2,000,000 are being
sold by Elcom Technologies Corporation and 100,000 are being sold by certain
Selling Shareholders. The Company will not receive any of the proceeds from the
sale of shares by such shareholders. See "Underwriting" and "Principal and
Selling Shareholders."
Prior to this offering there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price will be between $8.00 and $10.00 per share. See "Underwriting" for a
discussion of the factors considered in determining the initial public offering
price. The Company has applied to have its Common Stock approved for listing on
the NASDAQ National Market, under the symbol "ELCM."
-----------
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 6.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS AND PROCEEDS TO TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share................... $ $ $
- --------------------------------------------------------------------------------
Total(3).................... $ $ $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(1) Excludes a non-accountable expense allowance payable to the Representative
of the Underwriters equal to one percent of the total Price to Public. The
Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting expenses of the offering payable by the Company estimated
at $ , which includes the non-accountable expense allowance payable to
the Representatives of the Underwriters and assumes that the Underwriters'
over-allotment option is not exercised.
(3) The Company and certain Selling Shareholders have granted the Underwriters
an option exercisable within 30 days to purchase up to an additional
315,000 shares of Common Stock, solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, Proceeds to Company, and Proceeds to Selling
Shareholders will be $ , $ , $ , and $ , respectively. See
"Underwriting" and "Principal and Selling Shareholders."
-----------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them and subject to
their right to reject any order, in whole or in part. It is expected that
delivery of the certificates representing the shares will be made at the
offices of Pennsylvania Merchant Group Ltd in West Conshohocken, Pennsylvania,
on or about , 1996.
-----------
PENNSYLVANIA MERCHANT GROUP LTD
, 1996
<PAGE>
[LOGO OF ELCOM TECHNOLOGIES APPEARS HERE]
[GATE FOLD]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The Company presently has trademark applications pending before the United
States Patent and Trademark Office for, among other marks, CUSTOMER PREMISES
AREA NETWORK, CPAN, EZTV, EZPHONE, EZAUDIO, EZREMOTE, EZLAN, EZCOMM, EZGUARD,
EZVIEW, PLC READY, EZONLINE, JUST PLUG IT IN AND PLUG INTO THE FUTURE.
<PAGE>
Description of Gatefold:
The Gatefold contains a picture of the Company's logo and a diagram of a home
containing a television, computer terminal, telephone and audio speaker, each
connected to a Company product. Also pictured are communications to the home by
satellite, cable, telephone and electrical wiring into a home premises. The
following of the Company's products are also pictured:
ezTV with Remote Control Extender
ezAUDIO
ezCOMM PS20
ezPHONE & ezONLINE
ezREMOTE
ezGUARD MXT6
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Financial Statements and related
Notes thereto, appearing elsewhere in this Prospectus. Unless otherwise
indicated, all information in this Prospectus (i) gives retroactive effect to a
one-for-two reverse stock split of the Company which was effected on October
11, 1996 and (ii) assumes that the Underwriters' over-allotment option is not
exercised. The discussion in this Prospectus contains forward-looking
statements that include risks and uncertainties. The Company's actual results
could differ materially from those discussed in this Prospectus. See
"Cautionary Statement Regarding Forward-Looking Information" in this Prospectus
Summary and "Risk Factors."
THE COMPANY
Elcom Technologies Corporation (the "Company") is the developer of the
CUSTOMER PREMISES AREA NETWORK or CPAN System, which enables the distribution
of video, voice, audio and data signals through a premises' (typically a home
or small business) existing electrical wiring eliminating the need for
additional television cables, phone lines and stereo wires throughout the
premises. The CPAN System consists of a transmitter and a receiver which plug
into standard electrical outlets. The transmitter is linked by standard input
connectors to the signal source such as cable/satellite television, telephone
line, stereo or computer. One or more receivers, located in other rooms, are
linked by standard output connectors to televisions, telephones, fax/modems,
speakers, computers or printers. The Company is developing a family of products
incorporating the CPAN System, and recently began marketing five such products:
ezTV, ezPHONE, ezONLINE, ezAUDIO and ezREMOTE.
The ezTV product enables the distribution of a video signal, such as a cable
television channel, to multiple locations within a home without installing
additional cabling and offers remote control capability in either the primary
or secondary viewing room. The ezPHONE and ezONLINE products provide access to
telephone service in most rooms of the home for phone, fax, caller ID and
provide computer modem access up to 33.6 Kbps. The Company's ezONLINE product
is specifically targeted to the personal computer market. The ezAUDIO product
enables the distribution of audio signals in stereo to multiple locations
within a home for home theater systems and second room audio. The ezREMOTE
product enables consumers to operate remote control enabled equipment and
appliances in most rooms where an electrical outlet is present.
The CPAN System provides a common platform for additional products currently
under development, including the ezVIEW and ezCOMM products. The ezVIEW product
is intended to integrate electrical wiring systems with video cameras to enable
premises surveillance in most rooms. The ezCOMM product is intended to enable
the connection of multiple computers to a single printer. In addition to its
CPAN System products, the Company is developing its ezGUARD surge protection
device, under license from a third party licensor. The ezGUARD product is
designed to substantially reduce the risk of damage to computers, televisions
and other home appliances from electrical outlet power surges as compared with
competitive consumer products. The Company is currently devoting significant
resources toward the foregoing product development and anticipates marketing
these products beginning in 1997. There can be no assurance that the Company
will successfully complete the development of these products or that the
Company's existing or planned products will satisfy the needs of the market
place.
The Company markets its products directly and through sales representatives
to national retail organizations, such as consumer electronics and computer
retailers, electronics distributors and catalog retailers. Additionally, the
Company has an agreement with QVC, Inc. ("QVC") which, subject to certain
conditions, grants QVC exclusive direct response television rights to sell
Elcom branded products and to launch all other Company developed products on
the QVC network.
The Company's growth strategy is to: (i) improve, expand and diversify its
product lines utilizing its CPAN System and its ezGUARD product; (ii) expand
its sales and marketing efforts both domestically and
3
<PAGE>
internationally, including targeting individual retail segments such as home
computing and entertainment; (iii) establish sales to Original Equipment
Manufacturers ("OEMs"), enabling the Company to privately label and embed its
products; and (iv) develop digital technology to incorporate into its product
lines.
The Company was incorporated in Pennsylvania in September 1993. The Company's
executive offices and product development facilities are located at 78 Great
Valley Parkway, Malvern, Pennsylvania 19355, and its telephone number is (610)
408-0130. Information relating to the Company and its products is located on
its home page on the World Wide Web at www.elcomtech.com.
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Common Stock offered by the Company........ 2,000,000 shares
Common Stock offered by certain Selling 100,000 shares
Shareholders..............................
Common Stock to be outstanding after the 8,878,340 shares(1)
offering..................................
Use of Proceeds............................ To increase the Company's
outsourced manufacturing capabili-
ties, for research and develop-
ment, for sales and marketing and
for working capital and other gen-
eral corporate purposes, including
possible acquisitions.
Proposed NASDAQ National Market Symbol..... ELCM
</TABLE>
- --------
(1) Excludes 776,250 shares of Common Stock available for issuance upon the
exercise of outstanding options to purchase common stock.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Prospectus includes forward-looking information. All statements other
than statements of historical fact, including, without limitation, those with
respect to the Company's objectives, plans and strategy set forth under
"Prospectus Summary--The Company," "Business--Business Strategy," and
"Business--Short-Term Plan of Operations," those with respect to anticipated
product development and the need for additional financing set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and those preceded by or that include the words "believes,"
"expects," "anticipates" or similar expressions, are forward-looking
statements. Although the Company believes that such forward-looking statements
are reasonable, it can give no assurance that the Company's expectations are
correct. All forward-looking statements contained in this Prospectus are
expressly qualified in their entirety by this Cautionary Statement.
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- ------------------
1993(1) 1994 1995 1995 1996
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales................. $ 0 $ 0 $ 0 $ 0 $ 523
Operating loss............ (55) (1,238) (6,781) (5,716) (8,030)
Net loss.................. (54) (1,227) (6,733) (5,693) (7,952)
Net loss per common
share.................... $ (.01) $ (.20) $ (1.12) $ (.93) $ (1.25)
Weighted average number of
common shares
outstanding.............. 5,210 6,195 6,009 6,144 6,372
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------
ACTUAL AS ADJUSTED(2)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital..................................... $ 4,103 $20,103
Total assets........................................ 10,571 26,571
Shareholders' equity................................ 5,500 21,500
</TABLE>
- --------
(1) For period from inception through December 31, 1993.
(2) Adjusted to give effect to the issuance and sale of 2,000,000 shares of
Common Stock offered by the Company hereby at an assumed initial offering
price of $9.00 per share and the application of the net proceeds therefrom.
See "Use of Proceeds."
5
<PAGE>
RISK FACTORS
The shares of Common Stock offered hereby are speculative in nature and
involve a high degree of risk. Prospective investors should carefully
consider, together with the other information contained in this Prospectus,
the risk factors discussed below which are inherent in and affect the business
of the Company. This Prospectus contains forward-looking statements which
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed below.
EARLY STAGE OF THE COMPANY; LACK OF PROFITABLE OPERATIONS
The Company has a limited operating history. Since its formation the Company
has been engaged primarily in organizational and start-up activities,
including research and development. The Company sustained net losses for the
period ended December 31, 1993, in the amount of $54,498; for the years ended
December 31, 1994 and 1995, in the amounts of $1,227,478 and $6,733,312,
respectively; and for the nine months ended September 30, 1996, in the amount
of $7,951,551. As of September 30, 1996, the Company had an accumulated
deficit of $15,966,839 including a non-cash expense of $5,698,706 related to
Company stock options granted to employees and consultants to purchase Common
Stock. There can be no assurance that the Company will generate net income in
the future. Further, the Company is subject to all the risks inherent in a
relatively new technology business including, but not limited to, substantial
dependence on the protection of its intellectual property, risks such as
product obsolescence, new markets and dependence upon third party suppliers
and contractors.
NO ASSURANCE AS TO PROTECTION OF INTELLECTUAL PROPERTY; DEPENDENCE ON
PROPRIETARY TECHNOLOGY
The Company's success and competitive position are expected to depend on its
ability to obtain patent protection in various jurisdictions relating to the
technologies, processes and products it is developing and may develop in the
future. The Company has had one design patent application allowed in the
United States covering the ornamental aspect of at least one of the Company's
CPAN products and has eight additional patent applications filed in the United
States. The Company plans to continue developing its technology and applying
for additional domestic and foreign patents. There can be no assurance that
any United States or foreign patent applications that may be filed by the
Company or which are currently pending will result in issued patents; that any
patents issued to the Company will be valid or enforceable; or that patents
issued to the Company will afford protection against competitors with similar
or competing technology. There can be no assurance that the Company will apply
for additional patents in the United States or foreign countries. Moreover,
there can be no assurance that the Company's technology does not infringe any
claims of patents owned by others. Patent infringement litigation could result
in the Company incurring substantial costs in defending itself and there can
be no assurance that such an action would be resolved in the Company's favor.
If such a dispute were to be resolved against the Company, in addition to
potential damages, the testing, use, manufacture or sale of one or more of the
Company's technologies, present or proposed products, if developed, could be
enjoined. See "Legal Proceedings--Current Litigation" and "Business--
Intellectual Property."
TRADEMARKS
The Company has been using and intends to use trademarks for its products
beginning with "ez". The Company intends to establish a family of trademarks
using "ez". There can be no assurance that the Company will have the exclusive
right to use "ez" as a trademark or element of its trademarks on any or all of
its products in the United States or foreign countries or that the Company
will be able to stop others from using trademarks which the Company believes
infringe its trademarks. There can be no assurance that the Company will
obtain any trademark registrations in the United States or any foreign
countries and if any trademark registrations are issued that they will not be
found invalid or unenforceable. There can be no assurance that the Company
will market or sell products under trademarks it presently intends to use.
PRODUCT LITIGATION
Phonex Corporation ("Phonex") has filed a complaint in Federal District
Court alleging among other things that the Company's ezPHONE product infringes
the claims of two of its patents. The Company believes that it
6
<PAGE>
has not infringed upon Phonex's patents and has obtained an opinion from its
patent counsel to that effect. There can be no assurance that the outcome of
the litigation will be consistent with the opinion of its patent counsel. The
Company plans to vigorously defend such action and estimates that the cost of
defense through the trial stage will be approximately $500,000; however, there
can be no assurance that such amount will not be exceeded. Additionally, in
the event that the Company should lose the litigation, the damages assessed
against the Company could be substantial and the Company could be enjoined
from marketing or selling one or more of its products or could be required to
seek a license from Phonex. There can be no assurance that such a license
could be obtained on acceptable terms. See "Legal Proceedings--Current
Litigation" and "Business--Intellectual Property."
PRODUCT LIMITATIONS
The Company has identified certain limitations associated with its products.
Specifically, the performance of the ezTV, ezPHONE, ezONLINE, ezAUDIO and
ezREMOTE products may be significantly impaired in electrical outlets where
halogen lighting, fluorescent lighting or dimmer switches are utilized. The
Company's products may be significantly impaired if plugged into surge
suppression devices or Ground Fault Interrupter ("GFI") outlets such as those
commonly used in kitchens and bathrooms. Additionally, severe weather
conditions, such as lightning, may temporarily impair the performance of such
products. The Company's products are designed to operate in premises with a
single breaker box and standard dual phase wiring. These limitations,
individually or in the aggregate, will limit the potential size of the
Company's market for its products. There can be no assurance that the Company
will be able to resolve the above noted product limitations in a cost
effective manner or at all. See "Business--Regulation" and "Business--Product
Limitations."
NO ASSURANCE OF SUCCESSFUL PRODUCT DEVELOPMENT
The future of the Company depends in large part upon the successful
development and marketing of new products incorporating its CPAN System. These
potential products will require significant additional development and/or
testing prior to commercialization. There can be no assurance that any such
products will be successfully developed, be developed within the Company's
currently estimated time periods, or be capable of being produced in
commercial quantities at acceptable costs. See "Business--Product Development
Status," "Marketing and Distribution," and "Manufacturing."
DEPENDENCE UPON THIRD PARTY MANUFACTURERS AND SUPPLIERS
The Company has contracted with Flextronics (Malaysia) SDN, BHD
("Flextronics") for the assembly of all of its products, the components of
which are supplied by various third party suppliers. The agreement with
Flextronics (the "Flextronics Agreement") expires on March 1, 1997, and is
automatically renewable for successive one year terms unless terminated by
either party upon six months prior written notice. The Company believes that,
in order to avoid a significant disruption in production, it would require
approximately four months lead time to find a suitable replacement for
Flextronics should that become necessary. Certain critical components of the
Company's products are currently available only from a single source. If such
components were no longer available to the Company, the Company could be
prevented from manufacturing some or all of its products.
LIMITED MARKETING AND SALES CAPABILITY
The Company has limited sales and marketing resources and experience and
intends to rely on third parties to supplement its capabilities. There can be
no assurance that the Company will be able to establish and maintain third
party relationships necessary to successfully market its products. To the
extent that the Company makes arrangements with third parties to market its
products, the success of such products will depend on the efforts of such
third parties. Moreover, the Company is currently unable to determine whether
the products it is developing and testing will achieve market acceptance among
consumers. Achieving market acceptance may require substantial marketing and
advertising efforts and the expenditure of significant funds.
7
<PAGE>
NEED FOR ADDITIONAL FUNDS
The amount and timing of the Company's need for additional funds will depend
on among other things, the progress of the manufacturing and development of
its products. The Company's cash requirements may vary materially from those
now planned because of results of product development, results of prototype
testing, general market conditions and marketing requirements, changes in the
focus and direction of the Company's product development programs, competitive
and technological advances and other factors. The proceeds of this offering
may not be sufficient to fund the Company's operations, or to sustain the
manufacturing of completed products or its commercialization of new products.
See "Use of Proceeds." Therefore, after utilizing the proceeds of this
offering, the Company may require substantial additional funding for its
product development programs and for operating expenses. Further, provided the
Company is successful in the marketing and sales of its products and
development of new products, additional funds may be required for building and
sustaining production, sales and marketing capabilities. Adequate funds for
these purposes may not be available when needed or on terms acceptable to the
Company. Insufficient funds may require the Company to delay, scale back or
eliminate certain of its product development programs or to license third
parties to commercialize products or technologies that the Company would
otherwise seek to develop itself. To the extent the Company raises additional
capital by issuing securities, further dilution to the investors in this
offering may result. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and
"Dilution."
TECHNOLOGICAL CHANGE; INTENSE COMPETITION
The Company expects technological developments to continue at a rapid pace
in the consumer electronics industry. There can be no assurance that
technological developments will not cause the Company's technology to be
rendered obsolete or non-competitive or reduce or eliminate the demand for the
Company's products. The Company's future success, if any, will be dependent
upon its ability to be competitive in the development, manufacturing and
marketing of consumer electronics products in a cost efficient and timely
manner, of which there can be no assurance. The Company is aware of several
firms which have or are developing technology competitive with that of the
Company. Many of these firms have greater research and development capability
and experience, and more marketing, financial and managerial resources than
the Company and may have more extensive patent protection and/or pending
patent protection. See "Business--Competition."
DEPENDENCE ON QUALIFIED PERSONNEL
The Company is highly dependent upon its ability to attract and retain
qualified engineering, technical, management and marketing personnel. The
Company has employment agreements with several of its key management and
engineering personnel that extend until at least December 31, 1997. The
Company is currently recruiting additional engineering, technical, management
and marketing personnel. There is intense competition for qualified personnel
in the areas of the Company's activities, and there can be no assurance that
the Company will be able to continue to attract and retain qualified personnel
necessary for the development of its business. See "Management--Employment
Agreements."
RISK OF PRODUCT LIABILITY AND NECESSITY OF PRODUCT LIABILITY INSURANCE FOR
CERTAIN CUSTOMERS
The sale and installation of the Company's products entail a risk of product
liability or other claims. The Company maintains product liability insurance
coverage in the amount of $10 million with respect to the use of its products.
In the event of litigation against the Company, lack or insufficiency of
insurance coverage could have a material adverse effect on the Company.
Further, certain retailers of the Company's products may require minimum
product liability insurance coverage as a condition precedent to purchasing
products. Failure to satisfy such insurance requirements could impede the
ability of the Company to achieve broad sales of its products which would have
a material adverse effect on the Company. There is no assurance that such
insurance will be available at a reasonable cost or will be sufficient to
cover possible liabilities. See "Business--Product Limitations" and
"Business--Regulation."
8
<PAGE>
REGULATION
Every product developed by the Company and intended to be developed by the
Company is required to meet various Federal Communications Commission ("FCC")
and international regulations. Products must pass FCC compliance testing prior
to their sale. Failure to pass such FCC compliance testing would result in the
Company not being able to sell that product, which could have a material
adverse effect upon the Company and its prospects. The Company has retained an
independent, third-party laboratory acceptable to the FCC to conduct FCC
compliance testing for its ezTV, ezPHONE, ezONLINE, ezAUDIO, ezREMOTE, ezCOMM
and ezGUARD products. The Company anticipates that official FCC approval will
eventually be obtained for its products, however, there is no certainty that
such approval will be obtained. The Company further intends to seek
Underwriter's Laboratory ("UL") approval for all of its products and currently
has UL approval for its ezTV, ezPHONE, ezONLINE and ezAUDIO products.
The Company's products are required to comply with FCC rules governing
conducted and radiated emissions from current carrier devices. Although
certain of the Company's products have passed compliance tests under the FCC
verification procedure, the FCC rules regarding current carrier devices do not
require that tests be made on the operating frequencies used by the Company's
products. It is possible that the FCC may adopt rules applicable to the
frequencies employed by the Company's products and that the Company would be
required to comply with such rules. There is no assurance that the Company
could comply with such rules.
Although the Company's ezTV and ezPHONE products have passed compliance
tests under FCC procedure and may thereby be sold to the public, such
compliance does not guarantee the right of a purchaser to connect the device
to a cable television system. Issues regarding the connection of consumer
owned equipment to cable television systems are presently under consideration
in an FCC rulemaking proceeding. The FCC proceeding is not expected to be
resolved this year.
Although the Company's products have been tested for compliance with FCC
rules governing conducted and radiated emissions from current carrier devices,
such compliance does not guarantee that the Company's products will not
interact with similar devices in neighboring residences nor does its guarantee
that the Company's products will not cause interference to, or receive
interference from, licensed radio facilities. The FCC may require the owner of
a Company product to discontinue using it if it causes interference.
ABSENCE OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; POSSIBLE VOLATILITY
OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will
develop or be sustained. The initial offering price for the Common Stock was
determined by negotiation between the Company and the Representative (as
hereafter defined). See "Underwriting" for a discussion of the factors
considered in determining the initial public offering price. The market price
of the Common Stock is likely to be highly volatile. Factors such as
fluctuations in the Company's operating results, announcements and timing of
potential acquisitions, announcements of technological innovations or new
products by the Company or its competitors, FCC and international regulatory
actions, actions with respect to patents or proprietary rights, public concern
as to the safety of products developed by the Company or others, changes in
stock market analyst recommendations regarding the Company, developments with
respect to other consumer electronics companies or the consumer electronics
industry generally and general market conditions may have a significant effect
on the market price of the Common Stock. In addition, the stock market has
from time to time experienced significant price and volume fluctuations that
are unrelated to the operating performance of particular companies. These
broad market fluctuations may adversely affect the market price of the Common
Stock.
FLUCTUATIONS IN OPERATING RESULTS
The Company may experience significant fluctuations in its quarterly
operating results as a result of a variety of factors, including the length of
the sales cycle, the timing of orders from and shipments to customers, delays
in development and customer acceptance of products or product enhancements,
delays in delivery of the product, product development expenses, new product
introductions or announcements by the Company or its competitors, levels of
market acceptance for new products and the hiring and training of additional
staff as well as general economic conditions.
9
<PAGE>
RISK IN CONNECTION WITH INTERNATIONAL EXPANSION
The Company has made certain sales to distributors in Canada and Mexico and
may further expand business operations outside the United States. There can be
no assurance that the Company will be able to compete successfully in
international markets. The Company's international business may be subject to
a number of risks, including compliance with special telecommunications
standards, exports regulations and restrictions, currency exchange rates,
tariffs and other barriers, variability in market acceptance of the Company's
products or product enhancements, difficulties in staffing and managing
foreign subsidiary operations, longer payment cycles, greater difficulty in
accounts receivable collections and specialized inventory requirements
applicable to particular foreign countries or markets. There can be no
assurance that these factors will not have an adverse impact on the Company's
future international sales or operating results. The Company does not
currently engage in international currency hedging transactions. To the extent
the Company is unable to match revenue received in foreign currencies with
expenses paid in the same currency, it may be exposed to possible losses on
international currency transactions.
CONTINUED CONTROL BY MANAGEMENT
At the conclusion of this offering the present employees, officers and
directors of the Company will continue to own or control approximately 23% of
the outstanding Common Stock of the Company. Therefore, management will remain
in a position to influence the election of all of the Company's directors, the
adoption of proposals to amend the Company's Articles of Incorporation, the
approval of a merger or consolidation, or the offer or sale of all or
substantially all of the Company's assets without the approval of the
purchasers of the Common Stock being offered hereby. The Company's ByLaws
provide for cumulative voting for the election of directors. See "Principal
and Selling Shareholders" and "Description of Securities."
ABSENCE OF DIVIDENDS
The Company has neither paid nor declared any cash or other dividends on the
Common Stock since its inception and management does not presently anticipate
that dividends will be paid on the Common Stock in the foreseeable future.
IMMEDIATE DILUTION
As of September 30, 1996, the net tangible book value of the Company was
$5,268,209 or $0.77 per share of Common Stock. After giving effect to the sale
of 2,000,000 shares of Common Stock offered by the Company hereby at an
assumed initial offering price of $9.00 per share (less underwriting discounts
and estimated expenses of this offering), the adjusted net tangible book value
of the Common Stock as of September 30, 1996, would have been $21,268,209, or
$2.40 per share, representing an immediate increase in net tangible book value
of $1.63 per share to existing shareholders and an immediate dilution of $6.60
per share to the purchasers of the Common Stock offered hereby. The foregoing
assumes no exercise of outstanding options to purchase 776,250 shares of
Common Stock. See "Dilution."
FUTURE SALES OF COMMON STOCK
Upon completion of this offering, the Company will have outstanding
8,878,340 shares of Common Stock. The outstanding shares of Common Stock will
include 6,878,340 shares constituting "restricted securities" as that term is
defined in Rule 144 under the Securities Act (the "Restricted Shares") which
may not be sold unless such sale is registered under the Securities Act or is
made pursuant to an exemption from registration under the Securities Act,
including the exemption provided by Rule 144. Of the Restricted Shares, all
but 2,873,590 are eligible for sale under Rule 144. All executive officers and
directors of the Company as of the date of this Prospectus (who hold in the
aggregate approximately 1,968,250 shares) have agreed that for a period of 180
days from the date of this Prospectus, they will not sell any of their shares
of Common Stock, except for the amounts attributable to the Selling
Shareholders, without the prior written consent of Pennsylvania Merchant Group
Ltd. The Company has agreed to register 776,250 shares of Common Stock
underlying outstanding options to purchase Common Stock in four substantially
equal installments beginning six months after the consummation of this
offering. Additionally, the holders of 1,633,267 shares of Common Stock issued
in a private placement that concluded in August 1996 have been granted certain
registration rights commencing one
10
<PAGE>
year after the consummation of this offering. Such registration rights
require, within 60 days after a demand, the filing of a registration statement
for the resale of the shares covered thereby. The Company is unable to predict
the effect that sales made under Rule 144 or otherwise may have on the market
price of the Common Stock. However, the possibility that substantial amounts
of Common Stock may be sold in the public market may have an adverse effect on
the market prices for the Company's Common Stock. See "Principal and Selling
Shareholders," "Underwriting" and "Shares Eligible For Future Sale."
LEGAL PROCEEDINGS
CURRENT LITIGATION
On November 22, 1995, Phonex, a Utah corporation, filed a complaint against
the Company in the United States District Court, District of Utah, alleging
patent infringement, contributory patent infringement, inducing patent
infringement, false marking and false advertising under the patent and
trademark laws of the United States. Although Phonex holds patents, the
Company's patent counsel has provided an opinion, as of May 1, 1995, and an
updated opinion as of May 29, 1996, to the Company to the effect that the
Company's ezPHONE product does not infringe any valid claim of the Phonex
patents and that one or more of the claims of the Phonex patents is invalid,
unenforceable or both. There can be no assurance that the outcome of the
litigation will be consistent with the opinion of the Company's patent
counsel. The Company estimates that the cost of defending this lawsuit through
the trial stage will be approximately $500,000; however, there can be no
assurance that such amount will not be exceeded. In addition, any appeal of a
judgment would involve additional uncertainties and expense. In the event that
the Company should lose the litigation, the damages assessed against the
Company could be substantial and the Company could be enjoined from marketing
or selling one or more of its products or could be required to seek a license
from Phonex. There can be no assurance that such a license could be obtained
on acceptable terms.
The Company is also a party to other routine litigation incidental to its
business. Such matters, in the aggregate, are not expected to have a material
adverse impact on the Company.
PRIOR LITIGATION
On May 5, 1995, Charles Abraham (who, prior thereto, was the single largest
shareholder of the Company, Chairman of the Board of Directors and Vice
President of Technology) filed a lawsuit against Robert A. Vito and Paul
Kouch, shareholders and directors of the Company, but not against the Company.
The lawsuit made various claims and sought various relief, but in essence
challenged the Company's decision as to what technology to pursue in its
product development. On July 21, 1995, the defendants and the Company entered
into a settlement agreement (the "Abraham Settlement Agreement") with Mr.
Abraham.
Pursuant to the Abraham Settlement Agreement, Mr. Abraham dismissed the
lawsuit and returned 3,900,000 of his 4,000,000 shares of the Company's Common
Stock. The Company paid $225,000 to Mr. Abraham and agreed to pay him, among
other amounts, a 5% royalty on capital contributed to the Company through
December 31, 1996, but in no event to exceed $100,000 (which amount has
already been paid) and further to pay him 1% of the gross revenues from sales
and royalties of the Company through December 31, 1996, but in no event to
exceed $100,000. See "Business--Competition."
11
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby at an assumed initial offering
price of $9.00 per share are estimated to be approximately $16,000,000 after
deducting underwriting discounts and commissions and other estimated expenses
of this offering. The Company intends to utilize the net proceeds of this
offering as follows: (i) $13,000,000 to support expansion of its operations,
including increases in inventory and receivables and expansion of its
outsourced manufacturing and (ii) the balance to be used to increase the
Company's research and development and marketing and sales capacity and for
general corporate purposes, including working capital. Pending full
utilization of the net proceeds of this offering, the Company intends to make
temporary investments in short-term, interest bearing investments.
The anticipated uses set forth herein are based upon estimates and
assumptions. These estimates and assumptions relate to the rate and direction
of progress in product research and development, market acceptance of products
and other factors. These estimates and assumptions, while considered
reasonable by the Company, are subject to significant business, economic and
competitive uncertainties and contingencies, many of which are beyond the
control of the Company, and future business decisions which are subject to
change.
A portion of the proceeds designated for working capital purposes may also
be used for investment in or acquisitions of related or complementary
businesses, products, product development rights or technologies. However, at
the present time no discussions or arrangements have occurred regarding
possible investments or acquisitions.
DIVIDEND POLICY
The Company has never paid or declared a dividend on its Common Stock. The
payment of cash dividends, if any, in the future is within the discretion of
the Board of Directors and will depend upon the Company's earnings, if any,
its capital requirements, financial condition and other relevant factors. The
Company intends, for the foreseeable future, to retain earnings, if any, for
use in the Company's business.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of September 30, 1996 and as adjusted to reflect the sale of the
shares of Common Stock offered by the Company hereby at an assumed initial
offering price of $9.00 per share and the application of the net proceeds
therefrom:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt.......................................... $ 453 $ 453
Shareholders' equity:
Common Stock, no par value 20,000,000 shares
authorized; 8,858,340 shares issued, actual;
10,858,340; shares issued, as adjusted(1)(2).......... $ 22,162 $ 38,162
Treasury stock......................................... (695) (695)
Accumulated deficit.................................... (15,967) (15,967)
-------- --------
Shareholders' equity................................... 5,500 21,500
-------- --------
Total capitalization................................. $ 5,953 $ 21,953
======== ========
</TABLE>
- --------
(1) Excludes 776,250 shares of Common Stock reserved for issuance upon the
exercise of outstanding options to purchase Common Stock.
(2) Includes 1,980,000 shares of Common Stock held in treasury.
12
<PAGE>
DILUTION
The net tangible book value of the Company as of September 30, 1996 was
$5,268,209 or $0.77 per share of Common Stock. Net tangible book value per
share represents the amount of the Company's tangible assets, less total
liabilities, divided by the number of shares of Common Stock outstanding.
After giving effect to the sale of 2,000,000 shares of Common Stock offered by
the Company hereby at an assumed initial offering price of $9.00 per share,
and after deducting estimated underwriting discounts, commissions and offering
expenses payable by the Company, the Company's net tangible book value as of
September 30, 1996, would have been $21,268,209, or $2.40 per share. This
represents an immediate increase in net tangible book value of $1.63 per share
to existing shareholders and an immediate dilution of $6.60 per share to new
investors purchasing shares in this offering. The following table illustrates
this dilution:
<TABLE>
<S> <C>
Offering price per share........................................... $9.00
Net tangible book value per share before the offering............ $0.77
Increase in net tangible book value per share attributable to
investors in this offering...................................... $1.63
Pro forma net tangible book value per share after the offering..... $2.40
Dilution per share to investors in this offering................... $6.60
</TABLE>
The following table sets forth, as of September 30, 1996, the differences
between existing shareholders and purchasers of shares in this offering (at an
assumed initial offering price of $9.00 per share) with respect to the number
of shares of Common Stock purchased from the Company, the total consideration
paid and the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Shareholders..... 6,878,340 77% $18,891,235 51% $2.75
Investors in this
offering................. 2,000,000 23% 18,000,000 49% $9.00
--------- --- ----------- ---
Total(1)................ 8,878,340 100% $36,891,235 100%
========= === =========== ===
</TABLE>
- --------
(1) Following the sale of Common Stock by the Selling Shareholders, if the
Underwriters' over-allotment option is exercised in full, the number of
shares held by all existing shareholders will be reduced by 130,000 shares
to 6,748,340 shares or 74% of the total shares of Common Stock outstanding
after this offering. Investors in this offering will hold 2,415,000 shares
or 26% of the total shares of Common Stock outstanding after this offering
if the Underwriters' over-allotment option is exercised in full. See
"Principal and Selling Shareholders."
The foregoing tables assume no exercise of outstanding options to purchase
shares of Common Stock except 170,000 shares covered by options intended to be
exercised by Selling Shareholders in connection with this offering and
assuming the over-allotment option is exercised in full. On September 30,
1996, there were options outstanding to purchase 776,250 shares of Common
Stock at a weighted average exercise price of $1.73 per share. As of such
date, options to purchase 296,000 shares of Common Stock were immediately
exercisable. To the extent these or additional options, if granted, are
exercised, there will be further dilution to new investors. See "Management--
Executive Compensation," "Certain Transactions," and Note 3 of Notes to the
Financial Statements.
13
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data for the period ended December 31, 1993, and for
each of the two years ended December 31, 1994, and December 31, 1995, are
derived from audited financial statements of the Company. The selected
financial data for the nine months ended September 30, 1995 and 1996, are
derived from unaudited financial statements of the Company. In the opinion of
management, the unaudited financial statements of the Company have been
prepared on the same basis as the audited financial statements included herein
and include all adjustments necessary for a fair presentation of financial
condition and results of operations for these periods, which adjustments are
only of a normal recurring nature. The selected financial data is qualified in
its entirety by, and should be read in conjunction with, the Financial
Statements and related Notes thereto and other financial information appearing
elsewhere in this Prospectus and the discussion under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ ------------------
(UNAUDITED)
1993(1) 1994 1995 1995 1996
------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales...................... $ 0 $ 0 $ 0 $ 0 $ 523
Cost of goods sold............. 0 0 0 0 418
----- ------- ------- -------- --------
Gross margin................... 0 0 0 0 105
Operating expenses:
Selling, general and
administrative................ 55 689 4,368 3,868 4,962
Research and development....... 0 549 2,413 1,848 3,173
----- ------- ------- -------- --------
Total operating expenses....... 55 1,238 6,781 5,716 8,135
Operating loss................. (55) (1,238) (6,781) (5,716) (8,030)
Other income (expense)......... 1 11 48 23 78
----- ------- ------- -------- --------
Net loss....................... $ (54) $(1,227) $(6,733) $ (5,693) $ (7,952)
===== ======= ======= ======== ========
Net loss per common share(2)... $(.01) $ (.20) $ (1.12) $ (.93) $ (1.25)
===== ======= ======= ======== ========
Weighted average number of
common shares outstanding(2).. 5,210 6,195 6,009 6,144 6,372
===== ======= ======= ======== ========
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------ ------------------
1993 1994 1995 1995 1996
------- ------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................ $ 58 $ 247 $(2,178) $ (1,804) $ 4,103
Total assets................... 214 782 2,614 2,761 10,571
Other liabilities.............. 39 20 5 6
Total shareholders' equity..... 142 561 (1,610) (1,398) 5,500
</TABLE>
- --------
(1) For period from inception through December 31, 1993.
(2) Based on weighted average common shares and common share equivalents
outstanding. See Note 1 of Notes to the Financial Statements.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following management's discussion and analysis of financial condition
and results of operations contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and elsewhere
in this Prospectus.
OVERVIEW
The Company designs, contracts for the manufacture of, and markets certain
consumer electronic devices which enable the distribution of video, voice,
audio and data signals over existing premises wiring. The Company was
incorporated in September 1993 and immediately began a period of technology
and product development. In the second and third quarter of 1996, the Company
conducted pre-launch product acceptance testing on its ezTV, ezPHONE and
ezAUDIO products by manufacturing a total of approximately 7,000 units and
selling them on the QVC network and through the Company's sales representative
organizations. Through September 30, 1996, the Company generated net sales of
approximately $523,000. As a result of this initial test marketing, the
Company improved its products' features, circuitry, packaging (including an
installation video), and also improved and expanded its customer service and
sales support. The Company has commenced larger scale production and
distribution of the ezTV, ezPHONE, ezONLINE, ezAUDIO, and ezREMOTE products in
the fourth quarter of 1996. See "Business-Pre-Launch Product Acceptance
Testing and Product Sales."
The Company's ezVIEW, ezCOMM, and ezGUARD products are being field tested
and the Company anticipates that these products will be available for sale
beginning in 1997. There can, however, be no assurance that such timetable
will be met or that the Company will be able to successfully market or sell
any such products. See "Business--Overview of Targeted Markets and Products"
and "Business--Product Development Status."
From its inception through September 30, 1996, the Company committed
$6,135,793 to research and development of its products. The Company
anticipates its continued commitment of significant resources to research and
development efforts in connection with enhancements to some or all of the
above-described products and the commercialization of planned products.
Additionally, the Company anticipates significant commitments to marketing and
distribution and increasing the capacity of its outsourced manufacturing. See
"Use of Proceeds" and "Business--Marketing and Distribution."
RESULTS OF OPERATIONS OF THE COMPANY
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995.
The Company generated no revenues from product sales until April 1996.
General and administrative expenses increased by $1,094,543, from $3,867,801
during the first nine months of 1995 to $4,962,344 during the comparable
period of 1996. This increase was mainly attributable to increases in payroll
expenses and related taxes of $1,101,182, travel and trade show expenses of
$403,792, printing and advertising expenses of $326,929, legal and other
professional fees of $261,043, offset by a decrease in stock option
compensation expense (as explained below) of $1,568,892. Research and
development expenses increased $1,323,989, from $1,848,595 during the first
nine months of 1995 to $3,172,584 during the comparable period of 1996. Such
increase was due to the Company's continued focus on the development of its
currently offered and planned products for its "ez" product line.
Prior to 1996, the Company issued options to purchase its Common Stock at
exercise prices below the stock's estimated market value. As the options vest,
the Company has and will continue to recognize a non-cash expense for the
aggregate difference between the exercise price of the options and their fair
market value on the date of grant. For 1995 and the nine months ended
September 30, 1996, the Company recognized a non-cash expense of $3,504,299
and $2,194,407 respectively. As of September 30, 1996, the total future
compensation expense related to these options is approximately $1,400,000
which will be recognized as the options vest over the next four years.
15
<PAGE>
Net Interest income increased $55,301, during the first nine months of 1996
as a result of an increased amount of interest bearing cash equivalent assets
on hand.
The Company's net loss for the first nine months of 1996 was $7,951,551 as
compared to a net loss of $5,693,405 in the first nine months of 1995, an
increase of $2,258,146. This increase is attributable to the increase in
general and administrative expenses and research and development expenses as
described above.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994 AND
PERIOD FROM INCEPTION
The Company generated no revenues from product sales during the compared
periods. General and administrative expenses increased $3,678,830, from
$688,909 during 1994 to $4,367,739 during 1995. This increase was primarily
due to an increase of stock option compensation expense in the amount of
$2,578,986 plus increases in payroll expenses and related taxes in the amount
of $343,024, travel expenses in the amount of $136,565, trade show expenses of
$185,403 and legal and other professional fees of $46,460. Research and
development expenses increased $1,864,163 from $549,523 during 1994 to
$2,413,686 during 1995. This increase was due to the Company's focus on the
development of its "ez" product line and its efforts in connection with
seeking patent protection.
Interest income increased by $37,159, during 1995 compared to 1994 as a
result of an increased amount of interest bearing cash equivalent assets on
hand.
The Company's net loss for 1995 was $6,733,312 compared to a net loss of
$1,227,478 in 1994, an increase of $5,505,834. This increase in net loss is
attributable primarily to stock option compensation expense of $3,504,299,
other general and administrative expenses and research and development
expenses as described above, partially offset by an increase in the Company's
interest income and a decrease in its interest expense.
During the period from inception through December 31, 1993 the Company
incurred $54,981 of general and administrative expenses offset by $483 of
interest income for a net loss of $54,498.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has funded its operations, working capital
needs and capital expenditures primarily from sales of its Common Stock and
secondarily from bank borrowings. Subsequent to its initial capitalization,
the Company completed five separate private offerings of its Common Stock for
an aggregate consideration of $18,883,484.
The Company's start-up and development stage cash requirements consisted
primarily of the acquisition of capital equipment and expenditures for
research and development and general and administrative expenses.
As of September 30, 1996, the Company had cash and accounts receivable
totaling $6,091,498 and a backlog of orders of approximately $900,000. The
Company currently has no credit line or other credit facility in place. The
Company has a letter of credit arrangement with its bank in the amount of
$3,000,000 for the benefit of Flextronics. This letter of credit is secured by
a three million dollar interest bearing bank account and expires on December
31, 1996. See "Business--Manufacturing."
The Company anticipates that its need for cash will grow as it expands the
commercialization of its current products and continues research and
development with respect to new products. Significant anticipated capital
expenditures will take the form of funding letters of credit or other surety
arrangements obtained by the Company to assure and expand its outsourced
manufacturing capacity, on-going research and development and sales and
marketing efforts. The Company's future liquidity and capital resources will
depend on numerous factors, including continued technological progress in its
research and development, the success of product testing and
commercialization, the costs necessary to expand the Company's outsourced
manufacturing capabilities, the costs involved in preparing, filing and
prosecuting patent applications and maintaining and enforcing patents and
patent applications and other proprietary rights, the ability of the Company
to establish collaborative arrangements, demand for the Company's products and
the amount and timing of future revenues.
16
<PAGE>
Although the Company believes that the proceeds from this offering together
with cash generated from operations will be sufficient to meet the Company's
operating and capital requirements at least through December 31, 1998, there
can be no assurance that the Company will not require additional financing
within this time frame. In the event additional capital is required in excess
of the proceeds of this offering and cash generated by operations, the Company
presently intends to raise such additional capital by establishing and
maintaining borrowing arrangements and/or the sale of additional equity
securities. There is no assurance that the Company will be successful in
obtaining additional operating capital on satisfactory terms or at all.
INFLATION AND SEASONALITY
The Company believes that inflation has had little or no material impact on
its operations to date. Since the Company's current products consist of
consumer electronics products, which may sell heavily during the Christmas
shopping season, Company sales may be positively impacted in the fourth
quarter in any given year. Furthermore, because the Company recognizes
revenues upon shipment of finished products, such recognition may be irregular
and uneven, thereby disparately impacting quarterly operating results and
balance sheet comparisons.
BUSINESS
GENERAL
Elcom (derived from ELectric COMmunications) Technologies Corporation is the
developer of the CUSTOMER PREMISES AREA NETWORK or CPAN System, which enables
the distribution of video, voice, audio and data signals through a premises'
(typically a home or small business) existing electrical wiring eliminating
the need for additional television cables, phone lines and stereo wires
throughout the home. The CPAN System consists of a transmitter and a receiver
which plug into standard electrical outlets. The transmitter is linked by
standard input connectors to the signal source such as cable/satellite
television, telephone line, stereo or computer. One or more receivers, located
in other rooms, are linked by standard output connectors to televisions,
telephones, fax/modems, speakers, computers or printers. The Company is
developing a family of products incorporating the CPAN System, and recently
began marketing five such products: ezTV, ezPHONE, ezONLINE, ezAUDIO and
ezREMOTE.
The ezTV product enables the distribution of a video signal, such as a cable
television channel, to multiple locations within a home without installing
additional cabling and offers remote control capability in either the primary
or secondary viewing room. The ezPHONE and ezONLINE products provide access to
telephone service in most rooms of the home for phone, fax, caller ID and
provide computer modem access up to 33.6 Kbps. The Company's ezONLINE product
is specifically targeted to the personal computer market. The ezAUDIO product
enables the distribution of audio signals in stereo to multiple locations
within a home for home theater systems and second room audio. The ezREMOTE
product enables consumers to operate remote control enabled equipment and
appliances in most rooms where an electrical outlet is present.
The CPAN System provides a common platform for additional products currently
under development, including the ezVIEW and ezCOMM products. The ezVIEW
product is intended to integrate electrical wiring systems with video cameras
to enable premises surveillance in most rooms. The ezCOMM product is intended
to enable the connection of multiple computers to a single printer. In
addition to its CPAN System products, the Company is developing its ezGUARD
surge protection device, under license from a third party licensor. The
ezGUARD product is designed to substantially reduce the risk of damage to
computers, televisions and other home appliances from electrical outlet power
surges as compared with competitive consumer products. The Company is
currently devoting significant resources toward the foregoing product
development and anticipates marketing these products beginning in 1997. There
can be no assurance that the Company will successfully complete the
development of these products or that the Company's existing or planned
products will satisfy the needs of the market place.
The Company markets its products directly and through sales representatives
to national retail organizations, such as consumer electronics and computer
retailers, electronics distributors and catalog retailers. Additionally, the
Company has an agreement with QVC which, subject to certain conditions, grants
QVC exclusive direct response television rights to sell Elcom branded products
and to launch all other Company developed products on the QVC network.
17
<PAGE>
BUSINESS STRATEGY
The Company's strategy is to (i) improve, expand and diversify its product
lines; (ii) expand sales and marketing efforts; (iii) increase OEM sales; and
(iv) develop digital technology. The Company's strategy includes the following
key elements:
IMPROVE, EXPAND AND DIVERSIFY PRODUCT LINES. The Company's initial product
lines consist of single function analog products that address broad market
needs. The Company believes that its current products can be improved to
perform better and with less product limitations. The Company believes that
improved and expanded product lines, resulting in increased consumer choice,
are essential to increasing market share. The Company intends to expand and
diversify its product lines by a variety of means including combining existing
features and functions (for example, the ezAUDIO and ezREMOTE products) or by
providing lower cost products with one or more features removed. Additional
product line expansion and diversity may be obtained through incorporating
complementary technologies from OEM or third party relationships. The Company
intends to further modularize the design and development of product functions
enabling a common platform to be used in diverse product combinations which
should reduce product development cycle time and costs. The Company also plans
to expand and diversify its product lines and reduce costs through the use of
application specific integrated circuits ("ASICs") and hybrid circuits which
will allow its products to be imbedded and integrated with OEM products. There
can be no assurance, however, that such products will be successfully
developed or marketed.
EXPAND SALES AND MARKETING EFFORTS. The Company plans to continue its
initial sales efforts by targeting individual retail segments including home
theater, satellite television, home computing and home offices. The Company
believes that the development of these diverse market niches is key to
sustaining expanded product lines. The Company plans to expand to
international markets through the use of country representatives and the
Company's own direct marketing efforts. The Company also believes there is
significant potential for the sale of its products through entertainment
programmers and service providers such as cable, satellite, telephone and
utility companies.
INCREASE OEM SALES. The Company is pursuing agreements with OEMs to private
label its products and embed its products for OEM sales. The Company believes
that as its products gain acceptance by OEM customers, it will be able to
license its design for inclusion in OEM development-stage products. The
Company is also developing its PLC Ready technology for use by OEM customers
which will enable OEMs to embed the CPAN System within their products, such as
the ezAUDIO product embedded inside a speaker cabinet.
DEVELOP DIGITAL TECHNOLOGY. The Company has obtained an exclusive license
with X-Com, Inc. for the use of certain of X-Com, Inc.'s digital technology.
This technology, if feasible, may be used to develop high speed data
communications products for communication over existing electrical wiring. The
Company is currently developing this technology and anticipates future
commercialization of one or more products utilizing such technology. There can
be no assurance that the Company will be successful in developing such
products.
SHORT-TERM PLAN OF OPERATIONS
Through June 1997, the Company intends to continue to expand its research
and development activities to improve its current products and further the
development of additional products. The Company intends to hire additional
research engineers and/or technicians for such purposes. The Company also
intends to increase its sales and marketing efforts, in part, by the addition
of one or more in-house sales and marketing managers during that time frame.
While the Company has no plans to make any material acquisition of any plant
or equipment during such time frame, it does intend to increase the capacity
of its outsourced manufacturing by committing a portion of the proceeds of
this offering to securing an increase in its letter of credit limits or
obtaining one or more additional letters of credit or other surety
arrangements necessary for the production of its products. There can be no
assurance that the Company's present plans will be executed, that it will
possess the necessary capital to execute its plans, that such plans will not
change or that its plans will meet with success. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations--Liquidity and Capital Resources," and "--Overview of Products and
Targeted Markets."
18
<PAGE>
OVERVIEW OF PRODUCTS AND TARGETED MARKETS
Using the "ez" family of trademarks, the Company has developed or is
developing the following products for the consumer electronics market.
CURRENT PRODUCTS
. ezTV
The ezTV product permits the distribution of high quality analog video
signals to multiple televisions within a customer premises. Users plug ezTV
transceivers into electrical outlets to send and receive television signals
from one room to another from a cable television set top box, video
cassette recorder, laser disc player or satellite integrated receiver
decoder. In this way, multiple televisions can access the same program
without installing additional cables.
. ezPHONE and ezONLINE
The ezPHONE product, once plugged into the incoming telephone jack,
permits the reception of a telephone, fax or computer data signal by a
telephone equipped with an ezPHONE transceiver elsewhere in the premises
where there is an electrical outlet. The Company also markets the ezPHONE
product as the ezONLINE product which targets the personal computer market.
. ezAUDIO
The ezAUDIO product allows users to plug remote speakers into a premises
outlet to receive high quality audio signals from a central or local
amplifier. The ezAUDIO product targets the consumer electronics market by
providing surround sound, rear speaker, home theater and second room audio
capability by simply plugging ezAUDIO transceivers into power outlets.
. ezREMOTE
The ezREMOTE product enables control of audio, video and home theater
equipment by detecting and re-transmitting the infra-red signals from one
room to another room via existing electrical wiring.
PRODUCTS IN DEVELOPMENT
. ezVIEW
The ezVIEW product will provide an interconnection between a video camera
in one room and a television in another room to permit monitoring of
children and surveillance. The ezVIEW product line will target residential
consumers and businesses. The Company may also license the technology used
in the ezVIEW to video camera and security system integrators. The Company
believes that ezVIEW will provide a flexible, inexpensive security solution
utilizing existing televisions, camcorders and VCRs.
. ezCOMM
The ezCOMM product is intended to be the first product allowing multiple
desktop computer users to link up personal computers to a common printer
over existing electrical wiring.
. ezGUARD
The ezGUARD surge suppression product is designed based on a patented
technology licensed to the Company that meets the highest standards
established by the U.S. government for surge suppression. The ezGUARD
product will suppress and can withstand repeated voltage surges of 6000
volts. The product is targeted at the network server, personal computer,
home theater and home appliances.
19
<PAGE>
PRODUCT DEVELOPMENT STATUS
The Company presently offers its ezTV, ezPHONE, ezONLINE, ezAUDIO and
ezREMOTE products for sale and anticipates that production will begin on the
ezVIEW, ezCOMM and ezGUARD products in sufficient quantities to be available
for sale in 1997. The Company spent $549,523, $2,413,686 and $3,172,584 for
research and development in 1994, 1995 and the nine months ended September 30,
1996 respectively.
There can be no assurance that the products currently under development will
be successfully developed by the Company or, if developed, that such
production will be within the period set forth above. There can be no
assurance that products manufactured will be commercialized or meet consumer
expectations. Variations from such periods may be significant and may
materially adversely affect the Company. See "Risk Factors--No Assurance of
Successful Product Development" and "Need for Additional Funds."
PRODUCT LIMITATIONS
The Company has identified certain limitations associated with its products.
Specifically, the performance of the ezTV, ezPHONE, ezONLINE, ezAUDIO and
ezREMOTE products may be significantly impaired in electrical outlets where
halogen lighting, fluorescent lighting or dimmer switches are utilized. The
Company's products may be significantly impaired if plugged into surge
suppression devices or GFI outlets such as those commonly used in kitchens and
bathrooms. Additionally, severe weather conditions, such as lightning, may
temporarily impair the performance of such products. The Company's products
are designed to operate in premises with a single breaker box and standard
dual phase wiring. These limitations, individually or in the aggregate, will
limit the potential size of the Company's market for its products. There can
be no assurance that the Company will be able to resolve the above noted
product limitations in a cost effective manner or at all.
MANUFACTURING
The Company has contracted with Flextronics for the assembly of all of its
products, the components of which are supplied by various third party
suppliers. The Company's internal manufacturing operations consist primarily
of production of prototypes, test engineering, materials purchasing and
inspection and quality control. The Company believes that Flextronics is able
to produce high quality products allowing the Company to focus its efforts on
design rather than production. The Company monitors the performance and
quality of the work performed by Flextronics by using the Company's internal
quality assurance procedures and by making regular visits to its Malaysian
manufacturing facility. The Company has no other manufacturer or assembler at
this time. The Company is unable to determine what levels of inventory will be
required to meet the delivery requirements of its customers.
In order to maintain its production capacity with Flextronics, the Company
has entered into a $3 million letter of credit arrangement with a bank for the
benefit of Flextronics. Such letter of credit expires on December 31, 1996,
unless extended by the bank, and is collateralized by first priority lien on a
three million dollar interest bearing bank account of the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
PRE-LAUNCH PRODUCT ACCEPTANCE TESTING AND PRODUCT SALES
In the second and third quarters of 1996, the Company conducted pre-launch
product acceptance testing on its ezTV, ezPHONE and ezAUDIO products by
manufacturing a total of approximately 7,000 units and selling them on the QVC
network and through the Company's sales representative organizations. Through
September 30, 1996, the Company generated net sales of approximately $523,000.
As a result of this initial test marketing the Company improved its products'
features, circuitry, packaging (including an installation video) and also
improved and expanded its customer service and sales support. The Company
commenced larger scale production and distribution of the ezTV, ezPHONE,
ezONLINE, ezAUDIO and ezREMOTE products in the fourth quarter of 1996.
PRODUCT WARRANTY
The Company's current payment terms are generally net 30 days. The Company's
policy is not to accept sales returns except for defective goods. Depending on
the product, the Company provides a limited warranty
20
<PAGE>
for a period of between 90 days to one year from the date of purchase by the
end-user. The Company believes this warranty period is customary in the
consumer electronics industry.
MARKETING AND DISTRIBUTION
In addition to its own marketing staff, the Company is presently utilizing
independent sales representative organizations to market its products. During
1996, the Company entered into agreements with 20 independent sales
representative organizations covering the United States, Canada, Mexico, Brazil
and Colombia to accelerate its penetration of the retail marketplace and access
key retail organizations.
The Company intends to market its products directly and through sales
representatives to the following distribution channels:
. National retail organizations that sell products directly to the
consumer, including national and regional consumer electronics and
computer retail chains, and QVC;
. Traditional consumer computer/telecommunications marketplace distribution
channels which include national and regional distributors that
redistribute to a combination of value-added resellers, systems
integrators and specialty retailers;
. Catalogs and;
. OEMs of consumer electronic products.
The Company's marketing plans are subject to change as a result of a number
of factors, including progress or delays in the Company's product development
efforts, insufficient capital, changes in the market and competition factors.
There can be no assurance that the Company will be able to complete development
of those of its products under development, or enter into or maintain
satisfactory marketing arrangements for any of its products.
INTELLECTUAL PROPERTY
The Company intends to aggressively seek patent protection for any technology
and products it develops. The Company has received a notice of allowance for
one United States design patent associated with ornamental aspects of the
product casing and currently has eight patent applications pending in the
United States. The Company intends to file one or more corresponding
applications for foreign protection of its technology. There can be no
assurance that patents will issue on such patent applications. There can be no
assurance that the Company's existing patent or any future patents the Company
may obtain will effectively protect the technology, foreclose the development
of competitive products by others or otherwise be commercially valuable.
The Company presently has trademark applications pending before the United
States Patent and Trademark Office for, among other marks CUSTOMER PREMISES
AREA NETWORK, CPAN, ezTV, ezPHONE, ezAUDIO, ezREMOTE, ezLAN, ezCOMM, ezGUARD,
ezVIEW, PLC Ready, ezONLINE, JUST PLUG IT IN and PLUG INTO THE FUTURE. The
Company is in the process of preparing and expects to apply for additional
trademark registrations. The Company has three Canadian trademark applications
pending for ezPHONE, ezTV and ezAUDIO. There can be no assurance that the
Company will obtain any trademark registrations in the United States or in any
foreign country.
REGULATION
Every product developed by the Company and intended to be developed by the
Company is required to meet various FCC and international regulations. Products
must pass FCC compliance testing prior to their sale. Failure to pass such FCC
compliance testing would result in the Company not being able to sell that
product, which could have a material adverse effect upon the Company and its
prospects. The Company has retained an independent, third-party laboratory
acceptable to the FCC to conduct FCC compliance testing for its ezTV, ezPHONE,
ezONLINE, ezAUDIO, ezREMOTE, ezCOMM and ezGUARD products. The Company
anticipates that official FCC approval will eventually be obtained for its
products, however, there is no certainty that such approval will be obtained.
The Company further intends to seek UL approval for its products.
21
<PAGE>
The Company's products are required to comply with FCC rules governing
conducted and radiated emissions from current carrier devices. Although
certain of the Company's products have passed compliance tests under the FCC
rules verification procedure, the FCC rules regarding current carrier devices
do not require that tests be made on the operating frequencies used by the
Company's products. It is possible that the FCC may adopt rules applicable to
the frequencies employed by the Company's products and that the Company would
be required to comply with such rules.
Although the Company's ezTV and ezPHONE products have passed compliance
tests under FCC procedure and may thereby be sold to the public, such
compliance does not guarantee the right of a purchaser to connect the device
to a cable television system. Issues regarding the connection of consumer
owned equipment to cable television systems are presently under consideration
in an FCC rulemaking proceeding. The FCC proceeding is not expected to be
resolved this year.
Although the Company's products have been tested for compliance with FCC
rules governing conducted and radiated emissions from current carrier devices,
such compliance does not guarantee that the Company's products will not
interact with similar devices in neighboring residences nor does its guarantee
that the Company's products will not cause interference to, or receive
interference from, licensed radio facilities. The FCC may require the owner of
a Company product to discontinue using it if it causes interference.
COMPETITION
The market for consumer electronics devices which allow for the simultaneous
distribution of signals around consumer homes and small businesses utilizing
existing electrical wiring is highly competitive. The Company is aware of
several companies that have developed technology and products which may be
competitive with the Company's technology and products including Phonex and
its Intelejak product and Recoton, Inc. and RF Link Co., both of which
manufacture wireless video and audio products. Many of the Company's
competitors have greater financial, technical and marketing resources than the
Company. The Company competes on the basis of the uniqueness of its product
line, and to some degree, on the basis of price.
Other means of connecting televisions, telephones, audio devices and other
devices to the service providers (i.e., cable television, telephone) exist
including installing new wiring or using wireless devices. Installation of new
wiring may present significant costs and inconvenience. However, the
installation of new wiring provides a permanent solution to connecting
televisions, telephones, audio, and other devices to service providers with a
high degree of reliability. Wireless devices provide the ability to transmit
signals without requiring additional wiring. However, wireless devices also
have disadvantages. Most wireless consumer products operate in unlicensed
frequency ranges and are subject to interference, intermittent performance
heavily dependent on building materials and distances between units, as well
as the impact of other building devices and neighborhood wireless signals.
This situation may be exacerbated in multiple dwelling premises. Further, the
power needs of many wireless devices require them either to be periodically
recharged or to draw their power from AC outlets. The primary wireless
competitors for the Company's ezTV and ezAUDIO products are Recoton Inc. and
RF Link Co. For the ezPHONE and ezONLINE products, the primary competitors are
the several manufacturers of fax/modem capable, digital and cordless phones.
The Company believes that its competitive success will be based on its
ability to create and enhance products with advanced technology, develop
proprietary products, attract and retain engineering personnel, obtain patent
or other protection for its products, manufacture and successfully market its
products either independently or through outside parties and obtain necessary
capital on a timely basis and on favorable terms. Further, Charles Abraham,
the former Chairman of the Board of Directors of the Company, has knowledge of
the Company's technology and may compete with the Company. See "Legal
Proceedings--Prior Litigation."
EMPLOYEES
As of September 30, 1996, the Company employed 41 full-time individuals, 18
of whom are directly involved in product development.
22
<PAGE>
FACILITIES
The Company leases its office, research and development and engineering
space pursuant to a sublease agreement with Centocor Property Management
Corporation expiring on August 30, 1997. The sublease covers 16,741 square
feet beginning August 1, 1996, for an annual rent of $179,630.
BACKLOG
As of September 30, 1996, the Company had a backlog of orders of
approximately $900,000 all of which the Company expects to fill in the current
fiscal year.
23
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The directors, executive officers and key employees of the Company are:
<TABLE>
<CAPTION>
NAME AGE POSITION
--------------------------------- --- -------------------------------------------
<S> <C> <C>
Robert A. Vito..................... 34 President, Chief Executive Officer,
Treasurer and Chairman of the Board of
Directors
Myrddin L. Jones................... 62 Vice President of Strategic Planning
Louis J. Petriello................. 41 Chief Operating Officer, Chief Financial
Officer and Corporate Counsel
Stephen B. Pudles.................. 37 Vice President of Business Development
Dr. C.B. Patel..................... 56 Vice President of Engineering
George Daly........................ 61 Vice President of Operations
Robert B. Sando.................... 36 Vice President of Finance and Secretary
Paul Kouch......................... 39 Director
Dr. John Wade Seedor............... 41 Director
</TABLE>
All Company directors are elected annually and hold office until their
respective successors are elected and qualify. Executive officers are elected
annually by the Board of Directors and serve at its discretion.
ROBERT A. VITO has been the President, Chief Executive Officer and Treasurer
of the Company since its inception and Chairman of the Board of Directors of
the Company since May 1995. From 1988 through 1994, Mr. Vito served in the Tax
Technology Group of Price Waterhouse LLP. He is an adjunct professor at the
Pennsylvania State University and the Philadelphia College of Textiles &
Science and has extensive consulting experience with both Fortune 500
companies and small enterprises. Mr. Vito is primarily responsible for overall
direction of the Company's activities, day to day management, funding and
financial matters.
MYRDDIN L. JONES has been the Vice President of Strategic Planning for the
Company since June 1996. From September 1993 through May 1996, Mr. Jones
served as Vice President of Marketing. From 1987 through 1993, Mr. Jones
provided management consulting services, including strategic planning, fund
raising and marketing activities for a variety of clients. He has also served
in senior marketing, sales, service and strategic management positions for
companies such as Commodore, Sperry and Philips Electronics. His primary
responsibilities include business strategies for products developed by the
Company and operations.
LOUIS J. PETRIELLO is an attorney and Certified Public Accountant. He has
been Corporate Counsel since December 1995, and was appointed Chief Financial
Officer of the Company in September 1996. On October 1, 1996, Mr. Petriello
was appointed Chief Operating Officer. Since 1990, Mr. Petriello has been an
attorney in private practice and an Adjunct Professor in the M.B.A. programs
at the Pennsylvania State University and the Philadelphia College of Textiles
and Science. Mr. Petriello previously served as Director of Taxation at Shared
Medical Systems Corporation in Malvern, Pennsylvania, and as Tax Manager at
Arthur Andersen & Co. in Philadelphia, Pennsylvania.
STEPHEN B. PUDLES has been the Vice President of Business Development for
the Company since June 1996. From December 1995 through June 1996, Mr. Pudles
served as Vice President of Operations and Engineering. Prior to his
employment with the Company Mr. Pudles served in senior manufacturing,
marketing, sales and program management positions with Restor Industries and
Electronic Associates, two electronic contract manufacturers. He has extensive
experience in current manufacturing technologies, purchasing, subcontracting,
quality assurance, production control and customer fulfillment operations. Mr.
Pudles's responsibilities include management of sales and marketing activities
of the Company.
DR. C.B. PATEL has been the Vice President of Technology for the Company
since June 1996. Dr. Patel joined the Company as Technology Manager in October
1994. From 1989 through October 1994, he was chief engineer, advanced
applications, at AML/Samsung. Prior to that he was a senior member of the
technical staff of the David Sarnoff Research Center in Princeton. He has over
20 U.S. patents issued and has published four
24
<PAGE>
papers. His activities encompassed digital high definition television systems
design and development. He has a Ph.D. and MSEE from Michigan State and a BSEE
from Varnasi, India. He brings to the Company significant expertise and
experience in digital signal processing, digital filter design as well as all
aspects of digital and video development and testing.
GEORGE DALY has been the Vice President of Operations for the Company since
September 1995. He has over 30 years of experience in engineering and
manufacturing of a variety of technology products. From 1991 to August 1995,
Mr. Daly worked as Vice President of Operations for FiberCorp Inc. a
manufacturer of alarm monitoring systems. From 1987 to 1991 he was the Chief
Operating Officer for Test Technology Manufacturing Inc., a contract
manufacturer. Prior thereto he was employed as Senior Vice President of
Operations for Telesciences Inc., a manufacturer of telephone equipment. His
responsibilities include the commercializing and manufacturing of the
Company's product line.
ROBERT B. SANDO has been the Vice President of Finance and the Secretary of
the Company since September 1994. From 1991 through September 1994, Mr. Sando
was an accountant with the public accounting firm of Sacco Sweeney LLP. From
1988 to 1991, Mr. Sando was a senior tax consultant with the international
accounting firm of Deloitte & Touche in Philadelphia, Pennsylvania.
PAUL KOUCH has been a Director of the Company since August 1994. Mr. Kouch
is the Vice President and co-founder of Gearo's Inc. and Paroma Inc., a group
of multiple location specialty restaurants in the Philadelphia area, which he
has co-owned and operated over the past 15 years. He has over twenty years of
experience in managing all aspects of a business that has grown from a staff
of 6 to over one hundred.
DR. JOHN WADE SEEDOR was elected on July 28, 1995 to the Board of Directors.
Dr. Seedor is a board certified physician who had served as Vice President of
the Medical Staff of Taylor Hospital, Philadelphia, Pennsylvania and holds a
faculty appointment at the University of Pennsylvania. Dr. Seedor has been the
chairman of numerous hospital committees and currently serves on the Executive
Committee of Taylor Hospital.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the cash
compensation paid by the Company for services rendered during the fiscal year
ended December 31,1995, to its Chief Executive Officer. No officer or director
was paid salary and bonus in excess of $100,000 during 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------- ------------------------ --------------------
OTHER RESTRICTED SECURITIES
NAME AND ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS# PAYOUTS COMPENSATION
- ------------------------ ------- ------- ------------ ---------- ------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert A. Vito.......... $80,423 $15,238 350,000(1)
President, Chief Executive
Officer, Treasurer and
Chairman of the Board
</TABLE>
No stock options were granted to the Company's Chief Executive Officer
during 1995. None of the Company's officers exercised options during the
fiscal year ended December 31, 1995. The following table sets forth certain
information regarding options held as of December 31, 1995, by the Company's
Chief Executive Officer.
- --------
(1) On September 18, 1996, the Company and Mr. Vito entered into an agreement
whereby 300,000 outstanding options were canceled for no consideration.
See "Certain Transactions."
25
<PAGE>
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END(1) (2) AT FISCAL YEAR END(1) (2)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert A. Vito............. 233,330 116,670 $1,034,000 $516,000
</TABLE>
- --------
(1) There was no public trading market for the Common Stock as of December 31,
1995. Accordingly, these values have been calculated on the basis of the
price of shares of Common Stock sold in a private placement which was
being conducted at December 31, 1995.
(2) On September 18, 1996 the Company and Mr. Vito entered into an agreement
whereby 300,000 outstanding options were canceled for no consideration.
See "Certain Transactions."
In 1995, Mr. Vito was the only officer of the Company who participated in
deliberations of the Board of Directors concerning executive officer
compensation.
EMPLOYMENT AGREEMENTS
Robert A. Vito and Myrddin L. Jones have both entered into employment
agreements with the Company which terminate on December 31, 2003. Mr. Vito's
employment agreement calls for compensation at a rate mutually agreed upon by
the Company and Mr. Vito. Stephen B. Pudles, Dr. C.B. Patel, Robert B. Sando,
Louis J. Petriello, George Daly and certain other current employees have
entered into three year employment agreements which expire between 1997 and
1999.
Each of the Company's employment agreements described above required
acknowledgment of the Company's ownership of information created, discovered
or developed by the employee/executive and applicable to the business of the
Company and any client, customer or strategic partner of the Company. Each
employee/executive also agreed to assign all rights he may have or acquire in
proprietary information of the Company and to keep such proprietary
information confidential, and also agreed to certain covenants not to compete
with the Company.
COMPENSATION OF DIRECTORS
The Company has not paid any cash compensation and does not presently
propose to pay cash compensation to any director for acting in such capacity
except for reimbursement for reasonable expenses in attending meetings.
However, the Company has issued options to purchase Common Stock to its
directors, all of which have been cancelled except for options to purchase
12,500 shares of Common Stock.
26
<PAGE>
CERTAIN TRANSACTIONS
As of the date hereof, the Company had sold an aggregate of 1,968,250 shares
of Common Stock to various executive officers and directors for an aggregate
consideration of $540,180. Of such shares, 1,075,000 are owned by Robert A.
Vito, 400,000 are owned by Myrddin L. Jones, 450,000 are owned by Paul Kouch,
37,500 are owned by Dr. John Wade Seedor, 5,000 are owned by Louis J.
Petriello, and 250 are owned by Stephen B. Pudles.
Further, executive officers and directors currently hold options to purchase
500,000 shares of Common Stock in the aggregate. See "Principal and Selling
Shareholders" and "Dilution."
In order to reduce a significant source of potential future dilution, on
September 18, 1996, the Company and certain of its officers and directors
agreed to cancel the following outstanding options for no consideration:
<TABLE>
<CAPTION>
STOCK OPTIONS (1)
----------------------------------
GRANTED CANCELLED CURRENTLY HELD
--------- --------- --------------
<S> <C> <C> <C>
Robert A. Vito....................... 350,000 300,000 50,000
Myrddin L. Jones..................... 312,500 287,500 25,000
Stephen B. Pudles.................... 300,000 100,000 200,000
Paul Kouch........................... 50,000 50,000 0
--------- ------- -------
1,012,500 737,500 275,000
========= ======= =======
</TABLE>
- --------
(1) The amounts represent shares of Common Stock underlying options cancelled
by agreement between the officer or director and the Company.
PRINCIPAL AND SELLING SHAREHOLDERS
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of the date hereof, certain information
regarding the beneficial ownership of the Common Stock of the Company by (i)
each director, (ii) all directors and executive officers as a group and (iii)
each person or group of persons known to the Company to be the beneficial
owner of more than 5% of the shares of Common Stock outstanding.
<TABLE>
<CAPTION>
PERCENT OF CLASS
-----------------
BENEFICIAL OWNERSHIP BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER(1) PRIOR TO THE OFFERING(2) OFFERING OFFERING
--------------------------------------- ------------------------ -------- --------
<S> <C> <C> <C>
Robert A. Vito................. 1,125,000 16.2% 11.5%
Myrddin L. Jones............... 425,000 6.2% 4.2%
Paul Kouch..................... 450,000 6.5% 4.5%
Dr. John Wade Seedor........... 40,000 * *
All Directors and Executive
Officers as a Group
(9 persons)................... 2,316,500 31.9% 22.8%
</TABLE>
- --------
* Less than 1%
(1) The address of the identified beneficial owners is 78 Great Valley
Parkway, Malvern, Pennsylvania 19355.
(2) Includes shares issuable pursuant to outstanding options to purchase
Common Stock that may be exercised within 60 days as follows: 50,000
shares for Mr. Vito, 25,000 shares for Mr. Jones, 0 shares for Mr. Kouch,
5,000 shares for Dr. Seedor, 5,000 shares for Mr. Petriello, and 387,500
shares for all directors and executive officers as a group.
27
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth as of the date hereof, certain information
concerning the Selling Shareholders and assumes exercise by the Underwriters
of the entire over-allotment option.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
BENEFICIAL AFTER OFFERING
OWNERSHIP ----------------------
PRIOR TO SHARES TO NUMBER
NAME OF BENEFICIAL OWNER OFFERING BE SOLD OF SHARES PERCENT
------------------------------ ---------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Robert A. Vito................ 1,125,000 100,000(1) 1,025,000 11.5%
Myrrdin L. Jones.............. 425,000 50,000(1) 375,000 4.2%
Paul Kouch.................... 450,000 50,000 400,000 4.5%
Stephen Pudles................ 200,250 50,000 150,250 1.7%
Dr. C.B. Patel................ 40,000 25,000 15,000 *
Robert B. Sando............... 20,000 5,000 15,000 *
George Daly................... 5,000 5,000 0 *
Louis J. Petriello............ 10,000 5,000 5,000 *
Deepak Srinivasan............. 20,000 10,000 10,000 *
--------- ------- ------------ -------
Total....................... 2,296,250 300,000 1,995,250 22.8%
========= ======= ============ =======
</TABLE>
- --------
* Less than 1%
(1) Mr. Vito and Mr. Jones are selling 50,000 shares each of Common Stock in
the offering. Mr. Vito is also participating as a Selling Shareholder in
the Underwriters' over-allotment option.
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue 20,000,000 shares of Common Stock, no par
value. As of the date hereof, 6,878,340 shares of Common Stock are outstanding
and are held of record by 333 shareholders. The following is a summary
description of certain provisions relating to the Company's Common Stock
contained in its Articles of Incorporation, as amended, its ByLaws and under
the Pennsylvania Business Corporation Law of 1988, as amended (the "BCL") and
is qualified in its entirety by reference to the Company's Articles of
Incorporation, as amended, ByLaws and the BCL.
VOTING RIGHTS
Each outstanding share of Common Stock has one vote on all matters requiring
a vote of the shareholders. The Common Stock is entitled to cumulative voting
for the election of the directors of the Company.
LIQUIDATION RIGHTS
In the event of a voluntary or involuntary liquidation of the Company, all
shareholders are entitled to a pro rata distribution after payment of
liabilities and after provision has been made for each class of stock, if any,
having preference over the Common Stock.
PREEMPTIVE RIGHTS
The holders of the Common Stock have no preemptive rights with respect to
the Company's offerings of shares of its Common Stock.
DIVIDEND RIGHTS
Holders of Common Stock are entitled to dividends if, as and when declared
by the Board of Directors out of the funds legally available therefor. It is
the present intention of the Company to retain earnings, if any, for the
foreseeable future for use in its business. See "Dividend Policy."
28
<PAGE>
TRANSFER AGENT
The Transfer Agent for the Common Stock of the Company is Chase Mellon
Shareholder Services.
PERSONAL LIABILITY OF DIRECTORS
Subject to certain exceptions, the BCL permits Pennsylvania corporations to
eliminate or limit the personal liability of a director for monetary damages
arising actions taken as a director. The Company's ByLaws include a provision
eliminating the personal liability of directors to the Company and its
shareholders for monetary damages for any actions, or failure to take actions
as a director unless (i) the director has breached or failed to perform the
duties of his office, and (ii) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness. Directors are not insulated
from liability pursuant to any criminal statute, or for the payment of taxes.
The foregoing provisions of the Company's ByLaws may reduce the likelihood of
derivative litigation against directors for breaches of their duties, even
though such an action, if successful, might otherwise have benefited the
Company and its shareholders.
The Company's ByLaws also provide that the Company shall indemnify its
directors, officers and agents to the fullest extent permitted by the BCL. The
Company presently has directors' and officers' liability insurance.
Furthermore, the Company may enter into indemnity agreements with its
directors and officers for the indemnification of, and advancing of expenses
to, such persons to the fullest extent permitted by law.
PENNSYLVANIA LAW
Certain provisions of Pennsylvania's corporate law regulate takeover
activity involving Pennsylvania corporations. Principally, the relevant
provisions provide: (i) broad discretion for the Board of Directors to
consider a variety of constituencies when evaluating the merits of a proposed
takeover, including employees, customers and creditors of the corporation,
over the interests of its shareholders; (ii) a mechanism which eliminates an
acquiring person's right to vote his shares under certain circumstances unless
such right is reinstated by a shareholder voting procedure; and (iii) a
corporation with the ability to recover profits realized by certain persons
acquiring and disposing of stated percentages of voting control of a
corporation under certain circumstances.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering, the Company will have 8,878,340
shares of Common Stock outstanding. The Company has reserved for issuance
776,250 shares of Common Stock upon the exercise of outstanding options all of
which shall be exerciseable within five years of the date hereof. Of the
shares of Common Stock to be issued and outstanding after this offering, the
2,100,000 shares of Common Stock offered hereby (plus any additional shares
sold upon exercise of the Underwriters' over-allotment option) will be freely
tradable without restriction or further registration under the Securities Act,
except for any share purchased or held by an "affiliate" of the Company (in
general, a person who has a control relationship with the Company) which will
be subject to the limitations of applicable law. The remaining 6,778,340
shares of outstanding Common Stock, constitute "restricted securities" as that
term is defined under Rule 144, and may not be sold unless registered under
the Securities Act or exempted therefrom. All of such shares, except for
approximately 2,824,090 shares, are now eligible to be sold in accordance with
the exemptive provisions of Rule 144.
In general, under Rule 144, as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an "affiliate"
of the Company, who for at least two years has beneficially owned restricted
securities acquired directly or indirectly from the Company or an affiliate of
the Company in a private transaction, is entitled to sell in brokerage
transactions within any three-month period, a number of shares that does not
exceed the greater of (i) 1% of the total number of outstanding shares of the
same class, or (ii) if the stock is quoted by Nasdaq, the average weekly
trading volume in the stock during the four calendar weeks preceding the
notice given to the Securities and Exchange Commission (the "Commission") with
respect to such sale. A person who is not an affiliate and has not been an
affiliate of the Company for at least three months immediately preceding the
sale and who has beneficially owned restricted securities for at least three
years is entitled to sell such shares pursuant to subparagraph (k) of Rule 144
without regard to any of the limitations
29
<PAGE>
described above. Sales of the Common Stock by certain of the present
shareholders in the future may have a depressive effect on the price of the
Common Stock.
The holders of 1,633,267 shares that were issued in the most recently
completed private placement of shares concluding on August 22, 1996 have been
granted certain registration rights requiring the filing of a registration
statement for resale of such shares within 60 days of a demand for such
registration made after 12 months after the Company becomes a reporting
company. The Company has agreed to register 776,250 shares of Common Stock
underlying outstanding options to purchase Common Stock in four substantially
equal installments beginning six months after the consummation of this
offering. The Company intends to maintain the effectiveness of the
registration statements utilized until the earlier of the time that all Common
Stock registered thereby is sold or an exemption from the Securities Act
exists under which all of the Common Stock covered by a particular
registration statement may be sold without a currently effective registration
statement.
All of the Company's directors and executive officers (who hold in the
aggregate approximately 1,968,000 shares) have agreed not to sell, offer to
sell or otherwise dispose of any shares of the Company's Common Stock until
180 days from the date of this Prospectus, except pursuant to gifts or pledges
in which the donee or pledgee agrees to be bound by such restrictions, without
the prior written consent of Pennsylvania Merchant Group Ltd. These agreements
are enforceable only by the parties thereto, and are subject to rescission or
amendment at any time without the approval of other shareholders.
30
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters") have severally agreed to
purchase from the Company and certain Selling Shareholders the number of
shares of Common Stock set forth opposite their respective names in the table
below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------------------------------------------------------------- ---------
<S> <C>
Pennsylvania Merchant Group Ltd....................................
---------
Total............................................................ 2,100,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent. The nature of the Underwriters'
obligation is that they are committed to purchase all shares of Common Stock
offered hereby if any of such shares are purchased.
The Company has been advised by the Underwriters, for whom Pennsylvania
Merchant Group Ltd is acting as the representative (the "Representative"),
that they propose initially to offer the shares of Common Stock directly to
the public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers (which may include Underwriters) at such
public offering price less a concession not to exceed $ per share. The
Underwriters may allow, and such dealers may re-allow, a discount not to
exceed $ per share in sales to certain other dealers. After the public
offering, the public offering price and concessions and discounts may be
changed by the Representative.
Certain of the Selling Shareholders and the Company have granted to the
Underwriters an option, exercisable not later than 30 days after the date of
this Prospectus, to purchase up to an additional 315,000 shares of Common
Stock at the public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus. To the extent that
the Underwriters exercise such option, each of the Underwriters will have a
firm commitment to purchase approximately the same percentage thereof that the
number of shares of Common Stock to be purchased by it shown in the table
above bears to the number of shares of Common Stock offered hereby, and the
Selling Shareholders and the Company will be obligated pursuant to the over-
allotment option to sell such shares to the Underwriters. If such over-
allotment option is exercised in part, the Selling Shareholders granting such
over-allotment option will have priority on the sale of their shares subject
to such over-allotment option before the Company may sell any of its shares
pursuant to such over-allotment option. If the over-allotment option is
partially exercised such that less than all of the Selling Shareholders'
shares subject to such over-allotment option are covered by such exercise,
then such exercise shall cover an amount of shares of the Selling Shareholders
allocated ratably among such Selling Shareholders based upon the amount of
shares held by the Selling Shareholders that are subject to the over-allotment
option. The Underwriters may exercise the option only for the purposes of
covering over-allotments, if any, made in connection with the distribution of
the shares of Common Stock to the public. See "Principal and Selling
Shareholders."
The Representative has informed the Company that the Underwriters do not
intend to confirm sales of shares of the Common Stock offered hereby to any
accounts over which they exercise discretionary authority.
Prior to this offering there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price will be
determined through negotiations among the Company and the Representative.
Among the factors considered in making such determination are the prevailing
market conditions,
31
<PAGE>
the Company's financial and operating history and condition, its prospects and
the prospects for its industry in general, the management of the Company, and
the market prices of securities of companies in businesses similar to that of
the Company.
The Company, Mr. Vito, Mr. Jones and, assuming the over-allotment option is
exercised, all the Selling Shareholders, have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
The Company's executive officers and directors who hold in the aggregate
approximately 1,968,000 shares of Common Stock have agreed not to sell, offer
to sell or otherwise dispose of any shares of Common Stock (other than
pursuant to the exercise of the Underwriters' over-allotment option) until 180
days from the date of this Prospectus, except pursuant to gifts or pledges in
which the donee or pledgee agrees to be bound by such restrictions, without
the prior written consent of Pennsylvania Merchant Group Ltd. See "Shares
Eligible for Future Sale."
The Company has agreed to pay to the Representative a non-accountable
expense allowance equal to 1% of the gross offering proceeds.
From May 21 through August 22, 1996, the Company sold an aggregate of
1,633,267 shares of Common Stock in a private placement at a price of $7.00
per share. Pennsylvania Merchant Group Ltd was the placement agent utilized by
the Company in connection with the sale of a portion of such shares. Except
for the exclusive right to underwrite any public offering for a limited period
of time, Pennsylvania Merchant Group Ltd did not charge or receive any
commissions or other compensation in connection with its services as placement
agent for such private placement.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Fox, Rothschild, O'Brien & Frankel, 2000 Market Street,
Philadelphia, Pennsylvania 19103. Certain legal matters will be passed upon
for the Underwriters by Drinker Biddle & Reath, 1345 Chestnut Street,
Philadelphia, Pennsylvania 19107.
EXPERTS
The financial statements of the Company as of December 31, 1995 and for the
year ended December 31, 1995 included in this Prospectus have been so included
in reliance on the report of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The financial statements of the Company as of December 31, 1994 and for the
year ended December 31, 1994 and for the period from September 3, 1993
(inception) to December 31, 1993 included in this Prospectus have been so
included in reliance on the report of Sacco Sweeney & Schneider (now "Sacco
Sweeney LLP"), independent accountants given on the authority of said firm as
experts in auditing and accounting.
On June 9, 1995, the Company dismissed Sacco Sweeney LLP as the Company's
independent accountants. The report on the financial statements of the Company
for the period from inception through December 31, 1994, prepared by Sacco
Sweeney LLP, contained no adverse opinion or disclaimer of opinion and was not
modified as to uncertainty, audit scope or accounting principles. The decision
to change independent accountants was made by Mr. Robert A. Vito, President,
Chief Executive Officer and Treasurer of the Company and Mr. Robert B. Sando,
Vice President of Finance and Secretary of the Company. In connection with its
audit for the period from inception through December 31, 1994 and through June
9, 1995 there have been no disagreements with Sacco Sweeney LLP on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of Sacco Sweeney LLP would have caused them to make reference
thereto in their report on the financial statements for the period from
inception through December 31, 1994.
32
<PAGE>
On June 9, 1995, the Company engaged Price Waterhouse LLP as the Company's
independent accountants. During the period from inception through December 31,
1994 and through June 9, 1995, the Company has not consulted with Price
Waterhouse LLP on items which (i) were or should have been subject to SAS 50
or (ii) concerned the subject matter of a disagreement or reportable event
with Sacco Sweeney LLP, as described in Item 304(a)(2) of Regulation S-K.
The law firm of Ratner & Prestia, a professional corporation, is
intellectual property counsel to the Company. Such firm was consulted by the
Company with respect to the status of the Company's patent applications and
certain trademark matters disclosed in this Prospectus. Ratner & Prestia, a
professional corporation, does not handle all trademark matters for the
Company. Such firm is also representing the Company in the Phonex litigation
and was consulted by the Company regarding the status of that litigation as
disclosed in this Prospectus. Ratner & Prestia, a professional corporation,
has issued opinions dated May 1, 1995, and May 29, 1996 to the Company in
connection with the Phonex litigation. All such disclosures have been included
in this Prospectus upon the authority of said firm as experts in intellectual
property law.
ADDITIONAL INFORMATION
The Company is not subject to the informational requirements of the
Securities Exchange Act of 1934, as amended. The Company has filed with the
Commission, a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act with respect to the Common Stock being
offered hereby. This Prospectus, filed as part of the Registration Statement,
does not contain all the information set forth in such Registration Statement
and the exhibits relating thereto, certain portions of which have been omitted
as permitted by the rules and regulations of the Commission. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete. In each instance, reference
is made to the copy of such contract or other document filed as an exhibit to
this Registration Statement and such statement is qualified in all respects by
such reference. For further information with respect to the Company and the
Common Stock offered by this Prospectus, reference is made to such
Registration Statement and exhibits and schedules thereto, filed as part
thereof, which may be examined without charge at the offices of the Commission
at 450 Fifth Street, N.W., Washington, DC 20549; Seven World Trade Center,
13th Floor, New York, NY 10048, and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago IL 60621-2511 and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
DC 20549. The Commission maintains a site on the World Wide Web at
http://www.sec.gov. The Web site contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission.
33
<PAGE>
ELCOM TECHNOLOGIES CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants.......................................... F-2
Independent Auditor's Report............................................... F-3
Independent Auditor's Report............................................... F-4
Consolidated Balance Sheet................................................. F-5
Consolidated Statement of Operations....................................... F-6
Consolidated Statement of Changes in Stockholders' Equity (Deficit)........ F-7
Consolidated Statement of Cash Flows....................................... F-8
Notes to Consolidated Financial Statements................................. F-9
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders and Elcom Technologies Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of cash flows and of changes in
stockholders' equity (deficit) present fairly, in all material respects, the
financial position of Elcom Technologies Corporation at December 31, 1995, and
the results of its operations and its cash flows for the year in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Philadelphia, Pennsylvania
March 1, 1996
F-2
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Elcom Technologies Corporation
Malvern, Pennsylvania
We have audited the accompanying balance sheet of Elcom Technologies
Corporation (a development stage company) as of December 31, 1994, and the
related statements of operations, stockholders' equity, and cash flows for the
period from September 3, 1993 (inception), to December 31, 1994 and for the
year ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Elcom Technologies
Corporation as of December 31, 1994, and the results of its operations and its
cash flows from September 3, 1993 (inception), to December 31, 1994 and for
the year ended December 31, 1994, in conformity with generally accepted
accounting principles.
Sacco, Sweeney & Schneider
Jenkintown, Pennsylvania
June 8, 1995
F-3
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Elcom Technologies Corporation
Malvern, Pennsylvania
We have audited the accompanying balance sheet of Elcom Technologies
Corporation (a development stage company) as of December 31, 1993, and the
related statements of operations, stockholders' equity, and cash flows for the
period from September 3, 1993 (inception), to December 31, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Elcom Technologies
Corporation as of December 31, 1993, and the results of its operations and its
cash flows from September 3, 1993 (inception), to December 31, 1993, in
conformity with generally accepted accounting principles.
Sacco, Sweeney & Schneider
Jenkintown, Pennsylvania
October 20, 1995
F-4
<PAGE>
ELCOM TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............ $ 6,012,440 $ 2,040,895 $ 447,495
Accounts receivable (net of an
allowance for doubtful accounts of
$4,200 at September 30, 1996)....... 79,058
Inventory............................ 3,006,972
Prepaids and other current assets.... 75,367 922
------------ ----------- -----------
Total current assets............... 9,173,837 2,040,895 448,417
------------ ----------- -----------
Property and equipment:
Office and computer equipment........ 459,019 301,072 94,489
Research and engineering equipment... 197,398 163,215 102,120
Leasehold improvements............... 58,448 15,687 3,101
------------ ----------- -----------
714,865 479,974 199,710
Less: accumulated depreciation......... (169,396) (87,628) (28,670)
------------ ----------- -----------
Net property and equipment........... 545,469 392,346 171,040
Patents and patents pending............ 231,649 133,893 100,415
Deposits and other assets.............. 620,109 46,909 61,911
------------ ----------- -----------
$ 10,571,064 $ 2,614,043 $ 781,783
============ =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Notes payable........................ $ 225,000
Current portion of capital lease
obligation.......................... 1,610 $ 15,020 $ 13,289
Research grant liability (Note 4).... 226,141 126,141 76,141
Accounts payable and accrued
expenses............................ 1,876,704 573,366 111,572
Accrued stock option compensation.... 2,741,751 3,504,299
------------ ----------- -----------
Total current liabilities.......... 5,071,206 4,218,826 201,002
Capital lease obligation, less current
portion............................... 4,973 19,992
------------ ----------- -----------
Total liabilities.................. 5,071,206 4,223,799 220,994
------------ ----------- -----------
Commitments and contingencies (Notes 4,
5 and 7)..............................
Stockholders' equity (deficit):
Common stock, no par value,
20,000,000 shares authorized,
8,858,340, 7,094,987 and 6,023,433
shares issued as of September 30,
1996, December 31, 1995 and 1994,
respectively........................ 22,161,697 7,100,532 1,842,765
Treasury stock, 1,980,000 shares at
cost................................ (695,000) (695,000)
Accumulated deficit.................. (15,966,839) (8,015,288) (1,281,976)
------------ ----------- -----------
Total stockholders' equity
(deficit)......................... 5,499,858 (1,609,756) 560,789
------------ ----------- -----------
$ 10,571,064 $ 2,614,043 $ 781,783
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ELCOM TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 3,
1993
NINE MONTHS ENDED YEAR ENDED (INCEPTION) TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------------------ ------------------------ --------------
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............... $ 522,505
Cost of goods sold...... 417,420
-----------
Gross profit........ 105,085
-----------
Operating expenses:
General and
administrative....... 4,962,344 $ 3,867,801 $ 4,367,739 $ 688,909 $ 54,981
Research and
development.......... 3,172,584 1,848,595 2,413,686 549,523
----------- ----------- ----------- ----------- --------
Total operating
expenses........... 8,134,928 5,716,396 6,781,425 1,238,432 (54,981)
----------- ----------- ----------- ----------- --------
Interest income
(expense), net......... 78,292 22,991 48,113 10,954 483
----------- ----------- ----------- ----------- --------
Net loss............ $(7,951,551) $(5,693,405) $(6,733,312) $(1,227,478) $(54,498)
=========== =========== =========== =========== ========
Weighted average common
shares outstanding..... 6,372 6,144 6,009 6,195 5,210
=========== =========== =========== =========== ========
Net loss per common
share.............. $ (1.25) $ (.93) $ (1.12) $ (.20) $ (.01)
=========== =========== =========== =========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
ELCOM TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
PERIOD FROM SEPTEMBER 3, 1993 (INCEPTION) THROUGH DECEMBER 31, 1995
NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------------- TREASURY ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT STOCK DEFICIT EQUITY (DEFICIT)
--------- ----------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Balance at inception
Original issuance of
stock.................. 4,000,000 $ 4,000 $ 4,000
Issuance of common stock
for cash............... 757,500 192,500 192,500
Net loss................ $ (54,498) (54,498)
--------- ----------- --------- ------------ -----------
Balance at December 31,
1993.................. 4,757,500 196,500 0 (54,498) 142,002
Issuance of common stock
for cash............... 1,099,183 1,575,915 1,575,915
Issuance of common stock
for services........... 166,750 70,350 70,350
Net loss................ (1,227,478) (1,227,478)
--------- ----------- --------- ------------ -----------
Balance at December 31,
1994.................. 6,023,433 1,842,765 0 (1,281,976) 560,789
Issuance of common stock
for cash............... 1,051,554 5,257,767 5,257,767
Common stock repurchases
(1,980,000 shares)..... (695,000) (695,000)
Net loss................ (6,733,312) (6,733,312)
--------- ----------- --------- ------------ -----------
Balance at December 31,
1995................... 7,074,987 7,100,532 (695,000) (8,015,288) (1,609,756)
Issuance of common stock
for cash............... 1,763,103 12,011,435 12,011,435
Issuance of common stock
for services........... 20,250 93,500 93,500
Cancellation of stock
options (note 3)....... 2,956,230 2,956,230
Net loss................ (7,951,551) (7,951,551)
--------- ----------- --------- ------------ -----------
Balance at September 30,
1996 (unaudited)....... 8,858,340 $22,161,697 $(695,000) $(15,966,839) $ 5,499,858
========= =========== ========= ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
ELCOM TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 3,
1993 (INCEPTION)
NINE MONTHS ENDED THROUGH
SEPTEMBER 30, YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------------ ------------------------ ----------------
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss................ $(7,951,551) $(5,693,405) $(6,733,312) $(1,227,478) $ (54,498)
Adjustments to
reconcile net loss to
net cash used by
operating activities..
Depreciation and
amortization......... 82,539 38,729 58,958 30,667 4,022
Common stock issued
for services......... 93,500 70,350
Stock option
compensation
expense.............. 2,194,407 3,615,390 3,504,299
Changes in assets and
liabilities:
Accounts receivable.. (79,058)
Inventory............ (3,006,972)
Prepaid expenses..... (75,367) 922
Deposits and other
assets.............. (573,200) 27,361 15,924 4,000 (5,800)
Accounts payable and
accrued expenses.... 1,302,613 88,259 261,794 81,275 25,675
----------- ----------- ----------- ----------- ---------
Net cash used by
operating
activities......... (8,013,089) (1,922,744) (2,892,337) (1,041,186) (30,601)
----------- ----------- ----------- ----------- ---------
Cash flows from
investing activities:
Purchase of fixed
assets................ (234,891) (120,328) (280,264) (156,441) (105,184)
Patent and license
costs................. (98,527) (144,016) (153,478) (80,330) (20,600)
----------- ----------- ----------- ----------- ---------
Net cash used by
investing
activities......... (333,418) (264,344) (433,742) (236,771) (125,784)
----------- ----------- ----------- ----------- ---------
Cash flows from
financing activities:
Proceeds from note
payable............... 225,000
Proceeds from long-term
debt.................. 91,409 20,000
Proceeds from issuance
of common stock....... 12,011,435 4,429,264 5,257,767 1,575,915 196,500
Repayment of capital
lease obligation...... (18,383) (10,746) (13,288) (28,127)
Proceeds from research
grant................. 100,000 45,000 50,000 26,140
Repurchase of common
stock................. (375,000) (375,000)
----------- ----------- ----------- ----------- ---------
Net cash provided by
financing
activities......... 12,318,052 4,088,518 4,919,479 1,639,197 242,640
----------- ----------- ----------- ----------- ---------
Net increase............ 3,971,545 1,901,430 1,593,400 361,240 86,255
Cash and cash
equivalents, beginning
of period.............. 2,040,895 447,495 447,495 86,255 --
----------- ----------- ----------- ----------- ---------
Cash and cash
equivalents, end of
period................. $ 6,012,440 $ 2,348,925 $ 2,040,895 447,495 $ 86,255
=========== =========== =========== =========== =========
Supplemental disclosures
interest paid.......... $ 17,543 $ 1,787 $ 1,787 $ 2,619 $ --
=========== =========== =========== =========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
ELCOM TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994 SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
1. DESCRIPTION OF THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business. Elcom Technologies Corporation (the "Company"), a
Pennsylvania Corporation, was formed on September 3, 1993. The Company was a
development stage company through the first quarter of 1996. Revenues were
first earned in the second quarter of 1996. The Company is the developer of a
technology which enables the distribution of video, voice and audio signals
over a home's existing electrical wiring, thereby eliminating the need for
dedicated wiring. The Company is developing a family of products incorporating
this technology and recently began marketing five such products.
One customer accounted for 78% of the Company's sales for the period ended
September 30, 1996.
Principles of Consolidation. The consolidated financial statements include
the accounts of Elcom Technologies Corporation and its wholly-owned
subsidiary, Elcom Cash Management Corporation, formed in February 1996. All
intercompany transactions have been eliminated in consolidation.
Cash Equivalents. The Company considers all highly liquid investments with
original maturities of ninety days or less to be cash equivalents. Cash
equivalents include certificates of deposits of $255,000 at December 31, 1995.
Financial Instruments. Financial instruments, including cash, accounts
payable and accrued expenses, capital leases and other liabilities are
recorded at cost, which approximates fair value.
Inventory. Inventories are valued at the lower of cost or market, cost being
determined using the average cost method.
Property and Equipment. Property and equipment are recorded at cost.
Depreciation is provided over the estimated useful lives of the assets of 5
years using the straight-line method. Maintenance and repairs are expensed as
incurred and the cost of betterments are capitalized.
Patents and licenses. The Company capitalizes the costs of securing its
rights under certain patent applications and the costs of acquiring licenses.
Amortization begins upon patent award or license purchase and continues for
the lesser of its useful life or 20 years.
Income Taxes. The provision for income taxes is determined in accordance
with Statement of Financial Accounting Standards No. 109 (FAS 109). FAS 109
uses the asset and liability approach which recognizes deferred tax assets and
liabilities for the expected future tax consequences attributable to the
differences between the recorded amounts of assets and liabilities in the
financial statements and their respective tax bases.
Earnings per share. Net loss per share is computed based on the weighted
average number of common and common equivalent shares outstanding during each
period. To the extent shares and options were issued within one year prior to
the anticipated initial public offering at prices less than the offering
price, such shares and options have been included in the calculation of common
and common equivalent shares outstanding (using the treasury stock method) as
if they were outstanding since September 3, 1993. Such earnings per common
share amount will change if the actual initial public offering price differs
from the assumed initial public offering price of $9.00 per share.
Long-lived assets. The Company adopted Statement of Financial Accounting
Standards No. 121 (FAS 121), "Accounting for Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed Of" effective January 1, 1996. FAS 121
established accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used for long-lived assets and certain intangibles to be disposed of.
Under FAS 121, the Company will periodically review its long-lived assets to
assess recoverability through a non-discounted cash flow analysis and any
perceived impairment would be charged to operations in the period such
impairment becomes evident. There was no material effect from the adoption of
FAS 121 on the financial position or results of operations of the Company.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-9
<PAGE>
ELCOM TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994 SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
2. INVENTORIES
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996
-------------
<S> <C>
Raw materials................................................ $2,068,794
Finished goods............................................... 938,178
----------
$3,006,972
==========
</TABLE>
The above amounts are net of a $50,000 valuation reserve.
The Company's products are manufactured by one supplier located in Malaysia.
In July 1995, the Company entered into a purchase agreement with a supplier of
a component of the Company's products. The Company paid a deposit of $387,500
to the supplier in July 1996 and is committed to purchase an additional
$1,162,500 of the component through April 1997.
3. COMMON STOCK
The Company had 5,094,987 shares of its common stock issued and outstanding
as of December 31, 1995. Common stockholders have certain voting rights and
are entitled to dividends if and when declared. During the period from
September 3, 1993 (inception) through December 31, 1995, the Board of
Directors authorized a 10 for 1 and, subsequently, a 2 for 1 split of the
common stock.
On October 11, 1996, the Board of Directors authorized a one-for-two reverse
split of the Company's common stock. Accordingly, all references in the
financial statements to number of shares, per share amounts, stock option data
and market prices have been retroactively adjusted.
The Company has granted stock options to key employees and others. No
options were exercised or were exercisable at December 31, 1995 (296,000
exercisable at September 30, 1996). All stock options originally had been
conditioned upon certain performance criteria established by the President or
Board of Directors of the Company. Prior to 1995, in the opinion of
management, it was not probable the performance criteria would be met,
accordingly, no compensation with respect to such options had been accrued. In
1995 it became probable the performance criteria would be met and/or the
outstanding options would be amended to provide vesting from original dates of
employment. Accordingly, as of June 30, 1995, the cumulative compensation
through such date was recorded. Subsequently, in July 1995, the Company
revised the outstanding options so that such options vest over four years from
the original dates of issuance and are no longer conditioned upon performance
criteria.
In August 1996, the Company canceled 737,500 options previously granted to
certain officers and extended the expiration date for all remaining stock
options to December 31, 2002. Stock option compensation expense was accrued
for options with below market prices commencing with the new measurement date.
The liability for accrued stock option compensation of $2,956,230 associated
with the canceled options was transferred to equity. The remaining excess of
option value over exercise price of approximately $1,352,000 at September 30,
1996 will be charged to expense over the remaining vesting periods. The
accrued stock option compensation liability will be settled by the issuance of
common stock when the related options are exercised, and therefore, will not
require any cash payments.
F-10
<PAGE>
ELCOM TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994 SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
The following table sets forth a summary of activity related to the
Company's options.
<TABLE>
<CAPTION>
ACCRUED STOCK OPTION
SHARES UNDER RANGE OF STOCK OPTION COMPENSATION
OPTION EXERCISE PRICES COMPENSATION EXPENSE
------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
Balance at December 31,
1993................... 600,000 $.50-$1.00 -- --
Balance at December 31,
1994................... 1,395,000 $.50-$1.00 -- --
Options granted......... 185,000 $1.00-$5.00
Options forfeited....... (150,000) $.50-$5.00 $ (353,421) $ (353,421)
Options exercised....... --
Compensation expense.... 3,857,720 3,857,720
--------- ----------- ----------
Balance at December 31,
1995................... 1,430,000 3,504,299 3,504,299
==========
Options granted......... 136,250 $5.00-$7.00
Options forfeited....... (37,500) $.50-$1.00 (33,750)
Options canceled........ (737,500) $.50-$1.00 (2,956,230)
Options exercised....... (15,000) $0.50 (725)
Compensation expense.... 2,194,407 2,228,157
--------- ----------- ----------
Balance at September 30,
1996................... 776,250 $.50-$7.00 $ 2,741,751 $2,194,407
========= =========== ==========
</TABLE>
4. RESEARCH GRANT LIABILITY
The Company has an agreement with the Ben Franklin Technology Center of
Southeastern Pennsylvania ("BFTC") whereby BFTC has awarded $126,141 to the
Company through December 31, 1995. The Company received an additional $100,000
from BFTC in the nine months ended September 30, 1996. The Company is required
to repay BFTC 3% of all Company revenues, up to a maximum of one and one-half
times to three times the amount of the award (approximately $340,000 at
December 31, 1995). The Company could repay less than the maximum by paying
the amount due in less than five years from the commencement of royalty
payments. Payments begin the first fiscal quarter after the Company has
cumulative revenues of $50,000. The Company accrued approximately $18,000 in
payments due to BFTC through September 30, 1996.
F-11
<PAGE>
ELCOM TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994 SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
5. COMMITMENTS AND CONTINGENCIES
The Company has an operating lease for its office space and a capital lease
for certain equipment. Rent expense for the year ended December 31, 1995 was
approximately $60,000. Future minimum lease payments under noncancellable
leases at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR LEASE LEASE
---- --------- -------
<S> <C> <C>
1996.................................................... $57,750 $16,120
1997.................................................... 82,500 5,374
-------
21,494
Less: Amount representing interest................................ (1,501)
-------
Present value of capital lease obligation......................... 19,993
Less: Current portion............................................. (15,020)
-------
$ 4,973
=======
</TABLE>
Property and equipment includes equipment under capital leases of $41,409
and accumulated amortization of $12,423 at December 31, 1995.
In September 1995, the Company entered into a five year license agreement.
In conjunction with the agreement, the Company paid a $50,000 license fee and
will pay royalty payments ranging from 2.5% to 5% of sales of certain licensed
products. Minimum royalties of $50,000 are payable by the Company in calendar
years 1996 through 1999. The $50,000 license fee is included in deposits and
other assets in the accompanying balance sheet and is being amortized over the
original license term of five years.
6. NOTES PAYABLE
In March 1996 the Company was approved for a $500,000 line of credit by a
bank through September 30, 1996. The Company was required to maintain a cash
balance of $225,000 and a certificate of deposit of $275,000 with the bank at
all times. Interest was payable at the prime rate on borrowings up to $275,000
and at the prime rate plus 1/2% for borrowings in excess of $275,000. The
balance outstanding at September 30, 1996 of $225,000 was repaid in October
1996, and the line of credit was not renewed.
The Company has a $3,000,000 letter of credit outstanding at September 30,
1996, which is secured by a $3,000,000 interest bearing account. The letter of
credit expires on December 31, 1996.
7. INCOME TAXES
Deferred tax assets of approximately $3,000,000 at December 31, 1995
relating primarily to the Company's net operating loss carryforwards and
employee stock option compensation, are offset by a full valuation allowance.
The valuation allowance increased approximately $2,500,000 during 1995 due to
additional net operating losses and employee stock option compensation
expense. At December 31, 1995, the Company has available net operating loss
carryforwards of approximately $4,000,000 which expire between 2008 and 2010.
Due to certain substantial changes in the Company's ownership, there will be
an annual limitation on the amount of the carryforwards which can be utilized.
8. CONTINGENCIES
A competitor has filed a complaint in Federal District Court alleging, among
other things, that one of the Company's products infringes two of its patents.
The Company believes that it has not infringed upon its
F-12
<PAGE>
ELCOM TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994 SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
competitor's patents and has obtained an opinion from its patent counsel to
that effect. Accordingly, management believes, based on advice of counsel,
that the resolution of this matter will not have a material adverse effect on
the Company's financial condition or results of operations. The Company plans
to vigorously defend such action and estimates that the cost of defense
through the trial stage will be approximately $500,000 (which is being
expensed as incurred); however, there can be no assurance that such amount
will not be exceeded. Additionally, in the event that the Company should lose
the litigation, the damages assessed against the Company could be substantial
and the Company could be enjoined from marketing one or more of its products
or could be required to seek a license from its competitor. There can be no
assurance that such a license could be obtained on acceptable terms.
9. SHAREHOLDER SETTLEMENT
In May 1995, a founder, director and minority stockholder of the Company
filed suit against the Company's President and one of its directors, who are
also shareholders of the Company. The complaint did not name the Company as a
party defendant. In July 1995, the parties settled the complaint. Terms of the
settlement required the claimant to return 3,900,000 shares of the Company's
common stock in return for 1) an immediate cash payment of $225,000, 2) all
patents invented by the claimant which were carried on the balance sheet at
that date at approximately $120,000, 3) certain contingent future payments not
to exceed $200,000.
F-13
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTA-
TION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PRO-
SPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY, NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. THE DELIVERY OF
THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS COR-
RECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Legal Proceedings........................................................ 11
Use of Proceeds.......................................................... 12
Dividend Policy.......................................................... 12
Capitalization........................................................... 12
Dilution................................................................. 13
Selected Financial Data.................................................. 14
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 15
Business................................................................. 17
Management............................................................... 24
Certain Transactions..................................................... 27
Principal and Selling Shareholders....................................... 27
Description of Securities................................................ 28
Shares Eligible for Future Sale.......................................... 29
Underwriting............................................................. 31
Legal Matters............................................................ 32
Experts.................................................................. 32
Additional Information................................................... 33
Index to Financial Statements............................................ F-1
</TABLE>
UNTIL , 1996, (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDI-
TION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UN-
DERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,100,000 SHARES
[LOGO OF ELCOM TECHNOLOGIES APPEARS HERE]
COMMON STOCK
----------------
PROSPECTUS
----------------
PENNSYLVANIA MERCHANT GROUP LTD
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
The expenses, other than the underwriting discount and commissions, incurred
in connection with the issuance and distribution of the securities being
registered (including the securities which may be issued pursuant to the over-
allotment option) are estimated as follows:
<TABLE>
<S> <C>
Registration Fee--Securities and Exchange Commission............ $ 7,399
Filing Fee--National Association of Securities Dealers, Inc. ... 2,915
Listing Fee--NASDAQ Stock Market, Inc. ......................... 39,696
Legal Fees and Expenses (other than Blue Sky Fees).............. 175,000
Blue Sky Fees and Expenses, including Legal Fees................ 25,000
Printing and Engraving.......................................... 125,000
Accounting, Fees and Expenses................................... 75,000
Representative's Non Accountable Expense Allowance.............. 189,000
Miscellaneous................................................... 10,990
--------
Total......................................................... $650,000
========
</TABLE>
- --------
* All amounts are estimated except Securities and Exchange Commission and NASD
filing and listing fees.
ITEM 14: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Sections 1741 through 1750 of the Pennsylvania Business Corporation
Law of 1988, as amended, the Registrant has the power to indemnify directors
and officers under certain prescribed circumstances and, subject to certain
limitations, against certain costs and expenses, including attorney's fees,
actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of his being a director or officer of the
Registrant if it is determined that he acted in accordance with the applicable
standard of conduct set forth in such statutory provisions. Such
indemnification may be made whether or not the Registrant would have the power
to indemnify the director under any other provision of law and whether or not
the indemnified liability arises or arose from any action by or in the right
of the Registrant.
The Registrant has directors' and officers' liability insurance for the
benefit of its directors or officers.
Section 4.01 of the ByLaws of the Company provides as follows:
(a) General Rule. Unless otherwise provided by statute all powers vested
by law in the Corporation shall be exercised by or under the authority of,
and the business and affairs of the Corporation shall be managed under the
direction of, the Board of Directors.
(b) Standard of Care; Justifiable Reliance. A director shall stand in a
fiduciary relation to the Corporation and shall perform his or her duties
as a director, including duties as a member of any committee of the Board
upon which the director may serve, in good faith, in a manner the director
reasonably believes to be in the best interests of the Corporation and with
such care, including reasonable inquiry, skill and diligence, as a person
of ordinary prudence would use under similar circumstances. In performing
his or her duties, a director shall be entitled to rely in good faith on
information, opinions, reports or statements, including financial
statements and other financial data, in each case prepared or presented by
any of the following:
(1) One or more officers or employees of the Corporation whom the
director reasonably believes to be reliable and competent in the
matters presented.
(2) Counsel, public accountants or other persons as to matters which
the directors reasonably believe to be within the professional or
expert competence of such person.
(3) A committee of the Board upon which the director does not serve,
designated in accordance with law, as to matters within its designated
authority, which committee the director reasonably believes to merit
confidence.
II-1
<PAGE>
A director shall not be considered to be acting in good faith if the
director has knowledge concerning the matter in question that would cause
his or her reliance to be unwarranted.
(c) Consideration of Factors. In discharging the duties of their
respective positions, the Board of Directors, committees of the Board and
individual directors may, in considering the best interests of the
Corporation, consider the effects of any action upon employees, upon
suppliers and customers of the Corporation and upon communities in which
offices or other establishments or the Corporation are located, and all
other pertinent factors. The consideration of those factors shall not
constitute a violation of subsection (b).
(d) Presumption. Absent breach of fiduciary duty, lack of good faith or
self-dealing, actions taken as a director or any failure to take any action
shall be presumed to be in the best interests of the Corporation.
(e) Personal Liability of Directors.
(1) A director shall not be personally liable, as such for monetary
damages for any action taken, or any failure to take any action,
unless:
(i) the director has breached or failed to perform the duties of
his or her office under this section; and
(ii) the breach of failure to perform constitutes self-dealing,
willful misconduct or recklessness.
(2) The provisions of paragraph (1) shall not apply to the
responsibility or liability of a director pursuant to any criminal
statute, or the liability of a director for the payment of taxes
pursuant to local, state, and federal law.
(f) Notation of Dissent. A director who is present at a meeting of the
Board of Directors, or of a committee of the Board, at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless his or her dissent is entered in the minutes of the meeting or
unless the director files a written dissent to the action with the
secretary of the meeting before the adjournment thereof or transmits the
dissent in writing to the Secretary of the Corporation immediately after
the adjournment of the meeting. Nothing in this section shall bar a
director from asserting that minutes of the meeting incorrectly omitted his
or her dissent if, promptly upon receipt of a copy of such minutes, the
director notifies the Secretary in writing, of the asserted omission or
inaccuracy.
Article VII of the Company's ByLaws provides as follows:
Section 7.01. Right to Indemnification. The Corporation shall indemnify any
director or officer, and may indemnify any other employee or agent, who was or
is a party to, or is threatened to be made a party to, or who is called as a
witness in connection with any threatened, pending, or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative,
including an action by or in the right of the Corporation, by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement, actually and
reasonably incurred by him in connection with such action, suit or proceeding
unless the act or failure to act giving rise to the claim for indemnification
is determined by a court to have constituted willful misconduct or
recklessness.
Section 7.02. Scope of Indemnification. The indemnification and advancement
of expenses provided by, or granted pursuant to, this Article VII shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under these Bylaws, or any agreement,
contract, vote of shareholders or disinterested directors or pursuant to the
direction, howsoever embodied, of any court of competent jurisdiction or
otherwise, both as to action in any official capacity and as to action in
another capacity while holding such office. It is the policy of the
Corporation that indemnification of, and advancement of expenses to, directors
and officers of the Corporation shall be made to the fullest extent permitted
by law. To this end, the provisions of this Article VII shall be deemed to
have been amended for the benefit of directors and officers of the Corporation
effective immediately upon any modification of the Pennsylvania Business
Corporation Law of 1988, as amended (the "BCL"), that expands or enlarges the
power or obligation of
II-2
<PAGE>
corporations organized under the BCL to indemnify, or advance expenses to,
directors and officers of corporations.
Section 7.03. Expenses; Reimbursement. The Corporation shall pay expenses
incurred by an officer or director, and may pay expenses incurred by any other
employee or agent, in defending a civil or criminal action, suit or proceeding
in advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such person to repay such amount
if it shall ultimately be determined that he is not entitled to be indemnified
by the Corporation.
Section 7.04. Continuation. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article VII shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such person.
Section 7.05. Funding. The Corporation shall have the authority to create a
fund of any nature, which may, but need not be, under the control of a
trustee, or otherwise, to secure in any manner, its indemnification
obligations, whether arising under these Bylaws or otherwise. This authority
shall include, without limitation, the authority to: (i) deposit funds in
trust or in escrow; (ii) establish any form of self-insurance; (iii) secure
its indemnity obligation by grant of a security interest, mortgage or other
lien on the assets of the Corporation; or (iv) establish a letter of credit,
guaranty or surety arrangement for the benefit of such persons in connection
with the anticipated indemnification or advancement of expenses contemplated
by this Article VII. The provisions of this Article VII shall not be deemed to
preclude the indemnification of, or advancement of expenses to, any person who
is not specified in Section 7.01 of this Article VII but whom the Corporation
has the power or obligation to indemnify, or to advance expenses for, under
the provisions of the BCL or otherwise. The authority granted by this Section
7.05 shall be exercised by the Board of Directors of the Corporation.
Section 7.06. Indemnification Agreements. The Corporation shall have the
authority to enter into a separate indemnification agreement with any officer,
director, employee or agent of the Corporation or any subsidiary providing for
such indemnification of such person as the Board of Directors shall determine
up to the fullest extent permitted by law.
Section 7.07. Notice; Defense. As soon as practicable after receipt by any
person specified in Section 7.01 of this Article VII of notice of the
commencement of any action, suit or proceeding specified in Section 7.01 of
this Article VII, such person shall, if a claim with respect thereto may be
made against the Corporation under Article VII of these Bylaws, notify the
Corporation in writing of the commencement or threat thereof; however, the
omission so to notify the Corporation shall not relieve the Corporation from
any liability under Article VII of these Bylaws unless the Corporation shall
have been prejudiced thereby or from any other liability that it may have to
such person other than under Article VII of these Bylaws. With respect to any
such action as to which such person notifies the Corporation of the
commencement or threat thereof, the Corporation may participate therein at its
own expense and, except otherwise provided below, to the extent that it
desires, the Corporation, jointly with any other indemnifying party similarly
notified, shall be entitled to assume the defense thereof, with counsel
selected by the Corporation to the reasonable satisfaction of such person.
After notice from the Corporation to such person of its election to assume the
defense thereof, the Corporation shall not be liable to such person under
Article VII of these Bylaws for any legal or other expenses subsequently
incurred by such person unless: (i) the employment of counsel by such person
shall have been authorized by the Corporation; (ii) such person shall have
reasonably concluded that there may be a conflict of interest between the
Corporation and such person in the conduct of the defense of such proceeding;
or (iii) the Corporation shall not in fact have employed counsel to assume the
defense of such action. The burden of proving that indemnification is not
appropriate shall be on the Corporation. The Corporation shall not be entitled
to assume the defense of any proceeding brought by or on behalf of the
Corporation or as to which such person shall have reasonably concluded that
there may be a conflict of interest. If indemnification under Article VII of
these Bylaws or advancement of expenses are not paid or made by the
Corporation, or on its behalf, within ninety (90) days after a written claim
for indemnification or a request for an advancement of expenses has been
received by the Corporation, such person may, at any time thereafter, bring
suit against the Corporation to recover the unpaid amount of the claim or the
advancement of expenses. The right to indemnification and advancement of
expenses
II-3
<PAGE>
provided hereunder shall be enforceable by such person in any court of
competent jurisdiction. Expenses reasonably incurred by such person in
connection with successfully establishing the right to indemnification or
advancement of expenses, in whole or in part, shall also be indemnified by the
Corporation.
Section 7.08. Insurance. The Corporation shall have the power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article VII.
Pursuant to the Underwriting Agreement between the Underwriters and the
Company, a copy of which is filed as Exhibit 1 hereto, the Underwriters have
agreed to indemnify the Company, its officers and directors and all persons
who may be deemed to control the Company against certain civil liabilities
which may be incurred in connection with the offering, including certain
liabilities under the Securities Act of 1933.
ITEM 15: RECENT SALES OF UNREGISTERED SECURITIES
The Registrant has sold the following securities in the past three (3) years
without registering such securities under the Securities Act.
From inception through February 22, 1994, the Company sold 2,967,250 shares
of its Common Stock. The shares were sold to individual investors for an
aggregate offering price of $196,500. The Company paid no discounts or
commissions in connection with such sale. The exemption from registration
relied upon for such offering is set forth in Section 4(2) of the Securities
Act. The offering was limited in scope and there was no general solicitation
by the Company. All purchasers represented that they were accredited investors
who were familiar with the Company and its prospects and that they purchased
such securities for investment purposes only and not with a view for resale.
The transaction did not involve a public offering and was exempt under Section
4(2) of the Securities Act.
From approximately March 15, 1994 through October 3, 1994, the Company sold
487,000 shares of its Common Stock. The shares were sold to individual
investors for an aggregate offering price of $980,000. An additional 500,000
shares were issued to such purchasers on December 29, 1994, making the price
per share approximately $.98. The Company paid no discounts or commissions in
connection with such sale. The exemption from registration relied upon for
such offering is set forth in Section 4(2) of the Securities Act. The offering
was limited in scope and there was no general solicitation by the Company. All
purchasers represented that they were accredited investors who were familiar
with the Company and its prospects and that they purchased such securities for
investment purposes only and not with a view for resale. The transaction did
not involve a public offering and was exempt under Section 4(2) of the
Securities Act.
From approximately December 15, 1994 through April 28, 1995, the Company
sold 348,026 shares of its Common Stock. The shares were sold to individual
investors for an aggregate offering price of $1,740,133. The Company paid no
discounts or commissions in connection with such sale. The exemption from
registration relied upon for such offering is set forth in Section 4(2) of the
Securities Act. The offering was limited in scope and there was no general
solicitation by the Company. All purchasers represented that they were
accredited investors who were familiar with the Company and its prospects and
that they purchased such securities for investment purposes only and not with
a view for resale. The transaction did not involve a public offering and was
exempt under Section 4(2) of the Securities Act.
From approximately September 29, 1995 through January 18, 1996, the Company
sold 906,796 shares of its Common Stock. The shares were sold to individual
investors for an aggregate offering price of $4,533,979. The Company paid no
discounts or commissions in connection with such sale. The exemption from
registration relied upon for such offering is set forth in Section 4(2) of the
Securities Act. The offering was limited in scope and there was no general
solicitation by the Company. All purchasers represented that they were
accredited investors who were familiar with the Company and its prospects and
that they purchased such securities for investment purposes only and not with
a view for resale. The transaction did not involve a public offering and was
exempt under Section 4(2) of the Securities Act.
II-4
<PAGE>
From approximately May 21, 1996 through August 22, 1996, the Company sold
1,633,267 shares of its Common Stock. The shares were sold to individual
investors for an aggregate offering price of $11,432,872. The Company paid no
discounts or commissions in connection with such sale. The exemption from
registration relied upon for such offering is set forth in Section 4(2) of the
Securities Act. The offering was limited in scope and there was no general
solicitation by the Company. All purchasers represented that they were
accredited investors who were familiar with the Company and its prospects and
that they purchased such securities for investment purposes only and not with
a view for resale. The transaction did not involve a public offering and was
exempt under Section 4(2) of the Securities Act.
II-5
<PAGE>
ITEM 16: EXHIBITS
<TABLE>
<C> <S>
1 Form of Underwriting Agreement.
3(a) Articles of Incorporation, as amended.
3(b) ByLaws.
4 Specimen Common Stock Certificate.
5* Opinion of Fox, Rothschild, O'Brien & Frankel, Philadelphia, Pennsylvania.
10(a) Employment Agreement between the Company and George Daly dated September 18, 1995.
10(b) Stock Option Agreement between George Daly and the Company dated August 27, 1996.
10(c) Employment Agreement between Myrddin L. Jones and the Company dated July 28, 1995.
10(d) Stock Option Cancellation Agreement between Myrddin L. Jones and the Company dated
September 18, 1996.
10(e) Stock Option Agreement between Myrddin L. Jones and the Company dated September 19, 1996.
10(f) Employment Agreement between Louis J. Petriello and the Company dated October 1, 1996.
10(g) Employment Agreement between C.B. Patel and the Company dated July 28, 1995.
10(h) Stock Option Agreement between C.B. Patel and the Company dated August 27, 1996.
10(i) Stock Option Agreement between Louis J. Petriello and the Company dated September 30,
1996.
10(j) Employment Agreement between Stephen Pudles and the Company dated July 28, 1995.
10(k) Stock Option Cancellation Agreement between Stephen Pudles and the Company dated
September 18, 1996.
10(l) Stock Option Agreement between Stephen Pudles and the Company dated September 18, 1996.
10(m) Employment Agreement between Robert B. Sando and the Company dated July 28, 1995.
10(n) Stock Option Agreement between Robert B. Sando and the Company dated August 27, 1996.
10(o) Stock Option Agreement between John Wade Seedor and the Company dated August 27, 1996.
10(p) Employment Agreement between Robert A. Vito and the Company dated July 28, 1995.
10(q) Stock Option Cancellation Agreement between Robert A. Vito and the Company dated
September 18, 1996.
10(r) Stock Option Agreement between Robert A. Vito and the Company dated September 19, 1996.
10(s) Direct Response Television Marketing Agreement between QVC, Inc. and the Company dated
March 20, 1996.
10(t) Manufacturing Agreement between Flextronics (Malaysia) SDN, BDH and the Company dated
April 4, 1996.
10(u) Supplier Agreement between Adaptive Networks, Inc. and the Company dated July 18, 1996.
10(v) Agreement of Settlement of Litigation Between the Company and Charles Abraham dated
July 21, 1995.
10(w) Sublease Between the Company and Centocor Property Management Corporation dated June 11,
1994, as amended June 19, 1996.
10(x) Patent and Technical Licensing Agreement between Jack R. Harford and the Company dated
September 21, 1995.
10(y) Addendum to Patent and Technical Information License Agreement between Jack R. Harford
and the Company dated August 5, 1996.
10(z) Testing, License and Supply Agreement between X-Com, Inc. and the Company dated
August 5, 1996.
10(aa) Form of Employee Stock Option Agreement.
10(bb) Form of Manufacturer Sales Representative & Distribution Agreement.
10(cc) Irrevocable Letter of Credit.
10(dd) Registration Rights Agreement between certain shareholders and the Company dated
October 8, 1996.
11 Computation of Per Share Loss.
16 Letter from Sacco Sweeney LLP re: change in certifying accountant dated October 15, 1996.
21 Subsidiary of the Registrant.
23(a)* Consent of Fox, Rothschild, O'Brien & Frankel. Reference is made to Exhibit 5 hereto.
23(b) Consent of Price Waterhouse LLP.
23(c) Consent of Sacco Sweeney LLP.
23(d) Consent of Ratner & Prestia, a professional corporation.
24 Power of Attorney. Reference is made to the signature pages.
27 Financial Data Schedule (in electronic format only).
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
ITEM 17: UNDERTAKINGS
1. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to 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.
2. The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be a part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and such offering of the securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) It will provide to the Underwriter(s) at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the Underwriter(s) to permit prompt delivery to
each purchaser.
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF MALVERN, COMMONWEALTH OF
PENNSYLVANIA ON OCTOBER 17, 1996.
Elcom Technologies Corporation
By: /s/ Robert A. Vito
---------------------------------
ROBERT A. VITO
President, Treasurer, Chairman of
the Board
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS ROBERT A. VITO HIS TRUE AND LAWFUL ATTORNEY-IN-
FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM IN
HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES TO SIGN ANY AND ALL
AMENDMENTS TO THIS REGISTRATION STATEMENT AND TO SIGN ANY OTHER REGISTRATION
STATEMENTS RELATING TO THE SAME OFFERING, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES AS FULLY TO ALL INTENTS AND PURPOSES AS HE
MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID
ATTORNEY-IN-FACT AND AGENT OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO
OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Robert A Vito President, Treasurer, October 17, 1996
- ------------------------------------- Chairman of the Board
ROBERT A. VITO and Chief Executive
Officer
/s/ Louis J. Petriello Chief Financial October 17, 1996
- ------------------------------------- Officer (Principal
LOUIS J. PETRIELLO Financial and
Accounting Officer)
/s/ Paul Kouch Director October 17, 1996
- -------------------------------------
PAUL KOUCH
/s/ John Wade Seedor Director October 17, 1996
- -------------------------------------
JOHN WADE SEEDOR
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1 Form of Underwriting Agreement.
3(a) Articles of Incorporation, as amended.
3(b) ByLaws.
4 Specimen Common Stock Certificate.
10(a) Employment Agreement between the Company and George Daly dated
September 18, 1995.
10(b) Stock Option Agreement between George Daly and the Company dated
August 27, 1996.
10(c) Employment Agreement between Myrddin L. Jones and the Company dated
July 28, 1995.
10(d) Stock Option Cancellation Agreement between Myrddin L. Jones and the
Company dated September 18, 1996.
10(e) Stock Option Agreement between Myrddin L. Jones and the Company dated
September 19, 1996.
10(f) Employment Agreement between Louis J. Petriello and the Company dated
October 1, 1996.
10(g) Employment Agreement between C.B. Patel and the Company dated July 28,
1995.
10(h) Stock Option Agreement between C.B. Patel and the Company dated August
27, 1996.
10(i) Stock Option Agreement between Louis J. Petriello and the Company
dated September 30, 1996.
10(j) Employment Agreement between Stephen Pudles and the Company dated July
28, 1995.
10(k) Stock Option Cancellation Agreement between Stephen Pudles and the
Company dated September 18, 1996.
10(l) Stock Option Agreement between Stephen Pudles and the Company dated
September 18, 1996.
10(m) Employment Agreement between Robert B. Sando and the Company dated
July 28, 1995.
10(n) Stock Option Agreement between Robert B. Sando and the Company dated
August 27, 1996.
10(o) Stock Option Agreement between John Wade Seedor and the Company dated
August 27, 1996.
10(p) Employment Agreement between Robert A. Vito and the Company dated July
28, 1995.
10(q) Stock Option Cancellation Agreement between Robert A. Vito and the
Company dated September 18, 1996.
10(r) Stock Option Agreement between Robert A. Vito and the Company dated
September 19, 1996.
10(s) Direct Response Television Marketing Agreement between QVC, Inc. and
the Company dated March 20, 1996.
10(t) Manufacturing Agreement between Flextronics (Malaysia) SDN, BDH and
the Company dated April 4, 1996.
10(u) Supplier Agreement between Adaptive Networks, Inc. and the Company
dated July 18, 1996.
10(v) Agreement of Settlement of Litigation Between the Company and Charles
Abraham dated July 21, 1995.
10(w) Sublease Between the Company and Centocor Property Management
Corporation dated June 11, 1994, as amended June 19, 1996.
10(x) Patent and Technical Licensing Agreement between Jack R. Harford and
the Company dated September 21, 1995.
10(y) Addendum to Patent and Technical Information License Agreement between
Jack R. Harford and the Company dated August 5, 1996.
10(z) Testing, License and Supply Agreement between X-Com, Inc. and the
Company dated August 5, 1996.
10(aa) Form of Employee Stock Option Agreement.
10(bb) Form of Manufacturer Sales Representative & Distribution Agreement.
10(cc) Irrevocable Letter of Credit.
10(dd) Registration Rights Agreement between certain shareholders and the
Company dated October 8, 1996.
11 Computation of Per Share Loss.
16 Letter from Sacco Sweeney LLP re: change in certifying accountant
dated October 15, 1996.
21 Subsidiary of the Registrant.
23(b) Consent of Price Waterhouse LLP.
23(c) Consent of Sacco Sweeney LLP.
23(d) Consent of Ratner & Prestia, a professional corporation.
24 Power of Attorney. Reference is made to the signature pages.
27 Financial Data Schedule (in electronic format only).
</TABLE>
- --------
<PAGE>
Schedule III
2,100,000 Shares
Elcom Technologies Corporation
Common Stock
(No Par Value)
UNDERWRITING AGREEMENT
----------------------
October __, 1996
Pennsylvania Merchant Group Ltd,
as Representative of the Several Underwriters
Four Falls Corporate Center
West Conshohocken, Pennsylvania 19428-2961
Gentlemen:
Elcom Technologies Corporation, a Pennsylvania corporation (the "Company"),
proposes to sell, and the Shareholders of the Company named in Schedule II
hereto (the "Selling Shareholders" and individually, a "Selling Shareholder")
propose to sell, an aggregate of 2,100,000 shares of its Common Stock, 2,000,000
shares and 100,000 shares respectively, no par value (the "Common Shares"), to
the several underwriters (the "Underwriters") named in Schedule I hereto for
whom you are acting as representative (the "Representative"). The
aforementioned 2,100,000 Common Shares to be issued and sold to the Underwriters
by the Company and the Selling Shareholders are hereinafter referred to as the
"Firm Shares." The Company and certain Selling Shareholders, including
executives of the Company, named on Schedule II hereto who own shares of Common
Stock in the Company also propose to sell at the Underwriters' option an
aggregate of up to 315,000 additional shares of the Company's Common Stock (the
"Option Shares") as set forth below solely to cover over-allotments. The
amounts of the Firm Shares to be so purchased by the several Underwriters are
set forth opposite their names in Schedule I hereto. The respective amounts of
the Option Shares (subject to
<PAGE>
adjustment as provided herein) to be sold by the Selling Shareholders are set
forth on Schedule II hereto. The balance of the Option Shares, if any, shall be
sold by the Company. The Company and the Selling Shareholders are sometimes
referred to herein collectively as the "Sellers." The shares of Common Stock of
the Company, no par value per share, are hereinafter referred to as the "Common
Stock."
As the Representative, you have advised the Company and the Selling
Shareholders that the several Underwriters are willing, acting severally and not
jointly, to purchase the number of Firm Shares set forth opposite their
respective names in Schedule I, plus their pro rata portion of the Option Shares
if you elect to exercise the over-allotment option in whole or in part for the
accounts of the several Underwriters. The Firm Shares and the Option Shares (to
the extent the aforementioned option is exercised) are herein collectively
called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THE SELLING
-------------------------------------------------- -------
SHAREHOLDERS, AND THE PRINCIPAL SHAREHOLDER.
- -------------------------------------------
(a) The Company represents, warrants and agrees with each of the
Underwriters as set forth below.
(i) A registration statement on Form S-1 (File No. ________) with
respect to the Shares has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission under the Act. Copies of such registration statement, including any
amendments thereto, the preliminary prospectuses (meeting the requirements of
Rule 430A of the Rules and Regulations) contained therein (singularly, a
"Preliminary Prospectus") and the exhibits, financial statements and schedules,
as finally amended and revised, have heretofore been delivered by the Company to
each of you. Such registration statement (in the form in which it became
effective, herein referred to as the "Registration Statement," which shall be
deemed to include all information omitted therefrom in reliance upon Rule 430A
and contained in the Prospectus referred to below), has been declared effective
by the Commission under the Act and no post-effective amendment to the
Registration Statement has been filed as of the date of this Agreement. The
form of prospectus first filed by the Company with the Commission pursuant to
Rule 424(b) and Rule 430A is herein referred to as the "Prospectus."
-2-
<PAGE>
(ii) The exhibits that have been filed to the Registration Statement
include all agreements which are required to be filed as exhibits to the
Registration Statement.
(iii) The Commission has not issued any order preventing or
suspending the use of the Prospectus or any Preliminary Prospectus relating to
the proposed offering of the Shares nor instituted proceedings for that purpose
and each Preliminary Prospectus, at the time of filing thereof, did not and at
the date hereof does 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 light of the circumstances in which they were
made, not misleading. Each part of the Registration Statement contains, and the
Prospectus and any amendments or supplements thereto will contain, all
statements which are required to be stated therein by, and in all material
respects conform or will conform, as the case may be, to the requirements of,
the Act and the Rules and Regulations. Each part of the Registration Statement
and each amendment thereto does not contain and will not contain, as the case
may be, any untrue statement of a material fact and does not omit to state, as
the case may be, any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and the Prospectus and any amendments or supplements
thereto do not contain and will not contain, as the case may be, any untrue
statement of a material fact and do not omit nor will they omit to state, as the
case may be, any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in the Registration
Statement or the Prospectus, or any such amendment or supplement, in reliance
upon and in conformity with, written information furnished to the Company by or
on behalf of any Underwriter through the Representative or any Selling
Shareholder, specifically for use in the preparation thereof.
(iv) The Company has been duly organized and is validly existing as a
corporation in corporate good standing under the laws of the Commonwealth of
Pennsylvania, with corporate power and authority to own its properties and
conduct its business as described in the Registration Statement and the
Prospectus; the Company's wholly-owned subsidiary, Elcom Cash Management
Corporation, ("Subsidiary") has been duly organized and is validly existing as a
corporation in corporate good standing under the laws of the State of Delaware,
with corporate power and authority to own or lease its properties and conduct
its business as described in the Registration Statement and the Prospectus; each
of the Company and the Subsidiary is duly qualified to transact business in all
jurisdictions in which the conduct of its business or ownership of property
requires such
-3-
<PAGE>
qualification; the outstanding shares of capital stock of the Subsidiary have
been duly authorized and validly issued, are fully paid and non-assessable and
are or at the Closing Date and the Option Closing Date (as such dates are
hereinafter defined) will be owned of record and beneficially either by the
Company or by a wholly-owned corporate subsidiary of the Company free and clear
of all liens, security interests, equities, options, claims, mortgages, pledges,
charges, restrictions or encumbrances whatsoever (each, a "Lien" and together
"Liens"); and no options, warrants or other rights to purchase, or agreements,
commitments or other obligations to issue, or other rights to convert any
obligations into, shares of capital stock or ownership interests in, or other
securities of, the Subsidiary are outstanding.
(v) The outstanding shares of Common Stock of the Company, including
all shares of the Company's Common Stock to be sold by the Selling Shareholders,
have been or will be at the time of their sale to the Underwriters hereunder,
duly authorized, validly issued and fully paid and non-assessable; and no
preemptive rights exist with respect to any of the Shares or the issue and sale
thereof.
(vi) The Shares conform to the statements concerning them in the
Registration Statement and the Prospectus and, except as described therein, (A)
there are no outstanding options, warrants or other rights calling for the
issuance of, and there are no obligations, commitments, plans or arrangements to
issue, any shares of capital stock or other securities of the Company or any
security convertible into or exchangeable or exercisable for capital stock or
other securities of the Company, and (B) there is no holder of any security of
the Company or its Subsidiary or any other person who has the right, contractual
or otherwise, to have any shares of capital stock of the Company or its
Subsidiary included in the Registration Statement or the right to require
registration under the Act of any shares of capital stock or other securities of
the Company or its Subsidiary under any circumstances. The certificates
representing the shares comply with the Pennsylvania Business Corporation Law of
1988 (the "BCL") and are genuine. The Company has no knowledge of any fact
which would impair the validity of the Shares.
(vii) The financial statements of the Company (the "Financial
Statements"), together with related notes and schedules as set forth in the
Registration Statement and the Prospectus present fairly the financial position
and the results of operations of the Company, at the indicated dates and for the
indicated periods, in accordance with generally accepted accounting principles,
consistently applied throughout the periods involved, and all adjustments
necessary for a fair presentation of results for such periods have been made,
subject in the case of unaudited financial statements to normal year-end
-4-
<PAGE>
audit adjustments, none of which will be, individually or in the aggregate,
material or inconsistent with the Company's audited Financial Statements. The
selected and summary financial and statistical data included in the Registration
Statement and the Prospectus present fairly the information shown therein and
have been compiled on a basis consistent with the financial statements presented
therein and the books and records of the Company and its Subsidiary. The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (A) transactions are executed in accordance with
management's general or specific authorization; (B) transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets; (C) access to assets is permitted only in accordance with management's
general or specific authorization; and (D) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(viii) There is no action, suit, claim or proceeding pending or, to
the knowledge of the Company, threatened against the Company or its Subsidiary
before any court or administrative agency which might result in any material
adverse change in the condition (financial or otherwise) or operations of the
Company and its Subsidiary taken as a whole or in the management or business
prospects of the Company and its Subsidiary taken as a whole (a "Material
Adverse Change"), except as set forth in the Registration Statement.
(ix) The Company and its Subsidiary have good and marketable title to
all of their respective properties (real and personal) and assets, including
without limitation all such reflected in the Financial Statements (or described
in the Registration Statement and the Prospectus), subject to no Lien, except as
reflected in such Financial Statements (or described in the Registration
Statement and the Prospectus). The Company and its Subsidiary occupy their
leased properties under valid and binding leases conforming in all material
respects to the descriptions thereof set forth in the Registration Statement and
the Prospectus.
(x) The Company and its Subsidiary have filed all federal, state,
local and foreign income tax returns and reports which have been required to be
filed, which returns and reports are complete and correct, and have paid all
taxes indicated by said returns and reports and all assessments received by them
to the extent that such taxes have become due. There are no federal, state or
local tax liabilities of the Company or its Subsidiary not reflected in the
Financial Statements except as incurred in the ordinary course of business since
date thereof.
-5-
<PAGE>
(xi) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there has not
been any Material Adverse Change or, to the knowledge of the Company, any
development involving a prospective Material Adverse Change, whether or not
occurring in the ordinary course of business, and there has not been any
material transaction entered into by the Company or its Subsidiary, other than
transactions in the ordinary course of business and changes and transactions
described in the Registration Statement, as it may be amended or supplemented.
The Company and its Subsidiary have no material contingent obligations that are
not disclosed in the Registration Statement.
(xii) Neither the Company nor its Subsidiary is, or with the giving
of notice or lapse of time will be, in default under or in violation of its
articles of incorporation or bylaws or under any agreement, lease, license
agreement, contract, indenture or other instrument or obligation to which it is
a party or by which it or any of its properties is bound and which default or
violation results in a Material Adverse Change. The consummation of the
transactions herein contemplated and the fulfillment of the terms hereof
including the use of proceeds as contemplated in Prospectus will not (A)
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, contract,
lease, license agreement or other agreement or instrument to which the Company
is a party, or of the articles of incorporation and bylaws or other constituent
documents of the Company or its Subsidiary; (B) violate any statute, law, order,
rule or regulation applicable to the Company or its Subsidiary of any court or
of any regulatory body or administrative agency or other governmental body
having jurisdiction; or (C) result in the creation or imposition of any Lien
upon any property or assets of the Company or its Subsidiary pursuant to the
terms of any agreement or instrument to which any of them is a party or by which
any of them may be bound or to which any of the property or assets of any of
them is subject.
(xiii) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated, including use of proceeds (except such additional steps as may be
required by the National Association of Securities Dealers, Inc. (the "NASD") or
may be necessary to qualify the Shares for public offering by the Underwriters
under state securities or "Blue Sky" laws), has been obtained or made and is in
full force and effect.
(xiv) The Company and its Subsidiary hold all licenses, certificates
and permits from governmental authorities
-6-
<PAGE>
which are necessary to the conduct of its business, all of which are in full
force and effect, except where the failure to so hold such licenses,
certificates and permits could not result in a Material Adverse Change. The
Company and its Subsidiary own or possess all patents, trademarks, trademark
registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights described in the
Prospectus as being owned by them or each of them or necessary for the conduct
of their respective businesses, and the Company is not aware of any claim to the
contrary or any challenge by any other person to the rights of the Company with
respect to the foregoing except as set forth in the Registration Statement; and
neither the Company nor its Subsidiary has infringed any patent, patent rights,
trade names, trademarks or copyrights or other proprietary right, or received
any notice of or is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any patent, patent rights, trade
names, trademark, copyright or other proprietary rights, or otherwise received
any notice or is otherwise aware of any threatened early termination of any
license or any facts which would render any patent, patent rights, trade names,
trademark, copyright or proprietary right invalid or inadequate to protect the
interest of the Company or its Subsidiary therein except as set forth in the
Registration Statement.
(xv) The Company has obtained and delivered to the Representative the
agreements of the persons and entities named in Schedule III annexed hereto to
the effect that each such person or entity will not, for the periods specified
on such schedule, without the Representative's prior written consent, directly
or indirectly, offer to sell, sell, grant any option for the sale of, or
otherwise dispose of, any Common Stock or any securities convertible into or
exchangeable for Common Stock of the Company owned at the date hereof or
hereafter by each such person or entity or with respect to which each such
person or entity has power of disposition.
(xvi) From its inception until June 9, 1995, Sacco Sweeney was the
only public accountant engaged by the Company, and the Company had not had any
"disagreement" (as used in Item 304 of Regulation S-K of the Rules and
Regulations) with Sacco Sweeney, had not experienced any "reportable event" (as
used in such Item 304) since its inception and nothing was required to be filed
pursuant to Section 10A of the Securities Exchange Act of 1934 (the "Exchange
Act") and the rules and regulations of the Commission thereunder.
(xvii) Price Waterhouse LLP ("Price Waterhouse"), who have certified
certain of the financial statements filed with the Commission as part of the
Registration Statement, are independent public accountants as required by the
Act and the Rules and Regulations. Since June 9, 1995, Price Waterhouse has
-7-
<PAGE>
been the only public accountants engaged by the Company, and the Company has not
had any "disagreement" (as used in Item 304 of Regulation S-K of the Rules and
Regulations) with Price Waterhouse, and has not experienced any "reportable
event" (as used in such Item 304) since June 9, 1995.
(xviii) This Agreement has been duly authorized, executed and
delivered by the Company.
(xix) None of the Company or the Selling Shareholders has distributed
nor, prior to the later to occur of (A) the Closing Date and (B) completion of
the distribution of the Shares, will distribute any offering material in
connection with the offering and sale of the Shares other than the Registration
Statement, the Preliminary Prospectus, the Prospectus, or other materials, if
any, permitted by the Act. Neither the Company, nor to the Company's knowledge,
any of its Affiliates (as that term is defined in the Act), has taken, directly
or indirectly, any action designed to cause or result in, or which has
constituted or might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the sale
or resale of the Shares.
(xx) Except as described in the Registration Statement, the Company
maintains insurance of the types and in the amounts deemed by it to be adequate
for its business including, but not limited to, insurance covering real and
personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against,
all of which insurance is in full force and effect.
(xxi) To the Company's knowledge, neither the Company nor its
Subsidiary nor any of their respective employees or agents has made any payment
of funds of the Company or its Subsidiary or received or retained any such funds
in violation of any law, rule or regulation which could result in a Material
Adverse Change.
(xxii) The ownership of the capital stock of any corporation (other
than the Company and its Subsidiary) described in the Prospectus under the
caption "Certain Transactions" by the Company's officers or directors or its 5%
or greater shareholders is accurately described therein. To the Company's
knowledge, after due investigation, none of the officers, directors or 5% or
greater shareholders of the Company have any affiliation with the NASD.
-8-
<PAGE>
(xxiii) The Company is not, and after the sale of the Shares to be
sold by it hereunder and the application of the Net Proceeds thereof as
described in the Prospectus under the caption "Use of Proceeds" will not be, an
investment company within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act").
(xxiv) The Firm Shares and the Option Shares, if any, have been
approved for quotation on the NASD Automated Quotation National Market System
("NASDAQ"), subject to notice of official issuance.
(xxv) No labor dispute by the employees of the Company or its
Subsidiary exists or, to the best of the Company's knowledge, is imminent and
the Company is not aware of any existing or imminent labor disturbance by the
employees of any of their principal suppliers, subassemblers, value added
suppliers, subcontractors, original equipment manufacturers, authorized dealers,
representatives or distributors that could reasonably be expected to result in
any Material Adverse Change. No collective bargaining agreement nor organized
union exists with any of employees of the Company or Subsidiary and, to the
Company's knowledge, no such agreement or organization is imminent.
(xxvi) The Company and its Subsidiary are in compliance with all
Environmental Laws (as defined below), except to the extent that failure to
comply with such Environmental Laws could not result in a Material Adverse
Change. To the knowledge of the Company, except as disclosed in the Prospectus,
neither the Company nor its Subsidiary (A) is the subject to any pending or
threatened federal, state or local investigation evaluating whether any remedial
action is needed to respond to a release of any Hazardous Materials (as defined
below) into the environment, resulting from the business or operations of the
Company or its Subsidiary or from the Company's ownership or possession of any
of its properties or assets or (B) is in contravention of any Environmental Law
that, in the case of (A) or (B), could reasonably be expected to result in a
Material Adverse Change. Neither the Company nor its Subsidiary has received
any notice or claim, nor are there pending or, to the knowledge of the Company,
threatened lawsuits or other proceedings or administrative or regulatory actions
against them, with respect to violations of any Environmental Law or in
connection with any release of any Hazardous Material into the environment that,
individually or in the aggregate, if the subject of any unfavorable decision,
ruling or finding, could result in a Material Adverse Change. As used herein,
"Environmental Laws" means any federal, state or local law or regulation
applicable to the Company's or its Subsidiary's business operations or ownership
or possession of any of their properties or assets relating, to environmental
matters, and "Hazardous Materials" means those substances that are regulated by
or form the basis of liability under any Environmental Laws.
-9-
<PAGE>
(xxvii) The Company conducts no business in Cuba.
(xxviii) The Company has never conducted business through any
corporation, partnership, limited liability company, or any other entity other
than itself and the Subsidiary, and the Company does not hold any equity
interest in any entity other than the Subsidiary.
(b) Each of the Selling Shareholders severally represents and warrants
as follows:
(i) Such Selling Shareholder has, and immediately prior to the
delivery to the Underwriters of the Shares to be sold by such Selling
Shareholder on the Closing Date or the Option Closing Date, as the case may be,
will have good and valid title to the Shares to be sold by such Selling
Shareholder, free of any Liens, and full right, power and authority to effect
the sale and delivery of such Shares to the Underwriters; and upon the delivery
of and payment for such Shares pursuant to this Agreement, good and valid title
thereto, free of any Liens, will be transferred to the several Underwriters.
(ii) The consummation by such Selling Shareholder of the transactions
herein contemplated and the fulfillment by such Selling Shareholder of the terms
hereof will not result in a breach of any of the terms and provisions of, or
constitute a default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which such Selling Shareholder is a party or which
affects the Shares, or of any statute, law, order, rule or regulation applicable
to such Selling Shareholder or which affects the Shares of any court or of any
regulatory body or administrative agency or other governmental body having
jurisdiction.
(iii) All authorizations, approvals and consents necessary for the
execution and delivery by or on behalf of such Selling Shareholder of this
Agreement, and the sale and delivery of the Shares to be sold by the Selling
Shareholder hereunder (other than such authorizations, approvals or consents as
may be necessary under state securities or "Blue Sky" laws) have been obtained
and are in full force and effect.
(iv) Such Selling Shareholder has not taken and will not take,
directly or indirectly, individually or as a group, any action designed to, or
which has constituted, or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of the Common Stock of the
Company, and has not effected any sales of shares of Common Stock which, if
effected by the Issuer, would be required to be disclosed in response to Item
701 of Regulation S-K or any other of the Rules and Regulations or the Act,
except as disclosed.
-10-
<PAGE>
(v) Without independent investigation or verification, such
Selling Shareholder has no reason to believe that the representations and
warranties of the Company contained in this Section 1 are not true and correct,
is familiar with the Registration Statement to the prospectus and has no
knowledge of any material fact, condition or information not disclosed in the
Registration Statement to the Prospectus, or which has adversely affected or is
reasonably likely to adversely affect the business of the Company or its
Subsidiary; and the sale of the Shares by such Selling Shareholder pursuant
hereto is not prompted by any information concerning the Company or its
Subsidiary which is not set forth in the Registration Statement to the
Prospectus. The Registration Statement to the Prospectus, insofar as it relates
to such Selling Shareholder, does not and 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.
(vi) This Agreement and the Custodian Agreement (as defined below)
have each been duly authorized, executed and delivered by or on behalf of such
Selling Shareholder and are the valid and binding agreements of such Selling
Shareholder, enforceable against him or her in accordance with their respective
terms.
(vii) Such Selling Shareholder has executed a "lock-up" letter as
provided in section 1(a)(xiv) and no offering, sale or other disposition of any
Common Stock of the Company will be made for a period of 180 days after the date
of this Agreement, directly or indirectly, by such Selling Shareholder otherwise
than hereunder or pursuant to such "lock-up" letter, without the prior written
consent of the Representative.
(c) Any certificate signed by an officer of the Company and delivered
to the Representative or to counsel for the Underwriters in connection with the
execution and delivery of this Agreement, the Closing and the Option Closing
hereunder shall be deemed a representation and warranty by the Company to each
Underwriter as to the matters covered thereby; any certificate signed by or in
behalf of any Selling Shareholder and delivered to the Representative or to
counsel for the Underwriters as aforesaid shall be deemed a representation and
warranty by such Selling Shareholder to each Underwriter as to the matters
covered thereby.
2. PURCHASE, SALE AND DELIVERY OF THE SHARES. On the basis of the
-----------------------------------------
representations, warranties and covenants herein contained, and subject to the
conditions herein set forth, the Company agrees to sell to the Underwriters and
each Underwriter agrees, severally and not jointly, to purchase, at a price
between $8.00 and $10.00 per share, the number of Firm Shares set
-11-
<PAGE>
forth opposite the name of each Underwriter in Schedule I hereof, subject to
adjustments in accordance with Section 9 hereof.
Payment for the Firm Shares and the Option Shares (if the option
provided for below shall have been exercised before the first business day prior
to the Closing Date) to be sold hereunder is to be made in New York Clearing
House funds by certified or bank cashier's checks drawn to the order of the
Company for the shares to be sold by it and to the order of "Elcom Technologies
Corporation as Custodian" for the shares to be sold by the Selling Shareholders,
in each case against delivery of certificates therefor to the Representative for
the several accounts of the Underwriters. Such payment and delivery are to be
made at the offices of Pennsylvania Merchant Group Ltd, at _____ a.m., _________
time, on October __, 1996 or at such other time and date not later than two
business days thereafter as the Representative may designate as you and the
Company shall agree upon, such time and date being herein referred to as the
"Closing Date" or the "Closing." (As used herein, "business day" means a day on
which the New York Stock Exchange is open for trading and on which banks in New
York are open for business and not permitted by law or executive order to be
closed.) The certificates for the Firm Shares and the Option Shares, if any,
will be delivered in such denominations and in such registrations as the
Representative requests in writing not later than the one full business day
prior to the Closing Date or Option Closing Date, as applicable, and will be
made available for inspection by the Representative by no later than 1:00 p.m.
on the last business day prior to the Closing Date or Option Closing Date, as
applicable.
In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Selling
Shareholders listed on Schedule II hereto hereby grant an option to the several
Underwriters to purchase the Option Shares at the price per share as set forth
in the first paragraph of this Section 2. The maximum aggregate number of
Option Shares to be sold by the Selling Shareholders is set forth opposite their
respective names in Schedule II hereto. The option granted hereby may be
exercised in whole or in part, but only once, and at any time upon written
notice given within 30 days after the date of this Agreement, by you, as
Representative of the several Underwriters, to the Company and the Custodian (as
defined below) setting forth the number of Option Shares as to which the several
Underwriters are exercising the option, the names and denominations in which the
Option Shares are to be registered and the time and date at which such
certificates are to be delivered. If the option granted hereby is exercised for
less than the maximum number of Option Shares being offered by the Selling
Shareholders, the respective number of Option Shares to be sold by each of the
Selling Shareholders listed on Schedule II hereto shall be
-12-
<PAGE>
determined on a pro rata basis in accordance with the number of shares set forth
opposite their names on Schedule II hereto, adjusted by you in such manner as to
avoid fractional shares. The time and date at which certificates for Option
Shares are to be delivered shall be determined by the Representative but shall
not be earlier than one (if the option is exercised at least one full business
day prior to the Closing Date) or three (if the Option is exercised on or after
the last full business day prior to the Closing Date) nor later than 10 full
business days after the exercise of such option, nor in any event prior to the
Closing Date (such time and date being herein referred to as the "Option Closing
Date"). If the date of exercise of the option is one or more days before the
Closing Date, the notice of exercise shall set the Closing Date as the Option
Closing Date. The number of Option Shares to be purchased by each Underwriter
shall be in the same proportion to the total number of Option Shares being
purchased as the number of Firm Shares being purchased by such Underwriter bears
to 2,100,000, adjusted by you in such manner as to avoid fractional shares. The
option with respect to the Option Shares granted hereunder may be exercised only
to cover over-allotments in the sale of the Firm Shares by the Underwriters.
You, as Representative of the several Underwriters, may cancel such option at
any time prior to its expiration by giving written notice of such cancellation
to the Company. To the extent, if any, that the option is exercised, payment
for the Option Shares shall be made on the Option Closing Date in New York
Clearing House funds by certified or bank cashier's check drawn to the order of
"Elcom Technologies Corporation as Custodian" for the Option Shares to be sold
by the Selling Shareholders against delivery of certificates therefor at the
offices of Pennsylvania Merchant Group Ltd.
The Selling Shareholders have deposited irrevocable instructions to
exercise stock options for the Shares to be sold hereunder, together with checks
or cash in the amount of the option exercise price in custody with Elcom
Technologies Corporation as custodian (the "Custodian") pursuant to the
Custodian Agreement and Power of Attorney (the "Custodian Agreement") executed
by each Selling Shareholder for delivery of any Option Shares to be sold
hereunder by the Selling Shareholders. Each of the Selling Shareholders
specifically agrees that the stock option and the right to purchase the Option
Shares issuable upon exercise thereof are subject to the interests of the
Underwriters hereunder, that the arrangements made by the Selling Shareholders
for such custody are to that extent irrevocable, and that the obligations of the
Selling Shareholders hereunder shall not be terminable by any act or deed of the
Selling Shareholders (or by any other person, firm or corporation including the
Company, the Custodian or the Underwriters) or by operation of law (including
the death of an individual Selling Shareholder) or by the occurrence of any
other event or events, except as set forth in the Custodian Agreement.
-13-
<PAGE>
If any such event should occur prior to the delivery to the Underwriters of the
Option Shares hereunder, certificates for the Option Shares shall be delivered
by the Custodian in accordance with the terms and conditions of this Agreement
as if such event has not occurred. The Custodian is authorized to receive and
acknowledge receipt of the proceeds of sale of the Option Shares held by it
against delivery of such Shares.
The obligations of the Selling Shareholders and the Company hereunder
are several and not joint.
3. OFFERING BY THE UNDERWRITERS. It is understood that the several
----------------------------
Underwriters are to make a public offering of the Firm Shares as soon as the
Representative deems it advisable to do so. The Firm Shares are to be initially
offered to the public at the initial public offering price set forth in the
Prospectus. The Representative may from time to time thereafter change the
public offering price and other selling terms. To the extent, if at all, that
any Option Shares are purchased pursuant to Section 2 hereof, the Underwriters
will offer them to the public on the foregoing terms.
4. COVENANTS OF THE COMPANY AND THE SELLING SHAREHOLDERS.
-----------------------------------------------------
(a) The Company covenants and agrees with the several Underwriters and
the Selling Shareholders that:
(i) The Company will (A) prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus
containing information previously omitted at the time of effectiveness of the
Registration Statement in accordance with Rules 430 and 424, a copy of which has
been furnished to the Representative and to which the Representative have not
objected in writing prior to filing and (B) not file any amendment to the
Registration Statement or supplement to the Prospectus of which the
Representative shall not previously have been advised and furnished with a copy
or to which the Representative shall have reasonably objected in writing or
which is not in compliance with the Rules and Regulations.
(ii) The Company will advise the Representative promptly (A) of
any request of the Commission for amendment of the Registration Statement or for
a supplement to the Prospectus or for any additional information; (B) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose, and the Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending the use of
the Prospectus and to obtain as soon as possible the lifting thereof, if issued;
and (C) within the period of time referred to in paragraph (v) below,
-14-
<PAGE>
of any change in the Company's condition (financial or other), business,
prospects, properties, net worth or results of operations, or of the happening
of any event that makes any statement of a material fact made in the
Registration Statement or the Prospectus (as then amended or supplemented)
untrue or that requires the making of any additions to or changes in the
Registration Statement or the Prospectus (as then amended or supplemented) in
order to state a material fact required by the Act or the Rules and Regulations
to be stated therein or necessary in order to make the statements therein not
misleading, or of the necessity to amend or supplement the Prospectus (as then
amended or supplemented) to comply with Act and the Rules and Regulations or any
other law.
(iii) The Company will cooperate with the Representative in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Representative may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports, and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representative may reasonably request for distribution of the Shares.
(iv) The Company will deliver to, or upon the order of, the
Representative, from time to time, as many copies of any Preliminary Prospectus,
Prospectus or any amendment or supplement thereto as the Representative may
reasonably request. The Company will deliver to, or upon the order of, the
Representative during the period when, in the opinion of counsel for the
Underwriters, delivery of a Prospectus is required under the Act, as many copies
of the Prospectus in final form, or as thereafter amended or supplemented, as
the Representative may reasonably request. The Company will deliver to the
Representative at or before the Closing Date, four signed copies of the
Registration Statement and each amendment thereto, including all exhibits filed
therewith, and will deliver to the Representative such number of copies of the
Registration Statement, but without exhibits, and of all amendments thereto, as
the Representative may reasonably request.
(v) The Company will comply to the best of its ability with the Act
and the Rules and Regulations and the Exchange Act, so as to permit the
completion of the distribution of the shares as contemplated by this Agreement
and the Prospectus. If during the period in which a prospectus is
-15-
<PAGE>
required by law to be delivered by an Underwriter or dealer any event shall
occur as a result of which, in the judgment of the Company or the
Representative, it becomes necessary to amend or supplement the Prospectus or
the Registration Statement in order to make the statements therein, in the light
of the circumstances existing at the time the Prospectus is delivered to a
purchaser, not misleading, or, if it is necessary at any time to amend or
supplement the Prospectus to comply with any law, the Company promptly will
prepare and file with the Commission an appropriate amendment to the
Registration Statement or supplement to the Prospectus, reasonably acceptable to
the Representative, so that the Prospectus as so amended or supplemented will
not, in the light of the circumstances when it is so delivered, be misleading,
or so that the Prospectus will comply with all applicable laws, rules and
regulations.
(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, an earnings
statement in reasonable detail, covering a period of at least 12 consecutive
months beginning after the effective date of the Registration Statement, which
earning statement shall satisfy the requirements of Section 11(a) of the Act and
Rule 158 of the Rules and Regulations and will advise you in writing when such
statement has been so made available.
(vii) The Company will, for a period of five years from the Closing
Date, deliver to the Representative copies of annual reports and copies of all
other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Exchange Act,
as amended. The Company will deliver to the Representative similar reports with
respect to significant subsidiaries, as that term is defined in the Rules and
Regulations, which are not consolidated in the Company's financial statements.
(viii) No offering, sale or other disposition of any Common Stock of
the Company will be made for a period of 180 days after the date of this
Agreement, directly or indirectly, by the Company otherwise than hereunder or
with the prior written consent of the Representative, except that the Company
may, without such consent, issue shares upon the exercise of options outstanding
on the date of this Agreement.
(ix) The Company will use its best efforts to do and perform all
things required or necessary to be done and performed under this Agreement by
the Company prior to the Closing Date or the Option Closing Date, as the case
may be, and
-16-
<PAGE>
to satisfy all conditions precedent to the delivery of the Shares.
(x) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock.
(xi) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of its incorporation or required for NASDAQ designation,
a registrar for its Common Stock.
(xii) The Company shall apply the net proceeds of the sale of the
Shares as set forth in the Prospectus and shall file such reports with the
Commission with respect to the sale of the Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
(xiii) The Company shall not invest or otherwise use the proceeds
received by the Company from the sale of the shares to the Underwriters in such
manner as would require the Company to register as an investment company under
the 1940 Act.
(xiv) The Company shall apply the net proceeds of the sale of the
Shares as set forth in the Prospectus and shall file such reports with the
Commission with respect to the sale of the Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
(xv) The Company shall not invest, or otherwise use the proceeds
received by the Company from the sale of the shares to the Underwriters in such
manner as would require the Company to register as an investment company under
the 1940 Act.
(xvi) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company to facilitate the sale or resale of the Shares.
(b) Each of the Selling Shareholders covenants and agrees with the several
Underwriters and the Company that:
(i) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal Responsibility
Act of 1982 and the Interest and Dividend Tax Compliance Act of 1983 with
respect to the transactions herein contemplated, each of the Selling
Shareholders agrees to deliver to you prior to or at the Closing Date a properly
completed and executed United States Treasury
-17-
<PAGE>
Department Form W-9 (or other applicable form or statement specified by Treasury
Department regulations in lieu thereof).
(ii) Such Selling Shareholder will cooperate to the extent reasonably
necessary to cause the Registration Statement or any post-effective amendment
thereto to become effective at the earliest possible time.
(iii) Such Selling Shareholder will advise you promptly, and if
requested by you, will confirm such advice in writing, within the period of time
referred to in Section 4(a)(v) hereof, of any change in the Company's condition
(financial or other), business, prospects, properties, net worth or results of
operations or of any change in information relating to such Selling Shareholder
or the Company or any new information relating to the Company or relating to any
matter stated in the Prospectus or any amendment or supplement thereto which
comes to the attention of such Selling Shareholder that suggests that any
statement made in the Registration Statement or the Prospectus (as then amended
or supplemented) is or may be untrue in any material respect or that the
Registration Statement or Prospectus (as then amended or supplemented) omits or
may omit to state a material fact or a fact necessary to be stated therein in
order to make the statements therein not misleading in any material respect, or
of the necessity to amend or supplement the Prospectus (as then amended or
supplemented) in order to comply with the Act or any other law.
(iv) Such Selling Shareholder will (A) do or perform all things
reasonably required to be done or performed by the Selling Shareholder prior to
the Closing Date or the Option Closing Date, as the case may be, to satisfy all
conditions precedent to the delivery of his, her or its Shares pursuant to this
Agreement; (B) not take, directly or indirectly, any action designed to or that
might reasonably be expected to cause or result in stabilization or manipulation
of the price of the Company's Common Stock to facilitate the sale or resale of
the Shares; and (C) pay all federal and other taxes, if any, on the transfer of
the sale of Shares being sold by it to the Underwriter.
5. COSTS AND EXPENSES. The Company will pay all costs, expenses and fees
------------------
incident to the performance of the obligations of the Company and the Selling
Shareholders, except in the case of Selling Shareholders, for transfer taxes, if
any, involved in the sale of the Shares by them to the several Underwriters
under this Agreement, including, without limiting the generality of the
foregoing, the following: (a) the printing and filing of the Registration
Statement as originally filed and each amendment thereto; (b) the preparation,
issuance and delivery of the Certificate(s) for the Shares to the Underwriters;
(c) the fees and disbursements of the Company's and the Selling Shareholders'
-18-
<PAGE>
counsel and accountants; (d) the cost of printing and delivering to, or as
requested by, the Underwriters copies, as applicable, of the Registration
Statement, Preliminary Prospectuses, the Prospectus, this Agreement, the
Agreement Among Underwriters, the Underwriters' Selling Memorandum, the
Underwriters' Questionnaire, the Invitation Letter, the Selected Dealer
Agreement, the Custodian Agreement, and the Blue Sky Survey and any supplements
or amendments thereto and all other agreements, memoranda, correspondence and
any and all other documents printed and delivered in connection with the
offering of the Shares; (e) the filing fees of the Commission and the filing
fees and expenses incident to securing any required review by the NASD of the
terms of the sale of the Shares; (f) the application fee of the NASDAQ; (g) a
non-accountable expense allowance in the amount of 1.0% of the gross proceeds
raised payable at Closing to the Representative; (h) the expenses, including the
fees and disbursements of counsel for the Underwriters incurred in connection
with the qualification of the Shares under state securities or Blue Sky laws;
(i) the Company's travel expenses in connection with meetings with the brokerage
community and institutional investors; (j) the costs and expenses associated
with settlement in same day funds (including, but not limited to, interest or
cost of funds expenses), if desired by the Company; (k) the cost of printing and
engraving Certificate(s) for the Shares; (l) the costs of advertising the
offering, including a "tombstone" advertisement; (m) the fees, expenses and
other costs incurred by the Underwriters and their counsel for review of the
Company's patents and patent applications, if any, and related matters and
(n) any transfer or other taxes imposed on the sale of Shares by it to the
Underwriters. The Company shall not, however, be required to pay for any of the
Underwriters' expenses (other than those related to qualification under state
securities or Blue Sky laws or the non-accountable expense allowance equal to
1.0% of the gross proceeds raised), except that, if this Agreement shall not be
consummated because the conditions in Section 7 hereof are not satisfied, or
because this Agreement is terminated by the Representative pursuant to Section 6
hereof, or by reason of any failure, refusal or inability on the part of the
Company or the Selling Shareholders to perform in any material respect any
undertaking or satisfy any condition of this Agreement or to comply with any of
the terms hereof on their part to be performed, unless such failure to satisfy
said condition or to comply with said terms be due to the default or omission of
any Underwriter, then the Company shall reimburse the several Underwriters for
all out-of-pocket expenses, including fees and disbursements of counsel,
incurred in connection with investigating, marketing and proposing to market the
Shares or in contemplation of performing their obligations hereunder; but the
Company and the Selling Shareholders shall not in any event be liable to any of
the several Underwriters for damages on account of loss of anticipated profits
from the sale by them of the Shares.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS. The several obligations
---------------------------------------------
of the Underwriters to purchase the Firm Shares on the Closing Date and the
Option Shares, if any, on the Option Closing Date are subject to the accuracy,
as of the Closing Date or the Option Closing Date, as the case may be, of the
representations and warranties of the Company and the Selling Shareholders
contained herein, and to the performance by the Company and the Selling
Shareholders of their covenants and obligations hereunder and to the following
additional conditions:
-19-
<PAGE>
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective under the Act and any and all filings
required by Rule 424 and Rule 430A of the Rules and Regulations shall have been
made in the manner required, and any written request of the Commission for
additional information (to be included in the Registration Statement or
otherwise) shall have been disclosed to the Representative and complied with to
their reasonable satisfaction.
(b) The Representative shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Fox, Rothschild, O'Brien
& Frankel ("Fox Rothschild") counsel for the Company, dated the Closing Date or
the Option Closing Date, as the case may be, addressed to the Underwriters to
the effect that:
(i) The Company and Subsidiary have been duly organized and are
validly existing as corporations in corporate good standing under the laws of
the Commonwealth of Pennsylvania and the State of Delaware, respectively, with
corporate power and authority to own their properties and conduct their business
as described in the Prospectus; the Company and its Subsidiary are duly
qualified to transact business in all jurisdictions in which the conduct of its
business requires such qualification, or in which the failure to qualify could
result in a Material Adverse Change.
(ii) The Company has authorized and outstanding capital stock as
set forth under the caption "Capitalization" in the Prospectus; the authorized
shares of its Common Stock have been duly authorized; the outstanding shares of
its Common Stock have been duly authorized and validly issued and are fully paid
and non-assessable; all of the Shares conform to the description thereof
contained in the Prospectus; the certificates for the Shares comply with the
requirements of the BCL and are in due and proper form; the shares of Common
Stock, including the Option Shares, if any, to be sold by the Company and the
Selling Shareholders pursuant to this Agreement have been duly authorized and
will be validly issued, fully paid and non-assessable when issued and paid for
as contemplated by this Agreement.
(iii) No preemptive rights of stockholders exist with respect to
any of the Shares or the issue and sale thereof under the BCL or, to the
knowledge of such counsel, otherwise.
-20-
<PAGE>
(iv) Except as described in the Prospectus to the best knowledge of
such counsel, (A) there are no outstanding options, warrants or other rights of
any character calling for the issuance of, and such counsel does not know of any
agreements, commitments or obligations to issue, any shares of capital stock of
the Company or Subsidiary or any security convertible into or exchangeable or
exercisable for capital stock of the Company or Subsidiary, and (B) no holder of
any security of the Company has the right to require the registration of Common
Stock or other securities of the Company.
(v) The Registration Statement has become effective under the Act
and, to the best knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under the Act.
(vi) The Registration Statement, all Preliminary Prospectuses, the
Prospectus and each amendment or supplement thereto comply as to form with the
requirements of the Act and the Rules and Regulations (except that such counsel
need express no opinion as to the financial statements, schedules and other
financial information included therein).
(vii) The statements under the captions "Risk Factors - Future Sales
of Common Stock," "Legal Proceedings - Prior Litigation," and "Description of
Securities, (through and including the subheading "Transfer Agent") in the
Prospectus, insofar as such statements constitute a summary of documents
referred to therein or matters of law, are in all material respects accurate
summaries and fairly and correctly present in all material respects the
information called for with respect to such documents and matters; provided,
however, that such counsel may rely on representations and certificates of the
Company and its transfer agent with respect to the factual matters contained in
such statements.
(viii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are not so filed or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all material
respects.
(ix) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or its Subsidiary, except
as disclosed in the Prospectus.
(x) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do
-21-
<PAGE>
not and will not (A) conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, the articles of incorporation or
bylaws of the Company, or any agreement or instrument known to such counsel to
which the Company is a party or by which the Company may be bound; or (B)
violate any existing applicable federal or Pennsylvania law, regulation, ruling
(assuming compliance with all applicable state and federal securities and Blue
Sky laws) known to counsel or any judgment, order or decree, applicable to the
Company or its Subsidiary or any of their respective properties.
(xi) The Company has the power and authority to enter into this
Agreement and to issue, sell and deliver to the Underwriters the Firm Shares
that it is required to deliver and sell under this Agreement. This Agreement
has been duly authorized, executed and delivered by the Company.
(xii) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the National Association of Securities
Dealers, Inc. or as required by state securities and "Blue Sky" laws as to which
such counsel need express no opinions), except such as have been obtained or
made, specifying the same.
(xiii) The Company is not, and will not become as a result of the
transactions contemplated by this Agreement, required to register under the 1940
Act.
(xiv) This Agreement has been duly authorized, executed and
delivered on behalf of the Selling Shareholders.
(xv) To such counsel's knowledge, each Selling Shareholder has full
legal right, power and authority, and any approval required by law (other than
as required by state securities and Blue Sky laws as to which such counsel need
express no opinion), to sell, assign, transfer and deliver the portion of the
Shares to be sold by such Selling Shareholder.
(xvi) The Custodian Agreement has been duly authorized, executed and
delivered by each Selling Shareholder and is a valid, irrevocable instrument
legally sufficient for the purposes intended and constitutes the legal, valid
and binding obligation of the Selling Shareholders, enforceable against each of
them in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, arrangement or similar laws
affecting creditors' rights generally or by general principles of equity
(including
-22-
<PAGE>
standards of materiality, good faith, fair dealing and reasonableness) whether
applied by a court of law or equity, and except as rights to indemnify and
contribution hereunder may be limited by applicable law, statutory duties or
public policy.
(xvii) The Underwriters (assuming that they are bona fide
purchasers within the meaning of the Uniform Commercial Code) have acquired good
and marketable title to the Shares being sold by the Company and each Selling
Shareholder on the Closing Date or Option Closing Date, as applicable, free and
clear of all Liens.
In rendering such opinion Fox Rothschild may rely as to matters
governed by the laws of states other than Pennsylvania or federal laws on local
counsel in such jurisdictions and as to the matters set forth in subparagraphs
(xiv), (xv), (xvi) and (xvii), on opinions of other counsel representing the
respective Selling Shareholders, provided that in each case Fox Rothschild shall
state that they believe that they and the Underwriters are justified in relying
on such other counsel. Furthermore, in rendering an opinion as to the matters
set forth in such subparagraphs, Fox Rothschild may rely, as to matters of fact
with respect to each Selling Shareholder, upon the representations of such
Selling Shareholders contained in this Agreement and the Custodian Agreement of
such Selling Shareholder. In addition to the matters set forth above, such
opinion shall also include a statement to the effect that nothing has come to
the attention of such counsel which leads them to believe that the Registration
Statement, as of the time it became effective under the Act, the Prospectus or
any amendment or supplement thereto, on the date it was filed pursuant to Rule
424(b), and the Registration Statement and the Prospectus, or any amendment or
supplement thereto, as of the Closing Date or the Option Closing Date, as the
case may be, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading (except that such counsel need express no view as to
financial statements, schedules and other financial information included
therein). With respect to such statement, Fox Rothschild may state that their
belief is based upon the procedures set forth therein, but is without
independent check and verification.
(c) The Representative shall have received from the Company a copy of
an opinion given to the Company from Ratner & Prestia, patent counsel for the
Company, to the effect that the litigation brought by Phonex Corporation
challenging the Company's patents is without merit.
(d) The Representative shall have received from Drinker Biddle &
Reath, counsel for the Underwriters, an opinion dated the Closing Date or the
Option Closing Date, as the case
-23-
<PAGE>
may be, to the effect that the opinions delivered pursuant to Paragraphs 6(b)
and 6(c) above appear on their face to be appropriately responsive to the
requirements of this Agreement except, specifying the same, to the extent waived
by you, and with respect to the Shares, this Agreement, and the Prospectus, the
legal existence of the Company, and such other related matters as you may
require. Such counsel may also state that, insofar as such opinion involves
factual matters, they have relied, to the extent they deem proper, upon
certificates of officers or other appropriate representatives of the Company and
its Subsidiary and certificates of public officials. In rendering such opinion
Drinker Biddle & Reath may rely as to all matters governed other than by the
laws of the Commonwealth of Pennsylvania or federal laws on the opinions of
counsel referred to in Paragraphs (b) and (c) of this Section 6. In addition to
the matters set forth above, such opinion shall also include a statement to the
effect that nothing has come to the attention of such counsel which leads them
to believe that the Registration Statement, as of the time it became effective
under the Act, and the Prospectus or any amendment or supplement thereto on the
date it was filed pursuant to Rule 424(b), and the Registration Statement and
the Prospectus or any amendment or supplement thereto, as of the Closing Date or
the Option Closing Date, as the case may be, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (except that such
counsel need express no view as to financial statements, schedules and other
financial or statistical information included therein). With respect to such
statement, Drinker Biddle & Reath may state that their belief is based upon the
procedures set forth therein, but is without independent check and verification.
(e) The Representative shall have received at or prior to the Closing
Date from Drinker Biddle & Reath a memorandum or summary, in form and substance
satisfactory to the Representative, with respect to the qualification for
offering and sale by the Underwriters of the Shares under the state securities
or Blue Sky laws of such jurisdictions as the Representative may reasonably have
designated to the Company.
(f) The Representative shall have received on the Closing Date or the
Option Closing Date, as the case may be, a signed letter from Price Waterhouse,
dated the Closing Date or the Option Closing Date, as the case may be,
confirming that they are independent public accountants within the meaning of
the Act and the applicable published Rules and Regulations thereunder and
stating that in their opinion the financial statements and schedules examined by
them and included in the Registration Statement comply in form in all material
respects with the applicable accounting requirements of the Act and the related
published Rules and Regulations, and otherwise in accordance with
-24-
<PAGE>
the procedures set forth in the letter signed by such firm and dated and
delivered to the Representative on the date hereof that nothing has come to
their attention during the period from the date five days prior to the date
hereof, to a date not more than five days prior to the Closing Date or the
Option Closing Date, as the case may be, which would require any change in their
letter dated the date hereof if it were required to be dated and delivered on
the Closing Date or the Option Closing Date, as the case may be. All such
letters shall be in form and substance satisfactory to the Representative.
(g) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued, and no proceedings for such
purpose shall have been taken or, to the knowledge of the Company or any
Underwriter shall be contemplated or threatened by the Commission at or prior to
the Closing Date; (ii) there shall not have been any change in the capital stock
of the Company or any material increase in the short-term or long-term debt of
the Company (other than in the ordinary course of business) from that set forth
or contemplated in the Registration Statement and the Prospectus (or any
amendment or supplement thereto); (iii) there shall not have been, since the
respective dates as of which information is given in the Registration Statement
and the Prospectus (or any amendment or supplement thereto), except as may
otherwise be stated in the Registration Statement and Prospectus or any
amendment or supplement thereto, any Material Adverse Change; (iv) the Company
and its Subsidiary shall not have any liabilities or obligations, direct or
contingent (whether or not in the ordinary course of business), that are
material to the Company and its Subsidiary, taken as a whole, other than those
reflected in the Registration Statement and the Prospectus (or any amendment or
supplement thereto); and (v) all the representations and warranties of the
Company, and the Selling Shareholders contained in this Agreement shall be true
and correct on and as of the date hereof and on and as of the Closing Date and
Option Closing Date as if made on and as of the Closing Date or Option Closing
Date, and you shall have received a certificate, dated the Closing Date and
signed on behalf of the Company by the chief executive officer and the chief
financial officer of the Company (or such other officers as are acceptable to
you), to the effect set forth in this Section 6(g) and in Section 6(j) as it
relates to the Company;
(h) The Company and the Selling Shareholders shall have furnished to
the Representative such further certificates and documents confirming the
representations and warranties contained herein and related matters as the
Representative may reasonably have requested.
(i) The approval of the Firm Shares and Option Shares, if any, as
applicable, for quotation and listing (upon official
-25-
<PAGE>
notice of issuance) on the NASDAQ shall not have been rescinded or conditioned.
(j) The Company and the Selling Shareholders shall not have failed to
perform, or comply with, in any material respect any of the agreements contained
herein and required to be performed or complied with by the Company and the
Selling Shareholders at or prior to the Closing Date or Option Closing Date, as
the case may be.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects reasonably satisfactory to the Representative and to Drinker
Biddle & Reath, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representative by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the case
may be.
In such event, the Selling Shareholders, the Company and the
Underwriters shall not be under any obligation to each other except to the
extent provided in Sections 5 and 8 hereof.
7. CONDITIONS OF THE OBLIGATIONS OF THE SELLERS. The several obligations
--------------------------------------------
of the Company and the Selling Shareholders to sell and deliver the portion of
the Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. INDEMNIFICATION.
---------------
(a) The Company and the Selling Shareholders, severally and not
jointly, agree to indemnify and hold harmless each Underwriter and each person,
if any, who controls any Underwriter (within the meaning of the Act) against all
losses, claims, damages or liabilities to which such Underwriter or such
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (A) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or (B) the omission or alleged omission to
-26-
<PAGE>
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of the Prospectus, in the light of the
circumstances under which they were made) not misleading and will reimburse each
Underwriter and each such controlling person for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage, liability, action
or proceeding; provided, however, that the Company and the Selling Shareholders
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement, or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representative
specifically for use in the preparation thereof; provided further, that the
indemnity agreement contained in this Section with respect to any Preliminary
Prospectus will not inure to the benefit of any Underwriter (or of any person
controlling such Underwriter) on account of any loss, claim, damage, liability,
action or proceeding, arising out of or based upon an untrue statement or
alleged untrue statement of a material fact, or omission or alleged omission of
a material fact, made therein, with respect to the sale of the Shares by such
Underwriter to any person if a copy of a Preliminary Prospectus or Prospectus or
any amendment or supplement thereto (if any amendment or supplement thereto
shall have been furnished to such Underwriter) correcting such untrue statement
or alleged untrue statement or omission or alleged omission shall not have been
given or sent to such person by or on behalf of such Underwriter with or prior
to the written confirmation of the sale involved. This indemnity agreement will
be in addition to any liability which the Company or the Selling Shareholders
may otherwise have.
(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed the
Registration Statement, the Selling Shareholders, and each person, if any, who
controls the Company or the Selling Shareholders within the meaning of the Act,
against any losses, claims, damages or liabilities to which the Company or any
such director, officer, Selling Shareholder or controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof), arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under
-27-
<PAGE>
which they were made; and will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, Selling Shareholder or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding; provided, however, that each
Underwriter will be liable in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission has been made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or such amendment or supplement, in reliance upon and
in conformity with written information furnished to the Company by or through
the Representative specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which such Underwriter
may otherwise have.
(c) Any person entitled to indemnification hereunder (the "indemnified
party") shall give prompt written notice to the person against whom such
indemnity may be sought (the "indemnifying party") after the receipt by such
person of any written notice of the commencement of any action, suit, proceeding
or investigation or threat thereof made in writing for which such person may
claim indemnification or contribution pursuant to this Agreement and, unless in
the reasonable judgment of such indemnified party a conflict of interest may
exist between such indemnified party and the indemnifying party with respect to
such claim, permit the indemnifying party to assume the defense of such claim
with counsel reasonably satisfactory to such indemnified party. If the
indemnifying party is not entitled to, or elects not to, assume the defense of a
claim, it will not be obligated to pay the fees and expenses of more than one
counsel with respect to such claim, unless in the reasonable judgment of counsel
for such indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim, in which event the indemnifying party shall be obligated to pay the
reasonable fees and expenses of such additional counsel or counsels. The
indemnifying party will not be subject to any liability for any settlement made
without its consent.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a)(i) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other
-28-
<PAGE>
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in Section 8(c) hereof, any legal or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
The Company, the Selling Shareholders and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this Section
8(d) were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 8(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to above in this Section 8(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter, (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation, and (iii) no Selling Shareholder
shall be required to contribute any amount in excess of the proceeds received by
such Selling Shareholder from the Underwriters in the offering. The
Underwriters' obligations in this Section 8(d) to contribute are several in
proportion to their respective underwriting obligations and not joint. If
indemnification is available under this Section 8, the indemnifying parties
shall indemnify each indemnified party to the full extent provided in Section
8(a) and (b) hereof without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this Section 8(d).
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any
-29-
<PAGE>
other contributing party, agrees that process issuing from such court may be
served upon him or it by any other contributing party and consents to the
service of such process and agrees that any other contributing party may join
him or it as an additional defendant in any such proceeding in which such other
contributing party is a party.
(f) The liability of each Selling Shareholder under such Selling
Shareholder's representations and warranties made hereunder and under the
indemnity and contribution agreements hereof shall be limited to an amount equal
to the initial public offering price of the Shares sold by such Selling
Shareholders to the Underwriters net of underwriting discounts paid with respect
to such Shares. The Company and the Selling Shareholders may agree, as among
themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible.
9. DEFAULT BY UNDERWRITERS OR SELLING SHAREHOLDERS. If on the Closing
-----------------------------------------------
Date or the Option Closing Date, as the case may be, any Underwriter shall fail
to purchase and pay for the portion of the Shares which such Underwriter has
agreed to purchase and pay for on such date (otherwise than by reason of any
default on the part of the Company or a Selling Shareholder), you, as
Representative of the Underwriters, shall use your best efforts to procure
within 24 hours thereafter one or more of the other Underwriters, or any others,
to purchase from the Company and the Selling Shareholders such amounts as may be
agreed upon and upon the terms set forth herein, the Firm Shares or Option
Shares, as the case may be, which the defaulting Underwriter or Underwriters
failed to purchase. If during such 24 hours you, as such Representative, shall
not have procured such other Underwriters, or any others, to purchase the Firm
Shares or Option Shares, as the case may be, agreed to be purchased by the
defaulting Underwriter or Underwriters, then (a) if the aggregate number of
shares with respect to which such default shall occur does not exceed 10% of the
Firm Shares or Option Shares, as the case may be, covered hereby, the other
Underwriters shall be obligated, severally, in proportion to the respective
numbers of Firm Shares or Option Shares, as the case may be, which they are
obligated to purchase hereunder, to purchase the Firm Shares or Option Shares,
as the case may be, which such defaulting Underwriter or Underwriters failed to
purchase, or (b) if the aggregate number of shares of Firm Shares or Option
Shares, as the case may be, with respect to which such default shall occur
exceeds 10% of the Firm Shares or Option Shares, as the case may be, covered
hereby, the Company and the Selling Shareholders or you as the Representative of
the Underwriters will have the right, by written notice given within the next
24-hour period to the parties to this Agreement, to terminate this Agreement
without liability on the part of the non-defaulting Underwriters or of the
Company or of the Selling Shareholders except to the extent
-30-
<PAGE>
provided in Section 8 hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 9, the Closing Date or Option Closing
Date, as the case may be, may be postponed for such period, not exceeding seven
days, as you, as Representative, may determine in order that the required
changes in the Registration Statement or in the Prospectus or in any other
documents or arrangements may be effected. The term "Underwriter" includes any
person substituted for a defaulting Underwriter. Any action taken under this
Section 9 shall not relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
10. NOTICES. All communications hereunder shall be in writing and, except
-------
as otherwise provided herein, will be mailed, delivered by overnight courier
service or electronic facsimile transmission or telegraphed and confirmed as
follows: if to the Underwriters, to Pennsylvania Merchant Group Ltd, as
Representative of the Several Underwriters, Four Falls Corporate Center, West
Conshohocken, Pennsylvania 19428-2961, Attention: Jill S. Meyer; if to the
Company or the Selling Shareholders, to Elcom Technologies Corporation, 78 Great
Valley Parkway, Malvern, PA 19355.
11. TERMINATION. This Agreement may be terminated by you by notice to the
-----------
Company as follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m. on
the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in
the Registration Statement and the Prospectus or any amendment or supplement
thereto, in your opinion, any Material Adverse Change, whether or not arising in
the ordinary course of business, (ii) any outbreak of hostilities or other
national or international calamity or crisis or change in economic or political
conditions if the effect of such outbreak, calamity, crisis or change on the
financial markets of the United States would, in your reasonable judgment, make
the offering or delivery of the Shares impracticable, (iii) suspension of
trading in securities on the New York Stock Exchange, the American Stock
Exchange or the NASDAQ or limitation on prices (other than limitations on hours
or numbers of days of trading) for securities on either such Exchange or the
NASDAQ, (iv) the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of any court or other
governmental authority which in your reasonable opinion materially and adversely
affects or will materially or adversely affect the business or operations of the
Company, (v) declaration of a banking moratorium by either federal or New York
-31-
<PAGE>
state authorities, or (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which in
your opinion has a material adverse effect on the securities markets in the
United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
This Agreement also may be terminated by you, by notice to the Selling
Shareholders, as to any obligation of the Underwriters to purchase the Option
Shares, upon the occurrence at any time prior to the Option Closing Date of any
of the events described in subparagraph (b) above or as provided in Sections 6
and 9 of this Agreement.
12. SUCCESSORS. This Agreement has been and is made solely for the
----------
benefit of the Underwriters, the Company and the Selling Shareholders and their
respective successors, executors, administrators, heirs and assigns, and the
officers, directors and controlling persons referred to herein, and no other
person will have any right or obligation hereunder. The term "successors" shall
not include any purchaser of the Shares merely because of such purchase.
13. MISCELLANEOUS. The reimbursement, indemnification and contribution
-------------
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or its directors or officers, and (c) delivery of and payment for
the Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Pennsylvania.
Any person executing this Agreement as Attorney-in-Fact for a Selling
Shareholder represents by so doing that he has been duly appointed as Attorney-
in-Fact by such Selling Shareholder pursuant to a validly existing and binding
Power of Attorney which authorize such Attorney-in-Fact to take such action.
If the foregoing letter is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding
-32-
<PAGE>
agreement among the Selling Shareholders, the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
ELCOM TECHNOLOGIES CORPORATION
By
-------------------------------
Robert A. Vito, President
Selling Shareholders listed on
Schedule II
By
-------------------------------
Louis J. Petriello
Attorney-in-Fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
PENNSYLVANIA MERCHANT GROUP LTD
As Representative of the several
Underwriters listed on Schedule I
By
--------------------------------
-33-
<PAGE>
SCHEDULE I
Schedule of Underwriters
Number of Firm Shares
Underwriter to be Purchased
----------- ---------------------
Pennsylvania Merchant Group Ltd
---------------------
Total
-----------
-34-
<PAGE>
SCHEDULE II
Schedule of Selling Shareholders
Selling Shareholder Number of Option Shares
- ------------------- to be Sold
----------
-35-
<PAGE>
SCHEDULE III
Schedule Of Persons Subject to Lock-Up Agreements
-------------------------------------------------
-36-
<PAGE>
Microfilm Number_________ Filed with the Department of State on
Jan 26 1994
-----------
Entity Number 2565031 /s/Robert M. Grant
----------- ----------------------------------------
Secretary of the Commonwealth
ARTICLES OF INCORPORATION-FOR PROFIT
OF
ELCOM TECHNOLOGIES CORPORATION
------------------------------------
Name of Corporation
A TYPE OF CORPORATION INDICATED BELOW
Indicate type of domestic corporation:
X Business-stock (15 Pa.C.S. (S) 1306) ___ Management (15 Pa.C.S.
- ---
(S) 2702)
___ Business-nonstock (15 Pa.C.S. (S) 2102) ___ Professional (15 Pa.C.S.
(S) 2903)
___ Business-statutory close (15 Pa.C.S. (S) 2303) ___ Insurance (15 Pa.C.S.
(S) 3101)
___ Cooperate (15 Pa.C.S. (S) 7102)
DSCB:15-1306/2102/2303/2702/2903/3101/7102A (Rev 91)
In compliance with the requirements of the applicable provisions of 15
Pa.C.S. (relating to corporations and unincorporated associations) the
undersigned, desiring to incorporate a corporation for profit hereby, state(s)
that:
1. The name of the corporation is: ELCOM TECHNOLOGIES CORPORATION
--------------------------------------------
___________________________________________________________________________
2. The (a) address of this corporation's initial registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is:
(a) 333 Great Valley Center, 5 Great Valley Center, Malvern, PA 19345
-----------------------------------------------------------------------
Chester
-----------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o: __________________________________________________________________
Name of Commercial Registered Office Provides County
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official purposes.
3. The corporation is incorporated under the provisions of the business
Corporation Act of 1938.
4. The aggregate number of shares authorized is: 1,000,000 Common (other
provision, if any, attach 8 1/2 x 11 sheet)
5. The name and address, including number and street, if any, of each
incorporator is:
Name Address
Michael L. Nix, Esquire. Werner & Schwartz 230 S. Broad St 6th Flr. Phila
------------------------ ------------------------------------------------
PA 19102
-----------
________________________ _________________________________________________
6. The specified effective date, if any, is: 9/ 3/ 93
----------------------------
month day year
1325 Walnut St. Phil. PA 19107
<PAGE>
7. Additional provisions of the articles, if any, attach an 8 1/2 x 11 sheet.
8. STATUTORY CLOSE CORPORATION ONLY: Neither the corporation nor any
shareholder shall make an offering of any of its shares of any class that
would constitute a "public offering" within the meaning of the Securities
Act of 1933 (15 U.S.C. (S) 77a et seq.).
9. COOPERATIVE CORPORATIONS ONLY: (Complete and strike out inapplicable term).
The common bond of membership among its members/shareholders is:
___________________________________________
IN TESTIMONY WHEREOF, the incorporator(s) has (have) signed these Articles of
Incorporation this 2 day of September 3 , 1993.
--- ----------- - --
Michael Nix
- -------------------------------- _______________________________________
(Signature) (Signature)
<PAGE>
Microfilm Number______________ Filed with the Department of State on
AUG 15 1994
-----------
Entity Number 2565021 /s/ Robert M. Grant
----------------- --------------------------------------
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. (S) 1915 (relating
to articles of amendment), the undersigned business corporation, desiring to
amend its Articles, hereby states that:
1. The name of the corporation is: ELCOM TECHNOLOGIES CORPORATION
--------------------------------------------
________________________________________________________________________________
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and the
county of venue is (the Department is hereby authorized to correct the following
information to conform to the records of the Department):
(a) 78 Great Valley Parkway, Malvern, Pennsylvania 19355
------------------------------------------------------------------------
Number and Street City State
Chester County
------------------------------------------------------------------------
Zip County
(b) c/o:__________________________________________________________________
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located for
venue and official publication purposes.
3. The statute by or under which it was incorporated is: Business Corporation
---------------------
Law of 1988
---------------------------------------------------------------------------
4. The date of its incorporation is:__________________________________________
5. (Check, and if appropriate complete, one of the following):
___ The amendment shall be effective upon filing these Articles of
Amendment in the Department of State.
X The amendment shall be effective on: August 1, 1994 at 12:01 A.M.
--- ---------------------- ----------
Date Hour
6. (Check one of the following):
___ The amendment was adopted by the shareholders (or members) pursuant to
15 Pa.C.S. (S) 1914(a) and (b).
X The amendment was adopted by the board of directors pursuant to 15 Pa.
---
C.S. (S) 1914(c).
7. (Check, and if appropriate complete, one of the following):
X The amendment adopted by the corporation, set forth in full, is as
---
follows:
The corporation shall be authorized to issue 20,000,000 shares of
common stock,
PA DEPT. OF STATE
AUG 15 1994
___ The amendment adopted by the corporation as set forth in full in
Exhibit A attached hereto and made a part hereof.
<PAGE>
8. (Check if the amendment restates the Articles):
___ The restated Articles of Incorporation supersede the original Articles
and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this
1st day of August , 1994 .
- ----- --------- --
ELCOM TECHNOLOGIES CORPORATION
------------------------------------------------
(Name of Corporation)
BY: ROBERT A. VITO
---------------------------------------------
(Signature)
TITLE: PRESIDENT
-------------------------------------------
<PAGE>
BYLAWS
OF
ELCOM TECHNOLOGIES CORPORATION
(a Pennsylvania corporation)
ARTICLE I
_______________________
OFFICES AND FISCAL YEAR
Section 1.01. REGISTERED OFFICE. The registered office of the
Corporation in Pennsylvania shall be at 78 Great Valley Parkway, Malvern, PA
until otherwise established by an amendment of the Articles or by the Board of
Directors and until record of such change is filed with the Department of State
in the manner provided by law.
Section 1.02. OTHER OFFICE. The Corporation may also have offices at
such other places within or without Pennsylvania as the Board of Directors may
from time to time appoint or the business of the Corporation may require.
Section 1.03. FISCAL YEAR. The fiscal year of the Corporation shall
begin the 1st day of January in each year.
ARTICLE II
_______________________
NOTICE - WAIVERS - MEETINGS GENERALLY
Section 2.01. MANNER OF GIVING NOTICE.
(a) General Rule. Whenever written notice is required to be given to
any person under the provisions of the Business Corporation Law or by the
Articles or these Bylaws, it may be given to the person either personally or by
sending a copy thereof by first class or express mail, postage prepaid, or by
telegram (with messenger service specified), telex or TWX (with answer back
received) or courier service, charges prepaid, or by telecopier, to the address
(or to the telex, TWX, telecopier or telephone number) of the person appearing
on the books of the Corporation or, in the case of directors, supplied by the
directors to the Corporation for the purpose of notice. If the notice is sent
by mail, telegraph or courier service, it shall be deemed to have been given to
the person entitled thereto when deposited in the United States mail or with a
telegraph office or courier service for delivery to that person or, in the case
of telex or TWX, when dispatched or, in the case of telecopier, when received.
A notice of meeting shall specify
<PAGE>
the place, day and hour of the meeting and any other information required by any
other provision of the Business Corporation Law, the Articles or these Bylaws.
(b) Adjournment of Shareholders Meetings. When a meeting of
shareholders is adjourned, it shall not be necessary to give any notice of the
adjourned meeting or of the business to be transacted at an adjourned meeting,
other than by announcement at the meeting at which the adjournment is taken,
unless the Board fixes a new record date for the adjourned meeting.
Section 2.02. NOTICE OF MEETINGS OF BOARD OF DIRECTORS. Notice of a
regular meeting of the Board of Directors need not be given. Notice of every
special meeting of the Board of Directors shall be given to each director by
telephone or in writing at least 24 hours (in the case of notice by telephone,
telex, TWX or telecopier) or 48 hours (in the case of notice by telegraph,
courier service or express mail) or five days (in the case of notice by first
class mail) before the time at which the meeting is to be held. Every such
notice shall state the time and place of the meeting.
Section 2.03. NOTICE OF MEETINGS OF SHAREHOLDERS.
(a) General Rule. Written notice of every meeting of the
shareholders shall be given by, or at the direction of, the Secretary to each
shareholder of record entitled to vote at the meeting at least:
(1) ten days prior to the day named for a meeting called to
consider a fundamental transaction under 15 Pa. C.S. Chapter
19 regarding amendments of Articles of Incorporation,
mergers, consolidations, share exchanges, sale of assets,
divisions, conversions, liquidations and dissolution; or
(2) five days prior to the day named for the meeting in any
other case.
If the Secretary neglects or refuses to give notice of a meeting, the person or
persons calling the meeting may do so. In the case of a special meeting of
shareholders, the notice shall specify the general nature of the business to be
transacted.
(b) Notice of Action by Shareholders on Bylaws. In the case of a
meeting of shareholders that has as one of its purposes action on the Bylaws,
written notice shall be given to each shareholder that the purpose, or one of
the purposes, of the meeting is to consider the adoption, amendment or repeal of
the Bylaws. There shall be included in, or enclosed with, the notice a copy of
the proposed amendment or a summary of the changes to be effected thereby.
Section 2.04. WAIVER OF NOTICE.
(a) Written Waiver. Whenever any written notice is required to be
given under the provisions of the Business Corporation Law, the Articles or
these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after
2
<PAGE>
the time stated therein, shall be deemed equivalent to the giving of the notice.
Except as otherwise required by this subsection, neither the business to be
transacted at, nor the purpose of, a meeting need be specified in the waiver of
notice of the meeting. In the case of a special meeting of shareholders, the
waiver of notice shall specify the general nature of the business to be
transacted.
(b) Waiver by Attendance. Attendance of a person at any meeting
shall constitute a waiver of notice of the meeting except where a person attends
a meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting was not lawfully called
or convened.
Section 2.05. MODIFICATION OF PROPOSAL CONTAINED IN NOTICE.
Whenever the language of a proposed resolution is included in a written notice
of a meeting required to be given under the provisions of the Business
Corporation Law, the Articles or these Bylaws, the meeting considering the
resolution may without further notice adopt it with such clarifying or other
amendments as do not enlarge its original purpose.
Section 2.06. EXCEPTION TO REQUIREMENT OF NOTICE.
(a) General Rule. Whenever any notice or communication is required
to be given to any person under the provisions of the Business Corporation Law
or by the Articles or these Bylaws or by the terms of any agreement or other
instrument or as a condition precedent to taking any corporate action and
communication with that person is then unlawful, the giving of the notice or
communication to that person shall not be required.
(b) Shareholders Without Forwarding Addresses. Notice or other
communications shall not be sent to any shareholder with whom the Corporation
has been unable to communicate for more than 24 consecutive months because
communications to the shareholder are returned unclaimed or the shareholder has
otherwise failed to provide the Corporation with a current address. Whenever
the shareholder provides the Corporation with a current address, the Corporation
shall commence sending notices and other communications to the shareholder in
the same manner as to other shareholders.
Section 2.07. USE OF CONFERENCE TELEPHONE AND SIMILAR EQUIPMENT.
One or more persons may participate in a meeting or the Board of Directors or
the shareholders of the Corporation by means of conference telephone or similar
communications equipment by means of which all person participating in the
meeting can hear each other. Participation in a meeting pursuant to this section
shall constitute presence in person at the meeting.
3
<PAGE>
ARTICLE III
_______________________
SHAREHOLDERS
Section 3.01 PLACE OF MEETING. All meetings of the shareholders of
the Corporation shall be held at the registered office of the Corporation
unless another place is designated by the Board of Directors in the notice of a
meeting.
Section 3.02. ANNUAL MEETING. The Board of Directors may fix the date
and time of the annual meeting of the shareholders, but if no such date and
time is fixed by the Board, the meeting for any calendar year shall be held on
the 15th day of December in such year, if not a legal holiday under the laws of
Pennsylvania, and, if a legal holiday, then on the next succeeding business
day, not a Saturday, at 10:00 o'clock A.M., and at said meeting the
shareholders then entitled to vote shall elect directors and shall transact
such other business as may properly be brought before the meeting. If the
annual meeting shall not have been called and held within six months after the
designated time, any shareholder may call the meeting at any time thereafter.
Section 3.03. SPECIAL MEETINGS.
(a) Call of Special Meetings. Special meetings of the shareholders
may be called at any time by the Board of Directors of the Corporation.
(b) Fixing of Time for Meeting. At any time, upon written request
of any person who has called a special meeting, it shall be the duty of the
Secretary to fix the time of the meeting which shall be held not more than 60
days after the receipt of the request. If the Secretary neglects or refuses to
fix a time of the meeting, the person or persons calling the meeting may do so.
Section 3.04. QUORUM AND ADJOURNMENT.
(a) General Rule. A meeting of shareholders of the Corporation
duly called shall not be organized for the transaction of business unless a
quorum is present. The presence of shareholders entitled to cast at least a
majority of the votes that all shareholders are entitled to cast on a particular
matter to be acted upon at the meeting shall constitute a quorum for the
purposes of consideration and action on the matter. Shares of the Corporation
owned, directly or indirectly, by it and controlled, directly or indirectly, by
the Board of Directors of the Corporation, as such, shall not be counted in
determining the total number of outstanding shares for quorum purposes at any
given time.
(b) Withdrawal of a Quorum. The shareholders present at a duly
organized meeting can continue to do business until adjournment notwithstanding
the withdrawal of enough shareholders to leave less than a quorum.
4
<PAGE>
(c) Adjournment for Lack of Quorum. If a meeting cannot be organized
because a quorum has not attended, those present may, except as provided in the
Business Corporation Law, adjourn the meeting to such time and place as they may
determine.
(d) Adjournments Generally. Any meeting at which directors are to
be elected shall be adjourned only from day to day, or for such longer periods
not exceeding 15 days each as the shareholders present and entitled to vote
shall direct, until the directors have been elected. Any other regular or
special meeting may be adjourned for such period as the shareholders present and
entitled to vote shall direct.
(e) Electing Directors at Adjourned Meeting. Those shareholders
entitled to vote who attend a meeting called for the election of directors that
has been previously adjourned for lack of a quorum, although less than a quorum
as fixed in this section, shall nevertheless constitute a quorum for the purpose
of electing directors.
(f) Other Action in Absence of Quorum. Those shareholders entitled
to vote who attend a meeting of shareholders that has been previously adjourned
for one or more periods aggregating at least 15 days because of an absence of a
quorum, although less than a quorum as fixed in this section, shall nevertheless
constitute a quorum for the purpose of acting upon any matter set forth in the
notice of the meeting if the notice states that those shareholders who attend
the adjourned meeting shall nevertheless constitute a quorum for the purpose of
acting upon the matter.
Section 3.05. ACTION BY SHAREHOLDERS.
(a) General Rule. Except as otherwise provided in the Business
Corporation Law or the Articles or these Bylaws, whenever any corporate action
is to be taken by vote of the shareholders of the Corporation, it shall be
authorized by a majority of the votes cast at a duly organized meeting of
shareholders by the holders of shares entitled to vote thereon.
(b) Interested Shareholders. Any merger or other transaction
authorized under 15 Pa. C.S. Subchapter 19C between the Corporation or
subsidiary thereof and a shareholder of the Corporation, or any voluntary
dissolution authorized under 15 Pa. C.S. Subchapter 19F in which a shareholder
is treated differently from other shareholders of the same class (other than any
dissenting shareholders), shall require the affirmative vote of the shareholders
entitled to cast at least a majority of the votes that all shareholders other
than the interested shareholder are entitled to cast with respect to the
transaction, without counting the vote of the interested shareholder. For the
purposes of the preceding sentence, interested shareholder shall include the
shareholder who is a party to the transaction or who is treated differently from
other shareholders, any person, or group of persons, that is acting jointly or
in concert with the interested shareholder and any person who, directly or
indirectly, controls, is controlled by or is under common control with the
interested shareholder. An interested shareholder shall not include any person
who, in good faith and not for the purpose of circumventing this subsection, is
an agent, bank, broker, nominee or trustee for one or more other persons, to the
extent that the other person or persons are not interested shareholders.
5
<PAGE>
(c) Exceptions. Subsection (b) shall not apply to a transaction:
(1) that has been approved by a majority vote of the Board of
Directors without counting the vote of directors who:
(i) are directors or officers of, or have a material
equity interest in, the interested shareholder; or
(ii) were nominated for election as a director by the
interested shareholder, and first elected as a
director, within 24 months of the date of the vote on
the proposed transaction; or
(2) in which the consideration to be received by the
shareholders for shares of any class of which shares are
owned by the interested shareholder is not less than the
highest amount paid by the interested shareholder in
acquiring shares of the same class.
(d) Additional Approvals. The approvals required by subsection (b)
shall be in addition to, and not in lieu of, any other approval required by the
Business Corporation Law, the Articles or these Bylaws, or otherwise.
Section 3.06. ORGANIZATION. At every meeting of the shareholders,
the Chairman of the Board, if there be one, or, in the case of vacancy in office
or absence of the Chairman of the Board, one of the following officers present
in the order stated: the Vice Chairman of the Board, if there be one, the
President, the Vice Presidents in their order of rank and seniority, or a person
chosen by vote of the shareholders present, shall act as chairman of the
meeting. The Secretary or, in the absence of the Secretary, an assistant
secretary, or in the absence of both the Secretary and the assistant
secretaries, a person appointed by the chairman of the meeting, shall act as
secretary.
Section 3.07. VOTING RIGHTS OF SHAREHOLDERS. Unless otherwise
provided in the Articles, every shareholder of the Corporation shall be entitled
to one vote for every share standing in the name of the shareholder on the books
of the Corporation.
Section 3.08. VOTING AND OTHER ACTION BY PROXY.
(a) General Rule.
6
<PAGE>
(1) Every shareholder entitled to vote at a meeting of
shareholder or to express consent or dissent to corporate
action in writing without a meeting may authorize another
person to act for the shareholder by proxy.
(2) The presence of, or vote or other action at a meeting of
shareholders or the expression of consent or dissent to
corporate action in writing, by a proxy of a shareholder
shall constitute the presence of, or vote or action by, or
written consent or dissent of the shareholder.
(3) Where two or more proxies of a shareholder are present, the
Corporation shall, unless otherwise expressly provided in
the proxy, accept as the vote of all shares represented
thereby the vote cast by a majority of them and, if a
majority of the proxies cannot agree whether the shares
represented shall be voted or upon the manner of voting the
shares, the voting of the shares shall be divided equally
among those persons.
(b) Minimum Requirements. Every proxy shall be executed in writing
by the shareholder or by the duly authorized attorney-in-fact of the shareholder
and filed with the Secretary of the Corporation. A proxy, unless coupled with
an interest, shall be revocable at will, notwithstanding any other agreement or
any provision in the proxy to the contrary, but the revocation of a proxy shall
not be effective until written notice thereof has been given to the Secretary of
the Corporation. An unrevoked proxy shall not be valid after three years from
the date of its execution unless a longer time is expressly provided therein. A
proxy shall not be revoked by the death or incapacity of the maker unless,
before the vote is counted or the authority is exercised, written notice of the
death or incapacity is given to the Secretary of the Corporation.
(c) Expenses. Unless otherwise restricted in the Articles, the
Corporation shall pay the reasonable expenses of solicitation of votes, proxies
or consents of shareholders by or on behalf of the Board of Directors or its
nominees for election to the Board, including solicitation by professional proxy
solicitors and otherwise.
Section 3.09. VOTING BY FIDUCIARIES AND PLEDGEES. Shares of the
Corporation standing in the name of trustee or other fiduciary and shares held
by an assignee for the benefit of creditors or by a receiver may be voted by the
trustee, fiduciary, assignee or receiver. A shareholder whose shares are
pledged shall be entitled to vote the shares until the shares have been
transferred into the name of the pledgee, or a nominee of the pledgee, but
nothing in this section shall affect the validity of a proxy given to a pledgee
or nominee.
Section 3.10. VOTING BY JOINT HOLDERS OF SHARES.
7
<PAGE>
(a) General Rule. Where shares of the Corporation are held jointly
or tenants in common by two or more persons, as fiduciaries or otherwise:
(1) if only one or more of such persons is present in person or
by proxy, all of the shares standing in the names of such
persons shall be deemed to be represented for the purpose of
determining a quorum and the Corporation shall accept as the
vote of all the shares the vote cast by a joint owner or a
majority of them; and
(2) if the persons are equally divided upon whether the shares
held by them shall be voted or upon the manner of voting the
shares, the voting of the shares shall be divided equally
among the persons without prejudice to the rights of the
joint owners or the beneficial owners thereof among
themselves.
(b) Exception. If there has been filed with the Secretary of the
Corporation a copy, certified by an attorney at law to be correct, of the
relevant portions of the agreement under which the shares are held or the
instrument by which the trust or estate was created or the order of court
appointing them or of an order of court directing the voting of the shares, the
persons specified as having such voting power in the document latest in date of
operative effect so filed, and only those persons, shall be entitled to vote
the shares but only in accordance therewith.
Section 3.11. VOTING BY CORPORATIONS
(a) Voting by Corporate Shareholders. Any corporation that is a
shareholder of the Corporation may vote by any of its officers or agents, or by
proxy appointed by any officer or agent, unless some other person, by
resolution of the Board of Directors of the other corporation or provision of
its Articles or Bylaws, a copy of which resolution or provision certified to be
correct by one of its officers has been filed with the Secretary of the
Corporation, is appointed its general or special proxy in which case that
person shall be entitled to vote the shares.
(b) Controlled Shares. Shares of the Corporation owned, directly or
indirectly, by it and controlled, directly or indirectly, by the Board of
Directors of the Corporation, as such, shall not be voted at any meeting and
shall not be counted in determining the total number of outstanding shares for
voting purposes at any given time.
Section 3.12. DETERMINATION OF SHAREHOLDERS OF RECORD.
(a) Fixing Record Date. The Board of Directors may fix a time prior
to the date of any meeting of shareholders as a record date for the
determination of the shareholders entitled to notice of, or to vote at, the
meeting, which time, except in the case of an adjourned meeting, shall be not
more than 90 days prior to the date of the meeting of shareholders. Only
shareholders of record on the date fixed shall be so entitled notwithstanding
any transfer of
8
<PAGE>
shares on the books of the Corporation after any record date fixed as provided
in this subsection. The Board of Directors may similarly fix a record date for
the determination of shareholders of record for any other purpose. When a
determination of shareholders of record has been made as provided in this
section for purposes of a meeting, the determination shall apply to any
adjournment thereof unless the Board fixes a new record date for the adjourned
meeting.
(b) Determination When a Record Date is Not Fixed. If a record date
is not fixed:
(1) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be
at the close of business on the date preceding the day on
which notice is given or, if notice is waived, at the close
of business on the day immediately preceding the day on
which the meeting is held.
(2) The record date for determining shareholders entitled to
express consent or dissent to corporate action in writing
without a meeting, when prior action by the Board of
Directors is not necessary, shall be the close of business
on the day on which the first written consent or dissent is
filed with the Secretary of the Corporation.
(3) The record date for determining shareholders for any other
purpose shall be at the close of business of the day on
which the Board of Directors adopts the resolution relating
thereto.
Section 3.13. VOTING LISTS.
(a) General Rule. The officer or agent having charge of the transfer
books for shares of the Corporation shall make a complete list of the
shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and of the number of shares held by
each. The list shall be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder during the
whole time of the meeting for the purposes thereof.
(b) Effect of List. Failure to comply with the requirements of this
section shall not effect the validity of any action taken at a meeting prior to
a demand at the meeting by any shareholder entitled to vote thereat to examine
the list. The original share register or transfer book, or a duplicate thereof
kept in this Commonwealth, shall be prima facie evidence as to who are the
shareholders entitled to examine the list or share register or transfer book or
to vote at any meeting of shareholders.
Section 3.14. JUDGES OF ELECTION.
9
<PAGE>
(a) Appointment. In advance of any meeting of shareholders of the
Corporation, the Board of Directors may appoint judges of election, who need not
be shareholders to act at the meeting or any adjournment thereof. If judges of
election are not so appointed, the presiding officer of the meeting may, and on
the request of any shareholder shall, appoint judges of election at the meeting.
The number of judges shall be one or three. A person who is a candidate for
office to be filled at the meeting shall not act as a judge.
(b) Vacancies. In case any person appointed as a judge fails to
appear or fails or refuses to act, the vacancy may be filled by appointment made
by the Board of Directors in advance of the convening of the meeting or at the
meeting by the presiding officer thereof.
(c) Duties. The judges of election shall determine the number of
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, receive votes or ballots, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and
tabulate all votes, determined the result and do such acts as may be proper to
conduct the election or vote with fairness to all shareholders. The judges of
election shall perform their duties impartially, in good faith, to the best of
their ability and as expeditiously as is practical. If there are three judges
of election, the decision, act or certificate of a majority shall be effective
in all respect as the decision, act or certificate of all.
(d) Report. On request of the presiding officer of the meeting, or
of any shareholder, the judge shall make a report in writing of any challenge or
question or matter determined by them, and execute a certificate of any fact
found by them. Any report or certificate made by them shall be prima facie
evidence of the facts stated therein.
Section 3.15 CONSENT OF SHAREHOLDERS IN LIEU OF MEETING.
(a) Unanimous Written Consent. Any action required or permitted to
be taken at a meeting of the shareholders or of a class of shareholders may be
taken without a meeting if, prior or subsequent to the action, a consent or
consents thereto by all of the shareholders who would be entitled to vote at a
meeting for such purpose shall be filed with the Secretary of the Corporation.
(b) Partial Written Consent. Any action required or permitted to be
taken at a meeting of the shareholders or of a class of shareholders may be
taken without a meeting upon the written consent of shareholders who would have
been entitled to cast the minimum number of votes that would be necessary to
authorize the action at a meeting at which all shareholders entitled to vote
thereon were present and voting. The consents shall be filed with the
Secretary of the Corporation. The action shall not become effective until
after at least ten days' written notice of the action has been given to each
shareholder entitled to vote thereon who has not consented thereto.
Section 3.16, MINORS AS SECURITY HOLDERS. The Corporation may treat
a minor who holds shares or obligations of the Corporation as having capacity
to receive and to
10
<PAGE>
empower others to receive dividends, interest, principal and other payments or
distributions, to vote or express consent or dissent and to make elections and
exercise rights relating to such shares or obligations unless, in the case of
payments or distributions on shares, the corporate officer responsible for
maintaining the list of shareholders or the transfer agent of the Corporation
or, in the case of payments or distributions on obligations, the Treasurer or
paying officer or agent has received written notice that the holder is a minor.
ARTICLE IV
-----------------------
DIRECTORS
Section 4.01. POWERS; PERSONAL LIABILITY.
(a) General Rule. Unless otherwise provided by statute all powers
vested by law in the Corporation shall be exercised by or under the authority
of, and the business and affairs of the Corporation shall be managed under the
direction of, the Board of Directors.
(b) Standard of Care; Justifiable Reliance. A director shall stand
in a fiduciary relation to the Corporation and shall perform his or her duties
as a director, including duties as a member of any committee of the Board upon
which the director may serve, in good faith, in a manner the director reasonably
believes to be in the best interests of the Corporation and with such care,
including reasonable inquiry, skill and diligence, as a person of ordinary
prudence would use under similar circumstances, In performing his or her duties,
a director shall be entitled to rely in good faith on information, opinions,
reports or statements, including financial statements and other financial data,
in each case prepared or presented by any of the following:
(1) One or more officers or employees of the Corporation whom
the director reasonably believes to be reliable and
competent in the matters presented.
(2) Counsel, public accountants or other persons as to matters
which the directors reasonably believe to be within the
professional or expert competence of such person.
(3) A committee of the Board upon which the director does not
serve, designated in accordance with law, as to matters
within its designated authority, which committee the
director reasonably believes to merit confidence.
A director shall not be considered to be acting in good faith if the director
has knowledge concerning the matter in question that would cause his or her
reliance to be unwarranted.
11
<PAGE>
(c) Consideration of Factors. In discharging the duties of their
respective positions, the Board of Directors, committees of the Board and
individual directors may, in considering the best interests of the Corporation,
consider the effects of any action upon employees, upon suppliers and customers
of the Corporation and upon communities in which offices or other establishments
of the Corporation are located, and all other pertinent factors. The
consideration of those factors shall not constitute a violation of subsection
(b).
(d) Presumption. Absent breach of fiduciary duty, lack of good
faith or self-dealing, actions taken as a director or any failure to take any
action shall be presumed to be in the best interests of the Corporation.
(e) Personal Liability of Directors.
(1) A director shall not be personally liable, as such
for monetary damages for any action taken, or any failure
to take any action, unless:
(i) the director has breached or failed to perform the
duties of his or her office under this section; and
(ii) the breach of failure to perform constitutes
self-dealing, willful misconduct or recklessness.
(2) The provisions of paragraph (1) shall not apply to the
responsibility or liability of a director pursuant to any
criminal statute, or the liability of a director for the
payment of taxes pursuant to local, State and Federal law.
(f) Notation of Dissent. A director who is present at a meeting of
the Board of Directors, or of a committee of the Board, at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his or her dissent is entered in the minutes of the meeting or unless the
director files a written dissent to the action with the Secretary of the meeting
before the adjournment thereof or transmits the dissent in writing to the
Secretary of the Corporation immediately after the adjournment of the meeting.
The right to dissent shall not apply to a director who voted in favor of the
action. Nothing in this section shall bar a director from asserting that
minutes of the meeting incorrectly omitted his or her dissent if, promptly upon
receipt of a copy of such minutes, the director notifies the Secretary in
writing, of the asserted omission or inaccuracy.
Section 4.02 QUALIFICATION AND SELECTION OF DIRECTORS.
(a) Qualifications. Each director of the Corporation shall be a
natural person of full age who need not be a resident of Pennsylvania or a
shareholder of the Corporation.
12
<PAGE>
(b) Election of Directors. Except as otherwise provided in these
Bylaws, directors of the Corporation shall be elected by the shareholders. In
elections for directors, voting need not be by ballot, except upon demand made
by a shareholder entitled to vote at the election and before the voting begins.
The candidates receiving the highest number of votes from each class or group of
classes, if any, entitled to elect directors separately up to the number of
directors to be elected by the class or group of classes shall be elected. If at
any meeting of shareholders, directors of more than one class are to be elected,
each class of directors shall be elected in a separate election.
(c) Cumulative Voting. Unless the Articles provide for straight
voting, in each election of directors every shareholder entitled to vote shall
have the right to multiply the number of votes to which the shareholder may be
entitled by the total number of directors to be elected in the same election by
the holders of the class or classes of shares of which his or her shares are a
part and the shareholders may cast the whole number of his or her votes for one
candidate or may distribute them among two or more candidates.
Section 4.03. NUMBER AND TERM OF OFFICE.
(a) Number. The Board of Directors shall consist of such number of
directors, not less than 3 nor more than 9, as may be determined from time to
time by resolution of the Board of Directors.
(b) Term of Office. Each director shall hold office until the
expiration of the term for which he or she was elected and until a successor has
been selected and qualified or until his or her earlier death, resignation or
removal. A decrease in the number of directors shall not have the effect of
shortening the term of any incumbent directors.
(c) Resignation. Any director may resign at any time upon written
notice to the Corporation. The resignation shall be effective upon receipt
thereof by the Corporation or at such subsequent time as shall be specified in
the notice of resignation.
Section 4.04. VACANCIES.
(a) General Rule. Vacancies in the Board of Directors, including
vacancies resulting from an increase in the number of directors, may be filled
by a majority vote of the remaining members of the Board though less than a
quorum, or by a sole remaining director, and each person so selected shall be a
director to serve for the balance of the unexpired term, and until a successor
has been selected and qualified or until his or her earlier death, resignation
or removal.
(b) Action by Resigned Directors. When one or more directors resign
from the Board effective at a future date, the directors then in office,
including those who have so resigned, shall have power by the applicable vote to
fill the vacancies, the vote thereon to take effect when the resignations become
effective.
13
<PAGE>
Section 4.05. REMOVAL OF DIRECTORS.
(a) Removal by the Shareholders. The entire Board of Directors, or
any class of the Board, or any individual director may be removed from office
without assigning cause by the vote of shareholders, or of the holders of a
class or series of shares, entitled to elect directors, or the class of
directors. In case the Board or a class of the Board or any one or more
directors are so removed, new directors may be elected at the same meeting. The
Board of Directors may be removed at any time with or without cause by the
unanimous vote or consent of shareholders entitled to vote thereon.
(b) Removal by the Board. The Board of Directors may declare vacant
the office of a director who has been judicially declared of unsound mind or who
has been convicted of an offense punishable by imprisonment for a term of more
than one year or if, within 60 days after notice of his or her selection, the
director does not accept the office either in writing or by attending a meeting
of the Board of Directors.
(c) Removal of Directors by Cumulative Voting. An individual
director shall not be removed (unless the entire Board or class of the Board is
removed) if sufficient votes are cast against the resolution for his removal
which, if cumulatively voted at an annual or other regular election of
directors, would be sufficient to elect one or more directors to the Board or to
the class.
Section 4.06. PLACE OF MEETINGS. Meetings of the Board of Directors
may be held at such place within or without Pennsylvania as the Board of
Directors may from time to time appoint or as may be designated in the notice of
the meeting.
Section 4.07. ORGANIZATION OF MEETINGS. At every meeting of the
Board of Directors, the Chairman of the Board, if there be one, or, in the case
of a vacancy in the office or absence of the Chairman of the Board, one of the
following officers present in the order stated: the Vice Chairman of the Board,
if there be one, the President, the Vice Presidents in their order of rank and
seniority, or a person chosen by a majority of the directors present, shall act
as a chairman of the meeting. The Secretary or, in the absence of the Secretary,
an assistant secretary, or in the absence of the Secretary and the assistant
secretaries, any person appointed by the chairman of the meeting, shall act as
secretary.
Section 4.08. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such time and place as shall be designated from time
to time by resolution of the Board of Directors.
Section 4.09. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held whenever called by the Chairman or by two or more of the
directors
Section 4.10. QUORUM OF AND ACTION BY DIRECTORS,
14
<PAGE>
(a) General Rule. A majority of the directors in office of the
Corporation shall be necessary to constitute a quorum for the transaction of
business and the acts of a majority of the directors present and voting at a
meeting at which a quorum is present shall be the acts of the Board of
Directors.
(b) Action by Written Consent. Any action required or permitted to
be taken at a meeting of the directors may be taken without a meeting if, prior
or subsequent to the action, a consent or consents thereto by all of the
directors in office is filed with the Secretary of the Corporation.
Section 4.11. EXECUTIVE AND OTHER COMMITTEES.
(a) Establishment and Powers. The Board of Directors may, by
resolution adopted by a majority of the directors in office, establish one or
more committees to consist of one or more directors of the Corporation. Any
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all of the powers and authority of the Board of
Directors except that a committee shall not have any power or authority as to
the following:
(1) The submission to shareholders of any action requiring
approval of shareholders under the Business Corporation
Law.
(2) The creation or filling of vacancies in the Board of
Directors.
(3) The adoption, amendment or repeal of these Bylaws.
(4) The amendment or repeal of any resolution of the Board that
by its terms is amendable or repealable only by the Board.
(5) Action on matters committed by a resolution of the Board of
Directors to another committee of the Board.
(b) Alternate Committee Members. The Board may designate one or
more directors as alternate members of any committee who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member and alternate member or members of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously appoint another
director to act at the meeting in the place of the absent or disqualified
member.
(c) Term. Each committee of the Board shall serve at the pleasure
of the Board.
(d) Committee Procedures. The term "Board of Directors" or "Board"
when used in any provision of these Bylaws relating to the organization or
procedures of or the manner
15
<PAGE>
of taking action by the Board of Directors, shall be construed to include and
refer to any executive or other committee of the Board.
Section 4.12. COMPENSATION. The Board of Directors shall have the
authority to fix compensation of directors for their services as directors and a
director may be a salaried officer of the Corporation.
ARTICLE V
-----------------------
OFFICERS
Section 5.01 OFFICERS GENERALLY.
(a) Number, Qualification and Designation. The officers of the
Corporation shall be a president, a secretary, a treasurer, and such other
officers as may be elected in accordance with the provisions of Section 5.03.
Officers may but need not be directors or shareholders of the Corporation. The
President and Secretary shall be natural persons of full age. The Treasurer may
be a corporation, but if a natural person shall be of full age. The Board of
Directors may elect from among the members of the Board a Chairman of the Board
and a Vice Chairman of the Board who shall be officers of the Corporation. Any
number of officers may be held by the same person.
(b) Resignations. Any officer may resign at any time upon written
notice to the Corporation. The resignation shall be effective upon receipt
thereof by the Corporation or at such subsequent time as may be specified in the
notice of resignation.
(c) Bonding. The Corporation may secure the fidelity of any or
all of its officers by bonding or otherwise.
(d) Standard of Care. Except as otherwise provided in the Articles,
an officer shall perform his or her duties as an officer in good faith, in a
manner he or she reasonably believes to be in the best interests of the
Corporation and with such care, including reasonable inquiry, skill and
diligence, as a person of ordinary prudence would use under similar
circumstances. A person who so performs his or her duties shall not be liable
by reason of having been an officer of the Corporation.
Section 5.02. ELECTION AND TERM OF OFFICE. The officers of the
Corporation, except those elected by delegated authority pursuant to Section
5.03, shall be elected annually by the Board of Directors, and each such officer
shall hold office for a term of one year and until a successor has been selected
and qualified or until his or her earlier death, resignation or removal.
Section 5.03. SUBORDINATE OFFICERS, COMMITTEES AND AGENTS. The Board
of Directors may from time to time elect such other officers and appoint such
committees, employees or other agents as the business of the Corporation may
require, including
16
<PAGE>
one or more assistant secretaries, and one or more assistant treasurers, each of
whom shall hold office for such period, have such authority, and perform such
duties as are provided in these Bylaws or as the Board of Directors may from
time to time determine. The Board of Directors may delegate to any officer or
committee the power to elect subordinate officers and to retain or appoint
employees or other agents, or committees thereof and to prescribe the authority
and duties of such subordinate officers, committee, employees or other agents.
Section 5.04. REMOVAL OF OFFICERS AND AGENTS. Any officer or agent of
the Corporation may be removed by the Board of Directors with or without cause,
The removal shall be without prejudice to the contract rights, if any, of any
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights.
Section 5.05. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause, shall be filled by
the Board of Directors or by the officer or committee to which the power to fill
such office has been delegated pursuant to Section 5.03, as the case may be, and
if the office is one for which these Bylaws prescribe a term, shall be filled
for the unexpired of the term.
Section 5.06. AUTHORITY. All officers of the Corporation, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of the Corporation as may be provided by or pursuant to
resolution or orders of the Board of Directors or in the absence of controlling
provisions in the resolutions or orders of the Board of Directors, as may be
determined by or pursuant to these Bylaws.
Section 5.07. THE CHAIRMAN OF THE BOARD. The Chairman of the Board if
there be one, or in the absence of the Chairman, the Vice Chairman of the Board,
shall preside at all meetings of the shareholders and of the Board of Directors
and shall perform such other duties as may from time to time be requested by the
Board of Directors.
Section 5.08. THE PRESIDENT. The President shall be the Chief
Executive Officer of the Corporation and shall have general supervision over the
business and operations of the Corporation, subject however, to the control of
the Board of Directors, The President shall sign, execute, and acknowledge, in
the name of the Corporation, deeds, mortgages, contracts or other instruments
authorized by the Board of Directors, except in cases where the signing and
execution thereof shall be expressly delegated by the Board of Directors, or by
these Bylaws, to some other officer or agent of the Corporation; and, in
general, shall perform all duties incident to the office of president and such
other duties as from time to time may be assigned by the Board of Directors.
Section 5.09. THE SECRETARY. The Secretary or an assistant secretary
shall attend all meetings of the shareholders and of the Board of Directors and
shall record all votes of the shareholders and of the directors and the minutes
of the meetings of the shareholders and of the Board of Directors and of
committees of the Board in a book or books to be kept for that purpose; shall
see that notices are given and records and reports properly kept and filed by
the Corporation as required by law; shall be the custodian of the seal of the
Corporation and see that
17
<PAGE>
it is affixed to all documents to be executed on behalf of the Corporation under
its seal; and, in general, shall perform all duties incident to the office of
secretary, and such other duties as may from time to time be assigned by the
Board of Directors or the President.
Section 5.10. THE TREASURER. The Treasurer or an assistant treasurer
shall have or provide for the custody of the funds or other property of the
Corporation; shall collect and receive or provide for the collection and receipt
of moneys earned by or in any manner due to or received by the Corporation;
shall deposit all funds in his or her custody as treasurer in such banks or
other places of deposit as the Board of Directors may from time to time
designate; shall, whenever so required by the Board of Directors, render an
account, showing all transactions as treasurer and the financial condition of
the Corporation; and, in general, shall discharge such other duties as may from
time to time be assigned by the Board of Directors or the President.
Section 5.11 SALARIES. The salaries of the officers elected by the
Board of Directors shall be fixed from time to time by the Board of Directors or
by such officer as may be designated by resolution of the Board. The salaries
or other compensation of any other officers, employees and other agents shall be
fixed from time to time by the officer or committee to which the power to elect
such officers or to retain or appoint such employees or other agents has been
delegated pursuant to Section 5.03. No officer shall be prevented from receiving
such salary or other compensation by reason of the fact that the officer is also
of a director of the Corporation.
Section 5.12. DISALLOWED COMPENSATION. Any payments made to an
officer or employee of the Corporation such as a salary, commission, bonus,
interest, rent, travel or entertainment expense incurred by him, which shall be
disallowed in whole or in part as a deductible expense by the Internal Revenue
Service, shall be reimbursed by such officer or employee to the Corporation to
the full extent of such disallowance. it shall be the duty of the directors, as
a board, to enforce payment of each such amount disallowed lieu of payment by
the officer or employee, subject to the determination of the directors,
proportionate amounts may be withheld from future compensation payments until
the amount owed to the Corporation has been recovered.
ARTICLE VI
-----------------------
CERTIFICATES OF STOCK, TRANSFER, ETC.
Section 6.01 SHARE CERTIFICATES. Certificates for shares of the
Corporation shall be in such form as approved by the Board of Directors, and
shall state that the Corporation is incorporated under the laws of Pennsylvania,
the name of the person to whom issued, and the number and class of shares and
the designation of the series (if any) that the certificate represents. The
register or transfer books and blank share certificates shall be kept by the
Secretary or by any transfer agent or registrar designated by the Board of
Directors for that purpose.
18
<PAGE>
Section 6.02. ISSUANCE. The share certificates of the Corporation
shall be numbered and registered in the share register or transfer books of the
Corporation as they are issued. They shall be signed by the President or a vice
president and by the Secretary or an assistant secretary or the Treasurer or an
assistant treasurer, and shall bear the corporate seal, which may be a
facsimile, engraved or printed; but where such certificate is signed by a
transfer agent or a registrar the signature of any corporate officer upon such
certificate may be a facsimile, engraved or printed. In case any officer who
has signed, or whose facsimile signature has been placed upon, any share
certificate shall have ceased to be such officer because of death, resignation
or otherwise, before the certificate is issued, it may be issued with the same
effect as if the officer had not ceased to be such at the date of its issue.
The provisions of this Section 6.02 shall be subject to any inconsistent or
contrary agreement at the time between the Corporation and any transfer agent or
registrar.
Section 6.03. TRANSFER. Transfers of shares shall be made on the
share register or transfer books of the Corporation upon surrender of the
certificate therefor, endorsed by the person named in the certificate or by an
attorney lawfully constituted in writing. No transfer shall be made inconsistent
with the provisions of the Uniform Commercial Code, 13 Pa. C.S. 8101 et seq.,
and its amendments and supplements.
Section 6.04. RECORD HOLDER OF SHARES. The Corporation shall be
entitled to treat the person in whose name any share or shares of the
Corporation stand on the books of the Corporation as the absolute owner thereof,
and shall not be bound to recognize any equitable or other claim to, or interest
in, such share or shares on the part of any other person.
Section 6.05 LOST, DESTROYED OR MUTILATED CERTIFICATES. The holder
of any shares of the Corporation shall immediately notify the Corporation of any
loss, destruction or mutilation of the certificate therefor, and the Board of
Directors may, in its discretion, cause a new certificate or certificates to be
issued to such holder, in case of mutilation of the certificate, upon the
surrender of the mutilated certificate or, in case of loss or destruction of the
certificate, upon satisfactory proof of such loss or destruction and, if the
Board of Directors shall determine, the deposit of a bond in such form and in
such sum, and with such surety or sureties, as it may direct.
19
<PAGE>
ARTICLE VII
----------------------
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
Section 7.01. RIGHT TO INDEMNIFICATION. The Corporation shall
indemnify any director or officer, and may indemnify any other employee or
agent, who was or is a party to, or is threatened to be made a party to, or who
is called as a witness in connection with any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, including an action by or in the right of the Corporation, by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in connection with such action, suit or proceeding unless the
act or failure to act giving rise to the claim for indemnification is determined
by a court to have constituted willful misconduct or recklessness.
Section 7.02. SCOPE OF INDEMNIFICATION. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article VII
shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under these Bylaws,
or any agreement, contract, vote of shareholders or disinterested directors or
pursuant to the direction, howsoever embodied, of any court of competent
jurisdiction or otherwise, both as to action in any official capacity and as to
action in another capacity while holding such office. It is the policy of the
Corporation that indemnification of, and advancement of expenses to, directors
and officers of the Corporation shall be made to the fullest extent permitted by
law. To this end, the provisions of this Article VII shall be deemed to have
been amended for the benefit of directors and officers of the Corporation
effective immediately upon any modification of the Pennsylvania Business
Corporation Law of 1988, as amended (the "BCL") that expands or enlarges the
power or obligation of corporations organized under the BCL to indemnify, or
advance expenses to, directors and officers of corporations.
Section 7.03. EXPENSES; REIMBURSEMENT. The Corporation shall pay
expenses incurred by an officer or director, and may pay expenses incurred by
any other employee or agent, in defending a civil or criminal action, suit or
proceeding in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation.
Section 7.04. CONTINUATION. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article VII shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such person.
20
<PAGE>
Section 7.05. FUNDING. The Corporation shall have the authority to
create a fund of any nature, which may, but need not be, under the control of a
trustee, or otherwise, to secure in any manner, its indemnification obligations,
whether arising under these Bylaws or otherwise. This authority shall include,
without limitation, the authority to: (i) deposit funds in trust or in escrow;
(ii) establish any form of self-insurance; (iii) secure its indemnity obligation
by grant of a security interest, mortgage or other lien on the assets of the
Corporation; or (iv) establish a letter of credit, guaranty or surety
arrangement for the benefit of such persons in connection with the anticipated
indemnification or advancement of expenses contemplated by this Article VII.
The provisions of this Article VII shall not be deemed to preclude the
indemnification of, or advancement of expenses to, any person who is not
specified in Section 7.01 of this Article VII but whom the Corporation has the
power or obligation to indemnify, or to advance expenses for, under the
provisions of the BCL or otherwise. The authority granted by this Section 7.05
shall be exercised by the Board of Directors of the Corporation.
Section 7.06. INDEMNIFICATION AGREEMENTS. The Corporation shall have
the authority to enter into a separate indemnification agreement with any
officer, director, employee or agent of the Corporation or any subsidiary
providing for such indemnification of such person as the Board of Directors
shall determine up to the fullest extent permitted by law.
Section 7.07. NOTICE; DEFENSE. As soon as practicable after receipt
by any person specified in Section 7.01 of this Article VII of notice of the
commencement of any action, suit or proceeding specified in Section 7.01 of this
Article VII, such person shall, if a claim with respect thereto may be made
against the Corporation under Article VII of these Bylaws, notify the
Corporation in writing of the commencement or threat thereof; however, the
omission so to notify the Corporation shall not relieve the Corporation from any
liability under Article VII of these Bylaws unless the Corporation shall have
been prejudiced thereby or from any other liability that it may have to such
person other than under Article VII of these Bylaws. With respect to any such
action as to which such person notifies the Corporation of the commencement or
threat thereof, the Corporation may participate therein at its own expense and,
except otherwise provided below, to the extent that it desires, the Corporation,
jointly with any other indemnifying party similarly notified, shall be entitled
to assume the defense thereof, with counsel selected by the Corporation to the
reasonable satisfaction of such person. After notice form the Corporation to
such person of its election to assume the defense thereof, the Corporation shall
not be liable to such person under Article VII of these Bylaws for any legal or
other expenses subsequently incurred by such person unless: (i) the employment
of counsel by such person shall have been authorized by the Corporation; (ii)
such person shall have reasonably concluded that there may be a conflict of
interest between the Corporation and such person in the conduct of the defense
of such proceeding; or (iii) the Corporation shall not in fact have employed
counsel to assume the defense of such action. The burden of proving that
indemnification is not appropriate shall be on the Corporation. The Corporation
shall not be entitled to assume the defense of any proceeding brought by or on
behalf of the Corporation or as to which such person shall have reasonably
concluded that there may be a conflict of interest. If indemnification under
Article VII of these Bylaws or advancement of expenses are not paid or made by
the Corporation, or on its behalf, within ninety (90) days after a written claim
for
21
<PAGE>
indemnification or a request for an advancement of expenses has been received by
the Corporation, such person may, at any time thereafter, bring suit against the
Corporation to recover the unpaid amount of the claim or the advancement of
expenses. The right to indemnification and advancement of expenses provided
hereunder shall be enforceable by such person in any court of competent
jurisdiction. Expenses reasonably incurred by such person in connection with
successfully establishing the right to indemnification or advancement of
expenses, in whole or in part, shall also be indemnified by the Corporation.
Section 7.08 INSURANCE. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or note the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article VII.
ARTICLE VIII
_______________________
MISCELLANEOUS
Section 8.01. CORPORATE SEAL. The Corporation seal shall have
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Pennsylvania".
Section 8.02. CHECKS. All checks, notes, bills of exchange or other
orders in writing shall be signed by such person or persons as the Board of
Directors or any person authorized by resolution of the Board of Directors may
from time to time designate.
Section 8.03. CONTRACTS.
(a) General Rule. Except as otherwise provided in the Business
Corporation Law in the case of transactions that require action by the
shareholders, the Board of Directors may authorize any officer or agent to enter
into any contract or to execute or deliver any instrument on behalf of the
Corporation, and such authority may be general or confined to specific
instances.
(b) Statutory Form of Execution of Instruments. Any note, mortgage,
evidence of indebtedness, contract or other document, or any assignment or
endorsement thereof, executed or entered into between the Corporation and any
other person, when signed by one or more officers or agents having actual or
apparent authority to sign it, or by the President or Vice President and
Secretary or assistant secretary or Treasurer or assistant treasurer of the
Corporation, shall be held to have been properly executed for and in behalf of
the Corporation, without
22
<PAGE>
prejudice to the rights of the Corporation against any
person who shall have executed the instrument in excess of his or her actual
authority.
Section 8.04. INTERESTED DIRECTORS OR OFFICERS; QUORUM.
(a) General Rule. A contract or transaction between the Corporation
and one or more of its directors or officers or between the Corporation and
another corporation, partnership, joint venture, trust or other enterprise in
which one or more of its directors or officers are directors or officers or have
a financial or other interest, shall not be void or voidable solely for that
reason, or solely because the director or officer is present at or participates
in the meeting of the Board of Directors that authorizes the contract or
transaction, or solely because his, her or their votes are counted for that
purpose, if:
(1) the material facts as to the relationship or interest and
as to the contract or transaction are disclosed or are known to the Board of
Directors and the Board authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors even though the
disinterested directors are less than a quorum;
(2) the material facts as to the relationship or interest and
as to the contract or transaction are disclosed or are known to the shareholders
entitled to vote thereon and the contract or transaction is specifically
approved in good faith by vote of those shareholders: or
(3) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of Directors
or the shareholders,
(b) Quorum. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board which authorized
contract or transaction specified in subsection (a).
Section 8.05. DEPOSITS. All funds of the Corporation shall be
deposited from time to time to the credit of the Corporation in such banks,
trust Companies or other depositories as the Board of Directors may approve or
designate, and all such funds shall be withdrawn only upon checks signed by such
one or more officers or employees as the Board of Directors shall from time to
time determine.
Section 8.06. CORPORATE RECORDS.
(a) Required Records. The Corporation shall keep complete and
accurate books and records of account, minutes of the proceedings of the
incorporated, shareholders and directors and a share register giving the names
and addresses of all shareholders and the number and class of shares held by
each. The share register shall be kept at either the registered officer of the
Corporation in Pennsylvania or at its principal place of business whenever
situated or at the office of its registrar or transfer agent. Any books, minutes
or other
23
<PAGE>
records may be in written form or any other form capable of being converted
into written form within a reasonable time.
(b) Right of Inspection. Every shareholder shall, upon written
verified demand stating the purpose thereof, have a right to examine, in person
or by agent or attorney, during the usual hours for business for any proper
purpose, the share register, books and records of account, and records of the
proceedings of the incorporated, shareholders and directors and to make copies
or extracts therefrom. A proper purpose shall mean a purpose reasonably related
to the interest of the person as a shareholder. In every instance where an
attorney or other agent is the person who seeks the right of inspection, the
demand shall be accompanied by a verified power of attorney or other writing
that authorized the attorney or other agent to so act on behalf of the
shareholder. The demand shall be directed to the Corporation at its registered
office in Pennsylvania or at its principal place of business wherever situated.
Section 8.07. FINANCIAL REPORTS. Unless otherwise agreed between the
Corporation and a shareholder, the Corporation shall furnish to its shareholders
annual financial statements, including at least a balance sheet as of the end of
each fiscal year and a statement of income and expenses for the fiscal year.
The financial statements shall be prepared on the basis of Generally Accepted
Accounting Principles, if the Corporation prepares financial statements for the
fiscal year on that basis for any purpose, and may be consolidated statements of
the Corporation and one or more of its subsidiaries. The financial statements
shall be mailed by the Corporation to each of its shareholders entitled thereto
within 120 days after the close of each fiscal year and, after mailing and upon
written request, shall be mailed by the Corporation to any shareholder or
beneficial owner entitled thereto to whom a copy of the most recent annual
financial statements has not previously been mailed. Statements that are
audited or reviewed by a public accountant shall be accompanied by the report of
the accountant; in other cases, each copy shall be accompanied by a statement of
the person in charge of the financial records of the Corporation:
(1) Stating his reasonable belief as to whether or not the financial
statements were prepared in accordance with Generally Accepted Accounting
Principles and, if not, describing the basis of presentation.
(2) Discribing any material respects in which the financial
statements were not prepared on a basis consistent with those prepared for the
previous year.
Section 8.08. AMENDMENT OF BYLAWS. These Bylaws may be amended or
repealed, or new Bylaws may be adopted, either (i) by vote of the shareholders
at any duly organized annual or special meeting of shareholders, or (ii) with
respect to those matters that are not by statute committed expressly to the
shareholders and regardless of whether the shareholders have previously adopted
or approved the bylaw being amended or repealed, by vote of a majority of the
Board of Directors of the Corporation in office at any regular or special
meeting of directors. Any change in these Bylaws shall take effect when adopted
unless
24
<PAGE>
otherwise provided in the resolution effecting the change. See Section 2.03(b)
(relating to notice of action by shareholders on Bylaws).
25
<PAGE>
NUMBER [SEAL] SHARES
ELCOM TECHNOLOGIES CORPORATION
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA
AUTHORIZED SHARES 20,000,000 WITHOUT PAR VALUE
This Certifies that VOID is the
-----------------------------------------------------
(SEE REVERSE FOR CERTAIN DEFINITIONS)
owner of VOID
------------------------------------------------------------- Shares of
ELCOM TECHNOLOGIES CORPORATION
full paid and non-assessable transferable only on the books of the Corporation
in person or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its, duly authorized officers and its Corporate Seal to be hereunto
affixed
this______________day of_______________A.D. 19_____
____________________________ _________________________
SECRETARY PRESIDENT
M. BURR KEIM. PHILA
<PAGE>
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT, OR ANY CHARGE WHATEVER.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM-as tenants in common UNIF GIFT MIN ACT--..............Custodian.............under
TEN ENT-as tenants by the entireties (Cust) (Minor)
JT TEN-as joint tenants with right of Uniform Gifts to Minors Act.....................
survivorship and not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
For Value Received---hereby self assignment and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- -------------------------------------- ________________________________________
_______________________________________________________________________________
Shares represented by the within Certificate and do hereby irrevocably
constitute and appoint _____________________________________ Attorney to
transfer the said Shares on the books of the within named Corporation with full
power of substitution in the premises.
Dated_____________________19___
In presence of ____________________________________
_____________________________
<PAGE>
EMPLOYMENT CONTRACT
AGREEMENT made this 18th day of September, 1995, by and between Elcom
Technologies Corporation a Pennsylvania Corporation with a business address at
78 Great Valley Parkway, Malvern, Pennsylvania 19355 (hereinafter referred to as
the "Employer" and/or the " Company") and George Daly, an individual, with an
address at 1560 SW 21st Lane, Boca Raton, FL 33486 (hereinafter referred to the
"Employee").
WHEREAS, the Employer wishes to retain the services of the Employee; and
the Employee wishes to accept such employment on the terms and conditions set
forth below; and
WHEREAS, both the Employer and the Employee desire to enter into a formal
written employment contract in lieu of employment by oral agreement.
NOW, THEREFORE, in consideration of the covenants and conditions herein
contained and each party intending to be legally bound, acknowledging full and
adequate consideration, it is AGREED:
1. Prior Agreements. The date of the original employment contract between
----------------
the Employer and the Employee was the 18th of September, 1995. All prior oral or
written employment contracts and/or consulting agreements between the Employer
and the Employee are hereby terminated and declared NULL AND VOID.
2. Employment. The Employer employs the Employee and the Employee accepts
----------
employment upon the terms and conditions of this Employment Contract. All terms
of employment by oral agreement or previous course of conduct are rendered NULL
AND VOID hereby, with the rights of the parties governed SOLELY by this
Employment Contract.
3. Term. The term of this Employment Contract shall commence on 18th of
----
September, 1995, and terminate on December 31, 1998.
4. Compensation. For the first year of this Employment Contract, for all
------------
services rendered by the Employee, the Employer shall pay the Employee an annual
salary of $60,000 payable monthly. Salary payments shall be subject to
withholding and other applicable taxes. For the remaining term of the Employment
Contract, the monthly salary for the Employee shall be adjusted as per the
mutual agreement of both the Employer and the Employee.
5. Duties. The Employee is engaged as Director of Operations. The duties
------
of the Employee shall include responsibility for the operations, manufacturing,
purchasing, and production control functions of the Employer Corporation. The
precise services of the Employee may be extended or curtailed by the Employer
from time to time.
-1-
<PAGE>
6. Extent of Services. The Employee shall devote their entire time,
------------------
attention, and energies to the Employer's business and shall not during the term
of this Employment Contract be engaged in any other business during the term of
this Employment Contract or be engaged in any other business activity which
competes either directly or indirectly with the business of the Employer. The
Employee may, only with the express written permission of the Employer, be
engaged in outside work related activities. In the event "Early Termination"
occurs as defined in Paragraph 12, the Employee will not solicit or hire other
Company employees for a two (2) year period.
7. Assignment of Intellectual Property. The Employee hereby agrees that
-----------------------------------
any technologies, concepts, sales and/or marketing campaigns, business lists,
agreements and/or ideas developed specifically for the Employer Corporation
during the term of this Employment Contract shall be the property of the
Employer Corporation. The Employee further agrees that any and all resulting
circuits, designs, processes, procedures, software, firmware, hardware, layouts,
innovations, inventions, ideas, techniques, documents, writings, or any other
results of their employment are the sole property of the Employer Corporation.
The Employee agrees to promptly disclose and provide any and all such
information needed to support patent claims, copyrights, trademarks, licenses,
assignments, and any other conveyances to the Employer Corporation. The Employee
hereby assigns, transfers, releases and conveys any and all rights, title,
interest, and any other claims of ownership in any intellectual property (as
defined above) to the Employer Corporation in exchange for the compensation
herein.
8. Disclosure of Information. The Employee acknowledges that the list of
-------------------------
the Employer's proprietary information, customers, intellectual property, and
prototypes (hereinafter referred to as "Proprietary Information") as it may
exist from time to time is a valuable, special, and unique asset of the
Employer's business. The Employee will not, during or after the term of their
employment, disclose said Proprietary Information to any person, firm,
corporation, association, or other entity for any reason or purpose whatsoever.
In the event of a breach or threatened breach by the Employee of the provisions
of this paragraph, the Employer shall be entitled to an injunction restraining
the Employee from disclosing, in whole or in part, said Proprietary Information,
or from rendering any services to any person, firm, corporation, association, or
other entity to whom such Proprietary Information, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein shall be construed as
prohibiting the Employer from pursuing any other remedies available to the
Employer for such breach or threatened breach, including the recovery of damages
from the Employee.
9. Paid Absence. During the term of this Employment Contract, the Employee
------------
shall be entitled each year to a combination of vacation days, personal days and
sick days, which shall accrue at the rate of 1.25 days for each month of
employment of the Employee, totaling up to a maximum of three (3) weeks duration
in any given twelve (12) month period, during which time their compensation
shall be paid in full. This excludes company paid holidays.
-2-
<PAGE>
10. Death During Employment. If the Employee dies during the term of
-----------------------
employment, the Employer shall pay to the estate of the Employee the
compensation which would otherwise be payable to the Employee up to the day in
which their death occurs. Upon the death of the Employee, this Employment
Contract shall become null and void. Also, in the event of death during
employment, then an "Early Termination" will have been deemed to occur as
defined in Paragraph 12 on this Employment Contract.
11. Stock Option Agreement. Concurrently with the execution of this
----------------------
Employment Contract, the Employer shall present to the Employee a "Stock Option
Agreement" which shall grant the Employee the right to purchase up to Fifty
Thousand (50,000) shares of the Employer Corporation stock upon terms and
conditions outlined in said "Stock Option Agreement".
12. Termination. The Employer shall be permitted to terminate this
-----------
Employment Contract for cause by providing the Employee with written notice of
said termination. In the event that the Employer/Employee relationship is
terminated for any reason prior to December 31, 1998, then an "Early
Termination" will have been deemed to occur. In the event that the Employee
exercises any stock options under the Stock Option Agreement as defined in
Paragraph 11 above prior to "Early Termination", then the Employer Corporation
shall have the right to repurchase from the Employee, and the Employee shall be
required to sell to the Employer Corporation, all excess shares of Employer
Corporation stock purchased by the Employee prior to "Early Termination" at the
price of Two Dollars and Fifty Cents ($2.50) per share of excess Employer
Corporation stock purchased by the Employee. If "Early Termination" occurs, then
one of the following will occur depending on termination date:
(a) If said "Early Termination" occurs before the Employee has completed
one (1) calendar year of satisfactory service commencing from their date of
original continuous employment, then the Employee hereby forfeits their rights
to purchase all Fifty Thousand (50,000) shares of stock granted to them under
the Stock Option Agreement as defined in Paragraph 11 above.
(b) After completing one (1) calendar year of satisfactory service
commencing from their date of original continuous employment, the Employee earns
the right to purchase up to 15,000 shares of stock granted to them under the
Stock Option Agreement as defined in Paragraph 11 above. Thereafter, if an
"Early Termination" has been deemed to occur, the Employee or their estate will
then have ninety (90) days from the date "Early Termination" to exercise the
stock options for which the Employee has a right to purchase as defined in
Paragraph 12. After that period, the Stock Option Agreement is deemed to be null
and void.
(c) After completing two (2) calendar years of satisfactory service
commencing from their date of original continuous employment, the Employee earns
the right to purchase up to 30,000 shares of stock granted to them under the
Stock Option Agreement as defined in Paragraph 11 above. Thereafter, if an
"Early Termination" has been deemed to occur, the Employee or their estate will
then have ninety (90) days from the date "Early Termination" to
-3-
<PAGE>
exercise the stock options for which the Employee has a right to purchase as
defined in Paragraph 12. After that period, the Stock Option Agreement is deemed
to be null and void.
(d) After completing three (3) calendar years of satisfactory service
commencing from their date of original continuous employment, the Employee earns
the right to purchase up to 45,000 shares of stock granted to them under the
Stock Option Agreement as defined in Paragraph 11 above. Thereafter, if an
"Early Termination" has been deemed to occur, the Employee or their estate will
then have ninety (90) days from the date "Early Termination" to exercise the
stock options for which the Employee has a right to purchase as defined in
Paragraph 12. After that period, the Stock Option Agreement is deemed to be null
and void.
(e) After the Employee completes the term of their contract on December
31, 1998, the Employee earns the right to purchase 5,000 shares of stock granted
to them under the Stock Option Agreement as defined in Paragraph 11 above.
13. Restrictive Covenant. For a period of two (2) years after the
--------------------
termination or expiration of this Employment Contract, the Employee will not,
directly or indirectly, own, manage, operate, control, be employed by,
participate in, or be connected in any manner with the ownership, management,
operation, or control of any Power Line Communications (PLC) business similar to
the type of business conducted by the Employer and/or immediate vendors or
customers at the time of the termination of this Employment Contract. In the
event of the Employee's actual or threatened breach of the provisions of this
paragraph, the Employer shall be entitled to an injunction restraining the
Employee therefrom. Nothing shall be construed as prohibiting the Employer from
pursuing any other available remedies for such breach or threatened breach,
including the recovery of damages from the Employee.
14. Prior Arrangements. The Employee affirms that by being party to this
------------------
Employment Contract that:
(a) they are not in violation of any previous restrictive covenants, non-
compete clauses, confidentiality agreements, intellectual property agreements
and assignments, and/or employment agreements;
(b) they are not causing a conflict of interest with prior employers,
business arrangements and agreements; unless previously DISCLOSED in writing to
the Employer;
(c) there are no legal restraints, claims, settlements, and/or continuing
or impending litigation that would prohibit the Employee from engaging in or
executing the full scope of their Duties and that Elcom shall be indemnified and
held harmless by the Employee from any claims and/or litigation against the
Employee that may arise from circumstances existing prior to this Employment
Contract;
-4-
<PAGE>
(d) any statements written or verbal made by the Employee in reference to
their education, employment background, experience, periods of employment,
professional licenses and/or memberships in professional organizations, whether
or not they constituted, in full or in part, a basis for this Employment
Contract, are true and correct to the best of their knowledge.
15. Substance Abuse. It is the policy of the Company that no employee
---------------
may use alcohol or illegal substances during working hours. It is understood by
both the Employer and the Employee that the use of excessive alcohol or illegal
substances during working hours by the Employee is grounds for termination with
cause. The Company reserves the right to perform random drug testing
periodically on all employees of the Employer and the Employee hereby
acknowledges that they are subject to such random drug testing. Further,
excessive alcohol will be defined as the amount of alcohol an individual would
have consumed to be considered legally intoxicated by state standards.
16. Arbitration. Any controversy or claim arising out of, or relating
-----------
to this Employment Contract, or the breach thereof other than as described in
Paragraphs 8 and 13 of this Employment Contract shall be settled by arbitration
in Philadelphia, Pennsylvania in accordance with the rules then obtaining of the
American Arbitration Association, and judgment upon the award rendered will be
binding upon the parties and may be entered and enforced in any court having
jurisdiction thereof.
17. Notices. Any notice required or desired to be given under this
-------
Employment Contract shall be deemed given if in writing sent via certified mail
to their residence in the case of the Employee, or to its principal office in
the case of the Employer.
18. Waiver of Breach. The waiver by the Employer of a breach of any
----------------
provision of this Employment Contract by the Employee shall not operate or be
construed as a waiver of any subsequent breach by the Employee. No waiver shall
be valid unless in writing and signed by an authorized officer of the Employer.
19. Assignment. The Employee acknowledges that the services to be
----------
rendered by them are unique and personal. Accordingly, the Employee may not
assign any of their rights or delegate any of their duties or obligations under
this Employment Contract. The rights and obligations of the Employer under this
Employment Contract shall inure to the benefit of and shall be binding upon the
successors and assigns of the Employer.
20. Entire Agreement. This Employment Contract contains the entire
----------------
understanding of the parties. It may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension, or discharge is sought.
21. Captions. Captions are used in this Employment Contract for
--------
convenience only, and are not intended to be used in the construction or in the
interpretation of this Employment Contract.
-5-
<PAGE>
22. Interpretation. This Employment Contract shall be interpreted in
--------------
accordance with the laws of the Commonwealth of Pennsylvania.
23. Invalid Provision. In the event any provision or sub-provision of
-----------------
this Employment Contract is held to be void, invalid, or unenforceable in any
respect, then the same shall not effect the remaining provisions or sub-
provisions hereof, which shall continue in full force and effect.
24. Inclusive Language. In this Employment Contract, the singular shall
------------------
include the plural and the masculine, feminine, or neuter gender shall include
all other genders as may be appropriate.
25. Advice of Council. All parties to this Employment Contract hereto
-----------------
acknowledge that they signed this document only after having the opportunity to
consult with an attorney of their choosing.
26. Binding Effect. This Employment Contract and the separate Stock
--------------
Option Agreement shall, upon ratification by the Board of Directors of the
Company, bind the parties hereto, their legal representatives, successors, and
assigns.
IN WITNESS WHEREOF, the parties have executed this Employment Contract
the day and year first above written.
ATTEST: ELCOM TECHNOLOGIES CORPORATION
/s/[SIGNATURE ILLEGIBLE] BY: Robert A. Vito
- ------------------------- ----------------------------
Secretary Robert A. Vito, President
WITNESS:
OCT 23,1995 George Daly, Employee
- ------------------------- ----------------------------
-6-
<PAGE>
STOCK OPTION AGREEMENT
----------------------
AGREEMENT made this 27th day of August, 1996, by and among Elcom
Technologies Corporation, a corporation organized under the laws of the
Commonwealth of Pennsylvania (hereinafter referred to as "ELCOM"), and George
Daly, an individual employee of ELCOM (hereinafter referred to as "EMPLOYEE").
BACKGROUND
----------
WHEREAS; ELCOM's corporate charter currently permits ELCOM to issue up
to Twenty Million (20,000,000) shares of common stock; and
WHEREAS, as of the execution of this Agreement, ELCOM's total issued,
and outstanding shares of common stock is approximately Thirteen Million
(13,000,000) shares.
WHEREAS, ELCOM desires to grant to EMPLOYEE an option to purchase fifty
thousand(50,000) shares of ELCOM Technologies Corporation's common stock.
NOW, THEREFORE, in consideration of the mutual promises herein and other
valuable considerations, ELCOM and EMPLOYEE agrees as follows:
1. Prior Agreements. EMPLOYEE and ELCOM have previously entered into the
following Agreement:
Employment Agreement dated September 18, 1995
Stock Option Agreement dated September 18, 1995
1.1 Upon execution of this Agreement, all Stock Options granted under the
Stock Option Agreement dated September 18, 1995 are hereby canceled in full and
all rights, duties and obligations of the Parties thereto are hereby declared
null and void.
2. Grant of Options. Subject to all of the terms and conditions of this
----------------
Agreement, ELCOM hereby grants to EMPLOYEE options to purchase a total of fifty
thousand (50,000) Shares of ELCOM's common stock at the price of two dollars and
fifty cents ($2.50) per share in accordance with the following schedule:
Number of Shares Date Exercisable Expiration Date
---------------- ---------------- ---------------
10,000 September 18, 1996 December 31, 2002
10,000 September 18, 1997 December 31, 2002
10,000 September 18, 1998 December 31, 2002
10,000 September 18, 1999 December 31, 2002
10,000 September 18, 2000 December 31, 2002
Page 1 of 4
<PAGE>
Any Options not exercised by the Expiration Date listed above shall be
terminated in full for all purposes whatsoever.
2.1 Sale of Company. In the event that a controlling interest (over 50%) of
---------------
ELCOM is sold to a third party, other than the Public markets, EMPLOYEE may
exercise one hundred percent (100%) of all options granted under Section 2
herein. EMPLOYEE must exercise said options within sixty (60) days of
notification of the acquisition of a controlling interest by a third party. Any
Options not exercised by EMPLOYEE within this sixty (60) day period will
terminate in full upon expiration of said sixty (60) day period.
3. Termination of Employment. In the event that EMPLOYEE terminates employment
-------------------------
with ELCOM for any reason whatsoever, including death or disability, all Options
to purchase ELCOM common stock granted under this Agreement shall terminate in
full and be declared null and void for all purposes whatsoever, sixty (60) days
subsequent to the date of EMPLOYEE's last day of active employment with ELCOM.
EMPLOYEE shall receive no further vesting of Options under Section 2 herein,
after EMPLOYEE's last day of active employment with ELCOM.
4. Registration of Options. In the event that ELCOM makes an initial public
-----------------------
offering (the "IPO") of its common stock pursuant to rules established by the
United States Securities and Exchange Commission and the NASDAQ stock exchange,
the options granted in Section 2 of this Agreement shall be registered with the
Securities and Exchange Commission pursuant to the following schedule:
<TABLE>
<S> <C>
Six (6) months after completion of the IPO..........25% (twenty five percent)
Eighteen (18) months after completion of the IPO....25% (twenty five percent)
Thirty (30) months after completion of the IPO......25% (twenty five percent)
Forty two (42) months after completion of the IPO...25% (twenty five percent)
</TABLE>
5. Restrictions and Regulations. EMPLOYEE agrees that any Shares of ELCOM's
----------------------------
common stock purchased under this Stock Option Agreement will be subject to the
restrictions and regulations outlined in this Agreement and that these SHARES
may be subject to further restrictions and regulations. Said restrictions and
regulations may be imposed at any time by ELCOM at the sole discretion of ELCOM
and without the approval of EMPLOYEE.
5.1 In addition to the aforementioned restrictions, EMPLOYEE agrees that any
Shares purchased by EMPLOYEE pursuant to this Agreement, shall be subject to all
of the restrictions, regulations and non-dilution provisions of the ELCOM
Private Placement Memorandum dated, July 12, 1996.
6. Exercise of Option. EMPLOYEE may exercise any Options earned in accordance
------------------
with Section 2, herein, in any number that EMPLOYEE elects.
Page 2 of 4
<PAGE>
7. Adjustment of Option Shares. Prior to any public offering of ELCOM shares,
---------------------------
if the outstanding common shares of Elcom Technologies Corporation, are changed
into or exchanged for a different number or kind of shares or other securities
of Elcom Technologies Corporation or of another corporation, whether through
reorganization, share split-up, combination of shares, merger or consolidation,
then these shares shall be substituted for each common share of Elcom
Technologies Corporation then subject to this Stock Option Agreement. The number
and kinds of shares or other securities into which each such ELCOM share is so
changed or for which each ELCOM share is exchanged shall be at the sole
discretion of ELCOM.
8. Time for Payment for Shares. The option price of the Shares to be
---------------------------
purchased pursuant to the exercise of Options under this Agreement shall be
paid in full at the time of the exercise of the options.
9. Method of Exercising Option. EMPLOYEE shall provide ELCOM with at
---------------------------
least five (5) business days prior written notice in order to exercise any
options under this Agreement. EMPLOYEE shall comply with all procedures
established by ELCOM from time to time concerning exercising any options under
this Agreement.
10. Modification. This Agreement shall be effective as of the date hereof and,
------------
unless sooner terminated under the provisions of this Agreement, shall remain in
effect until December 31, 2002. No modification or amendment of this Agreement
shall be effective unless in writing and signed by the parties hereto.
11. Notices. All notices or other communications required or permitted to be
-------
given under the terms of this Agreement shall be in writing, delivered
personally, or sent via certified mail, postage prepaid, return receipt
requested.
12. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the parties hereto and supersedes all prior negotiations, understandings and
agreements of any nature with respect to the subject matter hereto. No
amendment, waiver or discharge of any of the provisions of this Agreement shall
be effective against any part, unless that party shall have consented thereto in
writing.
13. Binding Effect. This Agreement shall be binding upon execution by ELCOM
--------------
and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors, and assigns.
14. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
Page 3 of 4
<PAGE>
IN WITNESS WHEREOF, ELCOM and EMPLOYEE have set their hands and seals
hereto the day and year first above written.
ATTEST: Elcom Technologies Corporation
/s/ Robert B. Sando BY: /s/ Robert A. Vito
- -------------------------- -----------------------------
Robert B. Sando, Secretary Robert A. Vito, President
/s/ George Daly
--------------------------------
EMPLOYEE
Page 4 of 4
<PAGE>
EMPLOYMENT CONTRACT
-------------------
AGREEMENT made this 28 day of July, 1995, by and between Elcom Technologies
-- ---- ----
Corporation a Pennsylvania Corporation with a business address at 78 Great
Valley Parkway, Malvern, Pennsylvania 19355 (hereinafter referred to as the
"Employer" and/or the "Company") and Myrddin Jones, an individual, with an
address at 129 Graham Way, Devon, PA 19333 (hereinafter referred to the
"Employee").
WHEREAS, the Employer wishes to retain the services of the Employee; and
the Employee wishes to accept such employment on the terms and conditions set
forth below; and
WHEREAS, both the Employer and the Employee desire to enter into a formal
written employment contract in lieu of employment by oral agreement.
NOW, THEREFORE, in consideration of the covenants and conditions herein
contained and each party intending to be legally bound, acknowledging full and
adequate consideration, it is AGREED:
1. Prior Agreements. The date of the original employment contract
----------------
between the Employer and the Employee was the 4th of January, 1994. All prior
oral or written employment contracts and/or consulting agreements between the
Employer and the Employee are hereby terminated and declared NULL AND VOID.
2. Employment. The Employer employs the Employee and the Employee
----------
accepts employment upon the terms and conditions of this Employment Contract.
All terms of employment by oral agreement or previous course of conduct are
rendered NULL AND VOID hereby, with the rights of the parties governed SOLELY by
this Employment Contract.
3. Term. The term of this Employment Contract shall commence on 4th of
----
January, 1994, and terminate on December 31, 2003.
4. Compensation. For the first year of this Employment Contract, for
------------
all services rendered by the Employee, the Employer shall pay the Employee an
annual salary of $90,000 payable monthly. Salary payments shall be subject to
withholding and other applicable taxes. For the remaining term of the Employment
Contract, the monthly salary for the Employee shall be adjusted as per the
mutual agreement of both the Employer and the Employee.
5. Duties. The Employee is engaged as Vice President of Marketing. The
------
duties of the Employee shall include business planning and control of the
marketing and sales of the product developed by the Company. The precise
services of the Employee may be extended or curtailed by the Employer from time
to time.
-1-
<PAGE>
6. Extent of Services. The Employee shall devote their entire time,
------------------
attention, and energies to the Employer's business and shall not during the term
of this Employment Contract be engaged in any other Power Line Communications
(PLC) business during the term of this Employment Contract or be engaged in any
other Power Line Communications (PLC) business activity which competes either
directly or indirectly with the business of the Employer. The Employee may,
only with the express written permission of the Employer, be engaged in outside
work related activities. In the event "Early Termination" occurs as defined in
Paragraph 12, the Employee will not solicit or hire other Company employees for
a two (2) year period. Serving as a member of a company Board of Directors, that
is not a competitor of the Employer, or being a member of a faculty of an
accredited school or University shall not be restricted by the Employer.
7. Assignment of Intellectual Property. The Employee hereby agrees that
-----------------------------------
any technologies, concepts, sales and/or marketing campaigns, business lists,
agreements and/or ideas developed specifically for the Employer Corporation
during the term of this Employment Contract shall be the property of the
Employer Corporation. The Employee further agrees that any and all resulting
circuits, designs, processes, procedures, software, firmware, hardware, layouts,
innovations, inventions, ideas, techniques, documents, writings, or any other
results of their employment are the sole property of the Employer Corporation.
The Employee agrees to promptly disclose and provide any and all such
information needed to support patent claims, copyrights, trademarks, licenses,
assignments, and any other conveyances to the Employer Corporation. The Employee
hereby assigns, transfers, releases and conveys any and all rights, title,
interest, and any other claims of ownership in any intellectual property (as
defined above) to the Employer Corporation in exchange for the compensation
herein.
8. Disclosure of Information. The Employee acknowledges that the list
-------------------------
of the Employer's proprietary information, customers, intellectual property, and
prototypes (hereinafter referred to as "Proprietary Information") as it may
exist from time to time is a valuable, special, and unique asset of the
Employer's business. The Employee will not, during or after the term of their
employment, disclose said Proprietary Information to any person, firm,
corporation association, or other entity for any reason or purpose whatsoever.
In the event of a breach or threatened breach by the Employee of the provisions
of this paragraph, the Employer shall be entitled to an injunction restraining
the Employee from disclosing, in whole or in part, said Proprietary Information,
or from rendering any services to any person, firm, corporation, association, or
other entity to whom such Proprietary Information, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein shall be construed as
prohibiting the Employer from pursuing any other remedies available to the
Employer for such breach or threatened breach, including the recovery of damages
from the Employee.
9. Paid Absence. During the term of this Employment Contract, the
------------
Employee shall be entitled each year to a combination of vacation days, personal
days and sick days, which shall accrue at the rate of 1.25 days for each month
of employment of the Employee, totaling up to a maximum of three (3) weeks
duration in any given twelve (12) month period, during which time their
compensation shall be paid in full. This excludes company paid holidays.
-2-
<PAGE>
10. Death During Employment. If the Employee dies during the term of
-----------------------
employment, the Employer shall pay to the estate of the Employee the
compensation which would otherwise be payable to the Employee up to the day in
which their death occurs. Upon the death of the Employee, this Employment
Contract shall become null and void. Also, in the event of death during
employment, then an "Early Termination" will have been deemed to occur as
defined in Paragraph 12 on this Employment Contract.
11. Stock Option Agreement. Concurrently with the execution of this
----------------------
Employment Contract, the Employer shall present to the Employee a "Stock Option
Agreement" which shall grant the Employee the right to purchase up to Six
Hundred Thousand (600,000) shares of the Employer Corporation stock upon terms
and conditions outlined in said "Stock Option Agreement".
12. Termination. The Employer shall be permitted to terminate this
-----------
Employment Contract for cause by providing the Employee with written notice of
said termination. In the event that the Employer/Employee relationship is
terminated for any reason prior to December 31, 1997, then an "Early
Termination" will have been deemed to occur.
(a) If said "Early Termination" occurs before the Employee has completed
one (1) calendar year of satisfactory service commencing from their date of
original continuous employment, then the Employee hereby forfeits their rights
to purchase all Six Hundred Thousand (600,000) shares of stock granted to them
under the Stock Option Agreement as defined in Paragraph 11 above.
(b) If said "Early Termination" occurs before the Employee has completed
two (2) calendar years of satisfactory service commencing from their date of
original continuous employment, then the Employee hereby forfeits their right to
purchase 420,000 shares of stock granted to them under the Stock Option
Agreement as defined in Paragraph 11 above. Thereafter, the Employee or their
estate will then have ninety (90) days from the date "Early Termination" occurs
to exercise the stock options for which the Employee has a right to purchase as
defined in Paragraph 12. After that period, the Stock Option Agreement is deemed
to be null and void.
(c) If said "Early Termination" occurs before the Employee has completed
three (3) calendar years of satisfactory service commencing from their date of
original continuous employment, then the Employee hereby forfeits their rights
to purchase 240,000 shares of stock granted to them under the Stock Option
Agreement as defined in Paragraph 11 above. Thereafter, the Employee or their
estate will then have ninety (90) days from the date "Early Termination" occurs
to exercise the stock options for which the Employee has a right to purchase as
defined in Paragraph 12. After that period, the Stock Option Agreement is deemed
to be null and void.
(d) If said "Early Termination" occurs before the Employee completes their
contract on December 31, 1997, commencing from their date of original continuous
employment, then the
-3-
<PAGE>
Employee hereby forfeits their rights to purchase 60,000 shares of stock
granted to them under the Stock Option Agreement as defined in Paragraph 11
above. Thereafter, the Employee or their estate will then have ninety (90) days
from the date "Early Termination" occurs to exercise the stock options for which
the Employee has a right to purchase as defined in Paragraph 12. After that
period, the Stock Option Agreement is deemed to be null and void.
(e) In the event that the Employee exercises any stock options under the
Stock Option Agreement as defined in Paragraph 11 above prior to "Early
Termination", then the Employer Corporation shall have the right to repurchase
from the Employee, and the Employee shall be required to sell to the Employer
Corporation, all excess shares of Employer Corporation stock purchased by the
Employee prior to "Early Termination" at the price of Twenty Five Cents ($0.25)
per share of excess Employer Corporation stock purchased by the Employee.
13. Restrictive Covenant. For a period of two (2) years after the
--------------------
termination or expiration of this Employment Contract, the Employee will not,
directly or indirectly, own, manage, operate, control, be employed by,
participate in, or be connected in any manner with the ownership, management ,
operation, or control of any Power Line Communications (PLC) business similar to
the type of business conducted by the Employer and/or immediate vendors or
customers at the time of the termination of this Employment Contract. In the
event of the Employee's actual or threatened breach of the provisions of this
paragraph, the Employer shall be entitled to an injunction restraining the
Employee therefrom. Nothing shall be construed as prohibiting the Employer from
pursuing any other available remedies for such breach or threatened breach,
including the recovery of damages from the Employee.
14. Prior Arrangements. The Employee affirms that by being party to this
------------------
Employment Contract that:
(a) they are not in violation of any previous restrictive covenants, non-
compete clauses, confidentiality agreements, intellectual property agreements
and assignments, and/or employment agreements;
(b) they are not causing a conflict of interest with prior employers,
business arrangements and agreements; unless previously disclosed in writing to
the Employer;
(c) there are no legal restraints, claims, settlements, and/or continuing
or impending litigation that would prohibit the Employee from engaging in or
executing the full scope of their Duties and that Elcom shall be indemnified
and held harmless by the Employee from any claims and/or litigation against the
Employee that may arise from circumstances existing prior to this Employment
Contract;
(d) any statements written or verbal made by the Employee in reference to
their education, employment background, experience, periods of employment,
professional licenses
-4-
<PAGE>
and/or memberships in professional organizations, whether or not they
constituted, in full or in part, a basis for this Employment Contract, are true
and correct to the best of their knowledge.
15. Substance Abuse. It is the policy of the Company that no employee may
---------------
use alcohol or illegal substances during working hours. It is understood by both
the Employer and the Employee that the use of excessive alcohol or illegal
substances during working hours by the Employee is grounds for termination with
cause. The Company reserves the right to perform random drug testing
periodically on all employees of the Employer and the Employee hereby
acknowledges that they are subject to such random drug testing. Further,
excessive alcohol will be defined as the amount of alcohol an individual would
have consumed to be considered legally intoxicated by state standards.
16. Arbitration. Any controversy or claim arising out of, or relating to
-----------
this Employment Contract, or the breach thereof other than as described in
Paragraphs 8 and 13 of this Employment Contract shall be settled by arbitration
in Philadelphia, Pennsylvania in accordance with the rules then obtaining of the
American Arbitration Association, and judgment upon the award rendered will be
binding upon the parties and may be entered and enforced in any court having
jurisdiction thereof.
17. Notices. Any notice required or desired to be given under this
-------
Employment Contract shall be deemed given if in writing sent via certified mail
to their residence in the case of the Employee, or to its principal office in
the case of the Employer.
18. Waiver of Breach. The waiver by the Employer of a breach of any
----------------
provision of this Employment Contract by the Employee shall not operate or be
construed as a waiver of any subsequent breach by the Employee. No waiver shall
be valid unless in writing and signed by an authorized officer of the Employer.
19. Assignment. The Employee acknowledges that the services to be
----------
rendered by them are unique and personal. Accordingly, the Employee may not
assign any of their rights or delegate any of their duties or obligations under
this Employment Contract. The rights and obligations of the Employer under this
Employment Contract shall inure to the benefit of and shall be binding upon the
successors and assigns of the Employer.
20. Entire Agreement. This Employment Contract contains the entire
----------------
understanding of the parties. It may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension, or discharge is sought.
21. Captions. Captions are used in this Employment Contract for
--------
convenience only, and are not intended to be used in the construction or in the
interpretation of this Employment Contract.
22. Interpretation. This Employment Contract shall be interpreted in
--------------
accordance with the laws of the Commonwealth of Pennsylvania.
-5-
<PAGE>
23. Invalid Provision. In the event any provision or sub-provision of this
-----------------
Employment Contract is held to be void, invalid, or unenforceable in any
respect, then the same shall not effect the remaining provisions or sub-
provisions hereof, which shall continue in full force and effect.
24. Inclusive Language. In this Employment Contract, the singular shall
------------------
include the plural and the masculine, feminine, or neuter gender shall include
all other genders as may be appropriate.
25. Advice of Council. All parties to this Employment Contract hereto
-----------------
acknowledge that they signed this document only after having the opportunity to
consult with an attorney of their choosing.
26. Binding Effect. This Employment Contract and the separate Stock
--------------
Option Agreement shall, upon ratification by the Board of Directors of the
Company, bind the parties hereto, their legal representatives, successors, and
assigns.
IN WITNESS WHEREOF, the parties have executed this Employment Contract the
day and year first above written.
ATTEST: ELCOM TECHNOLOGIES CORPORATION
[SIGNATURE ILLEGIBLE] BY: /s/ Robert A. Vito,
- --------------------------- --------------------------------
Secretary Robert A. Vito, President
WITNESS:
[SIGNATURE ILLEGIBLE] /s/ Myrddin Jones
- --------------------------- --------------------------------
Myrddin Jones, Employee
-6-
<PAGE>
STOCK OPTION CANCELLATION AGREEMENT
-----------------------------------
AGREEMENT made this 18th day of September, 1996, by and among Elcom
Technologies Corporation, a corporation organized under the laws of the
Commonwealth of Pennsylvania (hereinafter referred to as "ELCOM") and MYRDDIN L.
JONES, an individual employee of ELCOM (hereinafter referred to as "EMPLOYEE").
BACKGROUND
----------
WHEREAS; ELCOM's corporate charter currently permits ELCOM to issue up to
Twenty Million (20,000,000) shares of common stock; and
WHEREAS, as of the execution of this Agreement, ELCOM's total issued, and
outstanding shares of common stock is approximately Thirteen Million five
hundred thousand (13,500,000) shares and has issued a total of approximately
three million (3,000,000) Options to purchase ELCOM's common stock; and
WHEREAS, ELCOM and EMPLOYEE previously entered a Stock Option Agreements
dated July 28, 1995 and attached hereto as Exhibit A (hereinafter referred to as
the "STOCK OPTION AGREEMENT"); and
WHEREAS, ELCOM desires to cancel certain of the Stock Options previously
granted to EMPLOYEE under the STOCK OPTION AGREEMENT and any and all other stock
option agreements granted to EMPLOYEE in order to enhance the potential value of
ELCOM's common stock.
NOW, THEREFORE, in consideration of the mutual promises herein and other
valuable considerations, ELCOM and EMPLOYEE agree as follows:
1. Cancellation of Stock Options. ELCOM and EMPLOYEE hereby agree that
-----------------------------
ELCOM shall cancel six hundred thousand (600,000) stock options granted to
EMPLOYEE on July 28, 1995 as a result of the STOCK OPTION AGREEMENT. ELCOM and
EMPLOYEE further agree to cancel twenty five thousand (25,000) stock options
granted pursuant to EMPLOYEE's role as a member of the Board of Directors of
ELCOM. The STOCK OPTION AGREEMENT attached hereto as Exhibit A and any other
Stock Option Agreement of any kind of nature whatsoever entered into by EMPLOYEE
and ELCOM prior to the date of this Agreement are hereby canceled in full and
all of the rights, duties and obligations of the Parties are hereby terminated
in full and deemed null and void for all purposes whatsoever.
2. Modification. This Agreement shall be effective as of the date hereof. No
------------
modification or amendment of this Agreement shall be effective unless in writing
and signed by the parties hereto.
Page 1 of 2
<PAGE>
3. Notices. All notices or other communications required or permitted to be
-------
given under the terms of this Agreement shall be in writing, delivered
personally, or sent via certified mail, postage prepaid, return receipt
requested.
4. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the parties hereto and supersedes all prior negotiations, understandings and
agreements of any nature with respect to the subject matter hereto. No
amendment, waiver or discharge of any of the provisions of this Agreement shall
be effective against any part, unless that party shall have consented thereto in
writing.
5. Binding Effect. This Agreement shall be binding upon ratification by the
--------------
Board of Directors of ELCOM and inure to the benefit of the parties hereto and
their respective heirs, executors, administrators, successors, and assigns.
6. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, ELCOM and EMPLOYEE have set their hands and seals
hereto the day and year first above written.
ATTEST: Elcom Technologies Corporation
/s/Robert B. Sando, Secretary BY:/s/Robert A. Vito, President
- ------------------------------ ----------------------------
Robert B. Sando, Secretary Robert A. Vito, President
/s/Miyiddin R. Jones
-----------------------------
EMPLOYEE
Page 2 of 2
<PAGE>
STOCK OPTION AGREEMENT
----------------------
AGREEMENT made this 19th day of September, 1996, by and among Elcom
Technologies Corporation, a corporation organized under the laws of the
Commonwealth of Pennsylvania (hereinafter referred to as "ELCOM"), and MYRDDIN
L. JONES, an individual employee of ELCOM (hereinafter referred to as
"EMPLOYEE").
BACKGROUND
----------
WHEREAS; ELCOM's corporate charter currently permits ELCOM to issue up to
Twenty Million (20,000,000) shares of common stock; and
WHEREAS, as of the execution of this Agreement, ELCOM's total issued, and
outstanding shares of common stock is approximately Thirteen Million five
hundred thousand (13,500,000) shares.
WHEREAS, ELCOM desires to grant to EMPLOYEE an option to purchase fifty
thousand (50,000) shares of ELCOM Technologies Corporation's common stock.
NOW, THEREFORE, in consideration of the mutual promises herein and other
valuable considerations, ELCOM and EMPLOYEE agree as follows:
1. Prior Agreements. EMPLOYEE and ELCOM have previously entered into the
following Agreement:
Employment Agreement dated July 28, 1995
2. Grant of Options. Subject to all of the terms and conditions of this
----------------
Agreement, ELCOM hereby grants to EMPLOYEE options to purchase a total of fifty
thousand (50,000) Shares of ELCOM's common stock at the price of twenty five
cents ($0.25) per share in accordance with the following schedule:
Number of Shares Date Exerciseable Expiration Date
------------------ ----------------- ---------------
50,000 September 19, 1996 December 31, 2002
Page 1 of 4
<PAGE>
Any Options not exercised by the Expiration Date listed above shall be
terminated in full for all purposes whatsoever.
2.1 Sale of Company. In the event that a controlling interest (over 50%) of
---------------
ELCOM is sold to a third party, other then the Public markets, EMPLOYEE may
exercise one hundred percent (100%) of all options granted under Section 2
herein. EMPLOYEE must exercise said options within sixty (60) days of
notification of the acquisition of a controlling interest by a third party. Any
Options not exercised by EMPLOYEE within this sixty (60) day period will
terminate in full upon expiration of said sixty (60) day period.
3. Termination of Employment. In the event that EMPLOYEE terminates
-------------------------
employment with ELCOM for any reason whatsoever, including death or disability,
all Option to purchase ELCOM common stock granted under this Agreement shall
terminate in full and be declared null and void for all purposes whatsoever,
sixty (60) days subsequent to the date of EMPLOYEE's last day of active
employment with ELCOM. EMPLOYEE shall receive no further vesting of Options
under Section 2 herein, after EMPLOYEE's last day of active employment with
ELCOM.
4. Registration of Options. In the event that ELCOM makes an initial public
-----------------------
offering (the "IPO") of its common stock pursuant to rules established by the
United States Securities and Exchange Commission and the NASDAQ stock exchange,
the options granted in Section 2 of this Agreement shall be registered with the
Securities and Exchange Commission pursuant to the following schedule:
Six (6) months after completion of the IPO.........25%(twenty five percent)
Eighteen (18) months after completion of the IPO...25%(twenty five percent)
Thirty (30) months after completion of the IPO.....25%(twenty five percent)
Forty two (42) months after completion of the IPO..25%(twenty five percent)
5. Restrictions and Regulations. EMPLOYEE agrees that any Shares of ELCOM's
----------------------------
common stock purchased under this Stock Option Agreement will be subject to the
restrictions and regulations outlined in this Agreement and that these SHARES
may be subject to further restrictions and regulations. Said restrictions and
regulations may be imposed at any time by ELCOM at the sole discretion of ELCOM
and without the approval of EMPLOYEE.
5.1 In addition to the aforementioned restrictions, EMPLOYEE agrees that any
Shares purchased by EMPLOYEE pursuant to this Agreement, shall be subject to all
of the restrictions, regulations and non-dilution provisions of the ELCOM
Private Placement Memorandum dated, July 12, 1996.
6. Exercise of Option. EMPLOYEE may exercise any Options earned in accor-
------------------
dance with Section 2, herein, in any number that EMPLOYEE elects.
Page 2 of 4
<PAGE>
7. Adjustment of Option shares. Prior to any public offering of ELCOM shares,
---------------------------
if the outstanding common shares of Elcom Technologies Corporation, are changed
into or exchanged for a different number or kind of shares or other securities
of Elcom Technologies Corporation or of another corporation, whether through
reorganization, share split-up, combination of shares, merger or consolidation,
then these shares shall be substituted for each common share of Elcom
Technologies Corporation then subject to this Stock Option Agreement. The number
and kinds of shares or other securities into which each such ELCOM share is so
changed or for which each ELCOM share is exchanged shall be at the sole
discretion of ELCOM.
8. Time for Payment for Shares. The option price of the Shares to be purchased
---------------------------
pursuant to the exercise of Options under this Agreement shall be paid in full
at the time of the exercise of the options.
9. Method of Exercising Option. EMPLOYEE shall provide ELCOM with at least five
---------------------------
(5) business days prior written notice in order to exercise any options under
this Agreement. EMPLOYEE shall comply with all procedures established by ELCOM
from time to time concerning exercising any options under this Agreement.
10. Modification. This Agreement shall be effective as of the date hereof and,
------------
unless sooner terminated under the provisions of this Agreement, shall remain in
effect until December 31, 2002. No modification or amendment of this Agreement
shall be effective unless in writing and signed by the parties hereto.
11. Notices. All notices or other communications required or permitted to be
-------
given under the terms of this Agreement shall be in writing, delivered
personally, or sent via certified mail, postage prepaid, return receipt
requested.
12. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the parties hereto and supersedes all prior negotiations, understandings and
agreements of any nature with respect to the subject matter hereto. No
amendment, waiver or discharge of any of the provisions of this Agreement shall
be effective against any part, unless that party shall have consented thereto in
writing.
13. Binding Effect. This Agreement shall be binding upon execution by ELCOM and
--------------
insure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors, and assigns.
14. Governing Law. This Agreement shall be construed, interpreted and enforced
-------------
in accordance with the laws of the Commonwealth of Pennsylvania.
Page 3 of 4
<PAGE>
IN WITNESS WHEREOF, ELCOM and EMPLOYEE have set their hands and seals
hereto the day and year first above written.
ATTEST: Elcom Technologies Corporation
/s/ Robert B. Sando BY: /s/ Robert A. Vito
- ------------------------------- ---------------------------
Robert B. Sando, Secretary Robert A. Vito, President
[SIGNATURE APPEARS HERE]
------------------------------
EMPLOYEE
Page 4 of 4
<PAGE>
EMPLOYMENT CONTRACT
-------------------
AGREEMENT made this 1st day of October, 1996, by and between Elcom
Technologies Corporation a Pennsylvania Corporation with a business address at
78 Great Valley Parkway, Malvern, Pennsylvania 19355 (hereinafter referred to as
"ELCOM") and LOUIS J. PETRIELLO an individual (hereinafter referred to as
"EMPLOYEE").
WHEREAS, ELCOM desires to retain the services of EMPLOYEE; and EMPLOYEE
desires to accept such employment on the terms and conditions set forth below;
and
WHEREAS, both the ELCOM and the EMPLOYEE desire to enter into a formal
written employment contract in lieu of employment by oral agreement.
NOW, THEREFORE, in consideration of the covenants and conditions herein
contained and each party intending to be legally bound, acknowleding full and
adequate consideration, it is AGREED as follows:
1. Prior Agreements. Effective with the execution of this Agreement, all
----------------
prior oral or written employment contracts and/or consulting agreements between
ELCOM and EMPLOYEE are herby terminated and declared NULL AND VOID hereby, with
the rights of the parties governed SOLELY by this Employment Contract.
2. Employment. ELCOM employs EMPLOYEE and EMPLOYEE accepts employment upon
----------
the terms and conditions of the Employment Contract. All terms of employment by
oral agreement or previous course of conduct are rendered NULL AND VOID hereby,
with the rights of the parties governed SOLELY by this Employment Contract.
3. Term. The Term of this Employment Contract shall commence on October 1,
----
1996 and terminate on December 31, 1999.
4. Compensation.
------------
4.1 EMPLOYEE shall receive a salary of ten thousand dollars ($10,000.00) per
month for the first twelve months (12) months of the Term of this Agreement.
Compensation for the remaining Term of this Agreement will be determined by the
mutual Agreement of EMPLOYEE and ELCOM.
5. DUTIES. EMPLOYEE is engaged as Chief Operating Officer for the Term of
------
this Agreement.
Assignment of Intellectual Property. EMPLOYEE hereby agrees that any
- ------------------------------------
technologies, artwork, graphic design work, concept, sales and/or marketing
campaigns, business
Page 1 of 5
<PAGE>
lists, agreements and/or ideas developed specifically for ELCOM during the term
of this Employment Contract shall be the exclusive property of ELCOM. EMPLOYEE
further agrees that any and all resulting circuits, designs, processes,
procedures, software, firmware, hardware, layouts, innovations, inventions,
ideas, techniques, documents, writings, or any other results of their employment
are the sole property of ELCOM. EMPLOYEE agrees to promptly disclose and
provide any and all such information needed to support patent claims,
copyrights, trademarks, licenses, assignments, and any other conveyances to
ELCOM. EMPLOYEE hereby assigns, transfers, releases and conveys any and all
rights, title, interest, and any other claims of ownership in any intellectual
property of any kind or nature whatsoever to ELCOM in exchange for the
compensation herein.
7. Disclosure of Information. EMPLOYEE acknowledges that the list of ELCOM's
-------------------------
proprietary information, customers, intellectual property, and prototypes
(hereinafter referred to as "Proprietary Information") as it may exist from time
to time is a valuable, special, and unique asset of ELCOM. EMPLOYEE will not,
during or after the term of their employment, disclose said Proprietary
Information to any person, firm, corporation, association, or other entity for
any reason or purpose whatsoever. In the event of a breach or threatened
breach by EMPLOYEE of the provisions of this paragraph, ELCOM shall be entitled
to an injunction restraining EMPLOYEE from disclosing, in whole or in part, said
Proprietary Information, or from rendering any services to any person, firm,
corporation, association, or other entity to whom such Proprietary Information,
in whole or in part, has been disclosed or is threatened to be disclosed.
Nothing herein shall be construed as prohibiting ELCOM from pursuing any other
remedies available to ELCOM for such breach or threatened breach, including the
recovery of damages from EMPLOYEE.
8. Paid Absence. During the term of this Employment Contract, EMPLOYEE shall
------------
be entitled each year to a combination of vacation days, personal days and sick
days, which shall accrue at the rate of -1.25 - days for each month of
employment of EMPLOYEE, totaling up to a maximum of 3 weeks vacation in any
given twelve (12) month period, during which time EMPLOYEE's compensation shall
be paid in full. This excludes company paid holidays.
9. Death During Employment. In the event that EMPLOYEE dies during the term
-----------------------
of employment, ELCOM shall pay to the estate of EMPLOYEE the compensation which
would otherwise be payable to EMPLOYEE up to the day in which their death
occurs. Upon the death of EMPLOYEE, this Employment Contract shall become null
and void as of the date of Death of EMPLOYEE.
10. Termination. ELCOM shall be permitted to terminate this Employment
-----------
Contract for cause by providing EMPLOYEE with written notice of said
termination.
11. Restrictive Covenant. For a period of two (2) years after the termination
--------------------
or expiration of this Employment Contract, EMPLOYEE will not, directly or
indirectly, own, manage, operate, control, be employed by, participate in, or be
connected in any manner with the ownership, management, operation, or control of
any Power Line Communications business similar to the
Page 2 of 5
<PAGE>
type of business conducted by ELCOM and/or immediate vendors or customers at the
time of the termination of this Employment Contract. In the event of EMPLOYEE's
actual or threatened breach of the provisions of this paragraph, ELCOM shall be
entitled to an injunction restraining EMPLOYEE therefrom. Nothing shall be
construed as prohibiting the ELCOM from pursuing any other available remedies
for such breach or threatened breach, including the recovery of damages from
EMPLOYEE.
12. Prior Arrangements. EMPLOYEE affirms that by being party to this
-----------------
Employment Contract that:
(a) they are not in violation of any previous restrictive covenants,
non-compete clauses, confidentiality agreements, intellectual property
agreements and assignments, and/or employment agreements;
(b) they are not causing a conflict of interest with prior employers,
business arrangements and agreements; unless previously disclosed in writing to
ELCOM;
(c) there are no legal restraints, claims, settlements, and/or
continuing or impending litigation that would prohibit EMPLOYEE from engaging in
or executing the full scope of their Duties and that ELCOM shall be indemnified
and held harmless by EMPLOYEE from any claims and/or litigation against EMPLOYEE
that may arise from circumstances existing prior to this Employment Contract;
(d) any statements written or verbal made by EMPLOYEE in reference to
their education, employment background, experience, periods of employment,
professional licenses and/or memberships in professional organizations, whether
or not they constituted, in full or in part, a basis for this Employment
Contract, are true and correct to the best of their knowledge.
13. Substance Abuse. It is the policy ELCOM that no employee may use
---------------
alcohol or illegal substances during working hours. It is understood by both
ELCOM and EMPLOYEE that the use of excessive alcohol or illegal substances
during working hours by EMPLOYEE is grounds for termination with cause. ELCOM
reserves the right to perform random drug testing periodically on all employees
of ELCOM and EMPLOYEE hereby acknowledges that they are subject to such random
drug testing. Further, excessive alcohol will be defined as the amount of
alcohol an individual would have consumed to be considered legally intoxicated
by state standards.
14. Arbitration. Any controversy or claim arising out of, or relating to
-----------
this Employment Contract, or the breach of this Employment Contract shall be
settled by arbitration in Philadelphia, Pennsylvania in accordance with the
rules then obtaining of the American Arbitration Association, and judgment upon
the award rendered will be binding upon the parties and may be entered and
enforced in any court having jurisdiction thereof.
Page 3 of 5
<PAGE>
15. Notices. Any notice required or desired to be given under this
-------
Employment Contract shall be deemed given if in writing sent via certified mail
to their residence in the case of the employee, or to its principal office in
the case ELCOM.
16. Waiver or Breach. The waiver by ELCOM or breach of any provision
----------------
of this Employment Contract by EMPLOYEE shall not operate or be construed as a
waiver of any subsequent breach by EMPLOYEE. No waiver shall be valid unless in
writing and signed by an authorized officer of ELCOM.
17. Assignment. EMPLOYEE acknowledges that the services to be rendered
----------
by them are unique and personal. Accordingly, EMPLOYEE may not assign any of
their rights or delegate any of their duties or obligations under this
Employment Contract. The rights and obligations of the Employer under this
Employment Contract shall inure to the benefit of and shall be binding upon the
successors and assigns ELCOM.
18. Entire Agreement. This Employment Contract contains the entire
----------------
understanding of the parties. It may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension, or discharge is sought.
19. Captions. Captions are used in this Employment Contract for
--------
convenience only, and are not intended to be used in the construction or in the
interpretation of this Employment Contract.
20. Interpretation. This Employment Contract shall be interpreted in
--------------
accordance with the laws of the Commonwealth of Pennsylvania.
21. Invalid Provision. In the event any provision or sub-provision of
-----------------
this Employment Contract is held to be void, invalid, or unenforceable in any
respect, then the same shall not effect the remaining provisions or
sub-provisions hereof, which shall continue in full force and effect.
22. Inclusive Language. In this Employment Contract, the singular shall
------------------
include the plural and the masculine, feminine, or neuter gender shall include
all other genders as may be appropriate.
23. Advice of Council. All parties to this Employment Contract hereto
-----------------
acknowledge that they signed this document only after having the opportunity to
consult with an attorney of their choosing.
Page 4 of 5
<PAGE>
24. Binding Effect. This Employment Contract shall, upon ratification by the
Board of Directors of the Company, bind the parties hereto, their legal
representatives, successors, and assigns.
IN WITNESS WHEREOF, the parties have executed this Employment Contract
the day and year first above written.
ATTEST: ELCOM TECHNOLOGIES CORPORATION
/s/ Robert B. Sando BY: /s/ Robert A. Vito
- ----------------------------- ----------------------------
Robert B. Sando, Secretary Robert A. Vito, President
[SIGNATURE APPEARS HERE]
--------------------------------
EMPLOYEE
Page 5 of 5
<PAGE>
EMPLOYMENT CONTRACT
-------------------
AGREEMENT made this 28 day of July 1995, by and between Elcom Technologies
Corporation a Pennsylvania Corporation with a business address at 78 Great
Valley Parkway, Malvern, Pennsylvania 19355 (hereinafter referred to as the
"Employer" and/or the "Company") and C.B. Patel, an individual, with an address
at 251 Amwell Road, Hopewell, NJ 08525 (hereinafter referred to the "Employee").
WHEREAS, the Employer wishes to retain the services of the Employee; and
the Employee wishes to accept such employment on the terms and conditions set
forth below; and
WHEREAS, both the Employer and the Employee desire to enter into a formal
written employment contract in lieu of employment by oral agreement.
NOW, THEREFORE, in consideration of the covenants and conditions herein
contained and each party intending to be legally bound, acknowledging full and
adequate consideration, it is
AGREED:
1. Prior Agreements. The date of the original employment contract
----------------
between the Employer and the Employee was the 24th of November, 1994. All prior
oral or written employment contracts and/or consulting agreements between the
Employer and the Employee are hereby terminated and declared NULL AND VOID).
2. Employment. The Employer employs the Employee and the Employee
----------
accepts employment upon the terms and conditions of this Employment Contract.
All terms of employment by oral agreement or previous course of conduct are
rendered NULL AND VOID hereby, with the rights of the parties governed SOLELY by
this Employment Contract.
3. Term. The term of this Employment Contract shall commence on 24th of
----
November, 1994, and terminate on December 31, 1997.
4. Compensation. For the first year of this Employment Contract, for all
------------
services rendered by the Employee, the Employer shall pay the Employee an annual
salary of $70,000 payable monthly. Salary payments shall be subject to
withholding and other applicable taxes. For the remaining term of the
Employment Contract, the monthly salary for the Employee shall be adjusted as
per the mutual agreement of both the Employer and the Employee.
5. Duties. The Employee is engaged as Engineering Director. The duties
------
of the Employee shall include directing engineering activities regarding various
circuit and Systems level designs both analog and digital, developments,
testing, and debugging of the Employer Corporation. The precise services of the
Employee may be extended or curtailed by the Employer from time to time.
-1-
<PAGE>
6. Extent of Services. The Employee shall devote their entire time,
------------------
attention, and energies to the Employer's business and shall not during the term
of this Employment Contract be engaged in any other Power Line Communications
(PLC) business during the term of this Employment Contract or be engaged in any
other Power Line Communications (PLC) business activity which competes either
directly or indirectly with the business of the Employer. The Employee may,
only with the express written permission of the Employer, be engaged in outside
work related activities. In the event "Early Termination" occurs as defined in
Paragraph 12, the Employee will not solicit or hire other Company employees for
a two (2) year period.
7. Assignment of Intellectual Property. The Employee hereby agrees that
-----------------------------------
any technologies, concepts, sales and/or marketing campaigns, business lists,
agreements and/or ideas developed specifically for the Employer Corporation
during the term of this Employment Contract shall be the property of the
Employer Corporation. The Employee further agrees that any and all resulting
circuits, designs, processes, procedures, software, firmware, hardware, layouts,
innovations, inventions, ideas, techniques, documents, writings, or any other
results of their employment are the sole property of the Employer Corporation.
The Employee agrees to promptly disclose and provide any and all such
information needed to support patent claims, copyrights, trademarks, licenses,
assignments, and any other conveyances to the Employer Corporation. The Employee
hereby assigns, transfers, releases and conveys any and all RIGHTS, title,
interest, and any other claims of ownership in any intellectual property (as
defined above) to the Employer Corporation in exchange for the compensation
herein.
8. Disclosure of Information. The Employee acknowledges that the list
-------------------------
of the Employer's proprietary information, customers, intellectual property, and
prototypes (hereinafter REFERRED to as "Proprietary Information") as it may
exist from time to time is a valuable, special, and unique asset of the
Employer's business. The Employee will not, during or after the term of their
employment, disclose said Proprietary Information to any person, firm,
corporation, association, or other entity for any reason or purpose whatsoever.
In the event of a breach or threatened breach by the Employee of the provisions
of this paragraph, the Employer shall be entitled to an injunction restraining
the Employee from disclosing, in whole or in part, said Proprietary Information,
or from rendering any services to any person, firm, corporation, association, or
other entity to whom such Proprietary Information, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein shall be construed as
prohibiting the Employer from pursuing any other remedies available to the
Employer for such breach or threatened breach, including the recovery of damages
from the Employee.
9. Paid Absence. During the term of this Employment Contract, the
------------
Employee shall be entitled each year to a combination of vacation days, personal
days and sick days, which shall accrue at the rate of 1.25 days for each month
of employment of the Employee, totaling up to a maximum of three (3) weeks
duration in any given twelve (12) month period, during which time their
compensation shall be paid in full. This excludes company paid holidays.
10. Death During Employment. If the Employee dies during the term of
-----------------------
employment, the Employer shall pay to the estate of the Employee the
compensation which would otherwise be
-2-
<PAGE>
payable to the Employee up to the day in which their death occurs. Upon the
death of the Employee, this Employment Contract shall become null and void.
Also, in the event of death during employment, then an "Early Termination" will
have been deemed to occur as defined in Paragraph 12 on this Employment
Contract.
11. Stock Option Agreement. Concurrently with the execution of this
----------------------
Employment Contract, the Employer shall present to the Employee a "Stock Option
Agreement" which shall grant the Employee the right to purchase up to One
Hundred Thousand (100,000) shares of the Employer Corporation stock upon terms
and conditions outlined in said "Stock Option Agreement".
12. Termination. The Employer shall be permitted to terminate this
-----------
Employment Contract for cause by providing the Employee with written notice of
said termination. In the event that the Employer/Employee relationship is
terminated for any reason prior to December 3 1, 1997, then an "Early
Termination" will have been deemed to occur.
(a) If said "Early Termination" occurs before the Employee has completed
one (1) calendar year of satisfactory service commencing from their date of
original continuous employment, then the Employee hereby forfeits their rights
to purchase all One Hundred Thousand (100,000) shares of stock granted to them
under the Stock Option Agreement as defined in Paragraph 11 above.
(b) If said "Early Termination" occurs before the Employee has completed
two (2) calendar years of satisfactory service commencing from their date of
original continuous employment, then the Employee hereby forfeits their right to
purchase 70,000 shares of stock granted to them under the Stock Option Agreement
as defined in Paragraph 11 above. Thereafter, the Employee or their estate will
then have ninety (90) days from the date "Early Termination" occurs to exercise
the stock options for which the Employee has a right to purchase as defined in
Paragraph 12. After that period, the Stock Option Agreement is deemed to be null
and void.
(c) If said "Early Termination" occurs before the Employee has completed
three (3) calendar years of satisfactory service commencing from their date of
original continuous employment, then the Employee hereby forfeits their rights
to purchase 40,000 shares of stock granted to them under the Stock Option
Agreement as defined in Paragraph 11 above. Thereafter, the Employee or their
estate will then have ninety (90) days from the date "Early Termination" occurs
to exercise the stock options for which the Employee has a right to purchase as
defined in Paragraph 12. After that period, the Stock Option Agreement is deemed
to be null and void.
(d) If said "Early Termination" occurs before the Employee completes their
contract on December 31, 1997, commencing from their date of original continuous
employment, then the Employee hereby forfeits their rights to purchase 10,000
shares of stock granted to them under the Stock Option Agreement as defined in
Paragraph 11 above. Thereafter, the Employee or their
-3-
<PAGE>
estate will then have ninety (90) days from the date "Early Termination" occurs
to exercise the stock options for which the Employee has a right to purchase as
defined in Paragraph 12. After that period, the Stock Option Agreement is deemed
to be null and void.
(e) In the event that the Employee exercises any stock options under the
Stock Option Agreement as defined in Paragraph 11 above prior to "Early
Termination", then the Employer Corporation shall have the right to repurchase
from the Employee, and the Employee shall be required to sell to the Employer
Corporation, all excess shares of Employer Corporation stock purchased by the
Employee prior to "Early Termination" at the price of Fifty Cents ($0.50) per
share of excess Employer Corporation stock purchased by the Employee.
13. Restrictive Covenant. For a period of two (2) years after the
--------------------
termination or expiration of this Employment Contract, the Employee will not,
directly or indirectly, own, manage, operate, control, be employed by,
participate in, or be connected in any manner with the ownership, management,
operation, or control of any Power Line Communications (PLC) business similar to
the type of business conducted by the Employer and/or immediate vendors or
customers at the time of the termination of this Employment Contract. In the
event of the Employee's actual or threatened breach of the provisions of this
paragraph, the Employer shall be entitled to an injunction restraining the
Employee therefrom. Nothing shall be construed as prohibiting the Employer from
pursuing any other available remedies for such breach or threatened breach,
including the recovery of damages from the Employee. The Employer will not
prevent the Employee from practicing as he was doing prior to joining the
Employer provided that this practice is in a non-competitive field of the
Employer for the two year period herein described.
14. Prior Arrangements. The Employee affirms that by being party to this
------------------
Employment Contract that:
(a) they are not in violation of any previous restrictive covenants, non-
compete clauses, confidentiality agreements, intellectual property agreements
and assignments, and/or employment agreements, except for those disclosed to the
Employer regarding the Employee's prior employment and business;
(b) they are not causing a conflict of interest with prior employers,
business arrangements and agreements; unless previously disclosed in writing to
the Employer;
(c) there are no legal restraints, claims, settlements, and/or continuing
or impending litigation that would prohibit the Employee from engaging in or
executing the full scope of their Duties and that Elcom shall be indemnified and
held harmless by the Employee from any claims and/or litigation against the
Employee that may arise from circumstances existing prior to this Employment
Contract;
-4-
<PAGE>
(d) any statements written or verbal made by the Employee in reference to
their education, employment background, experience, periods of employment,
professional licenses and/or memberships in professional organizations, whether
or not they constituted, in full or in part, a basis for this Employment
Contract, are true and correct to the best of their knowledge.
(e) Employee's is permitted to continue his consulting work with both
Sharp Electronics Corporation and E.I.A. Corporation at the rate of two (2) days
per month. This consulting work may continue through the duration of this
Employment Contract. However, if there is ever a dispute regarding the ownership
of intellectual property between Elcom Technologies Corporation and Sharp
Electronics Corporation or E.I.A. Corporation, that is in the scope of the
Employer's business, then Elcom Technologies Corporation shall be deemed to be
the owner of said intellectual property and the Employee will cooperate and
execute the necessary documents to that effect.
15. Substance Abuse. It is the policy of the Company that no employee may
---------------
use alcohol or illegal substances during working hours. It is understood by both
the Employer and the Employee that the use of excessive alcohol or illegal
substances during working hours by the Employee is grounds for termination with
cause. The Company reserves the right to perform random drug testing
periodically on all employees of the Employer and the Employee hereby
acknowledges that they are subject to such random drug testing. Further,
excessive alcohol will be defined as the amount of alcohol an individual would
have consumed to be considered legally intoxicated by state standards.
16. Arbitration. Any controversy or claim arising out of, or relating to
-----------
this Employment Contract, or the breach thereof other than as described in
Paragraphs 8 and 13 of this Employment Contract shall be settled by arbitration
in Philadelphia, Pennsylvania in accordance with the rules then obtaining of the
American Arbitration Association, and judgment upon the award rendered will be
binding upon the parties and may be entered and enforced in any court having
jurisdiction thereof.
17. Notices. Any notice required or desired to be given under this
-------
Employment Contract shall be deemed given if in writing sent via certified mail
to their residence in the case of the Employee, or to its principal office in
the case of the Employer.
18. Waiver of Breach. The waiver by the Employer of a breach of any
----------------
provision of this Employment Contract by the Employee shall not operate or be
construed as a waiver of any subsequent breach by the Employee. No waiver shall
be valid unless in writing and signed by an authorized officer of the Employer.
19. Assignment. The Employee acknowledges that the services to be
----------
rendered by them are unique and personal. Accordingly, the Employee may not
assign any of their rights or delegate any of their duties or obligations under
this Employment Contract. The rights and obligations of the Employer under this
Employment Contract shall inure to the benefit of and shall be binding upon the
successors and assigns of the Employer.
-5-
<PAGE>
20. Entire Agreement. This Employment Contract contains the entire
----------------
understanding of the parties. It may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension, or discharge is sought.
21. Captions. Captions are used in this Employment Contract for
--------
convenience only, and are not intended to be used in the construction or in
the interpretation of this Employment Contract.
22. Interpretation. This Employment Contract shall be interpreted in
--------------
accordance with the laws of the Commonwealth of Pennsylvania.
23. Invalid Provision. In the event any provision or sub-provision of
-----------------
this Employment Contract is held to be void, invalid, or unenforceable in any
respect, then the same shall not effect the remaining provisions or sub-
provisions hereof, which shall continue in full force and effect.
24. Inclusive Language. In this Employment Contract, the singular shall
------------------
include the plural and the masculine, feminine, or neuter gender shall include
all other genders as may be appropriate.
25. Advice of Council. All parties to this Employment Contract hereto
-----------------
acknowledge that they signed this document only after having the opportunity
to consult with an attorney of their choosing.
26. Binding Effect. This Employment Contract and the separate Stock
--------------
Option Agreement shall, upon ratification by the Board of Directors of the
Company, bind the parties hereto, their legal representatives, successors, and
assigns.
IN WITNESS WHEREOF, the parties have executed this Employment Contract
the day and year first above written.
ATTEST: ELCOM TECHNOLOGIES CORPORATION
[SIGNATURE ILLEGIBLE] BY: /s/ Robert A. Vito President
- ------------------------------ ---------------------------------
Secretary Robert A. Vito President
WITNESS:
[SIGNATURE ILLEGIBLE] /s/ C.B. Patel
- ------------------------------ ---------------------------------
C.B. Patel, Employee
-6-
<PAGE>
STOCK OPTION AGREEMENT
----------------------
AGREEMENT made this 27th day of August, 1996, by and among Elcom
Technologies Corporation, a corporation organized under the laws of the
Commonwealth of Pennsylvania (hereinafter referred to as "ELCOM"), and C.B.
Patel, an individual employee of ELCOM (hereinafter referred to as "EMPLOYEE").
BACKGROUND
----------
WHEREAS; ELCOM's corporate charter currently permits ELCOM to issue up
to Twenty Million (20,000,000) shares of common stock; and
WHEREAS, as of the execution of this Agreement, ELCOM's total issued,
and outstanding shares of common stock is approximately Thirteen Million
(13,000,000) shares.
WHEREAS, ELCOM desires to grant to EMPLOYEE an option to purchase two
hundred thousand (200,000) shares of ELCOM Technologies Corporation's common
stock.
NOW, THEREFORE, in consideration of the mutual promises herein and other
valuable considerations, ELCOM and EMPLOYEE agrees as follows:
1. Prior Agreements. EMPLOYEE and ELCOM have previously entered into the
following Agreement:
Employment Agreement dated July 28, 1995
Stock Option Agreement dated July 28, 1995
1.1 Upon execution of this Agreement, all Stock Options granted under the
Stock Option Agreement dated July 28, 1995 are hereby canceled in full and all
rights, duties and obligations of the Parties thereto ar hereby declared null
and void.
2. Grant of Options. Subject to all of the terms and conditions of this
----------------
Agreement, ELCOM hereby grants to EMPLOYEE options to purchase a total of two
hundred thousand (200,000) Shares of ELCOM's common stock at the price of fifty
cents ($0.50) per share in accordance with the following schedule:
Number of Shares Date Exercisable Expiration Date
---------------- ---------------- ---------------
40,000 November 24, 1995 December 31, 2002
40,000 November 24, 1996 December 31, 2002
40,000 November 24, 1997 December 31, 2002
40,000 November 24, 1998 December 31, 2002
40,000 November 24, 1999 December 31, 2002
Page 1 of 4
<PAGE>
Any Options not exercised by the Expiration Date listed above shall be
terminated in full for all purposes whatsoever.
2.1 Sale of Company. In the event that a controlling interest (over 50%) of
---------------
ELCOM is sold to a third party, other then the Public markets, EMPLOYEE may
exercise one hundred percent (100%) of all options granted under Section 2
herein. EMPLOYEE must exercise said options within sixty (60) days of
notification of the acquisition of a controlling interest by a third party. Any
Options not exercised by EMPLOYEE within this sixty (60) day period will
terminate in full upon expiration of said sixty (60) day period.
3. Termination of Employment. In the event that EMPLOYEE terminates employment
-------------------------
with ELCOM for any reason whatsoever, including death or disability, all
Options to purchase ELCOM common stock granted under this Agreement shall
terminate in full and be declared null and void for all purposes whatsoever,
sixty (60) days subsequent to the date of EMPLOYEE's last day of active
employment with ELCOM. EMPLOYEE shall receive no further vesting of Options
under Section 2 herein, after EMPLOYEE's last day of active employment with
ELCOM.
4. Registration of Options. In the event that ELCOM makes an initial public
-----------------------
offering (the "IPO") of its common stock pursuant to rules established by the
United States Securities and Exchange Commission and the NASDAQ stock exchange,
the options granted in Section 2 of this Agreement shall be registered with the
Securities and Exchange Commission pursuant to the following schedule:
Six (6) months after completion of the IPO........25% (twenty five percent)
Eighteen (18) months after completion of the IPO..25% (twenty five percent)
Thirty (30) months after completion of the IPO....25% (twenty five percent)
Forty two (42) months after completion of the IPO.25% (twenty five percent)
5. Restrictions and Regulations. EMPLOYEE agrees that any Shares of ELCOM's
----------------------------
common stock purchased under this Stock Option Agreement will be subject to the
restrictions and regulations outlined in this Agreement and that these SHARES
may be subject to further restrictions and regulations. Said restrictions and
regulations may be imposed at any time by ELCOM at the sole discretion of ELCOM
and without the approval of EMPLOYEE.
5.1 In addition to the aforementioned restrictions, EMPLOYEE agrees that any
Shares purchased by EMPLOYEE pursuant to this Agreement, shall be subject to all
of the restrictions, regulations and non-dilution provisions of the ELCOM
Private Placement Memorandum dated, July 12, 1996.
6. Exercise of Option. EMPLOYEE may exercise any Options earned in accordance
------------------
with Section 2, herein, in any number that EMPLOYEE elects.
Page 2 of 4
<PAGE>
7. Adjustment of Option Shares. Prior to any public offering of ELCOM
---------------------------
shares, if the outstanding common shares of Elcom Technologies Corporation, are
changed into or exchanged for a different number or kind of shares or other
securities of Elcom Technologies Corporation or of another corporation, whether
through reorganization, share split-up, combination of shares, merger or
consolidation, then these shares shall be substituted for each common share of
Elcom Technologies Corporation then subject to this Stock Option Agreement. The
number and kinds of shares or other securities into which each such ELCOM share
is so changed or for which each ELCOM share is exchanged shall be at the sole
discretion of ELCOM.
8. Time for Payment for Shares. The option price of the Shares to be
---------------------------
purchased pursuant to the exercise of Options under this Agreement shall be paid
in full at the time of the exercise of the options.
9. Method of Exercising Option. EMPLOYEE shall provide ELCOM with at
---------------------------
least five (5) business days prior written notice in order to exercise any
options under this Agreement. EMPLOYEE shall comply with all procedures
established by ELCOM from time to time concerning exercising any options under
this Agreement.
10. Modification. This Agreement shall be effective as of the date hereof
------------
and, unless sooner terminated under the provisions of this Agreement, shall
remain in effect until December 31, 2002. No modification or amendment of this
Agreement shall be effective unless in writing and signed by the parties hereto.
11. Notices. All notices or other communications required or permitted to
-------
be given under the terms of this Agreement shall be in writing, delivered
personally, or sent via certified mail, postage prepaid, return receipt
requested.
12. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes all prior negotiations, understandings
and agreements of any nature with respect to the subject matter hereto. No
amendment, waiver or discharge of any of the provisions of this Agreement shall
be effective against any part, unless that party shall have consented thereto in
writing.
13. Binding Effect. This Agreement shall be binding upon execution by
--------------
ELCOM and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors, and assigns.
14. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
Page 3 of 4
<PAGE>
IN WITNESS WHEREOF, ELCOM and EMPLOYEE have set their hands and seals
hereto the day and year first above written.
ATTEST: Elcom Technologies Corporation
/s/ [SIGNATURE APPEARS HERE] BY: /s/ [SIGNATURE APPEARS HERE]
- -------------------------------- --------------------------------
Robert B. Sando, Secretary Robert A. Vito, President
/s/ [SIGNATURE APPEARS HERE]
-----------------------------------
EMPLOYEE
Page 4 of 4
<PAGE>
STOCK OPTION AGREEMENT
----------------------
AGREEMENT made this 30th day of September, 1996, by and among Elcom
Technologies Corporation, a corporation organized under the laws of the
Commonwealth of Pennsylvania (hereinafter referred to as "ELCOM"), and LOUIS J.
PETRIELLO, an individual employee of ELCOM (hereinafter referred to as
"EMPLOYEE").
BACKGROUND
----------
WHEREAS; ELCOM's corporate charter currently permits ELCOM to issue up
to Twenty Million (20,000,000) shares of common stock; and
WHEREAS, as of the execution of this Agreement, ELCOM's total issued,
and outstanding shares of common stock is approximately Thirteen Million five
hundred thousand (13,500,000) shares.
WHEREAS, ELCOM desires to grant to EMPLOYEE an option to purchase fifty
thousand (50,000) shares of ELCOM Technologies Corporation's common stock.
NOW, THEREFORE, in consideration of the mutual promises herein and other
valuable considerations, ELCOM and EMPLOYEE agree as follows:
1. Prior Agreements. EMPLOYEE and ELCOM have previously entered into the
following Agreement:
Employment Agreement dated September 18, 1995
Stock Option Agreement dated August 27, 1996
EMPLOYEE agrees that any options to purchase Elcom Common Stock under any of the
above agreements listed in this Section 1 are hereby canceled and declared null
and void for all purposes whatsoever.
2. Grant of Options. Subject to all of the terms and conditions of this
----------------
Agreement, ELCOM hereby grants to EMPLOYEE options to purchase a total of fifty
thousand (50,000) Shares of ELCOM's common stock at the price of two dollars and
fifty cents ($2.50) per share in accordance with the following schedule:
<TABLE>
<CAPTION>
Number of Shares Date Exercisable Expiration Date
-------------------- ---------------- ---------------
<S> <C> <C>
10,000 December 5, 1996 December 31, 2002
10,000 December 5, 1997 December 31, 2002
10,000 December 5, 1998 December 31, 2002
10,000 December 5, 1999 December 31, 2002
10,000 December 5, 2001 December 31, 2002
</TABLE>
Page 1 of 4
<PAGE>
2.1 Sale of Company. In the event that a controlling interest (over 50%) of
---------------
ELCOM is sold to a third party, other then the Public markets, EMPLOYEE may
exercise one hundred percent (100%) of all options granted under Section 2
herein. EMPLOYEE must exercise said options within sixty (60) days of
notification of the acquisition of a controlling interest by a third party. Any
Options not exercised by EMPLOYEE within this sixty (60) day period will
terminate in full upon expiration of said sixty (60) day period.
3. Termination of Employment. In the event that EMPLOYEE terminates
-------------------------
employment with ELCOM for any reason whatsoever, including death or disability,
all Options to purchase ELCOM common stock granted under this Agreement shall
terminate in full and be declared null and void for all purposes whatsoever,
sixty (60) days subsequent to the date of EMPLOYEE's last day of active
employment with ELCOM. EMPLOYEE shall receive no further vesting of Options
under Section 2 herein, after EMPLOYEE's last day of active employment with
ELCOM.
4. Registration of Options. In the event that ELCOM makes an initial
-----------------------
public offering (the "IPO") of its common stock pursuant to rules established by
United States Securities and Exchange Commission and the NASDAQ stock exchange,
the options granted in Section 2 of this Agreement shall be registered with the
Securities and Exchange Commission pursuant to the following schedule:
Six (6) months after completion of the IPO..........25% (twenty five percent)
Eighteen (18) months after completion of the IPO....25% (twenty five percent)
Thirty (30) months after completion of the IPO......25% (twenty five percent)
Forty (40) months after completion of the IPO.......25% (twenty five percent)
5. Restrictions and Regulations. EMPLOYEE agrees that any Shares of
----------------------------
ELCOM's common stock purchased under this Stock Option Agreement will be subject
to the restrictions and regulations outlined in this Agreement and that these
SHARES may be subject to further restrictions and regulations. Said
restrictions and regulations may be imposed at any time by ELCOM at the sole
discretion of ELCOM and without the approval of EMPLOYEE.
5.1 In addition to the aforementioned restrictions, EMPLOYEE agrees that any
Shares purchased by EMPLOYEE pursuant to this Agreement, shall be subject to all
the restrictions, regulations and non-dilution provisions of the ELCOM Private
Placement Memorandum dated, July 12, 1996.
6. Exercise of Option EMPLOYEE may exercise any Options earned in
----------------------
accordance with Section 2, herein, in any number that EMPLOYEE elects.
Page 2 of 4
<PAGE>
7. Adjustment of Option Shares. Prior to any public offering of ELCOM
---------------------------
shares, if the outstanding common shares of Elcom Technologies Corporation, are
changed into or exchanged for a different number of kind of shares or other
securities of Elcom Technologies Corporation or of another corporation, whether
through reorganization, share split-up, combination of shares, merger or
consolidation, then these shares shall be substituted for each common share of
Elcom Technologies Corporation then subject to this Stock Option Agreement. The
number and kinds of shares or other securities into which each such ELCOM share
is so changed or for which each ELCOM share is exchanged shall be at the sole
discretion of ELCOM.
8. Time for Payment for Shares. The option price of the Shares to be
---------------------------
purchased pursuant to the exercise of Options under this Agreement shall be paid
in full at the time of the exercise of the options.
9. Method of Exercising Option. EMPLOYEE shall provide ELCOM with at least
---------------------------
five (5) business days prior written notice in order to exercise any options
under this Agreement. EMPLOYEE shall comply with all procedures established by
ELCOM from time to time concerning exercising any options under this Agreement.
10. Modification. This Agreement shall be effective as of the date hereof and,
------------
unless sooner terminated under the provisions of this Agreement, shall remain in
effect until December 31, 2002. No modification or amendment of this Agreement
shall be effective unless in writing and signed by the parties hereto.
11. Notices. All notices or other communications required or permitted to be
-------
given under the terms of this Agreement shall be in writing, delivered
personally, or sent via certified mail, postage prepaid, return receipt
requested.
12. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the parties hereto and supersedes all prior negotiations, understandings and
agreements of any nature with respect to the subject matter hereto. No
amendment, waiver or discharge of any of the provisions of this Agreement
shall be effective against any part, unless that party shall have consented
thereto in writing.
13. Binding Effect. This Agreement shall be binding upon execution by ELCOM
--------------
and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors, and assigns.
14. Governing Law. This Agreement shall be construed, interpreted and enforced
-------------
in accordance with the laws of the Commonwealth of Pennsylvania.
Page 3 of 4
<PAGE>
IN WITNESS WHEREOF, ELCOM and EMPLOYEE have set their hands and seals
hereto the day and year first above written.
ATTEST: Elcom Technologies Corporation
/s/ Robert B. Sando BY: /s/ Robert A. Vito
- ----------------------- -------------------------------
Robert B. Sando, Secretary Robert A. Vito, President
/s/ [SIGNATURE ILLEGIBLE]
----------------------------------
EMPLOYEE
Page 4 of 4
<PAGE>
EMPLOYMENT CONTRACT
-------------------
AGREEMENT made this 28 day July, 1995 by and between Elcom Technologies
Corporation a Pennsylvania Corporation with a business address at 78 Great
Valley Parkway, Malvern, Pennsylvania 19355 (hereinafter referred to as the
"Employer" and/or the "Company") and Stephen Pudles, an individual, with an
address at 78 Great Valley Parkway, Malvern, PA 19355 (hereinafter referred to
the "Employee").
WHEREAS, the Employer wishes to retain the services of the Employee; and
the Employee wishes to accept such employment on the terms and conditions set
forth below; and
WHEREAS, both the Employer and the Employee desire to enter into a formal
written employment contract in lieu of employment by oral agreement.
NOW, THEREFORE, in consideration of the covenants and conditions herein
contained and each party intending to be legally bound, acknowledging full and
adequate consideration, it is AGREED:
1. Prior Agreements. The date of the original employment contract
----------------
between the Employer and the Employee was the 28th of December, 1994. All prior
oral or written employment contracts and/or consulting agreements between the
Employer and the Employee are hereby terminated and declared NULL AND VOID.
2. Employment. The Employer employs the Employee and the Employee
----------
accepts employment upon the terms and conditions of this Employment Contract.
All terms of employment by oral agreement or previous course of conduct are
rendered NULL AND VOID hereby, with the rights of the parties governed SOLELY by
this Employment Contract.
3. Term. The term of this Employment Contract shall commence on 28th of
----
December, 1994, and terminate on December 31, 1997.
4. Compensation. For the first year of this Employment Contract, for all
------------
services rendered by the Employee, the Employer shall pay the Employee an annual
salary of $90,000 payable monthly. Salary payments shall be subject to
withholding and other applicable taxes. For the remaining term of the Employment
Contract, the monthly salary for the Employee shall be adjusted as per the
mutual agreement of both the Employer and the Employee.
5. Duties. The Employee is engaged as Vice President Operations &
------
Engineering. The duties of the Employee shall include Supervising the Technical,
Engineering and Quality Assurance managers and Departments. The precise services
of the Employee may be extended or curtailed by the Employer from time to time.
-1-
<PAGE>
6. Extent of Services. The Employee shall devote their entire time,
------------------
attention, and energies to the Employer's business and shall not during the term
of this Employment Contract be engaged in any other Power Line Communications
(PLC) business during the term of this Employment Contract or be engaged in any
other Power Line Communications (PLC) business activity which competes either
directly or indirectly with the business of the Employer. The Employee may,
only with the express written permission of the Employer, be engaged in outside
work related activities. In the event "Early Termination" occurs as defined in
Paragraph 12, the Employee will not solicit or hire other Company employees for
a two (2) year period. Serving as a member of a company Board of Directors, that
is not a competitor of the Employer, or being a member of a faculty of an
accredited school or University shall not be restricted by the Employer.
7. Assignment of Intellectual Property. The Employee hereby agrees that
-----------------------------------
any technologies, concepts, sales and/or marketing campaigns, business lists,
agreements and/or ideas developed specifically for the Employer Corporation
during the term of this Employment Contract shall be the property of the
Employer Corporation. The Employee further agrees that any and all resulting
circuits, designs, processes, procedures, software, firmware, hardware, layouts,
innovations, inventions, ideas, techniques, documents, writings, or any other
results of their employment are the sole property of the Employer Corporation.
The Employee agrees to promptly disclose and provide any and all such
information needed to support patent claims, copyrights, trademarks, licenses,
assignments, and any other conveyances to the Employer Corporation. The
Employee hereby assigns, transfers, releases and conveys any and all rights,
title, interest, and any other claims of ownership in any intellectual property
(as defined above) to the Employer Corporation in exchange for the compensation
herein.
8. Disclosure of Information. The Employee acknowledges that the list of
-------------------------
the Employer's proprietary information, customers, intellectual property, and
prototypes (hereinafter referred to as "Proprietary Information") as it may
exist from time to time is a valuable, special, and unique asset of the
Employer's business. The Employee will not, during or after the term of their
employment, disclose said Proprietary Information to any person, firm,
corporation, association, or other entity for any reason or purpose whatsoever.
In the event of a breach or threatened breach by the Employee of the provisions
of this paragraph, the Employer shall be entitled to an injunction restraining
the Employee from disclosing, in whole or in part, said Proprietary Information,
or from rendering any services to any person, firm, corporation, association, or
other entity to whom such Proprietary Information, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein shall be construed as
prohibiting the Employer from pursuing any other remedies available to the
Employer for such breach or threatened breach, including the recovery of damages
from the Employee.
9. Paid Absence. During the term of this Employment Contract, the
------------
Employee shall be entitled each year to a combination of vacation days, personal
days and sick days, which shall accrue at the rate of 1.25 days for each month
of employment of the Employee, totaling up to a maximum of three (3) weeks
duration in any given twelve (12) month period, during which time their
compensation shall be paid in full. This excludes company paid holidays.
-2-
<PAGE>
10. Death During Employment. If the Employee dies during the term of
-----------------------
employment, the Employer shall pay to the estate of the Employee the
compensation which would otherwise be payable to the Employee up to the day in
which their death occurs. Upon the death of the Employee, this Employment
Contract shall become null and void. Also, in the event of death during
employment, then an "Early Termination" will have been deemed to occur as
defined in Paragraph 12 on this Employment Contract.
11. Stock Option Agreement. Concurrently with the execution of this
----------------------
Employment Contract, the Employer shall present to the Employee a "Stock Option
Agreement" which shall grant the Employee the right to purchase up to Six
Hundred Thousand (600,000) shares of the Employer Corporation stock upon terms
and conditions outlined in said "Stock Option Agreement".
12. Termination. The Employer shall be permitted to terminate this
-----------
Employment Contract for cause by providing the Employee with written notice of
said termination. In the event that the Employer/Employee relationship is
terminated for any reason prior to December 31, 1997, then an "Early
Termination" will have been deemed to occur.
(a) If said "Early Termination" occurs before the Employee has completed
one (1) calendar year of satisfactory service commencing from their date of
original continuous employment, then the Employee hereby forfeits their rights
to purchase all Six Hundred Thousand (600,000) shares of stock granted to them
under the Stock Option Agreement as defined in Paragraph 11 above.
(b) If said "Early Termination" occurs before the Employee has completed
two (2) calendar years of satisfactory service commencing from their date of
original continuous employment, then the Employee hereby forfeits their right to
purchase 420,000 shares of stock granted to them under the Stock Option
Agreement as defined in Paragraph 11 above. Thereafter, the Employee or their
estate will then have ninety (90) days from the date "Early Termination" occurs
to exercise the stock options for which the Employee has a right to purchase as
defined in Paragraph 12. After that period, the Stock Option Agreement is deemed
to be null and void.
(c) If said "Early Termination" occurs before the Employee has completed
three (3) calendar years of satisfactory service commencing from their date of
original continuous employment, then the Employee hereby forfeits their rights
to purchase 240,000 shares of stock granted to them under the Stock Option
Agreement as defined in Paragraph 11 ABOVE. Thereafter, the Employee or their
estate will then have ninety (90) days from the date "Early Termination" occurs
to exercise the stock options for which the Employee has a RIGHT to purchase as
defined in Paragraph 12. After that period, the Stock Option Agreement is deemed
to be null and void.
(d) If said "Early Termination" occurs before the Employee completes their
contract on December 31, 1997, commencing from their date of original continuous
employment, then the
-3-
<PAGE>
Employee hereby forfeits their rights to purchase 60,000 shares of stock granted
to them under the Stock Option Agreement as defined in Paragraph 11 above.
Thereafter, the Employee or their estate will then have ninety (90) days from
the date "Early Termination" occurs to exercise the stock options for which the
Employee has a right to purchase as defined in Paragraph 12. After that period,
the Stock Option Agreement is deemed to be null and void.
(e) In the event that the Employee exercises any stock options under the
Stock Option Agreement as defined in Paragraph 11 above prior to "Early
Termination", then the Employer Corporation shall have the right to repurchase
from the Employee, and the Employee shall be required to sell to the Employer
Corporation, all excess shares of Employer Corporation stock purchased by the
Employee prior to "Early Termination" at the price of Fifty Cents ($0.50) per
share of excess Employer Corporation stock purchased by the Employee.
13. Restrictive Covenant. For a period of two (2) years after the
--------------------
termination or expiration of this Employment Contract, the Employee will not,
directly or indirectly, own, manage, operate, control, be employed by,
participate in, or be connected in any manner with the ownership, management,
operation, or control of any Power Line Communications (PLC) business similar to
the type of business conducted by the Employer and/or immediate vendors or
customers at the time of the termination of this Employment Contract. In the
event of the Employee's actual or threatened breach of the provisions of this
paragraph, the Employer shall be entitled to an injunction restraining the
Employee therefrom. Nothing shall be construed as prohibiting the Employer from
pursuing any other available remedies for such breach or threatened breach,
including the recovery of damages from the Employee. Employee may be employed
by an immediate vendor or customer in the event the Employer terminated this
agreement.
14. Prior Arrangements. The Employee affirms that by being party to this
------------------
Employment Contract that:
(a) they are not in violation of any previous restrictive covenants, non-
compete clauses, confidentiality agreements, intellectual property agreements
and assignments, and/or employment agreements;
(b) they are not causing a conflict of interest with prior employers,
business arrangements and agreements; unless previously disclosed in writing to
the Employer;
(c) there are no legal restraints, claims, settlements, and/or continuing
or impending litigation that would prohibit the Employee from engaging in or
executing the full scope of their Duties and that Elcom shall be indemnified and
held harmless by the Employee from any claims and/or litigation against the
Employee that may arise from circumstances existing prior to this Employment
Contract;
(d) any statements written or verbal made by the Employee in reference to
their education, employment background, experience, periods of employment,
professional licenses
-4-
<PAGE>
and/or memberships in professional organization, whether or not they
constituted, in full or in part, a basis for this Employment Contract, are true
and correct to the best of their knowledge.
15. Substance Abuse. It is the policy of the Company that no employee may
---------------
use alcohol or illegal substances during working hours. It is understood by both
the Employer and the Employee that the use of excessive alcohol or illegal
substances during working hours by the Employee is grounds for termination with
cause. The Company reserves the right to perform random drug testing
periodically on all employees of the Employer and the Employee hereby
acknowledges that they are subject to such random drug testing. Further,
excessive alcohol will be defined as the amount of alcohol an individual would
have consumed to be considered legally intoxicated by state standards.
16. Arbitration. Any controversy or claim arising out of; or relating to
-----------
this Employment Contract, or the breach thereof other than as described in
Paragraphs 8 and 13 of this Employment Contract shall be settled by arbitration
in Philadelphia, Pennsylvania in accordance with the rules then obtaining of the
American Arbitration Association, and judgment upon the award rendered will be
binding upon the parties and may be entered and enforced in any court having
jurisdiction thereof.
17. Notices. Any notice required or desired to be given under this
-------
Employment Contract shall be deemed given if in writing sent via certified mail
to their residence in the case of the Employee, or to its principal office in
the case of the Employer.
18. Waiver of Breach. The waiver by the Employer of a breach of any
----------------
provision of this Employment Contract by the Employee shall not operate or be
construed as a waiver of any subsequent breach by the Employee. No waiver shall
be valid unless in writing and signed by an authorized officer of the Employer.
19. Assignment. The Employee acknowledges that the services to be
----------
rendered by them are unique and personal. Accordingly, the Employee may not
assign any of their rights or delegate any of their duties or obligations under
this Employment Contract. The rights and obligations of the Employer under this
Employment Contract shall inure to the benefit of and shall be binding upon the
successors and assigns of the Employer.
20. Entire Agreement. This Employment Contract contains the entire
----------------
understanding of the parties. It may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension, or discharge is sought.
21. Captions. Captions are used in this Employment Contract for
--------
convenience only, and are not intended to be used in the construction or in the
interpretation of this Employment Contract.
22. Interpretation. This Employment Contract shall be interpreted in
--------------
accordance with the laws of the Commonwealth of Pennsylvania.
-5-
<PAGE>
23. Invalid Provision. In the event any provision or sub-provision of
-----------------
this Employment Contract is held to be VOID, invalid, or unenforceable in any
respect, then the same shall not effect the remaining provisions or sub-
provisions HEREOF; which shall continue in full force and effect.
24. Inclusive Language. In this EMPLOYMENT Contract, the singular shall
------------------
include the plural and the masculine, feminine, or neuter gender shall include
all other genders as may be appropriate.
25. Advice of Council. All parties to this Employment Contract hereto
-----------------
acknowledge that they signed this document only after having the opportunity to
consult with an attorney of their choosing.
26. Binding Effect. This Employment Contract and the separate Stock
--------------
Option Agreement shall, upon ratification by the Board of Directors of the
Company, bind the parties hereto, their legal representatives, successors, and
assigns.
IN WITNESS WHEREOF, the parties have executed this Employment Contract the
day and year first above written.
ATTEST: ELCOM TECHNOLOGIES CORPORATION
[SIGNATURE ILLEGIBLE] BY: /s/ Robert A. Vito
- ------------------------------ ---------------------------------
Secretary Robert A. Vito President
WITNESS:
[SIGNATURE ILLEGIBLE] /s/ Stephen Pudles
- ------------------------------ ---------------------------------
Stephen Pudles Employee
-6-
<PAGE>
STOCK OPTION CANCELLATION AGREEMENT
-----------------------------------
AGREEMENT made this 18th day of September, 1996, by and among Elcom
Technologies Corporation, a corporation organized under the laws of the
Commonwealth of Pennsylvania (hereinafter referred to as "ELCOM"), and STEPHEN
PUDLES, an individual employee of ELCOM (hereinafter referred to as
"EMPLOYEE").
BACKGROUND
----------
WHEREAS; ELCOM's corporate charter currently permits ELCOM to issue up to
Twenty Million (20,000,000) shares of common stock; and
WHEREAS, as of the execution of this Agreement, ELCOM's total issued, and
outstanding shares of common stock is approximately Thirteen Million five
hundred thousand (13,500,000) shares and has issued a total of approximately
three million (3,000,000) Options to purchase ELCOM's common stock; and
WHEREAS, ELCOM and EMPLOYEE previously entered a Stock Option Agreements
dated July 28, 1995 and attached hereto as Exhibit A (hereinafter referred to as
the "STOCK OPTION AGREEMENT "); and
WHEREAS, ELCOM desires to cancel certain of the Stock Options previously
granted to EMPLOYEE under the STOCK OPTION AGREEMENT and any and all other stock
option agreements granted to EMPLOYEE in order to enhance the potential value of
ELCOM's common stock.
NOW, THEREFORE, in consideration of the mutual promises herein and other
valuable considerations, ELCOM and EMPLOYEE agree as follows:
1. Cancellation of Stock Options. ELCOM and EMPLOYEE hereby agree that
------------------------------
ELCOM shall cancel two hundred thousand (200,000) stock options granted to
EMPLOYEE on July 28, 1995 as a result of the STOCK OPTION AGREEMENT. The
remaining four hundred thousand (400,000) stock options granted to EMPLOYEE
under the STOCK OPTION AGREEMENT shall be canceled and replaced with the four
hundred thousand (400,000) stock options granted pursuant to the Stock Option
Agreement attached hereto as Exhibit B and dated September 18, 1996. The STOCK
OPTION AGREEMENT attached hereto as Exhibit A and any other Stock Option
Agreement of any kind or nature whatsoever entered into by EMPLOYEE and ELCOM
prior to the date of this Agreement is hereby canceled in full and all of the
rights, duties and obligations of the Parties are hereby terminated in full and
deemed null and void for all purposes whatsoever.
2. Consideration For Cancellation of Stock Options. EMPLOYEE shall
------------------------------------------------
receive the stock options awarded under Section 1 herein, as provided for in
Exhibit B attached hereto, as the sole consideration for the cancellation of
stock options under this Agreement.
Page 1 of 2
<PAGE>
3. Modification. This Agreement shall be effective as of the date hereof. No
------------
modification or amendment of this Agreement shall be effective unless in writing
and signed by the parties hereto.
4. Notices. All notices or other communications required or permitted to
-------
be given under the terms of this Agreement shall be in writing, delivered
personally, or sent via certified mail, postage prepaid, return receipt
requested.
5. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes all prior negotiations, understandings
and agreements of any nature with respect to the subject matter hereto. No
amendment, waiver or discharge of any of the provisions of this Agreement shall
be effective against any part, unless that party shall have consented thereto in
writing.
6. Binding Effect. This Agreement shall be binding upon ratification by
--------------
the Board of Directors of ELCOM and inure to the benefit of the parties hereto
and their respective heirs, executors, administrators, successors, and assigns.
7. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, ELCOM and EMPLOYEE have set their hands and seals
hereto the day and year first above written.
ATTEST: Elcom Technologies Corporation
/s/ Robert B. Sando BY: /s/ Robert A. Vito
- -------------------------------- -------------------------------
Robert B. Sando, Secretary Robert A. Vito, President
/s/ [SIGNATURE APPEARS HERE]
-------------------------------
EMPLOYEE
Page 2 of 2
<PAGE>
EXHIBIT B
STOCK OPTION AGREEMENT
----------------------
AGREEMENT made this 18th day of September, 1996, by and among Elcom
Technologies Corporation, a corporation organized under the laws of the
Commonwealth of Pennsylvania (hereinafter referred to as "ELCOM"), and STEPHEN
PUDLES, an individual employee of ELCOM (hereinafter referred to as "EMPLOYEE").
BACKGROUND
----------
WHEREAS; ELCOM's corporate charter currently permits ELCOM to issue up to
Twenty Million (20,000,000) shares of common stock; and
WHEREAS, as of the execution of this Agreement, ELCOM's total issued, and
outstanding shares of common stock is approximately Thirteen Million five
hundred thousand (13,500,000) shares.
WHEREAS, ELCOM desires to grant to EMPLOYEE an option to purchase four
hundred thousand (400,000) shares of ELCOM Technologies Corporation's common
stock.
NOW, THEREFORE, in consideration of the mutual promises herein and other
valuable considerations, ELCOM and EMPLOYEE agree as follows:
1. Prior Agreements. EMPLOYEE and ELCOM have previously entered into the
following Agreement:
Employment Agreement dated July 28, 1995
1.1 Upon execution of this Agreement, all Stock Options granted under the
Stock Option Agreement dated July 28, 1995 and any other Agreement of any kind
or nature whatsoever are hereby cancelled in full and all rights, duties and
obligations of the Parties thereto are hereby declared null and void.
2. Grant of Options. Subject to all of the terms and conditions of this
----------------
Agreement, ELCOM hereby grants to EMPLOYEE options purchase a total of four
hundred thousand (400,000) Shares of ELCOM's common stock at the price of fifty
cents ($0.50) per share in accordance with the following schedule:
Number of Shares Date Exerciseable Expiration Date
------------------- ----------------- --------------
80,000 December 28, 1995 December 31, 2002
160,000 December 28, 1996 December 31, 2002
80,000 December 28, 1997 December 31, 2002
80,000 December 28, 1998 December 31, 2002
Page 1 of 4
<PAGE>
Any Options not exercised by the Expiration Date listed above shall be
terminated in full for all purposes whatsoever.
2.1 Sale of Company. In the event that a controlling interest (over 50%) of
---------------
ELCOM is sold to a third party, other then the Public markets, EMPLOYEE may
exercise one hundred percent (100%) of all options granted under Section 2
herein. EMPLOYEE must exercise said options within sixty (60) days of
notification of the acquisition of a controlling interest by a third party. Any
Options not exercised by EMPLOYEE within this sixty (60) day period will
terminate in full upon expiration of said sixty (60) day period.
3. Termination of Employment. In the event that EMPLOYEE terminates
-------------------------
employment with ELCOM for any reason whatsoever, including death or disability,
all Option to purchase ELCOM common stock granted under this Agreement shall
terminate in full and be declared null and void for all purposes whatsoever,
sixty (60) days subsequent to the date of EMPLOYEE's last day of active
employment with ELCOM. EMPLOYEE shall receive no further vesting of Options
under Section 2 herein, after EMPLOYEE's last day of active employment with
ELCOM.
4. Registration of Options. In the event that ELCOM makes an initial public
-----------------------
offering (the "IPO") of its common stock pursuant to rules established by the
United States Securities and Exchange Commission and the NASDAQ stock exchange,
the options granted in Section 2 of this Agreement shall be registered with the
Securities and Exchange Commission pursuant to the following schedule:
50,000 SHARES IN IPO OVER SUBSCRIPTION ALLOTMENT
Six (6) months after completion of the IPO.........25%(twenty five percent)
Eighteen (18) months after completion of the IPO...25%(twenty five percent)
Thirty (30) months after completion of the IPO.....25%(twenty five percent)
Forty two (42) months after completion of the IPO..25%(twenty five percent)
5. Restrictions and Regulations. EMPLOYEE agrees that any Shares of ELCOM's
----------------------------
common stock purchased under this Stock Option Agreement will be subject to the
restrictions and regulations outlined in this Agreement and that these SHARES
may be subject to further restrictions and regulations. Said restrictions and
regulations may be imposed at any time by ELCOM at the sole discretion of ELCOM
and without the approval of EMPLOYEE.
5.1 In addition to the aforementioned restrictions, EMPLOYEE agrees that any
Shares purchased by EMPLOYEE pursuant to this Agreement, shall be subject to all
of the restrictions, regulations and non-dilution provisions of the ELCOM
Private Placement Memorandum dated, July 12, 1996.
6. Exercise of Option. EMPLOYEE may exercise any Options earned in accordance
------------------
with Section 2, herein, in any number that EMPLOYEE elects.
Page 2 of 4
<PAGE>
7. Adjustment of Option Shares. Prior to any public offering of ELCOM
---------------------------
shares, if the outstanding common shares of Elcom Technologies Corporation, are
changed into or exchanged for a different number or kind of shares or other
securities of Elcom Technologies Corporation or of another corporation, whether
through reorganization, share split-up, combination of shares, merger or
consolidation, then these shares shall be substituted for each common share of
Elcom Technologies Corporation then subject to this Stock Option Agreement. The
number and kinds of Technologies Corporation then subject to this Stock Option
Agreement. The number and kinds of shares or other securities into which each
such ELCOM share is so changed or for which each ELCOM share is exchanged shall
be equivalent to all other shares sold in the ELCOM PRIVATE PLACEMENT MEMORANDUM
dated July 12 1996.
8. Time for Payment for Shares. The option price of the Shares to be
---------------------------
purchased pursuant to the exercise of Options under this Agreement shall be paid
in full at the time of the exercise of the options.
9. Method of Exercising Option. EMPLOYEE shall provide ELCOM with at least
---------------------------
five (5) business days prior written notice in order to exercise any options
under this Agreement. EMPLOYEE shall comply with all procedures established by
ELCOM from time to time concerning exercising any options under this Agreement.
10. Modification. This Agreement shall be effective as of the date hereof
------------
and, unless sooner terminated under the provisions of this Agreement, shall
remain in effect until December 31, 2002. No modification or amendment of this
Agreement shall be effective unless in writing and signed by the parties hereto.
11. Notices. All notices or other communications required or permitted to be
-------
given under the terms of this Agreement shall be in writing, delivered
personally, or sent via certified mail, postage prepaid, return receipt
requested.
12. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the parties hereto and supersedes all prior negotiations, understandings and
agreements of any nature with respect to the subject matter hereto. No
amendment, waiver or discharge of any of the provisions of this Agreement shall
be effective against any part, unless that party shall have consented thereto in
writing.
13. Binding Effect. This Agreement shall be binding upon execution by ELCOM
--------------
and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors, and assigns.
14. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
Page 3 of 4
<PAGE>
IN WITNESS WHEROF, ELCOM and EMPLOYEE have set their hands and seals hereto
the day and year first above written.
ATTEST: Elcom Technologies Corporation
/s/Robert B. Sando, Secretary BY:/s/Robert A. Vito, President
- ----------------------------- -----------------------------
Robert B. Sando, Secretary Robert A. Vito President
/s/ [Signature appears here]
----------------------------
EMPLOYEE
Page 4 of 4
<PAGE>
EMPLOYMENT CONTRACT
-------------------
AGREEMENT made this 28 day of July, 1995, by and between Elcom
Technologies Corporation a Pennsylvania Corporation with a business address at
78 Great Valley Parkway, Malvern, Pennsylvania 19355 (hereinafter referred to as
the "Employer" and/or the "Company") and Robert B. Sando, an individual, with an
address at 216 Edgehill Drive, Havertown, PA 19083 (hereinafter referred to the
"Employee").
WHEREAS, the Employer wishes to retain the services of the Employee; and
the Employee wishes to accept such employment on the terms and conditions set
forth below; and
WHEREAS, both the Employer and the Employee desire to enter into a formal
written employment contract in lieu of employment by oral agreement.
NOW, THEREFORE, in consideration of the covenants and conditions herein
contained and each party intending to be legally bound, acknowledging full and
adequate consideration, it is AGREED:
1. Prior Agreements. The date of the original employment contract
----------------
between the Employer and the Employee was the 1st of June, 1994. All prior oral
or written employment contracts and/or consulting agreements between the
Employer and the Employee are hereby terminated and declared NULL AND VOID.
2. Employment. The Employer employs the Employee and the Employee
----------
accepts employment upon the terms and conditions of this Employment Contract.
All terms of employment by oral agreement or previous course of conduct are
rendered NULL AND VOID hereby, with the rights of the parties governed SOLELY by
this Employment Contract.
3. Term. The term of this Employment Contract shall commence on 1st of
----
June, 1994, and terminate on December 31, 1997.
4. Compensation. For the first year of this Employment Contract, for
------------
all services rendered by the Employee, the Employer shall pay the Employee an
annual salary of $50,000 payable MONTHLY. Salary payments shall be subject to
withholding and other applicable taxes. For the remaining term of the Employment
Contract, the monthly salary for the Employee shall be adjusted as per the
mutual agreement of both the Employer and the Employee.
5. Duties. The Employee is engaged as Controller. The duties of the
------
Employee shall include performing "follow-up" activities regarding VARIOUS
strategic alliance developments and customer procurement and customer services
of the Employer Corporation. The precise services of the Employee may be
extended or curtailed by the Employer from time to time.
-1-
<PAGE>
6. Extent of Services. The Employee shall devote their entire time,
------------------
attention, and energies to the Employer's business and shall not during the term
of this Employment Contract be engaged in any other business during the term of
this Employment Contract or be engaged in any other business activity which
competes either directly or indirectly with the business of the Employer. The
Employee may, only with the express written permission of the Employer, be
engaged in outside work related activities. In the event "Early Termination"
occurs as defined in Paragraph 12, the Employee will not solicit or hire other
Company employees for a two (2) year period.
7. Assignment of Intellectual Property. The Employee hereby agrees
-----------------------------------
that any technologies, concepts, sales and/or marketing campaigns, business
lists, agreements and/or ideas developed specifically for the Employer
Corporation during the term of this Employment Contract shall be the property of
the Employer Corporation. The Employee further agrees that any and all resulting
circuits, designs, processes, procedures, software, firmware, hardware layouts,
innovations, inventions, ideas, techniques, documents, writings, or any other
results of their employment are the sole property of the Employer Corporation.
The Employee agrees to( promptly disclose and provide any and all such
information needed to support patent claims copyrights, trademarks, licenses,
assignments, and any other conveyances to the Employer Corporation. The
Employee hereby assigns, transfers, releases and conveys any and all rights
title, interest, and any other claims of ownership in any intellectual property
(as defined above) to( the Employer Corporation in exchange for the compensation
herein.
8. Disclosure of Information. The Employee acknowledges that the list
-------------------------
of the Employer's proprietary information, customers, intellectual property, and
prototypes (hereinafter referred to as "Proprietary Information") as it may
exist from time to time is a valuable, special and unique asset of the
Employer's business. The Employee will not, during or after the term of their
employment, disclose said Proprietary Information to any person, firm,
corporation association, or other entity for any reason or purpose whatsoever.
In the event of a breach or threatened breach by the Employee of the provisions
of this paragraph, the Employer shall be entitled to an injunction restraining
the Employee from disclosing, in whole or in part, said Proprietary Information,
or from rendering any services to any person, firm, corporation, association, or
other entity to whom such Proprietary Information, in whole or in part, has beer
disclosed or is threatened to be disclosed. Nothing herein shall be construed
as prohibiting the Employer from pursuing any other remedies available to the
Employer for such breach or threatened breach, including the recovery of damages
from the Employee.
9. Paid Absence. During the term of this Employment Contract, the
------------
Employee shall be entitled each year to a combination of vacation days, personal
days and sick days, which shall accrue at the rate of 1.25 days for each month
of employment of the Employee, totaling up to a maximum of three (3) weeks
duration in any given twelve (12) month period, during which time their
compensation shall be paid in full. This excludes company paid holidays.
-2-
<PAGE>
10. Death During Employment. If the Employee dies during the term of
-----------------------
EMPLOYMENT, the Employer shall pay to the estate of the Employee the
compensation which would otherwise be payable to the Employee up to the day in
which their death occurs. Upon the death of the Employee, this Employment
Contract shall become null and void. Also, in the event of death during
employment, then an "Early Termination" will have been deemed to occur as
defined in Paragraph 12 on this Employment Contract.
11. Stock Option Agreement. Concurrently with the execution of this
----------------------
Employment Contract, the Employer shall present to the Employee a "Stock Option
Agreement" which shall grant the Employee the right to purchase up to One
Hundred Thousand (100,000) shares of the Employer Corporation stock upon terms
and conditions outlined in said "Stock Option Agreement".
12. Termination. The Employer shall be PERMITTED to terminate this
-----------
Employment Contract for cause by providing the Employee with written notice of
said termination. In the event that the Employer/Employee relationship is
terminated for any reason prior to December 31, 1997, then an "Early
Termination" will have been deemed to occur.
(a) If said "Early Termination" occurs before the Employee has completed
one (1) calendar year of satisfactory service commencing from their date of
original continuous employment, then the Employee hereby forfeits their rights
to purchase all One Hundred Thousand (100,000) shares of stock granted to them
under the Stock Option Agreement as defined in Paragraph 11 above.
(b) If said "Early Termination" occurs before the Employee has completed
two (2) calendar years of satisfactory service commencing from their date of
original continuous employment, then the Employee hereby forfeits their right to
purchase 70,000 shares of stock granted to them under the Stock Option Agreement
as defined in Paragraph 11 above. Thereafter, the Employee or their estate will
then have ninety (90) days from the date "Early Termination" occurs to exercise
the stock options for which the Employee has a right to purchase as defined in
Paragraph 12. After that period, the Stock Option Agreement is deemed to be null
and void.
(c) If said "Early Termination" occurs before the Employee has completed
three (3) calendar years of satisfactory service commencing from their date of
original continuous employment, then the Employee hereby forfeits their rights
to purchase 40,000 shares of stock granted to them under the Stock Option
Agreement as defined in Paragraph 11 above. Thereafter, the Employee or their
estate will then have ninety (90) days from the date "Early Termination" occurs
to exercise the stock options for which the Employee has a right to purchase as
defined in Paragraph 12. After that period, the Stock Option Agreement is deemed
to be null and void.
-3-
<PAGE>
(d) If said "Early Termination" occurs before the Employee completes their
contract on December 31, 1997, commencing from their date of original continuous
EMPLOYMENT, then the Employee hereby forfeits their rights to purchase 10,000
shares of stock granted to them under the Stock Option Agreement as defined in
Paragraph 11 above. Thereafter, the Employee or their estate will then have
ninety (90) days from the date "Early Termination" occurs to exercise the stock
options for which the Employee has a right to purchase as defined in Paragraph
12. After that period, the Stock Option Agreement is deemed to be null and void.
(e) In the event that the Employee exercises any stock options under the
Stock Option Agreement as defined in Paragraph 11 above prior to "Early
Termination", then the Employer Corporation shall have the right to repurchase
from the Employee, and the Employee shall be required to sell to the Employer
Corporation, all excess shares of Employer Corporation stock purchased by the
Employee prior to "Early Termination" at the price of Twenty Five Cents ($0.25)
per share of excess Employer Corporation stock purchased by the Employee.
13. Restrictive Covenant. For a period of two (2) years after the
--------------------
termination or expiration of this Employment Contract, the Employee will not,
directly or indirectly, own, manage, operate, control, be employed by,
participate in, or be connected in any manner with the ownership, management,
operation, or control of any Power Line Communications (PLC) business similar to
the type of business conducted by the Employer and/or immediate ate vendors or
customers at the time of the termination of this Employment Contract. In the
event of the EMPLOYEE'S actual or threatened breach of the provisions of this
paragraph, the Employer shall be entitled to an injunction restraining the
Employee therefrom. Nothing shall be construed as prohibiting the Employer from
pursuing any other available remedies for such breach or threatened breach,
including the recovery of damages from the Employee.
14. Prior Arrangements. The Employee affirms that by being party to this
------------------
Employment Contract that:
(a) they are not in violation of any previous restrictive covenants, non-
compete clauses, confidentiality agreements, intellectual property agreements
and assignments, and/or employment agreements;
(b) they are not causing a conflict of interest with prior employers,
business arrangements and agreements; unless previously disclosed in writing to
the Employer;
(c) there are no legal restraints, claims, SETTLEMENTS, and/or continuing
or impending litigation that would prohibit the Employee from engaging in or
executing the full scope of their Duties and that Elcom shall be indemnified and
held harmless by the Employee from any claims and/or litigation against the
Employee that may arise from circumstances existing prior to this Employment
Contract;
-4-
<PAGE>
(d) any statements written or verbal made by the Employee in reference to
their education, employment background, experience, periods of employment,
professional licenses and/or memberships in professional organizations, whether
or not they constituted, in full or in part, a basis for this Employment
Contract, are true and correct to the best of their knowledge.
15. Substance Abuse. It is the policy of the Company that no employee
---------------
may use alcohol or illegal substances during working hours. It is understood by
both the Employer and the Employee that the use of excessive alcohol or illegal
substances during working hours by the Employee is grounds for termination with
cause. The Company reserves the right to perform random drug testing
periodically on all employees of the Employer and the Employee hereby
acknowledges that they are subject to such random drug testing. Further,
excessive alcohol will be defined as the amount of alcohol an individual would
have consumed to be considered legally intoxicated by state standards.
16. Arbitration. Any controversy or claim arising out of; or relating
-----------
to this Employment Contract, or the breach thereof other than as described in
Paragraphs 8 and 13 of this Employment Contract shall be settled by arbitration
in Philadelphia, Pennsylvania in accordance with the rules then obtaining of the
American Arbitration Association, and judgment upon the award rendered will be
binding upon the parties and may be entered and enforced in any court having
jurisdiction thereof.
17. Notices. Any notice required or desired to be given under this
-------
Employment Contract shall be deemed given if in writing sent via certified mail
to their residence in the case of the Employee, or to its principal office in
the case of the Employer.
18. Waiver of Breach. The waiver by the Employer of a breach of any
----------------
provision of this Employment Contract by the Employee shall not operate or be
construed as a waiver of any subsequent breach by the Employee. No waiver shall
be valid unless in writing and signed by an authorized officer of the Employer.
19. Assignment. The Employee acknowledges that the services to be
----------
rendered by them are unique and personal. Accordingly, the Employee may not
assign any of their rights or delegate any of their duties or obligations under
this Employment Contract. The rights and obligations of the Employer under this
Employment Contract shall inure to the benefit of and shall be binding upon the
successors and assigns of the Employer.
20. Entire Agreement. This Employment Contract contains the entire
----------------
understanding of the parties. It may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension, or discharge is sought.
-5-
<PAGE>
21. Captions. Captions are used in this Employment Contract for
--------
convenience only, and are not intended to be used in the construction or in
the interpretation of this Employment Contract.
22. Interpretation. This Employment Contract shall be interpreted in
--------------
accordance with the laws of the Commonwealth of Pennsylvania.
23. Invalid Provision. In the event any provision or sub-provision of
-----------------
this Employment Contract is held to be void, invalid, or unenforceable in any
respect, then the same shall not effect the remaining provisions or sub-
provisions hereof; which shall continue in full force and effect.
24. Inclusive Language. In this Employment Contract, the singular shall
------------------
include the plural and the masculine, feminine, or neuter gender shall include
all other genders as may be appropriate.
25. Advice of Council. All parties to this Employment Contract hereto
-----------------
acknowledge that they signed this document only after having the opportunity to
consult with an attorney of their choosing.
26. Binding Effect. This Employment Contract and the separate Stock
--------------
Option Agreement shall, upon ratification by the Board of Directors of the
Company, bind the parties hereto, their legal representatives, successors, and
assigns.
IN WITNESS WHEREOF, the parties have executed this Employment Contract
the day and year first above written.
ATTEST: ELCOM TECHNOLOGIES CORPORATION
[SIGNATURE ILLEGIBLE] BY: /s/ Robert A. Vito
- ------------------------------ ---------------------------------
Secretary Robert A. Vito President
WITNESS:
[SIGNATURE ILLEGIBLE] /s/ Robert E. Sando
- ------------------------------ ---------------------------------
Robert E. Sando Employee
-6-
<PAGE>
STOCK OPTION AGREEMENT
----------------------
AGREEMENT made this 27th day of August, 1996, by and among Elcom
Technologies Corporation, a corporation organized under the laws of the
Commonwealth of Pennsylvania (hereinafter referred to as "ELCOM"), and Robert
Sando, an individual employee of ELCOM (hereinafter referred to as "EMPLOYEE").
BACKGROUND
----------
WHEREAS; ELCOM's corporate charter currently permits ELCOM to issue up to
Twenty Million (20,000,000) shares of common stock.; and
WHEREAS, as of the execution of this Agreement, ELCOM's total issued, and
outstanding shares of common stock is approximately Thirteen Million
(13,000,000) shares.
WHEREAS, ELCOM desires to grant to EMPLOYEE an option to purchase one
hundred thousand (100,000) shares of ELCOM Technologies Corporation's common
stock.
NOW, THEREFORE, in consideration of the mutual promises herein and other
valuable considerations, ELCOM and EMPLOYEE agree as follows:
1. Prior Agreements. EMPLOYEE and ELCOM have previously entered into the
following Agreement:
Employment Agreement dated July 28, 1995
Stock Option Agreement dated July 28, 1995
1.1 Upon execution of this Agreement, all Stock Options granted under the Stock
Option Agreement dated July 28, 1995 are hereby cancelled in full and all
rights, duties and obligations of the Parties thereto are hereby declared null
and void.
2. Grant of Options. Subject to all of the terms and conditions of this
Agreement, ELCOM hereby grants to EMPLOYEE options to purchase a total of one
hundred thousand (100,000) Shares of ELCOM's common stock at the price of twenty
five cents ($0.25) per share in accordance with the following schedule:
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Shares Date Exercisable Expiration Date
---------------- ---------------- ---------------
20,000 June 1, 1995 December 31, 2002
20,000 June 1, 1996 December 31, 2002
20,000 June 1, 1997 December 31, 2002
20,000 June 1, 1998 December 31, 2002
20,000 June 1, 1999 December 31, 2002
</TABLE>
Page 1 of 4
<PAGE>
Any Options not exercised by the Expiration Date listed above shall be
terminated in full for all purposes whatsoever.
2.1 Sale of Company. In the event that a controlling interest (over 50%) of
---------------
ELCOM is sold to a third party, other then the Public markets, EMPLOYEE may
exercise one hundred percent (100%) of all options granted under Section 2
herein. EMPLOYEE must exercise said options within sixty (60) days of
notification of the acquisition of a controlling interest by a third party. Any
Options not exercised by EMPLOYEE within this sixty (60) day period will
terminate in full upon expiration of said sixty (60) day period.
3. Termination of Employment. In the event that EMPLOYEE terminates
-------------------------
employment with ELCOM for any reason whatsoever, including death or disability,
all Options to purchase ELCOM common stock granted under this Agreement shall
terminate in full and be declared null and void for all purposes whatsoever,
sixty (60) days subsequent to the date of EMPLOYEE's last day of active
employment with ELCOM. EMPLOYEE shall receive no further vesting of Options
under Section 2 herein, after EMPLOYEE's last day of active employment with
ELCOM.
4. Registration of Options. In the event that ELCOM makes an initial
-----------------------
public offering (the "IPO") of its common stock pursuant to rules established by
the United States Securities and Exchange Commission and the NASDAQ stock
exchange, the options granted in Section 2 of this Agreement shall be registered
with the Securities and Exchange Commission pursuant to the following schedule:
<TABLE>
<S> <C>
Six (6) months after completion of the IPO...............25% (twenty five percent)
Eighteen (18) months after completion of the IPO.........25% (twenty five percent)
Thirty (30) months after completion of the IPO...........25% (twenty five percent)
Forty two (42) months after completion of the IPO........25% (twenty five percent)
</TABLE>
5. Restrictions and Regulations. EMPLOYEE agrees that any Shares of ELCOM's
----------------------------
common stock purchased under this Stock Option Agreement will be subject to the
restrictions and regulations outlined in this Agreement and that these SHARES
may be subject to further restrictions and regulations. Said restrictions and
regulations may be imposed at any time by ELCOM at the sole discretion of ELCOM
and without the approval of EMPLOYEE.
5.1 In addition to the aforementioned restrictions, EMPLOYEE agrees that any
Shares purchased by EMPLOYEE pursuant to this Agreement, shall be subject to all
of the restrictions, regulations and non-dilution provisions of the ELCOM
Private Placement Memorandum dated, July 12, 1996.
6. Exercise of Option. EMPLOYEE may exercise any Options earned in
------------------
accordance with Section 2, herein, in any number that EMPLOYEE elects.
Page 2 of 4
<PAGE>
7. Adjustment of Option Shares. Prior to any public offering of ELCOM
---------------------------
shares, if the outstanding common shares of Elcom Technologies Corporation, are
changed into or exchanged for a different number or kind of shares or other
securities of Elcom Technologies Corporation or of another corporation, whether
through reorganization, share split-up, combination of shares, merger or
consolidation, then these shares shall be substituted for each common share of
Elcom Technologies Corporation then subject to this Stock Option Agreement. The
number and kinds of shares or other securities into which each such ELCOM share
is so changed or for which each ELCOM share is exchanged shall be at the sole
discretion of ELCOM.
8. Time for Payment for Shares. The option price of the Shares to be
---------------------------
purchased pursuant to the exercise of Options under this Agreement shall be paid
in full at the time of the exercise of the options.
9. Method of Exercising Option. EMPLOYEE shall provide ELCOM with at
---------------------------
least five (5) business days prior written notice in order to exercise any
options under this Agreement. EMPLOYEE shall comply with all procedures
established by ELCOM from time to time concerning exercising any options under
this Agreement.
10. Modification. This Agreement shall be effective as of the date hereof
------------
and, unless sooner terminated under the provisions of this Agreement, shall
remain in effect until December 31, 2002. No modification or amendment of this
Agreement shall be effective unless in writing and signed by the parties hereto.
11. Notices. All notices or other communications required or permitted
-------
to be given under the terms of this Agreement shall be in writing, delivered
personally, or sent via certified mail, postage prepaid, return receipt
requested.
12. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes all prior negotiations, understandings
and agreements of any nature with respect to the subject matter hereto. No
amendment, waiver or discharge of any of the provisions of this Agreement shall
be effective against any part, unless that party shall have consented thereto in
writing.
13. Binding Effect. This Agreement shall be binding upon execution by
--------------
ELCOM and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors, and assigns.
14. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
Page 3 of 4
<PAGE>
IN WITNESS WHEREOF, ELCOM and EMPLOYEE have set their hands and seals
hereto the day and year first above written.
ATTEST: Elcom Technologies Corporation
/s/ Robert B. Sando, Secretary BY: /s/ Robert A. Vito, President
- ------------------------------- ---------------------------------
Robert B. Sando, Secretary Robert A. Vito, President
/s/ Robert B. Sando
---------------------------------
EMPLOYEE
Page 4 of 4
<PAGE>
STOCK OPTION AGREEMENT
----------------------
AGREEMENT made this 27th day of August, 1996, by and among Elcom
Technologies Corporation, a corporation organized under the laws of the
Commonwealth of Pennsylvania (hereinafter referred to as "ELCOM"), and John Wade
Seedor, an individual Director of ELCOM (hereinafter referred to as "DIRECTOR").
BACKGROUND
----------
WHEREAS; ELCOM's corporate charter currently permits ELCOM to issue up
to Twenty Million (20,000,000) shares of common stock; and
WHEREAS, as of the execution of this Agreement, ELCOM's total issued,
and outstanding shares of common stock is approximately Thirteen Million
(13,000,000) shares.
WHEREAS, ELCOM desires to grant to DIRECTOR an option to purchase twenty
five thousand (25,000) shares of ELCOM Technologies Corporation's common stock.
NOW, THEREFORE, in consideration of the mutual promises herein and other
valuable considerations, ELCOM and DIRECTOR agrees as follows:
1. Prior Agreements. DIRECTOR and ELCOM have previously entered into the
following Agreement concerning Stock Options
None
1.1 Upon execution of this Agreement, all Stock Options granted under any
prior Agreement are hereby cancelled in full and all rights, duties and
obligations of the Parties thereto are hereby declared null and void.
2. Grant of Options. Subject to all of the terms and conditions of this
----------------
Agreement, ELCOM hereby grants to DIRECTOR options to purchase a total of twenty
five thousand (25,000) Shares of ELCOM's common stock at the price of fifty
cents ($0.50) per share in accordance with the following schedule:
Number of Shares Date Exercisable Expiration Date
------------------- ---------------- ---------------
5,000 July 24, 1996 December 31, 2002
5,000 July 24, 1997 December 31, 2002
5,000 July 24, 1998 December 31, 2002
5,000 July 24, 1999 December 31, 2002
5,000 July 24, 2000 December 31, 2002
Page 1 of 4
<PAGE>
Any Options not exercised by the Expiration Date listed above shall be
terminated in full for all purposes whatsoever.
2.1 Sale of Company. In the event that a controlling interest (over 50%) of
---------------
ELCOM is sold to a third party, other then the Public markets, DIRECTOR may
exercise one hundred percent (100%) of all options granted under Section 2
herein. DIRECTOR must exercise said options within sixty (60) days of
notification of the acquisition of a controlling interest by a third party. Any
Options not exercised by DIRECTOR within this sixty (60) day period will
terminate in full upon expiration of said sixty (60) day period.
3. Termination of Employment. In the event that DIRECTOR terminates
-------------------------
employment with ELCOM for any reason whatsoever, including death or disability,
all Options to purchase ELCOM common stock granted under this Agreement shall
terminate in full and be declared null and void for all purposes whatsoever,
sixty (60) days subsequent to the date of DIRECTOR's last day of active
employment with ELCOM. DIRECTOR shall receive no further vesting of Options
under Section 2 herein, after DIRECTOR's last day of active employment with
ELCOM.
4. Registration of Options. In the event that ELCOM makes an initial public
-----------------------
offering (the "IPO") of its common stock pursuant to rules established by the
United States Securities and Exchange Commission and the NASDAQ stock exchange,
the options granted in Section 2 of this Agreement shall be registered with the
Securities and Exchange Commission pursuant to the following schedule:
Six (6) months after completion of the IPO.........25%(twenty five percent)
Eighteen (18) months after completion of the IPO...25%(twenty five percent)
Thirty (30) months after completion of the IPO.....25%(twenty five percent)
Forty two (42) months after completion of the IPO..25%(twenty five percent)
5. Restrictions and Regulations. DIRECTOR agrees that any Shares of ELCOM's
----------------------------
common stock purchased under this Stock Option Agreement will be subject to the
restrictions and regulations outlined in this Agreement and that these SHARES
may be subject to further restrictions and regulations. Said restrictions and
regulations may be imposed at any time by ELCOM at the sole discretion of ELCOM
and without the approval of DIRECTOR.
5.1 In addition to the aforementioned restrictions, DIRECTOR agrees that any
Shares purchased by DIRECTOR pursuant to this Agreement, shall be subject to all
of the restrictions, regulations and non-dilution provisions of the ELCOM
Private Placement Memorandum dated, July 12, 1996.
6. Exercise of Option. DIRECTOR may exercise any Options earned in accor-
------------------
dance with Section 2, herein, in any number that DIRECTOR elects.
Page 2 of 4
<PAGE>
7. Adjustment of Option Shares. Prior to any public offering of ELCOM shares,
---------------------------
if the outstanding common shares of Elcom Technologies Corporation, are changed
into or exchanged for a different number or kind of shares or other securities
of Elcom Technologies Corporation or of another corporation, whether through
reorganization, share split-up, combination of shares,merger or consolidation,
then these shares shall be substituted for each common share of Elcom
Technologies Corporation then subject to this Stock Option Agreement. The number
and kinds of shares or other securities into which each such ELCOM share is so
changed or for which each ELCOM share is exchanged shall be at the sole
discretion of ELCOM.
8. Time for Payment for Shares. The option price of the Shares to be
---------------------------
purchased pursuant to the exercise of Options under this Agreement shall be paid
in full at the time of the exercise of the options.
9. Method of Exercising Option. DIRECTOR shall provide ELCOM with at least
---------------------------
five (5) business days prior written notice in order to exercise any options
under this Agreement. DIRECTOR shall comply with all procedures established by
ELCOM from time to time concerning exercising any options under this Agreement.
10. Modification. This Agreement shall be effective as of the date hereof and,
------------
unless sooner terminated under the provisions of this Agreement, shall remain in
effect until December 31, 2002. No modification or amendment of this Agreement
shall be effective unless in writing and signed by the parties hereto.
11. Notices. All notices or other communications required or permitted to be
-------
given under the terms of this Agreement shall be in writing, delivered
personally, or sent via certified mail, postage prepaid, return receipt
requested.
12. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the parties hereto and supersedes all prior negotiations, understandings and
agreements of any nature with respect to the subject matter hereto. No
amendment, waiver or discharge of any of the provisions of this Agreement shall
be effective against any part, unless that party shall have consented thereto in
writing.
13. Binding Effect. This Agreement shall be binding upon execution by ELCOM
--------------
and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors, and assigns.
14. Governing Law. This Agreement shall be constured, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
Page 3 of 4
<PAGE>
IN WITNESS WHEREOF, ELCOM and DIRECTOR have set their hands and seals
hereto the day and year first above written.
ATTEST: Elcom Technologies Corporation
/s/ Robert B. Sando BY: /s/ Robert A. Vito
- --------------------------- -----------------------------
Robert B. Sando, Secretary Robert A. Vito, President
/s/ John Wade Seedor
--------------------------------
JOHN WADE SEEDOR
Page 4 of 4
<PAGE>
EMPLOYMENT CONTRACT
-------------------
AGREEMENT made this 28 day of July, 1995, by and between Elcom Technologies
Corporation a Pennsylvania Corporation with a business address at 78 Great
Valley Parkway, Malvern, Pennsylvania 19355 (hereinafter referred to as the
"Employer" and/or the "Company") and Robert A. Vito, an individual, with an
address at 1434 Sugartown Road, Berwyn, PA 19312 (hereinafter referred to the
"Employee").
WHEREAS, the Employer wishes to retain the services of the Employee; and
the Employee wishes to accept such employment on the terms and conditions set
forth below; and
WHEREAS, both the Employer and the Employee desire to enter into a formal
written employment contract in lieu of employment by oral agreement.
NOW, THEREFORE, in consideration of the covenants and conditions herein
contained and each party intending to be legally bound, acknowledging full and
adequate consideration, it is AGREED:
1. Prior Agreements. The date of the original employment contract
----------------
between the Employer and the Employee was the 23rd of December, 1993. All prior
oral or written employment contracts and/or consulting agreements between the
Employer and the Employee are hereby terminated and declared NULL AND VOID:
2. Employment. The Employer employs the Employee and the Employee
----------
accepts employment upon the terms and conditions of this Employment Contract.
All terms of employment by oral agreement or previous course of conduct are
rendered NULL AND VOID hereby, with the rights of the parties governed SOLELY by
this Employment Contract.
3. Term. The term of this Employment Contract shall commence on 23rd of
----
December, 1993, and terminate on December 31, 2003.
4. Compensation. For the first year of this Employment Contract, for all
------------
services rendered by the Employee, the Employer shall pay the Employee an annual
salary of $90,000 payable monthly. Salary payments shall be subject to
withholding and other applicable taxes. For the remaining term of the Employment
Contract, the monthly salary for the Employee shall be adjusted as per the
mutual agreement of both the Employer and the Employee.
5. Duties. The Employee is engaged as President. The duties of the
------
Employee shall include controls and manages the daily operations and all
financial affairs of the Company. The precise services of the Employee may be
extended or curtailed by the Employer from time to time.
6. Extent of Services. The Employee shall devote reasonable time,
------------------
attention, and energies to the Employer's business and shall not during the term
of this Employment Contract be
-1-
<PAGE>
engaged in any other Power Line Communication (PLC) business activity which
competes either directly or indirectly with the business of the Employer. In the
event "Early Termination" occurs as defined in Paragraph 12, the Employee will
not solicit or hire other Company employees for a two (2) year period. Serving
as a member of a company Board of Directors, that is not a competitor of the
Employer, or being a member of a faculty of an accredited school or University
shall not be restricted by the Employer.
7. Assignment of Intellectual Property. The Employee hereby agrees that
-----------------------------------
any technologies, concepts, sales and/or marketing campaigns, business lists,
agreements and/or ideas developed specifically for the Employer Corporation
during the term of this Employment Contract shall be the property of the
Employer Corporation. The Employee further agrees that any and all resulting
circuits, designs, processes, procedures, software, firmware, hardware, layouts,
innovations, inventions, ideas, techniques, documents, writings, or any other
results of their employment are the sole property of the Employer Corporation.
The Employee agrees to promptly disclose and provide any and all such
information needed to support patent claims, copyrights, trademarks, licenses,
assignments, and any other conveyances to the Employer Corporation. The Employee
hereby assigns, transfers, releases and conveys any and all rights, title,
interest, and any other claims of ownership in any intellectual property (as
defined above) to the Employer Corporation in exchange for the compensation
herein.
8. Disclosure of Information. The Employee acknowledges that the list
-------------------------
of the Employer's proprietary information, customers, intellectual property, and
prototypes (hereinafter referred to as "Proprietary Information") as it may
exist from time to time is a valuable, special, and unique asset of the
Employer's business. The Employee will not, during or after the term of their
employment, disclose said Proprietary Information to any person, firm,
corporation, association, or other entity for any reason or purpose whatsoever.
In the event of a breach or threatened breach by the Employee of the provisions
of this paragraph, the Employer shall be entitled to an injunction restraining
the Employee from disclosing, in whole or in part, said Proprietary Information,
or from rendering any services to any person, firm, corporation, association, or
other entity to whom such Proprietary Information, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein shall be construed as
prohibiting the Employer from pursuing any other remedies available to the
Employer for such breach or threatened breach, including the recovery of damages
from the Employee.
9. Paid Absence. During the term of this Employment Contract, the
------------
Employee shall be entitled each year to a combination of vacation days, personal
days and sick days, which shall accrue at the rate of 1.67 days for each month
of employment of the Employee, totaling up to a maximum of four (4) weeks
duration in any given twelve (12) month period, during which time their
compensation shall be paid in full. This excludes company paid holidays.
10. Death During Employment. If the Employee dies during the term of
-----------------------
employment, the Employer shall pay to the estate of the Employee the
compensation which would otherwise be payable to the Employee up to the day in
which their death occurs. Upon the death of the Employee, this Employment
Contract shall become null and void. Also, in the event of death
-2-
<PAGE>
during employment, then an "Early Termination" will have been deemed to occur as
defined in Paragraph 12 on this Employment Contract.
11. Stock Option Agreement. Concurrently with the execution of this
----------------------
Employment Contract, the Employer shall present to the Employee a "Stock Option
Agreement" which shall grant the Employee the right to purchase up to Six
Hundred Thousand (600,000) shares of the Employer Corporation stock upon terms
and conditions outlined in said "Stock Option Agreement".
12. Termination. The Employer shall be permitted to terminate this
-----------
Employment Contract for cause by providing the Employee with written notice of
said termination. In the event that the Employer/Employee relationship is
terminated for any reason prior to December 31, 1997, then an "Early
Termination" will have been deemed to occur.
(a) If said "Early Termination" occurs before the Employee has completed
one (1) calendar year of satisfactory service commencing from their date of
original continuous employment, then the Employee hereby forfeits their rights
to purchase all Six Hundred Thousand (600,000) shares of stock granted to them
under the Stock Option Agreement as defined in Paragraph 11 above.
(b) If said "Early Termination" occurs before the Employee has completed
two (2) calendar years of satisfactory service commencing from their date of
original continuous employment, then the Employee hereby forfeits their right to
purchase 420,000 shares of stock granted to them under the Stock Option
Agreement as defined in Paragraph 11 above. Thereafter, the Employee or their
estate will then have ninety (90) days from the date "Early Termination" occurs
to exercise the stock options for which the Employee has a right to purchase as
defined in Paragraph 12. After that period, the Stock Option Agreement is deemed
to be null and void.
(c) If said "Early Termination" occurs before the Employee has completed
three (3) calendar years of satisfactory service commencing from their date of
original continuous employment, then the Employee hereby forfeits their rights
to purchase 240,000 shares of stock granted to them under the Stock Option
Agreement as defined in Paragraph 11 above. Thereafter, the Employee or their
estate will then have ninety (90) days from the date "Early Termination" occurs
to exercise the stock options for which the Employee has a right to purchase as
defined in Paragraph 12. After that period, the Stock Option Agreement is deemed
to be null and void.
(d) If said "Early Termination" occurs before the Employee completes their
contract on December 31, 1997, commencing from their date of original continuous
employment, then the Employee hereby forfeits their rights to purchase 60,000
shares of stock granted to them under the Stock Option Agreement as defined in
Paragraph 11 above. Thereafter, the Employee or their estate will then have
ninety (90) days from the date "Early Termination" occurs to exercise the
-3-
<PAGE>
stock options for which the Employee has a right to purchase as defined in
Paragraph 12. After that period, the Stock Option Agreement is deemed to be null
and void.
(e) In the event that the Employee exercises any stock options under the
Stock Option Agreement as defined in Paragraph 11 above prior to "Early
Termination", then the Employer Corporation shall have the right to repurchase
from the Employee, and the Employee shall be required to sell to the Employer
Corporation, all excess shares of Employer Corporation stock purchased by the
Employee prior to "Early Termination" at the price of Twenty Five Cents ($0.25)
per share of excess Employer Corporation stock purchased by the Employee.
13. Restrictive Covenant. For a period of two (2) years after the
--------------------
termination or expiration of this Employment Contract, the Employee will not,
directly or indirectly, own, manage, operate, control, be employed by,
participate in, or be connected in any manner with the ownership, management,
operation, or control of any Power Line Communications (PLC) business similar to
the type of business conducted by the Employer and/or immediate vendors or
customers at the time of the termination of this Employment Contract. In the
event of the Employee's actual or threatened breach of the provisions of this
paragraph, the Employer shall be entitled to an injunction restraining the
Employee therefrom. Nothing shall be construed as prohibiting the Employer from
pursuing any other available remedies for such breach or threatened breach,
including the recovery of damages from the Employee.
14. Prior Arrangements. The Employee affirms that by being party to this
------------------
Employment Contract that:
(a) they are not in violation of any previous restrictive covenants, non-
compete clauses, confidentiality agreements, intellectual property agreements
and assignments, and/or employment agreements;
(b) they are not causing a conflict of interest with prior employers,
business arrangements and agreements; unless previously disclosed in writing to
the Employer;
(c) there are no legal restraints, claims, settlements, and/or continuing
or impending litigation that would prohibit the Employee from engaging in or
executing the full scope of their Duties and that Elcom shall be identified
and held harmless by the Employee from any claims and/or litigation against the
Employee that may arise from circumstances existing prior to this Employment
Contract;
(d) any statements written or verbal made by the Employee in reference to
their education, employment background, experience, periods of employment,
professional licenses and/or memberships in professional organizations, whether
or not they constituted, in full or in part, a basis for this Employment
Contract, are true and correct to the best of their knowledge.
-4-
<PAGE>
15. Substance Abuse. It is the policy of the Company that no employee may
---------------
use alcohol or illegal substances during working hours. It is understood by both
the Employer and the Employee that the use of excessive alcohol or illegal
substances during working hours by the Employee is grounds for termination with
cause. The Company reserves the right to perform random drug testing
periodically on all employees of the Employer and the Employee hereby
acknowledges that they are subject to such random drug testing. Further,
excessive alcohol will be defined as the amount of alcohol an individual would
have consumed to be considered legally intoxicated by state standards.
16. Arbitration. Any controversy or claim arising out of, or relating to
-----------
this Employment Contract, or the breach thereof other than as described in
Paragraphs 8 and 13 of this Employment Contract shall be settled by arbitration
in Philadelphia, Pennsylvania in accordance with the rules then obtaining of the
American Arbitration Association, and judgment upon the award rendered will be
binding upon the parties and may be entered and enforced in any court having
jurisdiction thereof.
17. Notices. Any notice required or desired to be given under this
-------
Employment Contract shall be deemed given if in writing sent via certified mail
to their residence in the case of the Employee, or to its principal office in
the case of the Employer.
18. Waiver of Breach. The waiver by the Employer of a breach of any
----------------
provision of this Employment Contract by the Employee shall not operate or be
construed as a waiver of any subsequent breach by the Employee. No waiver shall
be valid unless in writing and signed by an authorized officer of the Employer.
19. Assignment. The Employee acknowledges that the services to be
----------
rendered by them are unique and personal. Accordingly, the Employee may not
assign any of their rights or delegate any of their duties or obligations under
this Employment Contract. The rights and obligations of the Employer under this
Employment Contract shall inure to the benefit of and shall be binding upon the
successors and assigns of the Employer.
20. Entire Agreement. This Employment Contract contains the entire
----------------
understanding of the parties. It may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension, or discharge is sought.
21. Captions. Captions are used in this Employment Contract for
--------
convenience only, and are not intended to be used in the construction or in the
interpretation of this Employment Contract.
22. Interpretation. This Employment Contract shall be interpreted in
--------------
accordance with the laws of the Commonwealth of Pennsylvania.
-5-
<PAGE>
23. Invalid Provision. In the event any provision or sub-provision of
-----------------
this Employment Contract is held to be void, invalid, or unenforceable in any
respect, then the same shall not effect the remaining provisions or sub-
provisions hereof; which shall continue in full force and effect.
24. Inclusive Language. In this Employment Contract, the singular shall
------------------
include the plural and the masculine, feminine, or neuter gender shall include
all other genders as may be appropriate.
25. Advice of Council. All parties to this Employment Contract hereto
-----------------
acknowledge that they signed this document only after having the opportunity to
consult with an attorney of their choosing.
26. Binding Effect. This Employment Contract and the separate Stock
--------------
Option Agreement shall, upon ratification by the Board of Directors of the
Company, bind the parties hereto, their legal representatives, successors, and
assigns.
IN WITNESS WHEREOF, the parties have executed this Employment Contract the
day and year first above written.
ATTEST: ELCOM TECHNOLOGIES CORPORATION
[SIGNATURE ILLEGIBLE] BY: /s/ Robert A. Vito
- ------------------------------ ---------------------------------
Secretary Robert A. Vito President
WITNESS:
[SIGNATURE ILLEGIBLE] /s/ Robert A. Vito
- ------------------------------ ---------------------------------
Robert A. Vito, Employee
-6-
<PAGE>
STOCK OPTION CANCELLATION AGREEMENT
-----------------------------------
AGREEMENT made this 18th day of September, 1996, by and among Elcom
Technologies Corporation, a corporation organized under the laws of the
Commonwealth of Pennsylvania (hereinafter referred to as "ELCOM"), and ROBERT A.
VITO, and individual employee of ELCOM (hereinafter referred to as "EMPLOYEE").
BACKGROUND
----------
WHEREAS; ELCOM's corporate charter currently permits ELCOM to issue up
to Twenty Million (20,000,000) shares of common stock; and
WHEREAS, as of the execution of this Agreement, ELCOM's total issued,
and outstanding shares of common stock is approximately Thirteen Million five
hundred thousand (13,500,000) shares and has issued a total of approximately
three million (3,000,000) Options to purchase ELCOM's common stock; and
WHEREAS, ELCOM and EMPLOYEE previously entered a Stock Option Agreement
dated July 28, 1995 and attached hereto as Exhibit A (hereinafter referred to as
the "STOCK OPTION AGREEMENT"); and
WHEREAS, ELCOM desires to cancel certain of the Stock Options previously
granted to EMPLOYEE under the STOCK OPTION AGREEMENT and any and all other stock
option agreements granted to EMPLOYEE in order to enhance the potential value of
ELCOM's common stock.
NOW, THEREFORE, in consideration of the mutual promises herein and other
valuable considerations, ELCOM and EMPLOYEE agree as follows:
1. Cancellation of Stock Options. ELCOM and EMPLOYEE hereby agree that
-----------------------------
ELCOM shall cancel six hundred thousand (600,000) stock options granted to
EMPLOYEE on July 28, 1995 as a result of the STOCK OPTION AGREEMENT. ELCOM and
EMPLOYEE further agree to cancel one hundred thousand (100,000) stock options
granted pursuant to EMPLOYEE's role as a member of the Board Of Directors of
ELCOM. The STOCK OPTION AGREEMENT attached hereto as Exhibit A and any other
Stock Option Agreement of any kind or nature whatsoever entered into by EMPLOYEE
and ELCOM prior to the date of this Agreement are hereby canceled in full and
all of the rights, duties and obligations of the Parties are hereby terminated
in full and deemed null and void for all purposes whatsoever.
2. Modification. This Agreement shall be effective as of the date hereof.
------------
No modification or amendment of this Agreement shall be effective unless in
writing and signed by the parties hereto.
Page 1 of 2
<PAGE>
3. Notices. All notices or other communications required or permitted to be
-------
given under the terms of this Agreement shall be in writing, delivered
personally, or sent via certified mail, postage prepaid, return receipt
requested.
4. Entire Agreement. This Agreement constitutes the entire agreement between the
----------------
parties hereto and supersedes all prior negotiations, understandings and
agreements of any nature with respect to the subject matter hereto. No
amendment, waiver or discharge of any of the provisions of this Agreement shall
be effective against any part, unless that party shall have consent thereto in
writing.
5. Binding Effect. This Agreement shall be binding upon ratification by the
--------------
Board of Directors of ELCOM and inure to the benefit of the parties hereto and
their respective heirs, executors, administrators, successors, and assigns.
6. Governing Law. This Agreement shall be construed, interpreted and enforced in
-------------
accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, ELCOM and EMPLOYEE have set their hands and seals
hereto the day and year first above written.
ATTEST: Elcom Technologies Corporation
/s/ Robert B. Sando BY: /s/ Robert A. Vito
- ------------------------------ ---------------------------
Robert B. Sando, Secretary Robert A. Vito, President
[SIGNATURE APPEARS HERE]
------------------------------
EMPLOYEE
Page 2 of 2
<PAGE>
STOCK OPTION AGREEMENT
----------------------
AGREEMENT made this 19th day of September, 1996, by and among Elcom
Technologies Corporation, a corporation organized under the laws of the
Commonwealth of Pennsylvania (hereinafter referred to as "ELCOM"), and ROBERT A.
VITO, an individual employee of ELCOM (hereinafter referred to as "EMPLOYEE").
BACKGROUND
----------
WHEREAS; ELCOM's corporate charter currently permits ELCOM to issue up
to Twenty Million (20,000,000) shares of common stock; and
WHEREAS, as of the execution of this Agreement, ELCOM's total issued,
and outstanding shares of common stock is approximately Thirteen Million five
hundred thousand (13,500,000) shares.
WHEREAS, ELCOM desires to grant to EMPLOYEE an option to purchase one
hundred thousand (100,000) shares of ELCOM Technologies Corporation's common
stock.
NOW, THEREFORE, in consideration of the mutual promises herein and other
valuable considerations, ELCOM and EMPLOYEE agrees as follows:
1. Prior Agreements. EMPLOYEE and ELCOM have previously entered into the
following Agreement:
Employment Agreement dated July 28, 1995
2. Grant of Options. Subject to all of the terms and conditions of this
----------------
Agreement, ELCOM hereby grants to EMPLOYEE options to purchase a total of one
hundred thousand (100,000) Shares of ELCOM's common stock at the price of twenty
five cents ($0.25) per share in accordance with the following schedule:
Number of Shares Date Exercisable Expiration Date
---------------- ---------------- ---------------
100,000 September 19, 1996 December 31, 2002
Any Options not exercised by the Expiration Date listed above shall be
terminated in full for all purposes whatsoever.
Page 1 of 4
<PAGE>
2.1 Sale of Company. In the event that a controlling interest (over 50%) of
---------------
ELCOM is sold to a third party, other then the Public markets, EMPLOYEE may
exercise one hundred percent (100%) of all options granted under Section 2
herein. EMPLOYEE must exercise said options within sixty (60) days of
notification of the acquisition of a controlling interest by a third party. Any
Options not exercised by EMPLOYEE within sixty (60) day period will terminate in
full upon expiration of said sixty (60) day period.
3. Termination of Employment. In the event that EMPLOYEE terminates employment
-------------------------
with ELCOM for any reason whatsoever, including death or disability, all Options
to purchase ELCOM common stock granted under this Agreement shall terminate in
full and be declared null and void for all purposes whatsoever, sixty (60) days
subsequent to the date of EMPLOYEE's last day of active employment with ELCOM.
EMPLOYEE shall receive no further vesting of Options under Section 2 herein,
after EMPLOYEE's last day of active employment with ELCOM.
4. Registration of Options. In the event that ELCOM makes an initial public
-----------------------
offering (the "IPO") of its common stock pursuant to rules established by the
United States Securities and Exchange Commission and the NASDAQ stock exchange,
the options granted in Section 2 of this Agreement shall be registered with the
Securities and Exchange Commission pursuant to the following schedule:
At the time of IPO...........................100%(one hundred percent)
5. Restrictions and Regulations. EMPLOYEE agrees that any Shares of ELCOM's
---------------------------
common stock purchased under this Stock Option Agreement will be subject to the
restrictions and regulations outlined in this Agreement and that these SHARES
may be subject to further restrictions and regulations. Said restrictions and
regulations may be imposed at any time by ELCOM at the sole discretion of ELCOM
and without the approval of EMPLOYEE.
5.1 In addition to the aforementioned restrictions, EMPLOYEE agrees that any
Shares purchased by EMPLOYEE pursuant to this Agreement, shall be subject to all
of the restrictions, regulations and non-dilution provisions of the ELCOM
Private Placement Memorandum dated, July 12, 1996.
6. Exercise of Option. EMPLOYEE may exercise any Options earned in accordance
------------------
with Section 2, herein, in any number that EMPLOYEE elects.
7. Adjustment of Option Shares. Prior to any public offering of ELCOM shares,
---------------------------
if the outstanding common shares of Elcom Technologies Corporation, are changed
into or exchanged for a different number of kind of shares or other securities
of Elcom Technologies Corporation or
Page 2 of 4
<PAGE>
of another corporation, whether through reorganization, share split-up,
combination of shares, merger or consolidation, then these shares shall be
substituted for each common share of Elcom Technologies Corporation then subject
to this Stock Option Agreement. The number and kinds of shares or other
securities into which each such ELCOM share is so changed or for which each
ELCOM share is exchanged shall be at the sole discretion of ELCOM.
8. Time for Payment for Shares. The option price of the Shares to be
---------------------------
purchased pursuant to the exercise of Options under this Agreement shall be paid
in full at the time of the exercise of the options.
9. Method of Exercising Option. EMPLOYEE shall provide ELCOM with at least
---------------------------
five (5) business days prior written notice in order to exercise any options
under this Agreement. EMPLOYEE shall comply with all procedures established by
ELCOM from time to time concerning exercising any options under this Agreement.
10. Modification. This Agreement shall be effective as of the date hereof and,
------------
unless sooner terminated under the provisions of this Agreement, shall remain in
effect until December 31, 2002. No modification or amendment of this Agreement
shall be effective unless in writing and signed by the parties hereto.
11. Notices. All notices or other communications required or permitted to be
-------
given under the terms of this Agreement shall be in writing, delivered
personally, or sent via certified mail, postage prepaid, return receipt
requested.
12. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the parties hereto and supersedes all prior negotiations, understandings and
agreement of any nature with respect to the subject matter hereto. No amendment,
waiver or discharge of any of the provisions of this Agreement shall be
effective against any party, unless that party shall have consented thereto in
writing.
13. Binding Effect. This Agreement shall be binding upon execution by ELCOM
--------------
and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors, and assigns.
14. Governing Law. This Agreement shall be construed, interpreted and enforced
-------------
in accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, ELCOM and EMPLOYEE have set their hands and seals
hereto the day and year first above written.
Page 3 of 4
<PAGE>
ATTEST: Elcom Technologies Corporation
/s/ Robert B. Sando BY: /s/ Robert A. Vito
- --------------------------------- --------------------------------
Robert B. Sando, Secretary Robert A. Vito, President
/s/ Robert A. Vito
--------------------------------
EMPLOYEE
Page 4 of 4
<PAGE>
AGREEMENT
THIS AGREEMENT ("Agreement") is entered into on this 20th day of March,
----
1996 by and between QVC, Inc. ("QVC"), a Delaware corporation with its principal
place of business at 1365 Enterprise Drive, West Chester, PA 19380, and Elcom
Technologies Corporation ("Elcom"), a Pennsylvania corporation with its
------------
principal place of business at 78 Great Valley Parkway, Malvern, PA 19355.
BACKGROUND
A. QVC and its affiliates promote, market, sell and distribute (collectively,
"Promote") products through various means and media, including without
limitation, their televised shopping programs (the "Programs").
B. Elcom designs, manufactures and sells various cable phone, video and data
transfer systems (collectively, the "Products").
C. Elcom and QVC desire that QVC Promote the Products through various means
and media, including without limitation, the Programs and that Robert A. Vito,
an officer of Elcom ("Vito"), appear on the Programs to assist QVC in promoting
the Products.
NOW, THEREFORE, incorporating the foregoing background, and for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. License. (a) Elcom grants to QVC and its affiliates throughout the
-------
term of this Agreement and the Sell-Off Period (as defined in paragraph 3 below)
(i) the exclusive right to Promote the Products through Direct Response
Television in the Territory (i) if distributed under the "Elcom" trademark,
during the term of this Agreement and the Sell-Off Period or (ii) if developed
solely by Elcom and distributed under any trademark during the ninety (90) day
period commencing upon QVC's acceptance of its initial order of each product
(the "Exclusive Period") ; (ii) the non-exclusive right to promote the Products
other than those distributed under the "Elcom" trademark through Direct Response
Television following the Exclusive Period; (iii) the non-exclusive right to
Promote the Products through all other means and media throughout
<PAGE>
the Territory; and (iv) the right to use, publish, reproduce and transmit the
trademarks, trade names and/or logos used and/or developed by Elcom in
connection with the Products, including without limitation, the terms "Elcom"
and "E-Z" (whether now in existence or created hereinafter, collectively, the
"Trademarks") to Promote the Products in accordance with the terms and
conditions of this Agreement. For purposes of this Agreement, "Direct Response
Television" shall mean any electronic transmission (whether now in existence or
developed hereafter) through which a consumer is requested to purchase any
product by mail, telephone or other electronic means and "Territory" shall mean
the United States, its territories and possessions.
(b) Vito grants to QVC (i) the exclusive right to use his name, likeness,
image, voice and performance (the "Endorsement") to Promote the Products through
Direct Response Television in the Territory and (ii) the non-exclusive worldwide
right to use the Endorsement to promote the Products through all other means and
media in the Territory. (Hereinafter, the rights granted to QVC pursuant to
subparagraph (a) of this paragraph 1 and this subparagraph (b) are collectively
referred to as the "License") .
2. Products. (a) From time to time, QVC may issue to Elcom a purchase
--------
order, the form of which is attached hereto as Exhibit "A" and incorporated
herein by reference (each, a "Purchase Order"). Any purchases made pursuant to
any Purchase Order shall be made on the terms set forth on the Purchase Order
for such Products, and the terms and conditions set forth in this Agreement. QVC
and Elcom acknowledge and agree that with QVC's initial purchase of any Product
shall be on a "100% Sale or Return" basis. The terms and conditions of this
Agreement, together with all other terms of each Purchase Order, shall survive
the expiration or termination of this Agreement. In the event that there exist
any inconsistencies between this Agreement and the terms and conditions of any
Purchase Order, the terms and conditions of this Agreement shall govern.
Notwithstanding anything to the contrary contained in this Agreement or
otherwise, QVC makes no representations or warranties with respect to the amount
of products that may be sold through the Programs, if any, the number of' times,
if any, the Products may be offered for sale on the Programs
2
<PAGE>
or the amount of revenue, if any, that may be generated through any sales of
Products on the Programs.
(b) During the term, Elcom shall provide to QVC or its designee, upon the
request of QVC, (i) consulting and advisory services with respect to QVC's
efforts to Promote the Products and (ii) such other creative input as QVC may
deem appropriate from time to time.
3. Term. The initial term (the "Initial Term") of this Agreement shall
----
commence on the date hereof and shall terminate one (1) year after any Product
first airs on any Program. Upon the expiration of the Initial Term, this
Agreement shall automatically, continually renew for nine (9) additional one (1)
year terms, (each, a "Renewal Term"), unless (i) Elcom notifies QVC in writing,
at least thirty days (30) prior to the end of the Initial Term or any Renewal
Term, of its intent to terminate the Agreement, and (ii) during the Initial Term
or any Renewal Term, as the case may be, Gross Purchases (as defined below) of
Products during that term are less than the Minimum Amount. For purposes of this
Agreement, "Minimum Amount" shall mean XXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXX with
respect to the Initial Term and, with respect to each Renewal Term, and "Gross
Purchases" shall mean the aggregate amount due to Elcom pursuant to all purchase
orders issued to Elcom by QVC during the applicable term, less following the
expiration or termination of this Agreement, QVC shall have the right, for as
long as necessary, to promote the Products, to sell off any remaining inventory
of Products QVC may have in its inventory and to place additional orders for
Products to fulfill any remaining unfilled customer orders for Products (the
"Sell-Off Period").
4. Appearances. If requested by QVC, Vito agrees to make at least four
-----------
(4) Appearances on the Programs during each year in which this Agreement remains
in effect. For purposes of this Agreement, an "Appearance" shall mean a one (1)
to three (3) day period during which the Products may be offered for sale on the
Programs from time to time. Vito further agrees to appear in promotional
announcements featuring the Programs, at dates and times determined by QVC,
subject to Vito's availability. Unless otherwise determined by QVC, all
Appearances and promotional announcements shall take place at QVC's studios in
West Chester, Pennsylvania. Vito acknowledges that Elcom is
3
<PAGE>
solely responsible for the expenses of Elcom arising in connection with all
Appearances and promotional announcements, including without limitation, travel,
lodging and food.
5. Non-Compete. Without the prior written consent of QVC,
-----------
neither Elcom nor Vito shall, during the term of this Agreement, promote,
advertise, endorse or sell products by means of Direct Response Television.
This provision shall survive the expiration or termination of this Agreement.
6. Representations, Warranties and Covenants. Elcom represents, warrants
-----------------------------------------
and covenants, which representations, warranties and covenants shall continue
during the term of this Agreement and shall survive the expiration or
termination of this Agreement, that: (i) Elcom possesses the full power and
exclusive right to grant the License to QVC; (ii) the execution, delivery and
performance of this Agreement by Elcom does not violate any agreement,
instrument, judgment, order or award of any court or arbitrator or any law, rule
or regulation; and (iii) there exist no agreements, or other arrangements, for
Elcom to endorse, promote, advertise, or sell any products through Direct
Response Television. Elcom shall provide QVC with any and all documents
reasonably required or requested by QVC at any time and from time to time to
support the representations and warranties herein contained.
7. Confidentiality. Elcom and Vito, each, individually and respectively,
---------------
agree that any and all information regarding QVC or its operations disclosed to
them in conjunction with this Agreement, and any information regarding the sale
and promotion of products and/or products by QVC, will be treated as
confidential information and will not be disclosed to any third party at any
time during the term of this Agreement, including any Renewal Term(s), and
thereafter. Elcom and Vito each further agree that any such information will
not be used for any purposes by Elcom or Vito other than for purposes
contemplated by this Agreement. Confidential information shall not be deemed to
include information which (a) is public knowledge or becomes generally available
to the public other than as a result of disclosure by Elcom or Vito; (b) becomes
available to Elcom or Vito, on a non-confidential basis, from a source (other
than QVC or its agents) who is not bound by a confidentiality agreement with
QVC; or (c) is in the possession of Elcom or Vito prior to disclosure by QVC,
4
<PAGE>
provided that the source was not bound by a confidentiality agreement with QVC.
Elcom and Vito each further agree that in the event of a breach or threatened
breach of the terms of this paragraph 7 and/or the provisions of paragraph 5 QVC
shall be entitled to seek from any court of competent jurisdiction, preliminary
and permanent injunctive relief which remedy shall be cumulative and in addition
to any other rights and remedies to which QVC may be entitled. Elcom and Vito
each acknowledge and agree that the confidential information and other
information referred to in this paragraph 7 and the prohibitions provided in
paragraph 5 above, are valuable and unique and that such breach of such
provisions will result in immediate irreparable injury to QVC. The rights and
obligations of the parties set forth in this paragraph 7 shall survive and
continue after the termination or expiration of this Agreement .
8. Publicity. Except for incidental non-derogatory remarks necessitated
---------
by the services provided hereunder, neither Elcom nor Vito shall issue any
publicity or press release regarding their contractual relations with QVC or
otherwise make any oral or written reference to QVC regarding their activities
hereunder, without obtaining QVC's prior written consent, and approval of the
contents thereof. Neither Elcom nor Vito shall utilize any trade name, service
mark, trademark, or copyright belonging to QVC without the prior written consent
of QVC.
9. Amendment. This Agreement may not be varied, amended, or modified
---------
unless in writing signed by the parties hereto .
10. No Assignment. This Agreement and the rights and obligations
-------------
hereunder are not assignable and any such assignment shall be null and void.
11. Governing Law. This Agreement shall be construed according to the
-------------
internal laws of the Commonwealth of Pennsylvania without regard to conflict of
laws principles. Each of Elcom and Vito hereby consent to the exclusive
jurisdiction of the state courts of the Commonwealth of Pennsylvania, Chester
County, and the United States District Court for the Eastern District of
Pennsylvania, in all matters arising out of this Agreement. Each of Elcom and
Vito consent to service of process by certified mail, return
5
<PAGE>
receipt requested, at the address indicated for Elcom in the opening paragraph
hereof.
12. Notices. All notices provided for hereunder shall be sent via
------- ---
certified mail, return receipt requested, or by reputable overnight carrier, to
the addresses indicated in the opening paragraph hereof. All notices sent to
QVC shall be sent to the attention of Executive Vice president, Electronic
Retailing, and Senior Vice president, General Counsel.
13. Entire Agreement. This Agreement supersedes all prior communications
----------------
between the parties regarding the subject matter hereof, whether oral or
written, and constitutes the entire understanding of the parties.
14. Waiver. No delay or failure on the part of any party hereto in
------
exercising any right or remedy under this Agreement, and no partial or single
exercise thereof, shall constitute a waiver of such right or remedy or of any
other right or remedy.
15. Severability. If any term or condition of this Agreement or the
------------
application thereof shall be illegal, invalid or unenforceable, all other
provisions hereof shall continue in full force and effect as if the illegal,
invalid or unenforceable provision were not a part hereof. The headings used in
this Agreement are for the convenience of the parties only and shall not be
construed in the interpretation of any provisions of this Agreement.
16. No Joint Venture. Nothing herein contained shall be construed to
----------------
place the parties in the relationship of partners or joint venturers, and
neither QVC nor Elcom shall have the power to obligate or bind the other in any
manner whatsoever. QVC and Elcom agree that in performing their duties under
this Agreement they shall be in the position of independent contractors.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have executed this Agreement on the date first above written.
6
<PAGE>
Elcom Technologies Corporation
By:
-------------------------
Its: CORPORATE COUNSEL
-------------------------
QVC, Inc.
By: /s/ Thomas Merrihew
-------------------------
Thomas Merrihew
Vice president
I, Robert A. Vito, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, acknowledge the Agreement set forth above and agree to be personally
bound by the provisions set forth in paragraphs 1(b), 4, 5, 7 8 and 11 of the
Agreement.
------------------------
Robert A. Vito
Date: 3/20/96
------------------------
7
<PAGE>
Exhibit A
THIS PURCHASE ORDER ("Order") IS EXPRESSLY CONDITIONED ON ACCEPTANCE OF THE
TERMS AND CONDITIONS HEREOF. Oral or written notice of acceptance by Vendor,
preparation to perform by Vendor and/or shipment of all or any part of the
merchandise specified in this Order ("Merchandise") shall constitute acceptance
by Vendor of the terms and conditions contained herein. BY ACCEPTANCE OF THIS
ORDER, VENDOR REPRESENTS AND AGREES AS FOLLOWS:
1. If shipping or delivery dates cannot be met, Vendor will promptly inform
Buyer in writing of Vendor's best possible shipping or delivery dates which
shall become part of this Order, if at all, only upon Buyer's written acceptance
thereof.
2. Vendor hereby grants to Buyer the irrevocable right, by all means now or
hereafter existing, to: (a) market, promote the sale of and sell the
Merchandise; (b) use the trademarks, trade names, service marks, patents and
copyrights (collectively the "Marks") registered, owned, licensed to or used by
Vendor in connection with the Merchandise; (c) use, perform, play, synchronize
and/or demonstrate, as applicable, the Merchandise, its contents, and/or any
promotional, advertising or similar material supplied by Vendor for use in
connection with such Merchandise ("Promotional Material"), and (d) use the
names, photographs, likenesses, voices and/or biographies of any individuals
performing in or otherwise associated with the production of the Merchandise as
contained in the Merchandise, its contents and/or any Promotional Material.
Buyer makes no representations with regard to the number of times, if any, that
Merchandise will be marketed or promoted by Buyer.
3. In addition to and without prejudice to any and all other warranties,
express, arising by operation of law or implied, Vendor represents, warrants and
covenants to Buyer its successors, assigns and customers that: (a) Vendor
possesses all licenses, permits, rights, powers and consents required, necessary
or desirable to enter into this Order and to grant to Buyer the rights granted
herein; (b) Vendor's performance hereunder does not violate any agreement,
instrument, judgment, order or award of any court or arbitrator; (c) any and all
prices, advertising, allowances, discounts and other benefits offered by Vendor,
Vendor's performance hereunder, and all Merchandise, including the production,
sale, packaging, labeling, safety, importation and transportation thereof and
all representations and advertising by Vendor made in connection therewith,
shall at all times comply with all applicable international, foreign, federal,
state, county, municipal, industry, organization or other statutes, laws, rules,
regulations, orders, standards or guidelines ("Laws"); (d) where applicable,
reasonable and representative tests as prescribed by Laws or government
authorities have been performed, or will be performed before shipment from
Vendor to the warehouse designated by Buyer (the "Warehouse"); (e) the
Merchandise is of consistent kind and quality, conforms to all instructions,
specifications, drawings, data or samples, and is of the quality, grade and
content as represented by Vendor or as otherwise provided on the face hereof;
(f) all manufacturers' warranties are effective and enforceable by both Buyer
and its customers; (g) the Marks, if any, which are part of or appear in
connection with the Merchandise are valid and genuine and the Merchandise,
including, but not limited to, all written, printed or other works constituting
a part of or appearing on or in such Merchandise and/or Promotional Material,
and the sale and promotion of the sale of the Merchandise and/or performance of
the Merchandise, its
EXHIBIT A
<PAGE>
contents and/or Promotional Material as provided for herein will not infringe or
violate any United States or foreign Marks, rights of privacy or publicity
and/or any other third party rights or cause Buyer to be liable to Vendor or any
third party for any additional fees, costs or expenses; (h) Vendor has good and
marketable title to the Merchandise and all Merchandise shall be and remain free
and clear of all encumbrances, liens, claims and debts of any nature whatsoever;
(i) neither the Merchandise nor any component part thereof is subject to any
duty, tariff, or penalty except as previously disclosed in writing by Vendor to
Buyer; (j) the Merchandise and similar goods are not and have not been subject
to product liability or infringement claims; (k) Vendor shall maintain for the
life of the Merchandise general liability insurance coverage on the Merchandise,
including full products liability, infringement and advertising injury, in
amounts set forth on the face hereof and, if not set forth on the face hereof,
in no event less than One Million Dollars with carriers acceptable to Buyer and
which shall include broad form Vendor's coverage in favor of Buyer, and Vendor
will promptly provide Buyer with a certificate of insurance naming Buyer as an
additional insured; (1) the amount to be paid by Buyer to Vendor for Merchandise
shall be under the most favorable terms and the same type or similar merchandise
is not and will not be offered to another under more favorable terms than appear
herein, and (m) the Merchandise (i) shall be new, first quality merchandise;
(ii) shall be free from all defects, including latent defects in workmanship,
material and design; and (iii) shall not be reworked, rebuilt or refurbished.
Vendor agrees to provide Buyer with any and all documents requested or required
by Buyer at any time and from time to time to support the representations,
warranties and covenants herein contained.
4. Vendor, its successors and permitted assigns and each of them, hereby agree
to protect, defend, hold harmless and indemnify Buyer, its subsidiaries and
affiliates and each of their respective customers, cable television affiliates,
employees, agents, officers, directors, successors and assigns from and against
any and all claims, actions, suits, costs, liabilities, damages, and expenses
(including, but not limited to, reasonable attorneys' fees and in-house counsel
costs) based upon or resulting from: (a) the infringement, alleged infringement,
violation and/or alleged violation of any Marks, rights of publicity or privacy
and/or any other third party rights (including, without limitation, any claims
for additional fees, costs or expenses) arising from the sale or promotion of
the sale of Merchandise and/or from the performance of the Merchandise, its
contents and/or the Promotional Material as provided for herein; (b) any alleged
and/or actual defect in any of the Merchandise; (c) any alleged and/or actual
injury to person or damage to property arising out of the furnishing or use of
the Merchandise; (d) Vendor's breach of any of the representations, warranties
or covenants contained herein, and (e) the repossession, garnishment, lien,
levy, attachment of or on the Merchandise. In the event that Buyer shall notify
Vendor of any claim, demand, action, suit or other matter ("Claim") based upon
or resulting from the circumstances specified in this Section, and provided that
Vendor shall provide assurance to Buyer's reasonable satisfaction of its ability
to indemnify Buyer pursuant to this Section, Vendor shall have the right to
control, at its sole cost and expense, the defense of any Claim. If Vendor fails
to provide such assurance and commence to defend such Claim by the fifth (5th)
day after receipt of written notice from Buyer, Buyer may, in addition to any
and all other rights it may have at law or in equity, elect to undertake the
defense of and compromise or settle the Claim in its own name and all recoveries
from such Claim shall belong to Buyer. In the latter event, Buyer shall, in its
sole discretion, elect counsel to represent Buyer, and Vendor shall be solely
responsible for the payment or reimbursement, at Buyer's option, of counsel fees
and other fees in defending such Claim and for any and all damages arising
thereunder.
5. Time is of the essence. Buyer may cancel all or any part hereof, with no
liability or obligation to Vendor (a) if Buyer is notified that any Merchandise
or Marks is alleged to infringe any third party rights, or (b)
<PAGE>
in the event of any breach or anticipated breach of this Order by Vendor, or (c)
if the shipment of the Merchandise shall not occur on or after the First Ship
Date and on or before the Last Ship Date set forth on the face hereof, or if not
so set forth, then if the Merchandise is not delivered on or after the First
Delivery Date and on or before the Last Delivery Date set forth on the face
hereof, or (d) in the event of any casualty adversely affecting Buyer's
business or the Warehouse, or any substantial change to Buyer's business for
any reason whatsoever.
6. Merchandise shipped or delivered to the Warehouse prior to the First Ship
Date or prior to the First Delivery Date may at Buyer's option, be returned to
Vendor at Vendor's expense and risk and held by Vendor for Buyer until shipment
or delivery on the dates set forth on the face hereof. Merchandise shipped after
the Last Ship Date or delivered after the Last Delivery Date, may, at Buyers
option, be returned to Vendor at Vendor's expense and risk and Buyer may cancel
this Order with no liability or the Merchandise may be held by Buyer. Unless
stated otherwise on the face hereof, Vendor shall ship the Merchandise in one
shipment. In the event of shipment or receipt of less than the quantity ordered,
Buyer may, at its option, either reject or accept the entire shipment unless
partial shipments are authorized on the face hereof. Additional freight charges
resulting from partial shipments will be borne by Vendor. Partial shipments
shall not cause Vendor's obligations to become severable. Unless stated
otherwise on the face hereof, Vendor agrees to pay or reimburse Buyer, at the
direction of Buyer, for all freight, packing and insurance incident to the
shipment of the Merchandise, including, but not limited to, loading and
unloading charges, mileage charges, taxes, tolls and other fees. Vendor agrees
to follow Buyer's instructions with respect to shipment, routing and packaging.
All Merchandise is to be suitably packed or otherwise prepared for shipment to
secure safe delivery and the lowest transportation rates. All shipment master
cartons must contain a legible packing slip or invoice and must be marked with
the correct Buyer item number for the Merchandise, the Order number specified on
the face hereof the number of Buyer's stock keeping units per box and a total
box count (i.e. 1 of 10). Vendor's failure to comply with the terms and
conditions set forth in this Section or in Buyer's Shipping Regulations
(including Chargeback Program) in effect as of the date of this Order
("Regulations"), which are incorporated herein by reference, may, at Buyer's
option, result in the imposition of charges as set forth in such Regulations.
Any such charges assessed may be deducted from any amounts due or which may
become due to Vendor. A copy of the Regulations is available to Vendor on
written request.
7. Merchandise furnished hereunder which is not accepted, for any reason, is
not in compliance with specifications hereof, or the Regulations, is shipped
contrary to instructions or in any unauthorized quantity, is substituted for
Merchandise herein specified, is below sample or standard, is returned by any of
Buyer's customers for any reason, fails to meet Buyer's quality control tests,
fails to meet Buyer's carrier's quality, drop or other tests, or violates any
Laws, may be rejected (or acceptance thereof revoked) at Buyer's option and
returned to Vendor. Merchandise or merchandise not received by Buyer in a
quantity sufficient, in the sole opinion of Buyer, to support any planned
promotion which includes such Merchandise and merchandise, may be rejected (or
acceptance thereof revoked) at Buyer's option and returned to Vendor. All
expense of unpacking, examining, repacking, storing, returning and reshipping
any Merchandise rejected, (or acceptance of which has been revoked) as aforesaid
shall be at Vendor's expense and risk. With respect to Merchandise so returned
to Vendor, Buyer shall, at its option, receive a credit or refund of all amounts
paid by Buyer for such Merchandise, including, without limitation, in-bound
freight charges (notwithstanding contrary Freight Terms, if any, set forth on
the face hereof). In the event Buyer shall opt to receive a refund, Vendor will
pay Buyer in immediate funds within thirty (30) days of Buyer's request. In the
event that Buyer shall opt to receive a credit, Buyer may apply such a credit
toward any amounts due or which may
<PAGE>
become due to Vendor. Authorization is granted to Buyer to return Merchandise
without additional authorization, and Vendor hereby agrees to accept such
returns notwithstanding Buyer's request for return authorization labels.
Merchandise returned or rejected by Buyer is not to be replaced by Vendor
without the prior written approval of Buyer. Vendor acknowledges that the Buyer
does not inspect each item at receipt of Merchandise and, therefore, Vendor
understands that defects, imperfections or nonconformity with any
representations, warranties or covenants set forth herein may not be discovered
by Buyer until Merchandise shall have been purchased by its customers and
returned to Buyer. Buyer's inspection, discovery of any breach of warranty,
failure to make an inspection or failure to discover any breach of warranty
shall not constitute a waiver of any of Buyer's rights or remedies whatsoever.
8. If a percentage greater than zero is indicated in the "Sale or Return"
designation on the face hereof, this Order is a sale or return transaction as
defined in the Uniform Commercial Code as adopted by the Commonwealth of
Pennsylvania, 13 Pa. C.S., Division 2. Without limiting the foregoing, Buyer may
return to Vendor, for credit or cash at Buyer's option, all or any portion of
the Merchandise which Buyer shall not have sold. Expenses incident to the return
shall be paid by Buyer unless otherwise specified on the face hereof. The rights
of Buyer set forth in this Section are in addition to and independent of all
other rights and remedies of Buyer pursuant to other provisions hereof and
applicable law.
9. Vendor shall not assign any rights, claims or obligations under this Order
without the prior written consent of Buyer, and any such attempted assignment
shall be void at the election of Buyer. All claims for money due or to become
due from Buyer shall be subject to deduction by Buyer for any set-off,
recoupment or counterclaim arising out of this or any other of Buyer's orders
with Vendor, whether arising before or after any assignment by Vendor.
10. Unless specified otherwise on the face hereof, the time for payment set
forth on the face hereof shall begin to accrue upon receipt of Merchandise at
the Warehouse or receipt of invoice, whichever is later. If this is a Sale or
Return transaction, the time for payment set forth on the face hereof shall
begin to accrue upon the first sale of Merchandise by Buyer to its customers. If
the Merchandise or invoice is received on or after the twenty-fifth (25th) of
the month or, in the case of a Sale or Return transaction, the Merchandise is
first sold by Buyer between the twenty-fifth (25th) of the month and the end of
the month, inclusive, End of Month ("EOM") terms begin on the first (1st) of the
next succeeding month. Payment of invoice does not constitute acceptance of
Merchandise covered by this Order and is without prejudice to any and all claims
of Buyer against Vendor.
11. Until date of delivery to Buyer, Vendor shall meet its lower prices and the
lower prices of legitimate competition, or accept cancellation at Buyer's
option. Buyer, in its sole discretion, shall determine the price at which
Merchandise shall be offered for sale to its customers and shall retain all
handling and shipping charges collected from its customers.
12. For purposes of this Order, "Confidential Information" means any agreement
between Buyer and Vendor, all information in whatever form transmitted relating
to the past, present or future business affairs, including without limitation,
the sale of Merchandise by Buyer, customer lists, research, development,
operations, security, broadcasting, merchandising, marketing, financial,
programming and data processing information of Buyer or another party whose
information Buyer has in its possession under obligations of confidentiality,
which is disclosed by Buyer, its subsidiaries, affiliates, employees, agents,
officers or directors to Vendor or which is produced or developed during the
working relationship between the parties. Confidential Information shall not
include any information of Buyer that is lawfully required to be disclosed by
Vendor to any governmental agency or is otherwise required to be disclosed by
law, provided that before making such disclosure Vendor shall give Buyer an
adequate opportunity to interpose an objection or take action
<PAGE>
to assure confidential handling of such information. Vendor shall not disclose
any Confidential Information to any person or entity except employees of Vendor
and its affiliates as required in the performance of their employment-related
duties, nor will Vendor use the Confidential Information for any purposes other
than those purposes expressly contemplated herein. In the event of a breach or
threatened breach of this Section by Vendor, Buyer shall be entitled to obtain
from any court of competent jurisdiction, preliminary and permanent injunctive
relief, including, but not limited to, temporary restraining orders, which
remedy shall be cumulative and in addition to any other rights and remedies to
which Buyer may be entitled. Vendor acknowledges that the Confidential
Information referred to in this Section is valuable and unique and that
disclosure or use in breach of this Section could result in immediate
irreparable injury to Buyer.
13. This Order shall be governed by the laws of the Commonwealth of Pennsylvania
applicable to contracts to be performed wholly therein, regardless of place of
acceptance. Vendor and Buyer expressly exclude the application of the United
Nations Convention on Contracts for the International Sale of Goods, if
applicable. Vendor hereby consents to the exclusive jurisdiction of the state
courts of the Commonwealth of Pennsylvania for the County of Chester and the
Federal courts for the Eastern District of Pennsylvania in all matters arising
out of this Order. Vendor hereby irrevocably agrees to service of process by
certified mail, return receipt requested, to its address as set forth on the
face of this Order or to such other address as Vendor may deliver to Buyer in
writing. No waiver by Buyer of any term, provision or condition hereof shall be
deemed to constitute a waiver of any other term, provision or condition of this
Order, or a waiver of the same or of any other term, provision or condition with
regard to subsequent transactions or subsequent parts of the same transaction,
including without limitation, subsequent shipments under this Order. If any
paragraph, term, condition, or portion thereof contained in this Order shall be
determined to be unenforceable or prohibited by law, then such paragraph, term,
condition or portion thereof shall be void and the remaining provisions herein
shall not in any way be affected or impaired thereby. Vendor shall not issue any
publicity or press release regarding Buyer or Buyer's activities hereunder
without first obtaining Buyer's prior written approval and consent to such
release. This Order, the terms, conditions and agreements herein contained and
the Regulations, constitute the full understanding of the parties hereto and a
complete and exclusive statement of the terms of this Order. No conditions,
understandings or agreements purporting to modify or vary the terms of this
Order shall be binding unless hereafter made in writing and signed by an
authorized representative of the party to be bound, and no modification shall be
effected by the acknowledgement or acceptance of this Order or of shipping
documents or other forms of documents containing terms or conditions at variance
with or in addition to those set forth herein. Notwithstanding any legal
presumption to the contrary, the covenants, conditions, representations,
indemnities and warranties contained in this Order, including, but not limited
to Sections 3, 4, 7 and 12 hereof, shall survive inspection, delivery,
acceptance and payment.
<PAGE>
MANUFACTURING AGREEMENT
-----------------------
This Agreement is entered into as of 4-Apr-96, by and between Elcom Technologies
-------- --------------------------
Corporation, a Pennsylvania corporation with its principal place of business at
- ----------- ------------
78 Great Valley Parkway Malvern PA 19355 ("Buyer"), and Flextronics (Malaysia)
- ----------------------------------------
SDN. BHD., a company incorporated in the Republic of Malaysia having its
business address at Lot Plo 37, Dirizab, Jalan, Kawasan Perindustrian, Senai,
81400, Senai, J.B. Malaysia ("Flextronics").
RECITALS
--------
WHEREAS, Elcom wishes to have Flextronics manufacture for Elcom, and
Flextronics is willing to so manufacture for Elcom, certain printed circuit
board assemblies and subassemblies for incorporation into Elcom's products.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, Elcom and Flextronics hereby agree as follows:
1.0 Term.
----
1.1 Initial Term. The initial term of this Agreement shall commence on
------------
the date hereof and shall terminate on March 1, 1997, unless this Agreement is
terminated earlier under Section 6.0 hereto.
1.2 Automatic Renewal. After the expiration of the initial term hereunder
-----------------
(unless this Agreement has been terminated ted under Section 6.0 hereto), this
Agreement shall be automatically renewed for separate but successive one-year
terms. Subject to Section 6.0 hereto, each party shall have the right to
terminate this Agreement at any time after the expiration of the initial term by
providing six (6) months prior written notice to the other party of the exercise
of such termination right.
2.0 Agreement to Manufacture.
------------------------
2.1 Agreement to Manufacture: Quantity: Price: During the initial term
-----------------------------------------
and any subsequent terms hereof, Flextronics agrees to manufacture, sell, and
deliver to Elcom and Elcom agrees to purchase and accept from Flextronics
various printed circuit board assemblies and subassemblies (the "Products") in
the quantities and at the prices listed in our turnkey proposals. Initial
production will consist of the products hereinafter provided In Exhibit A.
Pricing for each model will be negotiated outside of this contract using the
terms and conditions specified in each individual quotation. Additional Products
may be manufactured by Flextronics for Elcom under the terms of this agreement
without specifically amending this agreement.
1
<PAGE>
2.2 Period Review of Price. Elcom acknowledges that the prices of
----------------------
the Products as set forth on Exhibit A hereto are based in part on Flextronics'
costs of manufacturing the Products, including, without limitation, Flextronics'
cost of labor, components and overhead. During the initial term and any
subsequent terms hereof, Flextronics and Elcom agree to periodically review in
good faith the prices set forth on Exhibit A and to make appropriate adjustments
to said prices to reasonably reflect any changes in Flextronics' costs of
manufacturing the Products. In particular, if the cost of any component
Flextronics uses to manufacture any Product hereunder Increases or decreases by
more than five percent (5%) from the cost of the component at the time of
entering into this Agreement (or the time of the latest price adjustment
pursuant to this Section 2.2, if appropriate), then an appropriate adjustment
shall be made to the price for each unit of the Product incorporating such
component.
3.0 Order Requirements.
------------------
3.1 Purchase Orders. Elcom will order Products by purchase order which
---------------
will set forth specifics as to ordered and forecasted amounts and delivery
dates. On or prior to the fifteenth (15th) day of each month, Elcom will deliver
a purchase order to Flextronics, setting forth the Elcom's orders, forecasts
and delivery schedule for the next seven months per the Material Management
agreement attached as Exhibit B. Upon acceptance and acknowledgment of Elcom's
purchase order by Flextronics, Elcom will be firmly and irrevocably obligated
to buy from Flextronics and Flextronics will be similarly obligated to sell and
deliver to Elcom the Products in accordance with the quantities and delivery
dates specified by the orders, except to the extent of permitted order
variations described in Sections 3.2 below.
2
<PAGE>
3.2 Order Forecast Variations. Elcom's purchase order quantities for any
-------------------------
specific month may vary from Elcom's previous purchase order quantities for
such month as follows:
Maximum Allowable Variance From
Purchase Order Quantities
-------------------------
Allowable Quantity decreases
----------------------------
<TABLE>
<CAPTION>
#Days before Maximum
Shipment Date on Reschedule
Purchase Order %Cancelable % Reschedulable Period
----------- --------------- ------
<S> <C> <C> <C>
0-30 X X X
31-60 X X X
61-90 X XXX XXXXXXX
91-120 X XXX XXXXXXX
121-150 XXX XXX XXXXXXX
151-180 XXX XXX XXXXXXXX
180+ XXXX
</TABLE>
Any purchase order quantities rescheduled pursuant to this Section 3.2 may not
subsequently canceled or rescheduled by Elcom without the prior written approval
of Flextronics.
3.3 Excess Inventory - Material in stores or on order to support Elcom's
----------------
deliveries outside the al1owable variance as stated above will be sold to the
Elcom at XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX of Flextronics cost. Inventory not
immediately dispositioned in this way will accrue carrying costs of XXXXXXXXXXX
XXXXXXXXXXXXXXXXXXX per XXXXXXXXXXX day period not to exceed a total of XXXXXX
XXXX days. Elcom must buy the excess inventory on the XXXXXXXXXXXXXXXXX XXX at
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX of Flextronics' cost. Flextronics will, to
the best of it's ability , attempt to limit Elcom's exposure by canceling or
selling excess inventory wherever reasonably possible. Excess inventory
generated by cancellations and/or reschedules allowed in table in 3.2 above is
nonetheless covered by the Material Management Agreement (exhibit B).
3:4 Initial Purchase Order. The quantities and delivery dates set forth
----------------------
in Exhibit C hereto are Elcom's initial firm order and forecast orders.
4.0 Set-Up Expenses: Property.
-------------------------
4.1 General. Flextronics will be required to engage certain engineers
-------
and other third parties to assist Flextronics in preparing to manufacture and in
manufacturing the Products and in performing its other obligations under this
Agreement (the "Set-Up Services") and to acquire certain tooling machinery,
equipment, fixtures and other property in connection with the manufacture of the
Products (the "Set-Up Property") Flextronics shall perform the Set-Up
3
<PAGE>
Services and acquire or develop the Set-Up Property only upon the receipt of a
purchase order from Elcom (a "Purchase Order") setting forth in reasonable
detail the actual set-up expenses to be incurred by Flextronics.
4.2 Reimbursement of Set-Up Expenses. Elcom shall reimburse Flextronics
--------------------------------
for expenses actually incurred by Flextronics in acquiring or developing the
Set-Up Property and performing the Set-Up Services. Elcom shall pay Flextronics
fifty percent (50%) of such expenses at the time Elcom delivers a Purchase
Order to Flextronics and Flextronics shall bill Elcom (payment terms shall be
net thirty (30) days) for the remaining fifty percent (50%) of such expenses
upon the completion by Flextronics of the work specified in the Purchase Order.
4.3 Ownership of Set-Up Property. Elcom shall own title to all Set-Up
----------------------------
Property. Flextronics shall hold all Set-Up Property and other property
provided to Flextronics by Elcom from time to time hereafter for Elcom, shall
exercise reasonable care in the use and custody of such property and shall use
such property only in performing its obligations under this Agreement.
5.0 Terms and Conditions.
--------------------
5.1 Changes in Specifications. Elcom may, during the term of this
-------------------------
Agreement, request changes to the specifications for the Products other than as
expressed in Exhibit A hereto by delivering to Flextronics an Engineering Change
Notice ("ECN") describing the changes and the proposed effective date of such
changes. Such changes shall be subject to the prior written approval of
Flextronics, which approval shall not be unreasonably withheld. If any such
implemented change causes an increase or decrease in the price of, or time
required for, the performance of any part of the work under this Agreement, an
equitable adjustment shall be made in the contract price and/or delivery
schedule and this Agreement shall be modified to reflect such equitable
adjustment. Flextronics will not be obligated to proceed with this Agreement as
modified until mutual agreement has been reached, reduced to writing and signed
by both parties, but Flextronics shall make all reasonable efforts to comply
with the requested changes pending such mutual agreement. In all cases Elcom
shall be responsible for obsolescence costs and additional set-up expenses
related to an ECN. Within thirty (30) days after Flextronics' written request to
Elcom therefor, with reasonable supporting detail in such request, Elcom (i)
will pay Flextronics, at 110% of Flextronics' documented cost therefor, for
inventory which Flextronics is not able to use in other products or resell at
its cost or better and (ii) will reimburse Flextronics for amounts required to
be paid by Flextronics under purchase orders it has placed, incurred as a result
of the ECN, to the extent Flextronics cannot cancel them using commercially
reasonable efforts. Flextronics will use commercially reasonable efforts to
minimize the amount of Elcom's liability for compensation to be paid to
Flextronics by Elcom under this Section 5.1.
4
<PAGE>
5.2 Components.
----------
5.2.1 Approved Vendor List. Attached as Exhibit D hereto is a Bill
--------------------
of Materials for each Product to be manufactured hereunder. Flextronics shall
manufacture the Products using components obtained from vendors included on
Elcom's List, as it may change from time to time, of vendors who are approved
sources of supply for such components.
5.2.2 Customer Supplied Components. Elcom shall be entitled to
----------------------------
supply components to Flextronics only with the written consent of Flextronics
and only in such amounts as are necessary for firm orders then placed by Elcom.
Such components, including provision for failed parts, shall be delivered to
Flextronics not later than three (3) weeks prior to the scheduled delivery date
for the related Products. Should Elcom be unable to meet such delivery
requirements, Elcom may at its option, request Flextronics to either (i) ship
products to Elcom absent the supplied parts on or after seven (7) days from
the scheduled delivery date or (ii) hold the Products pending receipt of such
components from Elcom. Under these circumstances, Elcom will give written
notification to Flextronics prior to the scheduled delivery date and Flextronics
may invoice Elcom for such Products on or after seven (7) days from the
scheduled delivery date. Elcom shall have no right of offset from the purchase
price of any Products purchased hereunder with respect to any amounts
Flextronics owes Elcom for Elcom supplied components.
5.2.3 Advance Purchase. Flextronics shall be entitled to purchase
----------------
materials and components for use in manufacturing the Products in advance of
receiving actual purchase orders from Elcom covering such Products, provided
that in no event shall such advance purchases exceed an amount that is
reasonable under the circumstances.
5.3 Acceptance and Inspection.
-------------------------
5.3.1 Acceptance Criteria. The basic acceptance criteria shall be
-------------------
conformance to the drawings, specifications, and test criteria specified in
Exhibit A and satisfaction of Flextronics' written workmanship and quality
standards as set forth in Exhibit E hereto.
5.3.2 Acceptance. Elcom shall inspect all Products promptly upon
----------
receipt thereof at the receiving destination and may reject any goods which fail
to meet the acceptance criteria as set forth in Section 5.3.1. Units not
rejected by written notification to Flextronics within fifteen (15) days of
receipt at Elcom's facilities shall be deemed to have been accepted.
5.3.3 AQL Rejection. If an entire shipment is rejected at the
-------------
incoming inspection based upon AQL level criteria or other similar sampling
techniques as set forth in Exhibit A, the following procedures shall be applied:
5
<PAGE>
(a) Elcom shall notify Flextronics of the rejection in writing
within five (5) days after rejection.
(b) Flextronics shall have the option, to be exercised in good
faith, of performing or requesting Elcom to perform an additional complete or
partial inspection of the rejected Products. This decision must be made within
five (5) days after receipt by Flextronics of Elcom's rejection notice. Such
additional inspection must be performed within ten (10) days after Flextronics
decision. The cost of such additional inspection will be borne by Flextronics.
5.3.4 Source Inspection. Elcom may, at its option, elect to inspect
-----------------
and accept Products at Flextronics' locations. Flextronics will provide
sufficient space for such inspection activities. Should Elcom elect to inspect
at Flextronics' location, Flextronics will not be obligated to hold completed
Products for Elcom inspection beyond seven (7) days from the scheduled delivery
date.
5.3.5 Defected Units. Defective units detected by inspection will
--------------
promptly be returned to Flextronics, at Flextronics' expense, and will be
repaired or replaced by Flextronics within twenty (20) days of Flextronics'
receipt thereof.
5.4 Shipment. Delivery will be F.O.B. Flextronics' initial shipping
--------
point. Shipments will he made in Flextronics' standard shipping package. Title
and risk of loss of Products purchased under this Agreement shall pass to Elcom
upon shipment thereof by Flextronics.
5.5 Payment. Except as may be otherwise agreed by the parties hereto in
-------
writing, Elcom agrees to pay Flextronics the purchase price as determined by
applying the pricing formula set out in Exhibit A. Payment terms will be due net
thirty (30) days from shipment date. All late payments shall incur a finance
charge of one and one-ha1f percent (1 1/2%) per thirty (30) day period which
Elcom herewith agrees to pay, but which charge shall be waived if payment is
received by Flextronics not later than fifteen days from payment due date.
Flextronics may require a stand-by letter of credit (LOC) to ensure payment.
Flextronics will, in good faith, review Elcom's creditworthiness periodically
and will provide more favorable terms once it feels it is prudent to do so.
Elcom agrees to provide necessary financial information required for Flextronics
to make a proper assessment of creditworthiness.
5.6 Taxes. Elcom shall bear all applicable U.S. Federal, state, municipal
-----
and other governmental taxes, duties and charges (such as sales, use, customs,
duty and similar charges) and all personal property taxes assessable on the
Products. Elcom shall in no event be liable for taxes levied on Flextronics
based upon its income. Flextronics will allow Elcom or Elcom's agent to minimize
any taxes or duties as allowed by law and will verify, certify, or otherwise
sign any applicable documents that allow reduction or elimination of taxes or
duties.
6
<PAGE>
5.7 Security. (To be individually negotiated.)
--------
5.8 Warranty Limitation on Liability.
--------------------------------
5.8.1 General. Flextronics warrants that each unit of Product will
-------
meet Elcom's specifications therefor described in Exhibit A and will be free
from defects in material and workmanship for a period of XXX XXXXXXX XXX XXXXXX
XXXXX days after receipt by Elcom of such units. This warranty does not extend
to Elcom supplied components.
5.8.2 Failure to Comply with Warranty. Upon failure of any unit of
-------------------------------
Product to comply with the above warranty, Flextronics will, at its option,
promptly repair or replace such unit or, if unable to repair or replace it,
promptly refund in cash to Elcom the amount paid by Elcom for such unit.
THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES EITHER
EXPRESSED OR IMPLIED INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
5.8.3 Limitation of Liability. Any provision herein to the contrary
-----------------------
notwithstanding, in no event shall Flextronics be liable for indirect,
incidental or consequential damages and in no event shall the liability of
Flextronics arising in connection with any products sold hereunder (whether such
liability arises from a claim based on contract, warranty, tort, or otherwise)
exceed the actual amount paid by Elcom to Flextronics for Products delivered
hereunder.
6.0 Default; Termination.
--------------------
6.1 Default. Either Elcom, or Flextronics (the "terminating party"), may,
------- -----------------
by ten (10) days' prior written notice to the other party (the "other party")
-----------
terminate this Agreement and all or any of the privileges, permissions, and
rights granted hereunder or in connection herewith in whole or in part, (a) if
the other party defaults in any payment to the terminating party called for in
this Agreement and such default continues unremedied for a period of fifteen
(15) days after the date of delivery of written notice thereof by the
terminating party to the other party, or (b) if the other party defaults in the
performance by it of any other material term or condition of this Agreement, or
of any purchase order issued pursuant to this Agreement, and such default
continues unremedied for a period of thirty (30) days after the date of delivery
of written notice thereof by the terminating party to the other party. The
effective date of termination will be the date therefor stated in any
termination notice given hereunder, which date will not be before the expiration
of the applicable cure period provided for herein.
7
<PAGE>
6.2 Termination for Bankruptcy. Either party may immediately terminate
--------------------------
this Agreement if the other party is adjudicated bankrupt, or if a receiver is
appointed for the other party or for a substantial portion of its assets, or if
an assignment for the benefit of creditors of the other party is made, or if the
other party is dissolved or liquidated or has a petition for dissolution or
liquidation filed which is not dismissed within forty-five (45) days with
respect to it.
6.3 Obligations Upon Termination or Expiration. Upon the expiration or
------------------------------------------
termination of this Agreement as set forth in Sections 1.0 or 6.0 hereto,
Flextronics will complete units of Product as scheduled at the date of
termination; provided, however, that if Elcom requests on the basis of lack of
requirement by Elcom for such units, Flextronics will negotiate in good faith to
agree with Elcom on a price for partially completed units and inventory of
purchased parts, net of any amounts paid by or on behalf of Elcom to
Flextronics' suppliers, but in no event will Flextronics be required to accept a
price lower than that price otherwise payable pursuant to Exhibit A as
calculated before taking into account any such payments to Flextronics'
suppliers. Flextronics will make reasonable attempts to restock or utilize
common material (i.e., that which is not specific to Products but is used in
their production) and to resell, and to otherwise promptly and in good faith
attempt to mitigate Elcom's liability hereunder. Where this is not feasible or
to the extent that Flextronics is unsuccessful in such attempts, such common
material (including common material purchased by Flextronics prior to receipt of
a purchase order from Elcom as set forth in Section 5.2.3) may be sent to Elcom,
and Flextronics may bill Elcom therefor (and if so billed, Elcom will pay) at
110% of Flextronics' documented cost therefor. All other inventory and raw
materials (including inventory and raw materials purchased by Flextronics prior
to receipt of a purchase order from Elcom as set forth in Section 5.2.3) either
in stock or on order and not cancelable by Flextronics without penalty, as
determined by Flextronics' purchase documentation therefor, also may be
delivered to Elcom as it is received by Flextronics and Flextronics may bill
Elcom therefor (and if so billed, Elcom will pay) at 110% of Flextronics'
documented cost therefor.
7.0 Proprietary Rights: Indemnification.
-----------------------------------
7.1 No Express or Implied License. Nothing in this Agreement will be
-----------------------------
construed as granting to Flextronics or conferring on Flextronics any rights by
license or otherwise to Elcom's patents, trademarks, copyrights, or other
proprietary or confidential rights except as specifically set forth in this
Agreement or other written agreements between the parties hereto.
7.2 Indemnification. Elcom shall defend, indemnify and hold harmless
---------------
Flextronics from all claims, costs, damages, judgments and attorney's fees
resulting from or arising out of any alleged and/or actual infringement or other
violation of any patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, trade secrets, proprietary rights and
processes or other such rights in connection with the performance by Flextronics
of its obligations under this Agreement.
8
<PAGE>
8.0 Miscellaneous.
-------------
8.1 Confidentiality. The parties acknowledge that in the course of
---------------
performance of their obligations under this Agreement, each party may obtain
certain confidential and proprietary information of the other party, including
without limitation information concerning copyrighted works, patented or patent
pending investigations or developments, and general information regarding such
party's financial, business and marketing matters. The parties hereby mutually
agree that all such information communicated to it by the other party will be
held in strict confidence and not disclosed to any third parties, and each party
will use all reasonable efforts to protect against the unauthorized use and
disclosure of the confidential information of the other party: provided that
each party may disclose each other's confidential information to their
respective responsible employees, but only to the extent necessary to carry out
the purposes for which the confidential information was disclosed, and each
party agrees to instruct all such employees not to disclose such confidential
information to third parties, including consultants, without the prior written
permission of the party disclosing such confidential information Each party
further agrees not to use or allow the use of any confidential information of
the other party disclosed to it except in accordance with the purposes of this
Agreement. The provisions of this Section 8.1 will not extend to confidential
information that is already known to the receiving party at the time that it is
disclosed to the receiving party and which knowledge is not wrongfully obtained,
or which, before being divulged by the receiving party, (a) has become publicly
known through no wrongful act of the receiving party, (b) has been rightfully
received from a third party without restriction on disclosure and without a
breach of this Agreement, (c) has been independently developed by the receiving
party, (d) has been approved for release by written authorization of the
disclosing party, (e) has been furnished by the disclosing party to a third
party without a similar restriction on disclosure, or (f) has been or must be
disclosed by reason of legal, accounting or regulatory requirements beyond the
reasonable control of the receiving party or the disclosing party.
8.2 Relationship of Parties. The parties' relationship during the term of
-----------------------
this Agreement and under purchase orders placed pursuant hereto will be that of
independent contractors. Neither party has, or will not represent that it has,
any power, right or authority to bind or to incur any changes or expenses on
behalf of the other party or in the other party's name without the written
consent of the other party.
8.3 Force Majeure. Neither party hereto will be liable for any failure to
-------------
perform any obligation under this Agreement, or for delay in such performance,
to the extent such failure to perform or delay is caused by circumstances beyond
its reasonable control that make such performance commercially impractical,
including without limitation fire, storm, flood, earthquake, explosion,
accident, war, acts of a public enemy or rebellion, insurrection, sabotage,
epidemic, quarantine restrictions, labor disputes, labor shortages,
transportation embargoes, delays in transportation, shortages of materials,
fuels or power, acts of God, acts
9
<PAGE>
of any government or any agency thereof and judicial action. Any suspension of
performance by reason of this Section 8.3 will be limited to the period during
which the cause of suspension exists.
8.4 Severability. If any of the provisions of this Agreement are found by
------------
any court or tribunal of competent jurisdiction to be unenforceable, then such
provisions will be enforced to the maximum extent permissible, and the remaining
provisions of this Agreement will be unaffected thereby and will remain in full
force and effect.
8.5 Whole Agreement; Modification. This Agreement, including all
-----------------------------
documents to be delivered by the parties hereto and described herein, represents
the entire understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior representations, understandings and
agreements, whether oral or written, with respect to such subject matter. This
Agreement may be modified only by a writing executed by both parties hereto.
8.6 Assignment. This Agreement will be binding upon and inure to the
----------
benefit of the successors and assigns of the parties, but neither party may
assign any rights or delegate any duties under this Agreement, voluntarily or
involuntarily, without the prior written consent of the other, which will not be
unreasonably withheld, and any attempt by either party to assign any rights or
delegate any duties under this Agreement without such consent will be void and
of no effect.
8.7 Waiver. No Waiver of any provision of this Agreement shall be
------
effective except by written agreement signed by both parties. The failure by any
party at any time to require performance of the other party of any provision of
this Agreement will in no way affect the right of such party thereafter to
enforce the same provision, nor will the waiver by any party of any breach of
any provision hereof be taken or held to be a waiver of any other or subsequent
breach, or as a waiver of the provision itself.
8.8 Governing Law and Jurisdiction. This Agreement:nnt will be governed
------------------------------
by and construed in accordance with the laws of the State of California without
reference to such state's laws regarding choice of law.
8.9 Notices and Consents. All notices and other communications required
--------------------
or permitted under this Agreement will be in writing, and will be deemed given
(i) when delivered personally, (ii) when sent by confirmed telex or facsimile
transmission, (iii) one (1) day after having been sent by commercial overnight
courier with written verification of receipt, or (iv) five (5) days after having
been sent by registered or certified airmail, return receipt requested, postage
prepaid, or upon actual receipt thereof, whichever first occurs. All
communications will be sent to the receiving party's address on the first page
of this
10
<PAGE>
Agreement or to such other address that the receiving party may have provided
for purpose of notice as provided in this Section 8.9.
8.10 Attorney's Fees. If any action of law or inequity is necessary to
---------------
enforce or interpret the terms of this Agreement, the prevailing party will be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
8.11 Use of Standard Purchase Order. Elcom may use its standard purchase
------------------------------
order form to release items, quantities, prices, schedules, change notices,
specifications, or other notice provided for hereunder. In the event of any
conflict, discrepancy, or inconsistency between this Agreement and any purchase
order or other document delivered pursuant hereto, such purchase order or other
document shall be governed by the terms and conditions of this Agreement to the
extent of such conflict, discrepancy, or inconsistency.
8.12 Headings and References. The headings and captions used in this
-----------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. All references in this Agreement to
Sections and Exhibits will, unless otherwise provided, refer to Sections hereof
and Exhibits attached hereto, all of which are incorporated herein by this
reference.
8.13 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed or organized, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement through
the signatures of their duly authorized representatives as set forth below.
ELCOM FLEXTRONICS MALAYSIA
BY:/s/ George Daly By: /s/ [SIGNATURE ILLEGIBLE]
------------------------- -------------------------
NAME: GEORGE DALY NAME: S.L. TSNI
----------------------- ------------------------
TITLE: DIRECTOR OPERATIONS TITLE: PRESIDENT, CEO
---------------------- -----------------------
11
<PAGE>
- -------------
ELCOM TECHNOLOGIES CORPORATION
78 Great Valley Parkway Telephone: (610) 408-0130
Malvern, PA 19355 Fax: (610) 408-0136
[LOGO OF ELCOM TECHNOLOGIES APPEARS HERE] PURCHASE ORDER
- --------------------------------------------------------
To:
- ---------
Flextronics International Marketing (L) Ltd.
512 Chal Chee Lane
#04-13
Singapore 1646514
- --------------------------------------------------------
- --------------------------------------------------------
Ship To:
- ---------
Marjorie Kouch, Purchasing
Elcom Technologies Corporation
78 Great Valley Parkway
Malvern, PA 19355
- --------------------------------------------------------
- ----------------
Issue Date: 6/10/96
- -----------------------------------------
- ----------------
P.O. Number: 6365
- -----------------------------------------
- ----------------
REV: C
- -----------------------------------------
Page 1 of 2
- ----------------
Order Placed On: 2/7/96
- -----------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Terms: Net 30 Ship Via POB: Malaysia Inspection Confirming
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Item Elcom Part No Description/Manufacturer/Part No. Date Due Qty
- -----------------------------------------------------------------------------------------------------------------------------------
1 ezPHONE Base/with consigned material x
Release 1: x 3/29/96
Release 2: x TBD
2 ezPHONE Extension/with consigned material x
Release 1: x 3/29/96
Release 2: x TBD
3 ezTV Receiver/with consigned matrial x
Release 1: x 3/29/96
Release 2: x TDB
4 ezTV Transmitter/with consigned material x
Release 1: x 3/29/96
Release 2: x TBD
5 ezTV Remote Kit x
Release 1: x 3/29/96
Release 2: x TBD
NRE Costs:
6 ezPHONE Production
7 ICT Software & Fixture x
8 ezTV Production
9 ICT Software & Fixture x
10 ezTV Remote Tooling
11 x of AB Switch @ x ea.
12 x Overpack boxes @ x
- -----------------------------------------------------------------------------------------------------------------------------------
===================================================================================================================================
*** Please Notify Us Immediately If We Will Not Receive This Order By:
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Terms: Net 30 Ship Via POB: Malaysia Requisitions:
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Item Elcom Part No Description/Manufacturer/Part No. Unit Price Ext Price Project No.
- -----------------------------------------------------------------------------------------------------------------------------------
1 ezPHONE Base/with consigned material $ XXXX $ XXXXXXXXXX
Release 1:
Release 2:
2 ezPHONE Extension/with consigned material $ XXXX $ XXXXXXXXXX
Release 1:
Release 2:
3 ezTV Receiver/with consigned matrial $ XXXX $ XXXXXXXXXX
Release 1:
Release 2:
4 ezTV Transmitter/with consigned material $ XXXX $ XXXXXXXXXX
Release 1:
Release 2:
5 ezTV Remote Kit $ XXXX $ XXXXXXXXX
Release 1:
Release 2:
NRE Costs:
6 ezPHONE Production $ XXXXXXXX $ XXXXXXXX
7 ICT Software & Fixture $ XXXXXXXX $ XXXXXXXX
8 ezTV Production $ XXXXXXXX $ XXXXXXXX
9 ICT Software & Fixture $ XXXXXXXX $ XXXXXXXX
10 ezTV Remote Tooling $ XXXXXXXXX $ XXXXXXXXX
11 of AB Switch @ $ XXXXXXXX
12 Overpack boxes @ $ XXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal: XXXXXXXXXX
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Order Subtotal XXXXXXXXXX
------------------
</TABLE>
- ----------------------------------------------
Send Correspondence To:
Marjorie Kouch
Purchasing
Elcom Technologies Corporation
78 Great Valley Parkway
Malvern, PA 19355
- ----------------------------------------------
- ----------------------------------------------
Send Billing Information To:
Robert B. Sendo
VP Finance
Elcom Technologies Corporation
78 Great Valley Parkway
Malvern, PA 19355
- ----------------------------------------------
Approved By Date 6-10-96
----------------------- -------
EXHIBIT A
<PAGE>
EXHIBIT B
ELCOM MATERIAL MANAGEMENT AGREEMENT
ELCOM will release FIRM ORDERS no later than XX days prior to required ship date
(months X through X). Outside this FIRM ORDER window Flextronics will procure
material with lead times longer than X weeks per the ELCOM FORECAST. ELCOM will
release their FORECAST the first week of each month listing forecasted delivery
requirements for months X through X.
No specific approval, beyond this agreement, is required to purchase material to
support shipments in months X through X. As part of this agreement, Flextronics
will provide a long lead-time listing to ELCOM quarterly. This document will
specify all components that Flextronics must purchase based on FORECAST, their
lead times and costs. An additional report will be compiled that will illustrate
total exposure by product for any given month.
Components with lead times so long that they are not covered by the X month
window will be listed and provided to ELCOM for buy approval in a separate
document.
In the event of FIRM ORDER OR FORECAST cancellation, Flextronics will to the
best of our ability, attempt to cancel or re-schedule material on order to
support ELCOM's original requirements. ELCOM assumes full financial
responsibility for this material and agrees to pay Flextronics in accordance
with section 3.3 of the manufacturing agreement.
ELCOM TECHNOLOGIES FLEXTRONICS INTERNATIONAL
/s/George Daly /s/[SIGNATURE ILLEGIBLE]
- ---------------------------- ----------------------------------
Authorized Signature Authorized Signature
Title: DIRECTOR OPERATIONS Title: S.L. TSNI - PRESIDENT, CEO
---------------------- ----------------------------
Date: 4-29-96 Date: MAY 16, 1996
----------------------- -----------------------------
13
<PAGE>
MEMO AGREEMENT
Elcom Technologies Corporation ("ELCOM") will issue a purchase order to Adaptive
Networks, Inc. ("ANI") for 50,000 AN192 Chip Sets @ $31.00 for a total purchase
order of $1,550,000.00, due on Thursday, July 18, 1996.
ELCOM will make a deposit with ANI of 25% of the total purchase order for a
total deposit of $387,500.00 (the "DEPOSIT"), due on Thursday, July 18, 1996.
Scheduled deliveries of chip set:
- --------------------------------
August 30, 1996 1,000
September 30, 1996 4,500
October 28, 1996 2,000
November 30, 1996 7,500
December 30, 1996 7,500
January 30, 1997 5,000
February 28, 1997 5,000
March 30, 1997 7,500
April 30, 1997 10,000
The entire DEPOSIT of $387,500.00 will be refunded to ELCOM in the event that
the first scheduled delivery of Chip Sets is made by ANI after September 30,
1996, or in the event that the second or third deliveries of Chip Sets are
delivered by ANI 60 days late as outlined above, provided that ELCOM meets all
of the terms of the order, including those provided in this agreement. Provided
that ELCOM meets all of the terms of the order, including those provided in this
agreement, in the event that any other deliveries of Chip Sets, scheduled above,
are not made within a reasonable period of time, the remaining balance of the
DEPOSIT, as calculated below, shall be refunded to ELCOM. Under all conditions,
a reasonable period of time shall include delays in deliveries due to unforeseen
circumstances or due to causes beyond ANI's control including, but not limited
to, acts of nature, acts of government, labor disputes, delays in
transportation, and delays or inability to deliver by ANI's suppliers, and under
all conditions shall not be less than 120 days. Under all other conditions, the
DEPOSIT shall be applied against ELCOM's account payable balance to ANI for the
Chip Sets as ordered above, as provided below, with the exception of the DEPOSIT
being nonrefundable in the event of any cancellation of the order or deliveries
by ELCOM.
A credit of twenty five percent (25%) will be issued by ANI to ELCOM with each
delivery of Chip Sets ordered above, by ANI to ELCOM, thereby reducing the
amount of the DEPOSIT. The remaining seventy five percent (75%) of all ANI
invoices shall be paid by ELCOM Net 30.
In the event that any of the DEPOSIT shall be due to be returned to ELCOM for
any reason as provided above, ANI shall return said DEPOSIT, or any portion
thereof, less any and all outstanding amount due and payable to ANI, no later
than thirty (30) days from receipt of Notice from ELCOM. In the event said
DEPOSIT, or any portion thereof, less any and all outstanding amount due and
payable to ANI, is not returned as provided in this agreement, ELCOM shall be
due from ANI all costs of collection, including reasonable attorney fees
associated with the collection of the DEPOSIT or any portion thereof.
Agreed: /s/ Michael Propp /s/ George Daly
---------------------------- ------------------------------------
Adaptive Networks, Inc. Elcom Technologies Corporation
By: Michael Propp By: George Daly
July 17, 1996 July 17, 1996
---------------------------- ------------------------------------
Date Date
<PAGE>
ELCOM TECHNOLOGIES CORPORATION
SETTLEMENT AGREEMENT WITH CHARLES ABRAHAM
Closing Date: July 21, 1995
(All documents dated July 21, 1995 unless otherwise noted)
================================================================================
INDEX
================================================================================
1. Settlement Agreement, Mutual General Releases and Assignment of
Intellectual Property Rights (the "Settlement Agreement") by and among
Charles Abraham ("Abraham"), Elcom Technologies Corporation ("Elcom"),
Robert A. Vito ("Vito") and Paul Kouch ("Kouch")
2. Exhibit A to Settlement Agreement - Escrow Agreement ("Escrow Agreement")
by and among Elcom, Vito, Kouch, Abraham, Powell, Trachtman, Logan, Carrle
& Bowman and Astor Weiss Kaplan & Rosenblum
3. Exhibit B to Settlement Agreement - Sales Royalty Judgement Note executed
by Elcom in the principal amount of up to $100,000.00 (held in escrow
pursuant to the Escrow Agreement)
4. Exhibit C to Settlement Agreement - Investment Royalty Judgement Note
executed by Elcom in the principal amount of up to $100,000.00 (held in
escrow pursuant to the Escrow Agreement)
5. Exhibit D to Settlement Agreement - Schedule of Patent and Patent
Applications assigned to Abraham
6. Exhibit E to Settlement Agreement - Resignation of Abraham as a director,
officer and employee of Elcom
7. Exhibit F to Settlement Agreement - General Releases
a. Release executed by Abraham
b. Release executed by Elcom
c. Release executed by Vito
d. Release executed by Kouch
8. Exhibit G to Settlement Agreement - General Release by Arthur Werner,
Esquire, Lee Schwartz, Esquire and Werner & Schwartz, P.C. in favor of
Abraham
<PAGE>
9. Exhibit H to Settlement Agreement - Revocation and Substitution of New
Power of Attorney
10. Patent Assignment
11. Canadian Patent Application Assignment dated July 31, 1995
12. July 27, 1995 letter from Benjamin E. Leace, Esquire to Robert B.
Famiglio transferring files relating to the patent and patent
applications assigned to Abraham
13. Settlement Inventory List executed by Abraham
14. Elcom Stock Certificate Number 1001 representing 4,000,000 shares issued
in the name of Abraham, duly endorsed to Elcom
15. Elcom Stock Certificate Number 1196 representing 100,000 shares issued
in the name of Abraham
16. Letter from Benjamin E. Leace to German counsel enclosing executed
documents and filing fee regarding preserving EPO patent application
17. Cashier's and Elcom Check in the aggregate amount of $190,000.00 made
payable to Abraham
18. Praecipe to Settle, Discontinue and End filed with the Prothonotary of
Montgomery County on July 28, 1995
19. Side Letter from Elcom to Abraham regarding search for Abraham listed
property
<PAGE>
Exhibit D
I. Patent Applications:
-------------------
1) U.S. Patent Application by Charles Abraham for IMPROVED
TRANSFORMER COUPLER FOR COMMUNICATION OVER VARIOUS LINES
Serial No.: 08/270,002 Filed: July 1, 1994
2) File Wrapper Continuation Application from Application Serial No.
07/822,326 for TRANSFOMER COUPLER FOR COMMUNICATION OVER VARIOUS LINES
3) PCT Patent Application No. PCT/US90/02291--Priority of U.S. Serial
No. 08/270,002 Filed July 1, 1994
4) EPO Patent Application No. 90 907 855.2 Corresponding to
International Appl. No. PCT/US90/02291--Priority of U.S. Serial No.
08/270,002 Filed July 1, 1994
5) PCT Patent Application No. PCT/US93/04726--Priority of U.S. Serial
No. 07/884,123 Filed May 18, 1992
6) EPO Patent Application No. 93 913 976.2 Corresponding to
International Appl. No. PCT/US93/04726--Priority of U.S. Serial No.
07/884,123 Filed May 18, 1992
7) Canadian Patent Application No. 2,135,918 Corresponding to
International Appl. No. PCT/US93/04726--Priority of U.S. Serial No.
07/884,123 Filed May 18, 1992
8) Japanese Patent Application No. 6-503823 Corresponding to
International Appl. No. PCT/US93/04726--Priority of U.S. Serial No.
07/884,123 Filed May 18, 1992
<PAGE>
9) Russian Patent Application No. 94046009.00 Corresponding to
International Appl. No. PCT/US93/04726--Priority of U.S. Serial No.
07/884,123 Filed May 18, 1992
10) U.S. Patent Application by Charles Abraham for SYSTEM AND METHOD
FOR HIGH SPEED COMMUNICATION OF VIDEO, VOICE AND ERROR-FREE DATA OVER
IN-WALL WIRING
Serial No.: 08/180/421 Filed: January 11, 1994
11) PCT Patent Application No. PCT/US95/00354--Priority of U.S.
Serial No. 08/180,421 Filed January 11, 1994
12) U.S. Patent Application by Charles Abraham for VIDEO DISTRIBUTION
SYSTEM USING IN-WALL WIRING Serial No.: 08/304,495
Filed: September 12, 1994
13) U.S. Patent Application by Charles Abraham for POWER LINE
CIRCUITS AND ADAPTERS FOR COUPLING CARRIER FREQUENCY CURRENT SIGNALS
BETWEEN POWER LINES
Serial No.: 08/349,041 Filed December 2, 1994
II. Issued Patent:
-------------
1) U.S. Patent No. 5.351,272 titled COMMUNICATIONS APPARATUS AND
METHOD FOR TRANSMITTING AND RECEIVING MULTIPLE MODULATED SIGNAL OVER
ELECTRICAL LINES issued on September 27, 1994
- The above listed patent applications and patent are all currently
pending or issued patent applications or patents listing Charles Abraham (or his
other name(s)) as an inventor and assigned to Elcom Technologies Corporation.
Robert A. Vito 7/21/95
-----------------------------------------
<PAGE>
RESIGNATION
-----------
I, CHARLES ABRAHAM, hereby resign as a director, officer and employee of
ELCOM TECHNOLOGIES CORPORATION, a Pennsylvania corporation, as of the date
hereof.
/s/ Charles Abraham
-------------------
CHARLES ABRAHAM
DATE: July 21, 1995
<PAGE>
GENERAL RELEASE
---------------
KNOW ALL MEN BY THESE PRESENTS that I, Charles Abraham, for and in
consideration of the mutual covenants contained in a "Settlement Agreement,
Mutual General Releases and Assignment of Intellectual Property Rights" dated
even date herewith by and among Elcom Technologies Corporation ("Elcom"), Robert
Vito ("Vito"), Paul Kouch ("Kouch") and Charles Abraham ("Abraham")(the
"Agreement"), the sufficiency of which is hereby acknowledged and intending to
be legally bound hereby, except for the continuing obligations of Elcom, Vito
and Kouch as set forth in the Agreement and subject to the terms of the
Agreement, do hereby remise, release, and forever discharge Vito, Kouch, Elcom,
its directors, officers, employees, former employees and agents, including but
not limited to Arthur Werner, Esquire, Lee Schwartz, Esquire, the law firm of
Werner & Schwartz, P.C. (as to Werner, Schwartz and Werner & Schwartz, P.C., in
reliance upon a letter dated July 20, 1995 from Lee Schwartz, Esquire to Joel
Perilstein, Esquire and Steven Smith, Esquire), Benjamin E. Leace, Esquire, the
law firm of Astor Weiss Kaplan & Rosenblum and the law firm of Ratner & Prestia,
their heirs, administrators, executors, successors and assigns, of and from all
actions, causes of action, suits, debts, dues, accounts, bonds, covenants,
contracts, agreements, judgments, claims and demands whatsoever in law or
equity, including, but not limited to, all those claims raised in the lawsuit
captioned CHARLES ABRAHAM v. ROBERT A. VITO and PAUL KOUCH, Montgomery County,
--------------------------------------------------------------------
C.P. No 95-08987, which the said
- ----------------
<PAGE>
Charles Abraham ever had, now has, or which his heirs, administrators,
executors, successors or assigns, hereafter can, shall or may have, for, or by
reason of any cause, matter, or thing whatsoever, from the beginning of the
world to the date of these presents. This release shall be governed by the law
of the Commonwealth of Pennsylvania.
IN WITNESS THEREOF, I have hereunto set my hand and seal the 21 day of
----
July, 1995.
- ----
/s/ [SIGNATURE ILLEGIBLE] /s/ Charles Abraham
- ------------------------------ -----------------------------
WITNESS CHARLES ABRAHAM
<PAGE>
GENERAL RELEASE
---------------
KNOW ALL MEN BY THESE PRESENTS that Elcom Technologies Corporation, for and
in consideration of the mutual covenants contained in a "Settlement Agreement,
Mutual General Releases and Assignment of Intellectual Property Rights" dated
even date herewith by and among Elcom Technologies Corporation ("Elcom"), Robert
Vito ("Vito"), Paul Kouch ("Kouch") and Charles Abraham ("Abraham") (the
"Agreement"), the sufficiency of which is hereby acknowledged and intending to
be legally bound hereby, except for the continuing obligations of Abraham as
set forth in the Agreement and subject to the terms of the Agreement, does
hereby remise, release, and forever discharge Abraham, his wife, Abraham
Communications, Inc. and their agents, successors and assigns, including but not
limited to the law firm of Powell Trachtman Logan Carrle & Bowman, their heirs,
administrators, executors, successors and assigns, of and from all actions,
causes of action, suits, debts, dues, accounts, bounds, covenants, contracts,
agreements, judgments, claims and demands whatsoever in law or equity, which the
said Elcom Technologies Corporation ever had, now has, or which its successors
or assigns, hereafter can, shall or may have, for, or by reason of any cause,
matter, or thing whatsoever, from the beginning of the world to the
<PAGE>
date of these presents. This release shall be governed by the law of the
Commonwealth of Pennsylvania.
IN WITNESS THEREOF, I have hereunto set my hand and seal the 21st day of
----
July, 1995.
- ----
ATTEST ELCOM TECHNOLOGIES CORPORATION
/s/ Paul Kouch By: /s/ Robert Vito
- ------------------ ---------------------
Robert Vito
Its:
<PAGE>
GENERAL RELEASE
---------------
KNOW ALL MEN BY THESE PRESENTS that I, Robert Vito, for and in
consideration of the mutual covenants contained in a "Settlement Agreement,
Mutual General Releases and Assignment of Intellectual Property Rights" dated
even date herewith by and among Elcom Technologies Corporation ("Elcom"), Robert
Vito ("Vito"), Paul Kouch ("Kouch") and Charles Abraham ("Abraham") (the
"Agreement"), the sufficiency of which is hereby acknowledged and intending to
be legally bound hereby, except for the continuing obligations of Abraham as set
forth in the Agreement and subject to the terms of the Agreement, do hereby
remise, release, and forever discharge Abraham, his wife, Abraham
Communications, Inc. and their agents, successors and assigns, including but not
limited to the law firm of Powell Trachtman Logan Carrle & Bowman, their heirs,
administrators, executors, successors and assigns, of and from all actions,
causes of action, suits, debts, dues, accounts, bonds, covenants, contracts,
agreements, judgments, claims and demands whatsoever in law or equity, which the
said Robert Vito ever had, now has, or which his heirs, administrators,
executors, successors or assigns, hereafter can, shall or may have, for, or by
reason of any cause, matter, or thing whatsoever, from the beginning of the
world to the date of these presents. This release shall be governed by the law
of the Commonwealth of Pennsylvania.
IN WITNESS THEREOF, I have hereunto set my hand and seal the 21st day of
----
July 1995.
- ----
[UNKNOWN SIGNATURE APPEARS HERE] /s/ Robert Vito
- -------------------------------- -------------------------------
WITNESS ROBERT VITO
<PAGE>
GENERAL RELEASE
---------------
KNOW ALL MEN BY THESE PRESENTS that I, Paul Kouch for and in consideration
of the mutual covenants contained in a "Settlement Agreement, Mutual General
Releases and Assignment of Intellectual Property Rights" dated even date
herewith by and among Elcom Technologies Corporation ("Elcom"), Robert Vito
("Vito"), Paul Kouch ("Kouch") and Charles Abraham ("Abraham") (the
"Agreement"), the sufficiency of which is hereby acknowledged and intending to
be legally bound hereby, except for the continuing obligations of Abraham as set
forth in the Agreement and subject to the terms of the Agreement, do hereby
remise, release, and forever discharge Abraham, his wife, Abraham
Communications, Inc. and his agents, successors and assigns, including but not
limited to the law firm of Powell Trachtman Logan Carrle & Bowman, their heirs,
administrators, executors, successors and assigns, of and from all actions,
causes of action, suits, debts, dues, accounts, bonds, covenants, contracts,
agreements, judgments, claims and demands whatsoever in law or equity, which the
said Paul Kouch ever had, now has, or which his heirs, administrators,
executors, successors or assigns, hereafter can, shall or may have, for, or by
reason of any cause, matter, or thing whatsoever, from the beginning of the
world to the date of these presents. This release shall be governed by the law
of the Commonwealth of Pennsylvania.
IN WITNESS THEREOF, I have hereunto set my hand and seal the 21st day of
July, 1995.
/s/ ? /s/ Paul Kouch
- --------------------------- -------------------------
WITNESS PAUL KOUCH
<PAGE>
GENERAL RELEASE
---------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned, Arthur Werner,
Esquire, Lee Schwartz, Esquire and Werner & Schwartz, P.C. for and in
consideration of the mutual covenants contained in a "Settlement Agreement,
Mutual General Releases and Assignment of Intellectual Property Rights" dated
even date herewith by and among Elcom Technologies Corporation ("Elcom"), Robert
Vito ("Vito"), Paul Kouch ("Kouch") and Charles Abraham ("Abraham") (the
"Agreement"), the sufficiency of which is hereby acknowledged and intending to
be legally bound hereby, except for the continuing obligations of Abraham as set
forth in the Agreement and subject to the terms of the Agreement, do hereby
remise, release, and forever discharge Abraham, his wife, Abraham
Communications, Inc. and his agents, successors and assigns, including but not
limited to the law firm of Powell Trachtman Logan Carrle & Bowman, their heirs,
administrators, executors, successors and assigns, of and from all actions,
causes of action, suits, debts, dues, accounts, bonds, covenants, contracts,
agreements, judgments, claims and demands whatsoever in law or equity, which the
undersigned ever had, now has, or which their heirs, administrators, executors,
successors or assigns, hereafter can, shall or may have, for, or by reason of
any cause, matter, or thing whatsoever, from the beginning of the world to the
date of these presents. This release shall be governed by the law of the
Commonwealth of Pennsylvania.
<PAGE>
IN WITNESS THEREOF, the undersigned have hereunto set their hands and
seals the 21st day of July, 1995.
------ ----
/s/ Arthur Werner
- ---------------------------- -------------------------------
WITNESS ARTHUR WERNER, ESQUIRE
/s/ Lee Schwartz
- ---------------------------- -------------------------------
WITNESS LEE SCHWARTZ, ESQUIRE
WERNER & SCHWARTZ, P.C.
By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------
<PAGE>
IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
Applicant: Charles Abraham
Serial No.: 5,351,272
Issued: September 27, 1994
FOR: COMMUNICATION APPARATUS AND METHOD FOR TRANSMITTING AND RECEIVING
MULTIPLE MODULATED SIGNALS OVER ELECTRICAL LINES
REVOCATION OF PRIOR POWER OF ATTORNEY
AND SUBSTITUTION OF NEW POWER OF ATTORNEY
-----------------------------------------
Assistant Commissioner for Patents
Washington, D.C. 20231
Sir:
The undersigned Assignee of the above-identified patent hereby revokes
all prior Powers of Attorney and appoints Robert B. Famiglio, Esquire, Reg. No.
29,305, to transact all business in the Patent and Trademark Office connected
herewith.
Send Correspondence To:
Robert B. Famiglio, Esquire
FAMIGLIO & MASSINGER
201 North Jackson Street
P.O. Box 1999
Media, Pennsylvania 19063
Direct Telephone Calls To:
Robert B. Famiglio, Esquire
610-566-6800
Respectfully submitted,
Charles Abraham
Dated: 8/9/95 /s/ Charles Abraham
---------- ----------------------
<PAGE>
IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
Applicant: Charles Abraham : Art Unit:
Serial No.: 08/304,495 : Examiner:
Filed: September 12, 1994 :
FOR: VIDEO DISTRIBUTION SYSTEM
USING IN-WALL WIRING
REVOCATION OF PRIOR POWER OF ATTORNEY
AND SUBSTITUTION OF NEW POWER OF ATTORNEY
-----------------------------------------
Assistant Commissioner for Patents
Washington, D.C. 20231
Sir:
The undersigned Assignee of the above-identified patent hereby revokes
all prior Powers of Attorney and appoints Robert B. Famiglio, Esquire, Reg. No.
29,305, to transact all business in the Patent and Trademark Office connected
herewith.
Send Correspondence To:
Robert B. Famiglio, Esquire
FAMIGLIO & MASSINGER
201 North Jackson Street
P.O. Bos 1999
Media, Pennsylvania 19063
Direct Telephone Calls To:
Robert B. Famiglio, Esquire
610-566-6800
Respectfully submitted,
Charles Abraham
Dated: 8/9/95 /s/Charles Abraham
----------- ---------------------
<PAGE>
IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
Applicant: Charles Abraham : Art Unit: 2603
Serial No.: 08/180,421 : Examiner: S. Hom
Filed: January 11, 1994 :
FOR: SYSTEM AND METHOD FOR
HIGH SPEED COMMUNICATION
OF VIDEO, VOICE AND ERROR-
FREE DATA OVER IN-WALL
WIRING
REVOCATION OF PRIOR POWER OF ATTORNEY
AND SUBSTITUTION OF NEW POWER OF ATTORNEY
-----------------------------------------
Assistant Commissioner for Patents
Washington, D.C. 20231
Sir:
The undersigned Assignee of the above-identified patent hereby revokes
all prior Powers of Attorney and appoints Robert B. Famiglio, Esquire,
Reg. No. 29,305, to transact all business in the Patent and Trademark Office
connected herewith.
Send Correspondence To:
Robert B. Famiglio, Esquire
FAMIGLIO & MASSINGER
201 North Jackson Street
P.O. Box 1999
Media, Pennsylvania 19063
Direct Telephone Calls To:
Robert B. Famiglio, Esquire
610-566-6800
Respectively submitted,
Charles Abraham
Date: 8/9/95 /s/ Charles Abraham
------------- ------------------------
<PAGE>
IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
Applicant: Charles Abraham : Art Unit: 2102
Serial No.: 08/349,041 : Examiner:
Filed: December 2, 1994 :
FOR: POWER LINE CIRCUITS AND
ADAPTERS FOR COUPLING
CARRIER FREQUENCY CURRENT
SIGNALS BETWEEN POWER
LINES
REVOCATION OF PRIOR POWER OF ATTORNEY
AND SUBSTITUTION OF NEW POWER OF ATTORNEY
-----------------------------------------
Assistant Commissioner for Patents
Washington, D.C. 20231
Sir:
The undersigned Assignee of the above-identified patent hereby revokes all
prior Powers of Attorney and appoints Robert B. Famiglio, Esquire, Reg. No.
29,305, to transact all business in the Patent and Trademark Office connected
herewith.
Send Corresponding To:
Robert B. Famiglio, Esquire
FAMIGLIO & MASSINGER
201 North Jackson Street
P.O. Box 1999
Media, Pennsylvania 19063
Direct Telephone Calls To:
Robert B. Famiglio, Esquire
610-566-6800
Respectfully submitted,
Charles Abraham
Date: 8/9/95 /s/ Charles Abraham
------------- -----------------------
<PAGE>
IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
Applicant: Charles Abraham : Art Unit: 2603
Serial No.: 08,458,229 : Examiner:
Filed: June 6, 1995 :
FOR: IMPROVED TRANSFORMER
COUPLER FOR COMMUNICATION
OVER VARIOUS LINES
REVOCATION OF PRIOR POWER OF ATTORNEY
AND SUBSTITUTION OF NEW POWER OF ATTORNEY
-----------------------------------------
Assistant Commissioner for Patents
Washington, D.C. 20231
Sir:
The undersigned Assignee of the above-identified patent hereby revokes all
prior Powers of Attorney and appoints Robert B. Famiglio, Esquire, Reg. No.
29,305, to transact all business in the Patent and Trademark Office connected
herewith.
Send Correspondence To:
Robert B. Famiglio, Esquire
FAMIGLIO & MASSINGER
201 North Jackson Street
P.O. Box 1999
Media, Pennsylvania 19063
Direct Telephone Calls To:
Robert B. Famiglio, Esquire
610-566-6800
Respectfully submitted,
Charles Abraham
Date: 8/9/95 /s/ Charles Abraham
------------- --------------------------
<PAGE>
IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
Applicant: Charles Abraham : Art Unit: 2603
Serial No.: 08/270,002 : Examiner:
Filed: JULY 1, 1994 :
FOR: IMPROVED TRANSFORMER
COUPLER FOR COMMUNICATION
OVER VARIOUS LINES
REVOCATION OF PRIOR POWER OF ATTORNEY
AND SUBSTITUTION OF NEW POWER OF ATTORNEY
-----------------------------------------
Assistant Commissioner for Patents
Washington, D.C. 20231
Sir:
The undersigned Assignee of the above-identified Patent hereby revokes all
prior Powers of Attorney and appoints Robert B. Famiglio, Esquire, Reg. No.
29,305, to transact all business in the patent and Trademark Office connected
herewith.
Send Correspondence To:
Robert B. Famiglio, Esquire
FAMIGLIO & MASSINGER
201 North Jackson Street
P.O. Box 1999
Media, Pennsylvania 19063
Direct Telephone Calls to:
Robert B. Famiglio, Esquire
610-566-6800
Respectfully submitted,
Charles Abraham
Date: 8/9/95 /s/ Charles Abraham
--------- -----------------------
<PAGE>
ASSIGNMENT
----------
WHEREAS, Elcom Technologies Corporation having a place of business at
78 Great Valley Parkway,Malvern, Pennsylvania 19355, (hereinafter referred to as
"ASSIGNOR") is desirous of assigning to Charles Abraham residing at 804 Cheswold
Court, Wayne, Pennsylvania 19087 (hereinafter referred to as "ASSIGNEE") the
inventions, patent applications and patent listed in Exhibit A, attached hereto;
and
WHEREAS, ASSIGNEE is desirous of acquiring the entire right, title and
interest in and to said inventions, patent applications and patent listed in
Exhibit A.
NOW, THEREFORE, in consideration of One Dollar ($1.00) and of other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, ASSIGNOR, intending to be legally bound, does hereby sell, assign
and transfer to ASSIGNEE the ASSIGNOR'S entire right, title and interest, for
the United States of America, its territories and possessions, and for all
foreign countries, in said inventions, patent applications and patent listed in
Exhibit A, including all divisions and continuations thereof, all rights to
claim priority based thereon, all rights to file foreign applications on said
inventions, all rights in any and all foreign applications and all Letters
Patents and reissues thereof, issuing for said inventions in the United States
of America and in any and all foreign countries.
-It is agreed that ASSIGNOR shall, upon request and at the expense of
the ASSIGNEE or his successors or assigns or legal representatives, execute all
instruments proper to patent said inventions in the United States of America and
foreign countries in the name of ASSIGNEE and to execute all instruments proper
to carry out the intent of this instrument.
<PAGE>
ECC-905 - 2 -
ASSIGNOR hereby covenants that no assignment, sale, agreement or
encumbrance has been or will be made or entered into which would conflict with
this assignment.
ASSIGNOR hereby authorizes and requests the Commissioner of Patents and
Trademarks to issue any and all such United States Letters Patents to ASSIGNEE,
his successors and assigns, as the owner of all right, title and interest
therein.
Date: July 21, 1995 ELCOM TECHNOLOGIES CORPORATION
-------------
BY: /S/ Robert A. Vito
-----------------------
Robert Vito, President
<PAGE>
Exhibit A
I. Patent Applications:
-------------------
1) U.S. Patent Application by CHARLES Abraham for IMPROVED
TRANSFORMER COUPLER FOR COMMUNICATION OVER VARIOUS LINES
Serial No.: 08/270,002 Filed: July 1, 1994
2) File Wrapper Continuation APPLICATION from Application
Serial No. 07/822, 326 for TRANSFORMER COUPLER FOR
COMMUNICATION OVER VARIOUS LINES
3) PCT Patent Application NO. PCT/US90/02291--Priority
of U.S. Serial No. 08/270,002 Filed July 1, 1994
4) EPO Patent Application No. 90 907 855.2 Corresponding
to International Appl. No. PCT/US90/02291--Priority of
U.S. Serial No. 08/270,002 Filed July 1, 1994
5) PCT Patent Application No. PCT/US93/04726--Priority of
U.S. Serial No. 07/884,123 Filed May 18, 1992
6) EPO Patent Application No. 93 913 976.2 Corresponding
to International Appl. No. PCT/US93/04726--Priority
of U.S. Serial No. 07/884,123 Filed May 18, 1992
7) Canadian Patent Application No. 2,135,918 Corresponding
to International Appl. No.. PCT/US93/04726--Priority of
U.S. Serial No. 07/884,123 Filed May 18, 1992
8) Japanese Patent Application No. 6-503823 Corresponding
to International Appl. No. PCT/US93/04726--Priority of
U.S. Serial No. 07/884,123 Filed May 18, 1992
<PAGE>
9) Russian Patent Application No. 94046009.00
Corresponding to International Appl. No.
PCT/US93/04726--Priority of U.S. Serial No.
07/884,123 Filed May 18, 1992
10) U.S. Patent Application by Charles Abraham
for SYSTEM AND METHOD FOR HIGH SPEED COMMUNICATION
OF VIDEO, VOICE AND ERROR-FREE DATA OVER IN-WALL
WIRING
Serial No.: 08/180,421 Filed: January 11, 1994
11) PCT Patent Application No. PCT/US95/00354--
Priority of U.S. Serial No. 08/180,421
Filed January 11, 1994
12) U.S. Patent Application by Charles Abraham
for VIDEO DISTRIBUTION SYSTEM USING IN-WALL WIRING
Serial No.: 08/304,495 Filed: September 12, 1994
13) U.S. Patent Application by Charles Abraham
for POWER LINE CIRCUITS AND ADAPTERS FOR COUPLING
CARRIER FREQUENCY CURRENT SIGNALS BETWEEN POWER
LINES.
SERIAL NO.: 08/349,041 Filed: December 2, 1994
II. Issued Patent:
--------------
1) U.S. Patent No. 5.351,272 titled
COMMUNICATIONS APPARATUS AND METHOD FOR
TRANSMITTING AND RECEIVING MULTIPLE MODULATED
SIGNAL OVER ELECTRICAL LINES issued on
September 27, 1994
<PAGE>
ASSIGNMENT
----------
WHEREAS, Elcom Technologies Corporation having a place of business at
78 Great Valley Parkway, Malvern, Pennsylvania 19355, (hereinafter referred to
as "ASSIGNOR") is desirous of assigning to charles Abraham residing at 804
Cheswold Court, Wayne, Pennsylvania 19087 (hereinafter referred to as
"ASSIGNEE") the invention and patent application listed in Exhibit 1, attached
hereto; and
WHEREAS, ASSIGNEE is desirous of acquiring the entire right, title and
interest in and to said invention and patent application listed in Exhibit 1.
NOW, THEREFORE, in consideration of One Dollar ($1.00) and of other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, ASSIGNOR, intending to be legally bound, does hereby sell, assign
and transfer to ASSIGNEE the ASSIGNOR'S entire right, title and interest, for
the United States of America, its territories and possessions, and for all
foreign countries, in said inventions and patent application listed in Exhibit
1, including all divisions and continuations thereof, all rights to claim
priority based thereon, all rights to file foreign applications on said
inventions, all rights in any and all foreign applications and all Letters
Patents and reissues thereof, issuing for said inventions in the United States
of America and in any and all foreign countries.
It is agreed that ASSIGNOR shall, upon request and at the expense of
the ASSIGNEE or his successors or assigns or legal representatives, execute all
instruments proper to patent said inventions in the United States of America and
foreign countries in the name of ASSIGNEE and to execute all instruments proper
to carry out the intent of this instrument.
ASSIGNOR hereby covenants that no assignment, sale, agreement or
encumbrance has been or will be made or entered into which would conflict with
this assignment.
<PAGE>
ECC-905 - 2 -
ASSIGNOR hereby authorizes and request the Commissioner of Patents and
Trademarks to issue any and all such United States Letters Patents to ASSIGNEE,
his successors and assigns, as the owner of all right, title and interest
therein.
Date: 7/31/95 ELCOM TECHNOLOGIES CORPORATION
-----------
BY: /S/ Robert A. Vito
------------------------
Robert Vito, President
<PAGE>
Exhibit 1
I. Patent Application:
------------------
1) Canadian Patent Application
Corresponding to International Appl. No.
PCT/US90/02291--Priority of U.S. Serial No.
08/270,002, Filed July 1, 1994
<PAGE>
[LETTERHEAD OF RATNER AND PRESTIA APPEARS HERE]
July 27, 1995
HAND DELIVERY
Robert B. Famigilio, Esquire
Famiglio & Massinger
201 N. Jackson Street
P.O. Box 1999
Media, Pennsylvania 19063
RE: Charles Abraham Files
Dear Bob:
The accompanying files pertain to the applications listed in the assignment
which were part of the Settlement Agreement entered into between ELCOM and
Charles Abraham. We have also included the file for a Canadian patent
application which was inadvertently not listed in the Assignment. A separate
Assignment is being prepared for execution by Elcom and will be forwarded to you
shortly. Mr. Perilstein had been advised of this application by copy of our
letter to our Canadian associate, requesting that it be filed. We have just
recently received confirmation of the filing of the Canadian application. In
addition, and although under no obligation to do so, we have included our file
for the abandoned parent application of Mr. Abraham's U.S. Patent Application,
Serial No. 07/822,326, filed January 17, 1992, for IMPROVED TRANSFORMER COUPLER
FOR COMMUNICATION OVER VARIOUS LINES.
Further, as a courtesy and under no obligation to do so, we have provided a
listing of docket dates from our docket system for the month of August
pertaining to the patent applications listed in the assignment.
<PAGE>
Robert B. Famiglio - 2 - July 27, 1995
PLEASE BE ADVISED THAT ELCOM AND ITS ATTORNEYS, RATNER & PRESTIA, MAKE
NO REPRESENTATION OR WARRANTY REGARDING ANY OF THE INFORMATION CONTAINED IN THE
DOCKET DATE LIST OR IN ANY OF THE FILES TRANSFERRED HEREWITH. YOU AND MR.
ABRAHAM SHOULD CONFIRM ALL DATES, AS WELL AS ANY RESPONSIVE ACTIONS WHICH MAY
HAVE BEEN TAKEN. PRIOR TO SETTLEMENT, AN UNDEFINED REPRESENTATION/WARRANTY WAS
REQUESTED BY MR. ABRAHAM, THROUGH HIS ATTORNEY REGARDING COMMUNICATIONS AND THE
APPLICATIONS AND PATENT LISTED IN THE ASSIGNMENT. ELCOM (AS WELL AS ITS
ATTORNEYS, RATNER & PRESTIA TO WHOM THE REQUEST WAS SPECIFICALLY DIRECTED) DID
NOT PROVIDE ANY SUCH REPRESENTATION/WARRANTY AND SPECIFICALLY REFUSED THIS
- --- -------
REQUEST WHILE BOTH YOU AND JOEL PERILSTEIN WERE ON THE TELEPHONE. THE SETTLEMENT
AGREEMENT WAS ENTERED INTO WITHOUT ANY REPRESENTATION/WARRANTY BY ELCOM
REGARDING THE PATENT APPLICATIONS AND PATENT WHICH LIST CHARLES ABRAHAM AS AN
INVENTOR. ACCORDINGLY, MR. ABRAHAM ENTERED INTO THIS SETTLEMENT AGREEMENT AT HIS
OWN RISK AND WITH KNOWLEDGE THAT NO REPRESENTATION/WARRANTY WAS PROVIDED. AGAIN,
IT IS THE RESPONSIBILITY AND OBLIGATION OF YOU AND MR. ABRAHAM TO IDENTIFY AND
RESPOND TO ANY OUTSTANDING ACTION/PAYMENTS OR OTHER MATTERS FOR THE FILES BEING
TRANSFERRED HEREWITH. ELCOM SPECIFICALLY REFUSES TO ACCEPT ANY LIABILITY,
OBLIGATION OR RESPONSIBILITY FOR ANY OF THESE FILES. IN PARTICULAR, ALL COSTS OF
FOREIGN ASSOCIATES, FOREIGN PATENT OFFICES AND THE U. S. PATENT & TRADEMARK
OFFICE SHALL BE THE SOLE AND EXCLUSIVE RESPONSIBILITY OF MR. ABRAHAM FROM JULY
21, 1995 ONWARD. PLEASE FORWARD A COPY OF YOUR CORRESPONDENCE WITH THE FOREIGN
ASSOCIATES, SUBSTITUTING YOURSELF AS ATTORNEY OF RECORD. ALSO, PLEASE FORWARD
COPIES OF THE REVOCATION/SUBSTITUTION OF NEW POWER OF ATTORNEY, WHICH YOU WILL
BE FILING WITH THE U. S. PATENT & TRADEMARK OFFICE FOR MR. ABRAHAM'S U.S. PATENT
APPLICATIONS.
Further, ELCOM has asked me to inform you and Joel Perilstein, by copy
of this letter, that it has not found any of the items which Mr. Abraham claimed
were in Elcom's possession and were not produced at the signing of the
settlement agreement on July 21, 1995, by ELCOM. After not finding any of the
items which Mr. Abraham claims existed and were in the possession of ELCOM,
------
ELCOM takes the position that either these items are (1) with Mr. Abraham, (2)
at a location other than ELCOM at the direction or
<PAGE>
Robert B. Famiglio -3- July 27, 1995
action of Mr. Abraham, (3) do not exist or (4) never existed. ELCOM's
representation with respect to these items should only be interpreted as
agreeing that Mr Abraham claims that these items exist and were not produced.
------
ELCOM has no specific knowledge regarding whether these items ever existed, do
exist, and if so, their whereabouts. We await Mr. Perilstein's reply regarding
the Zero Haliburton briefcase which Mr. Abraham did not return to ELCOM. Of
course, even if Mr. Abraham cannot find the briefcase at this time, we assume
that should he walk into either of your offices with the briefcase, that he
would be advised that this is ELCOM property and ELCOM would be advised as to
the date that it would be returned.
If you have any other questions or comments, please let us know. We
believe that with the transfer of these files and our courtesy copy of docket
copies for the month of August (without any representation that these dates are
accurate or complete), there is nothing for ELCOM to do, regarding the Abraham
patent applications and patent listed in the assignment attached to the
Settlement Agreement of July 21, 1995 in order to comply with the Settlement
Agreement.
Sincerely,
RATNER & PRESTIA
/s/BENJAMIN E. LEACE
Andrew L. Ney
Benjamin E. Leace
BEL/mg/sls
Encls.: Files listed in Assignment
Other files listed in this letter
cc: R. Vito
Steve Smith, Esq.
J. Perilstein, Esq.
FILES RECEIVED BY COURIER:
---------------------------------------------------
DATE:
--------------------
FILES RECEIVED BY R. FAMIGLIO:
-----------------------------------------------
DATE:
--------------------
<PAGE>
SETTLEMENT INVENTORY LIST
RETURNED TO ABRAHAM
-------------------
1. (4) Video Units
2. (2) LAN units developed in 1993
3. (3) LAN units developed in 1990
3. (2) LAN connector cables
4. (3) Boxes of Software
5. (1) Brother typewriter
6. (1) Temna Function Generator
7. (1) 20mhz Oscilloscope
8. (1) Computer, with keyboard and monitor
9. (1) High Voltage Coupler
10. (1) Framed Patent
11. (1) Box of Abraham files/Patents
12. (1) Murray Bicycle
These 12 items have been received by Abraham:
/s/Charles Abraham 7/21/95
- ------------------------- --------------
Charles Abraham Date
<PAGE>
[DETAILED FRAME SURROUNDS DOCUMENT]
NUMBER SHARES
1001 4,000,000
[SKETCH OF BALD EAGLE APPEARS HERE]
ELCOM TECHNOLOGIES CORPORATION
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA
Authorized Shares 20,000,000 Without Par Value
This Certifies that Charles Abraham is the
---------------
owner of Four Million (4,000,000) Shares of
------------------------
ELCOM TECHNOLOGIES CORPORATION
full paid and non-assessable transferable only on the book of the Corporation in
person or by Attorney upon surrender of this Certificate properly endorsed.In
Witness Whereof, the said Corporation has caused this Certificate to be signed
by its duly authorized officers and its Corporate Seal to be hereunto affixed
this 3rd day of October 1994
------- ------- --
/s/ [SIGNATURE APPEARS HERE] /s/ [SIGNATURE APPEARS HERE]
--------------------------- ----------------------------
SECRETARY PRESIDENT
H. BURR HEIM, PHILA.
[CIRCULAR SEAL APPEARS HERE]
<PAGE>
These securities have not been registered under the Securities Act of 1993 or
the securities laws of any state. These securities may not be transferred or
resold except as permitted under such acts and laws, or pursuant to registration
or exemption therefrom.
The following abbreviations, when used in the description on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM--as tenants in common UNIF GIFT MIN ACT-...........Custodian.........under
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN --as joint tenants with right of survivorship Uniform Gifts to Minors Act..............
and not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
For Value Received, I hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBERS OF ASSIGNEE
- ------------------------------------------
- ------------------------------------------ ------------------------------------
Four Million (4,000,000)
- -------------------------------------------------------------------------------
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint _____________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated 7-21 1995
------------------
In presence of
[SIGNATURE APPEARS HERE]
-------------------------------
[SIGNATURE APPEARS HERE]
- -------------------------------------
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE>
[ART WORK APPEARS HERE]
ELCOM TECHNOLOGIES CORPORATION
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA
Authorized Shares 20,000,000 Without Par Value
This Certifies that Charles Abraham is the
-----------------------------------------------------
(SEE REVERSE FOR CERTAIN DECLARATIONS)
owner of ***One Hundred Thousand*** Shares of
-------------------------------------------------------------
ELCOM TECHNOLOGIES CORPORATION
full paid and non assessable transferable only on the books of the Corporation
in person or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed
this 21st day of July , A.D. 1995
---- ----------------- -----
[SIGNATURE APPEARS HERE] [SIGNATURE APPEARS HERE]
- ------------------------ ------------------------
SECRETARY PRESIDENT
<PAGE>
[LETTERHEAD OF RATNER AND PRESTIA APPEARS HERE]
JULY 21, 1995
VIA FEDERAL EXPRESS
ADVANCE COPY VIA FACSIMILE
Patenwalte Dipl.-Inge.
Rose, Kosel & Sobisch
Odastrasse 4a
D-37581 Bad Gandersheim
GERMANY
RE: European Patent Appl. No. 90 907 855.2
POWER-LINE COMMUNICATION APPARATUS
Inventor: Karoly Charles Abraham
Your Ref: 4128/1; Our Ref: EEC-0192
Gentlemen:
We are in receipt of your communications, the latest dated July 21, 1995.
We apologize for not providing more prompt instructions to you.
As we advised you in an earlier letter, there was litigation going on
between Charles Abraham and ELCOM Communications. This litigation has now been
settled with Charles Abraham leaving ELCOM and ELCOM reassigning Mr. Abraham his
patent applications. Accordingly, all future communication, actions and charges
regarding these applications should be made directly to Mr. Abraham or his
attorney
Regarding the grant of the EPO applications and translation, we enclose a
check to cover those costs, as well as signed papers from Mr. Abraham. Please
proceed with
<PAGE>
Rose, Kosel & Sobisch - 2 - July 21, 1995
the grant of the EPO application and whatever other actions are required.
We also enclose funds for European Patent Appl. No. 90 907 855.2,
European Patent Application Corresponding to International Appl. No.
PCT/US93/04726 -- Priority of U.S. Serial No. 07/884,123, Filed: 18 May 1992,
Our Ref.: ECC-0292, Your Ref.: 4206/1 as requested in your statement dated
March 3, 1995 (originally sent December 16, 1994). All further invoices should
be sent directly to Mr. Abraham or his new attorney.
If you have any questions or comments, please contact Mr. Abraham
directly, or his attorney Bob Famiglio. Mr. Famiglio can be reached at the
following address and telephone number:
Robert Famiglio, Esq.
Famiglio & Massinger
201 N. Jackson Street
P.O. Box 1999
Media, PA 19063
Tele: (610) 566-6800
Sincerely,
RATNER & PRESTIA
/S/ Benjamin E. Leace
Andrew L. Ney
Benjamin E. Leace
BEL/mg
Enclosures: Six Power of Attorney Forms
Check
cc: R. Vito
J. Perilstein, Esq.
R. Famiglio, Esq.
<PAGE>
COPY
RATNER & PRESTIA
<TABLE>
<CAPTION>
VENDOR ROSE CHECK NO. 014371
- ----------------------------------------------------------------------------------------------
OUR REF. NO. YOUR INV. NO. INVOICE DATE INVOICE AMOUNT AMOUNT PAID DISCOUNT TAKEN
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
18056 4206/1
12/16/94 24,476.00 24,476.00 .00
Check total 24,476.00
Filings for ECC-0192 and ECC-0292
</TABLE>
<TABLE>
<CAPTION>
RATNER & PRESTIA MERIDIAN BANK CHECK NO. CHECK DATE VENDOR NO.
LAW OFFICES 3-9-310
P.O. BOX 980 014371 07/21/95 ROSE
VALLEY FORGE, PA 19482
PAY CHECK AMOUNT
<S> <C>
TWENTY-FOUR THOUSAND FOUR HUNDRED SEVENTY************* $*******24,476.00
SIX AND 00/100 DOLLARS****************************
</TABLE>
TO THE
ORDER
OF Rose, Kosel, Sobisch
Odastrasse 4a, Post 129
D-3353 Bad Gandersheim 1
GERMANY
/s/ Andrew L. Ney
-------------------
|:031000095|: ||'4164|||0685||'
<PAGE>
Vollmacht fur Patente, Marken, Modelle, Muster
Der/Die Unterzeichnete/Die Unterzeichneten
erteilt/erteilen hiermit
Vollmacht zur Vertretung bezuglich
Die Bevollmachtigten sind insbesondere ermachtigt, vor dem Patentamt und allen
Verwaltungs- und Gerichtsbehorden tatig zu sein und fur diese ganze Vollmacht
oder einen Teil von ihr einen Untervertreter zu bestellen. Sie sind befugt,
alle notwendigen Handlungen fur die Erwerbung und Aufrechterhaltung der
Schutzrechte vorsunehmen, abgezweigte Anmeldugen einzureichen, nach der
Eintragung der Schutzrechte als bevollmachtigte Vertreter zu handeln sowie
Anmeldungen und erteilte Schutzrechte zuruckzuziehen. Als Gerichtsstand
zwischen Vollmachtgeber und Bevollmachtigten gilt das Geschaftsdomizil der
letzteren und schweizerisches Recht. Ohne ausdrucklichen Widerruf erlischt diese
Vollmacht in den in Art. 35 und 405 OR aufgefuhrten Fallen nicht.
Der Vollmachtgeber wahlt Domizil gemass Art. 30 MSchG bei den Bevollmachtigten.
Ort und Datum
Unterschrift des Vollmachtgebers
Power of Attorney for Patents, Trade Marks, Designs
The undersigned
Hereby authorize/authorizes
A. BRAUN, BRAUN, HERITIER, ESCHMANN AG
Patentanwalte, Patent Attorneys, Ingenueurs-Conseils
to represent him/her/them as agents with respect to
In particular, the aforenamed agents are authorized to act before the Patent
Office and before all administrative and judicial authorities as well as to
delegate all or part of the powers hereby granted. They are further authorized
to take all steps necessary for obtaining and maintaining the rights sought, to
file divisional applications, to act as duly appointed agents after grant
thereof, and withdraw applications and granted registered rights. Jurisdiction
in any disputes between principal/principals and agents shall lie exclusively
with the competent court at the domicile of the latter, and Swiss law shall
apply. Unless expressly cancelled by the principal/principals, this Power of
Attorney shall not lapse on any of the grounds provided for by Sections 35 and
405 of the Swiss Code of Obligations.
The undersigned elect/elects domicile according to Section 30 of the Trade Marks
Act at the address of the agents.
Place and date
Philadelphia, PA, USA
July 21, 1995
Signature of Principal/Principals
Charles Abraham
/s/Charles Abraham
Schweiz-Switzerland-Suisse
Pourvoir pour Brevets, Marques, Modeles, Dessins
Le soussigne/La soussignee/Les soussignes/Les soussignees
donne/donnent, apr la presente, mandat a
pour le/la/les representer au sujet
Les mandataires susnommes sont notamment autorises a representer l'auteur/les
auteurs de la procuration devant l'Office des Brevets et toutes les Autorites
Administratives et Judiciaires ainsi qu'a nommer un substitut pour tout ou
partie du present pouvoir. Ils sont autorises a remplir toutes les formalites
necessaires pour l'obtention et le maintien de la protection sollicitee a
deposer des demandes scindees, a agir en qualite de mandataires apres
l'enregistrement, ainsi qu'a retirer les demandes ou les enregistrements
obtenus. En cas de divergences entre l'auteur/les auteurs de la procuration et
les mandataires, les lois Suisses et le tribunal competent du domicile des
mandataires sont reconnus par le soussigne/la sousignee/les soussignes/les
soussignees. A moins de revocation expresse, ce mandat ne s'eteindra pas pour
l'une des causes prevues aux art. 35 et 405 du CO.
Le soussigne/le soussignee/les soussignes/les soussignees elit/elisent domicile
selon l'art. 30 de la loi sur les marques chez les mandataires.
Lieu et date
Signature de l'auteur/des auteurs de la procuration
<PAGE>
SVERIGE
PATENT
OMBUDSFULLMAKT
Fullmakt for
med ratt att utfarda motsvarande fullmakr forannun. att i SVERIGE soka patent
och foretrada mig/oss i allt som ror foljande svenska/europeiska/internationella
parentansokning/patent
nr:.............................................................................
benamning:......................................................................
................................................................................
................................................................................
................................................................................
daruravdelade eller urbrutna ansokningar samt darpa grundade patent. Fuilmakten
innefattar behorighet att mottaga delgivning av stamning. kallelser och andra
handlingar i mal och arenden rorande namnda patentansokning/patent.
For samtliga de uppdrag ombuder kan komma att ataga sig galler omstaende
villkor. AU 92.
................................................................................
Ort och datum
................................................................................
Sokande/Patenthavarc
................................................................................
UnderskriXX
................................................................................
NamalXXXdligande
................................................................................
FullXtandig adreXX
SWEDEN
PATENT
POWER OF ATTORNEY
Authorization for
AXEL EHRNERS PATENTBYRA AB
Box 10316
S-100 55 STOCKHOLM
with full power of substitution to apply for a patent and to represent me/us in
SWEDEN in everything that concerns the following Swedish/European/International
Patent Application/Patent
No.:............................................................................
entitled: POWER-LINE COMMUNICATION APPARATUS
................................................................................
................................................................................
................................................................................
applications divided or separated therefrom as well as patents based thereupon.
This authorization includes the authority to accept writs of indictment or
summonses and other documents in proceedings and matters concerning the
application or patent.
The conditions over-leaf. AU92.shall be applied to all the commissions which the
patent attorney may undertake.
Philadelphia PA, USA, July 21 , 1995
................................................................................
Place and date
Charles Abraham
................................................................................
Applicant
/s/Charles Abraham
................................................................................
Signature
................................................................................
Name type written
804 Cheswold Court
Wayne, PA, 19087
USA
................................................................................
Full Address
NO LEGISLATION REQUIRED
<PAGE>
Deutschland
Germany
[LETTERHEAD OF VOLLMACHT-POWER OF ATTORNEY APPEARS HERE]
Vertretervollmacht erteilt fur das Anmelde- und Schutzbewilligungsverfahren,
fur das erteilte bzw, eingetragene Schulzrecht sowie fur das Einspruchs-,
Nichtigkeits-, Zwangsilzenzoder Loschungsverfahren vor dam Deutschen Patentamt,
dam Bundespatentgericht und dem Bundesgerichtshof, Die Vollmacht schlieBt auch
das Verfahren nach dem Vertrag uber die internationale Zusammenarbeit auf dem
Gebeit des Patentwesens (PCT) ein. Der (Die) Bevollmachtigte(n) ist (sind)
berechtigt, Untervollmachten zu erteilen.
Auf Grund dieser Vollmacht ist er (sind sie) insbesondere zu folgenden
Rechtsgeschalten und Verfugungen ermachtigt: Alle Mitteilungen, Bescheide und
Beschlusse des Patentamtes und der Gerichte in Empfang zu nehmen. Rechtsmittel
oder Rechtsbehelle einzulegen und zuruckzunehmen, Vergleiche abzuschlieBen, auf
die Anmeldung oder das Schulzrecht ganz oder teilweise zu verzichten, die
Beschrankung des Patentes zu beantragen, eine Lizenzbereitschaftserklarung
abzugeben oder einen von einem Genger erhobenen Anspruch anzuerkennen, in
Warenzeichen- und Markensachen Widerspruch gegen die Loschung des Zeichens oder
Aberkennung des Schulzes der Marke und gegen die Eintragung anderer Zeichen
sowie gegen die Schulzbewilligung fur andere IR-Marken zu erheben und die
Loschung bzw. Schulzentziehung anderer Zeichen und fur andere IR-Marken zu
beantragen, gesteilte Antrage zuruckzunehmen, Zahlungen fur den Auftraggeber in
Empfang zu nehmen, Strafantrage zu stellen.
(Nur bei auslandischen Vollmachtgebern:) Durch diese Vollmacht ist (sind) der
Patentwalt (die Patentanwalte) zum Vertreter gemaB (S) 25 des Patentgesetzes.
(S) 28 des Gebrauchsmustergesetzes. (S) 35 des Warenzeichengesetzes und (S) 16
des Geschmacksmustergesetzes bestallt.
Erfullungsort fur alle Anspruche aus dam der Vollmacht zugrunde liegenden
Rechtsverhaltnis und Gerichtsstand ist der Ort der Kanzlei des Patentanwaltes
(der Patentanwalte)
Die Vollmacht gilt auch fur einan Praxisverwaser (Trehander, Abwickler), solange
sie diesem gegenuber nicht widerrlun wird.
Philadelphia, PA July 21, 1995
_______________________________________________________________________________
to act for me/us in proceedings concerning applications, registrations, granted
or registered industrial or intellectual property rights, and in proceedings
concerning opposition, nullity, compulsory license, rectification, revocation or
cancellation in the German Patent Office, before the Federal Patent Court and
before the Federal Court of Justice. This authorization includes also the
procedure under the Patent Cooperation Treaty (PCT). The authorized agent(s) is
(are) authorized to grant powers of substitution.
By virtue of this authorization he is (they are) especially empowered to carry
out the following legal transactions and disposals; to receive all
communications, official actions and decisions of the Patent Office and the
Courts; to lodge or withdraw legal measures or legal remedies; to conclude
agreements; to fully or partially disclaim the application or the property
right; to apply for the restriction of a patent; to deliver a declaration of
"readiness to license" or to acknowledge a claim raised by an opposing party; in
matters of trade marks to contest an application for the cancellation or
revocation of an entry in the Register in respect of a trade mark, to enter
opposition against the registration of other trade marks including
internationally registered marks, and to apply for the cancellation or
revocation of an entry in the Register in respect of other trade marks including
internationally registered marks; to withdraw applications; to receive payments
on behalf of the client(s); and to demand penalties.
(For foreign clients only:) By this Authorization, the Patent Attorney(s) is
(are) appointed as representative(s) in accordance with (S) 25 of the Patent
Law, (S) 28 of the Utility Model Law, (S) 35 of the Trade Mark Law and (S) 16 of
the Register Designs Act.
The place of settlement and the court for all claims arising out of the legal
relationship existing by virtue of the Power of Attorney are at the location
where the office of the Patent Attorney(s) is situated.
The power is also extended to an administrator (trustee, liquidator) of the
office of the Patent Attorney(s) unless revoked.
Charles Abraham
/s/ (signature appears here)
___________________________________________________________________________
(Bei Personen: Namen und Vornamen voll ausschreiben, bei Firmen genaue,
eingetragne Firmenbezeichnung angeben. Xeine Beclaubigung erfordarlich.)
<PAGE>
OSTERREICH
AUTRIA
Patente
Marken
Muster
V O L L M A C H T
Der(Die) Unterzeichnete(n)
bevollmachtigt(bevollmachtigen)
PATENTANWALTE
DIPLING.WILHELM CASATI
DIPLING. PETER ITZE
1060 Wien, AmarlingstraBe 8, Gewallagaus 4
hiedurch, for ihn (sie) alle Vertretungs - und Beistandsleistungen vorzunehmen,
und zwar.
in Patentangelegenheiten nach (S) 21 Abs 6 PatG 1970 bzw. Art. 49 un Regal 90
PCT bzw. fur in Osterreich durchzufuhrende Handlungen betreffend
europaische Patentanmeldungen und Patente:
in Markenangelegenheiten nach (S) 61 Abs 4 MSchG bzw. fur solche, die sich aus
zwischenstaatlichen Vereinbarungen uber den Markenschutz ergeben:
in Musterangelegenheiten.
Der(Die)selbe(n) (und zwar sowohl gemeinschaftlich als auch jeder einzelne fur
sich allein) ist (sind) zur Beistandsleistung vor Gerichts- und
Verwaltungsbehorden und ausserbehordlich ermachtigt: insbesondere ist er (sind
sie) zusatzlich ermachtigt, Geld und Geldeswert zu beheben und
auf erteilte Patente nach (S) 21 Abs 8 PatG 1970 ganz oder teilweise verzichten.
registrierte Marken GemaB (S) 29 Abs 1 lit. a MSchG ganz oder teilweise loschen
zu lassen, bzw.
auf eingetragene Muster zu verzichten.
Der (Die) Unterzeichnete(n) verpflichtet (verpflichten) sich, (zur
ungeteilten Hand) Honorare sowie Auslagen in ................. (Ostereich) zu
bezahlen, und erklart (erklaren) sich damit einverstanden, daB der bezugliche
Anspruch in................. (Osterreich) gerichtlich geltend gemacht werden
kann.
Patents
Trademarks
Designs
POWER OF ATTORNEY
The undersigned Charles Abraham
herby authorize(s)
Patentanwalte
DIPL. ING. WILHELM CASATI
DIPL. ING. PETER ITZE
1060 Wien, AmarlingstraBe 8, Chwallagaus 4
to represent and assist him (them) in all matters with regard to
patents an patent applications according to Sec. 21 (6) Patents Act 1970, Art.
49 and Rule 90 PCT, as well as actions to be carried out in Austria
concerning European patent applications and patents:
trademarks and trademark applications according to Sec. 61 (4) of the Trademarks
Act 1970, as well as matters arising from bilateral and multilateral
agreements concerning trademark protection;
designs and design applications.
The above attorney(s) is/are authorized (individually and collectively) to
assist the undersigned in proceedings before courts and administrative
authorities and extrofficially: in particular, he is (they are) authorized to
receive money and money's worth and
to relinquish totally or partially the protection of granted patents according
to Sec. 21 (8) Patents Act 1970.
to cancel totally or partially registered trademarks according to Sec 29 (1)
lit. a of the Trademarks Act 1970.
to renounce rights on registered designs.
The undersigned hereby agree(s) to pay (solidary) the full costs of the
representation as well as expenses in ................. (Austria), and with
respect to same accept(s) the jurisdiction of the pertinent courts in
................(Austria).
Ort,Datum Philadelphia , 1995 July 21
- ----------------------------------------------------------------------
Place, Date ,Pennsylvania, USA
Charles Abraham
Unterschrift mit vollem Namen: /s/Charles Abraham
Sign full name here:
---------------------------------------
<PAGE>
ITALY - FOR A GLE PATENT, DESIGN, TRADE XXXXX APPLICATION
OR TRANSLATION OF EUROPEAN PATENT APPLICATION
LETTERA D'INCARICO
POWER OF ATTORNEY
(Art. 38 del D.P.R. 22-6-1979, n. 338 - Art. 1 D.M. 3-6-1981)
I/I sottoscritto/i
A
nomina/no con la presente
come propri mandatari confirma libera e disgiunta e con facolta di farsi
sostituire, incaricandoli affinche depositino in Italia
e di fare quant'altro occorra per il suo accoglimento e per il riconoscimento
dei diritti e delle facolta che da essa derivano nei rapporri con I'Ufficio
Centrale Brevetti e con gli altri Uffici competenti, come: designare lo/gli
inventore/i, presentare documenti, dichiarare le traduzioni presentate conformi
al testi originali, pagare tasse, rispondere ai rilievi, richiedere
certificati e copile autentiche, richiedere rimborsi e riscuotere somme ammesse
al rimborso, modificare o ritirare domande e documenti, ritirare gli attestati o
certificati rilasciati e i documenti relativi, presentare e documentare ricorsi
alla Commissione dei Ricorsi.__
A tale scopo, i/l sottoscritto/i elegge/eleggono domicilio presso detti
mandatari, ai quali chiede/chiedono che vengano fatte direttamente dall'Ufficio
Centrale Brevetti e dagli altri Uffici competenti tutte le comunicazioni, nonche
tutte le richieste e consegne di documenti che si rendessero necessarie, anche
al sensi e per gli effetti degli artt. 75 R.D. 29-6-1939, n. 1127 e 56 R.D.
21-6-1942, n. 929, ultimi comma.
Firma del mandatario
Representative's signature
------------------------------------
I/We, the undersigned, Charles Abraham
E 804 Cheswold Court
Wayne, Pennsylvania 19087
United States of America
do hereby appoint
to act as my/our representatives with free and separate signature, and with
power of substitution authorizing them to file in Italy and to do whatever else
is necessary for its acceptance and for the recognition of the rights and
interests deriving therefrom with respect to the Central Patent Office and the
other competent Offices, such as: to designate the inventor/s, to file
documents, to certify the translation filed as conforming with the original
texts, to pay taxes, to reply to official actions, to apply for certificates and
certified copies, to apply for refunds and to collect refundable fees, to amend
or withdraw applications and documents, to receive Letters Patent or
certificates issued and relating documents, to lodge appeals, with all briefs,
and documents in support thereof, at the board of Appeals.
To this purpose, I/we, the undersigned, elect domicile with the aforesaid
representative, to whom I/we request that the Central Patent Office and the
other competent Offices directly address all communications as well as all
requests and deliveries of documents which may be necessary, also pursuant to
last paragraphs of Articles 75 R.D. 29-6-1939. No. 1127, and 56 R.D. 21-6-1942,
No. 929.
Firma
Signature:/s/Charles Abraham
-----------------------------------
Charles Abraham
Data
Date: July 21, 1995
----------------------------------------
<PAGE>
[LETTERHEAD OF ELZABURU APPEARS HERE] Miguel Angel, 21
28010 Madrid
- -------------------------------
AUTORIZACION
que suscribe Charles Abraham
domiciliad en 804 Cheswold Court, Wayne, Pennsylvania 19087, United States
of America
autorize indistintamente a D.
Agentes de la Propiedad Industrial,
con facultad de delegar el encargo, para que, en su nombre y representacion,
firmen cuantes instancias, declaraciones y documentos presenten ante la Oficina
Espanola de Patentes y Marcas, los modifiquen, reformen, renuncien o desistan;
recurran contra les resoluciones o acuerdos que recaigan y apra que retiren los
titulos y notificaciones a cuya expedicion den lugar
Y cuanto mas seo necesario hacer en Cualquier tiempo, de conformidad con las
instrucciones que el efecto puedan serles communcades.
Firmado en Philadelphia, Pennsylvania, USA
de July 21 de 1995
-------------------------------
/s/ Charles Abraham
-------------------------------
Charles Abraham
- --------------------------------------------------------------------------------
(Please sign along the dotted lines
above and indicate the name of the
signer beneath the signatures. If the
signature is made in the name of a
company, please indicate the sign- [TRANSLATION IN [TRANSLATION IN
er's position to the firm). GERMAN APPEARS FRENCH APPEARS
HERE] HERE]
(TRANSLATION)
The undersigned __________________
domiciled at _____________________
authorizes _______________________
indistinctly, Industrial Property
Attorneys, with authority to delegate
the commission in sign, in name
and representation hereof, positions,
declarations and documents filed
before the Spanish Patent Faioni and
Trademark Office and to modify
amend, renounce or withdraw them:
to appeal from decisions or actions
rendered and to collect certificates
and notifications issued in connec-
tion therewith _____________________
____________________________________
____________________________________
and whatever also it may be neces-
sary to do at any time, in accordance
with the instructions communicated
for the purposes
Signed at ___ on the ___ day of ___ 19__
NO LEGALIZATION
<PAGE>
===============================================================================
2510
[MONOGRAMMED "E" APPEARS HERE] ELCOM TECHNOLOGIES CORPORATION 3-5
---674
July 21, 1995 310
PAY
TO THE
ORDER OF ChaRLES ABRAHAM $5,000 --
-------------------------------------------------
FIVE THOUSAND ------------------------------------------------- DOLLARS
- ---------------------------------------------------------------
PNCBANK
PNC Bank, N.A.
Philadelphia, PA 020
FOR SETTLEMENT FUNDS /s/ [SIGNATURE APPEARS HERE]
------------------------------ -----------------------------
"002510" "031000053: 8542963625"
================================================================================
- --------------------------------------------------------------------------------
12500052 REV. 8/94 3-5/310
PNCBANK No. 02762348
PNC Bank National Association Date July 21 95
Cashier's Check Philadelphia, PA -----------------
647
Pay to the CHARLES ABRAHAM ************************ $*****188,500.00
Order of _________________________________________________ ---------------
***************************************$188,500.00*********************
Dollars
--------------------------------------------------------------
ELCOM TECH CORP
----------------------------------- PNC Bank, National Association
REMITTER
/s/ [SIGNATURE APPEARS HERE]
---------------------------------
OFFICIAL SIGNATURE
SETTLEMENT FUNDS
"02762348" :031000053: 8500041542"
- --------------------------------------------------------------------------------
<PAGE>
[STAMP OF FILED JUL 28 11:35 AM '95
OFFICE OF PROTHONOTARY
MONTGOMERY CO. PA APPEARS HERE]
POWELL, TRACHTMAN, LOGAN,
CARRLE & BOWMAN, P.C.
By: Michael G. Trachtman
Attorney I.D. No. 19525
367 South Gulf Road Attorneys for Plaintiff
King of Prussia, PA 19406
(610) 354-9700
CHARLES ABRAHAM : COURT OF COMMON PLEAS
: MONTGOMERY COUNTY, PA
v. :
:
ROBERT A. VITO and :
PAUL KOUCH : NO. 95-08987
ORDER TO SETTLE, DISCONTINUE & END
----------------------------------
TO THE PROTHONOTARY:
Kindly mark the above-captioned matter settled, discontinued and ended
upon payment of your costs only.
POWELL, TRACHTMAN, LOGAN,
CARRLE & BOWMAN, P.C.
By:/s/ Michael G. Trachtman
------------------------
Michael G. Trachtman
Dated: 7-27-95
--------
11134.1
<PAGE>
Elcom Technologies Corporation acknowledges that Charles Abraham is the owner of
the following items:
(i) 4 shielded units of the Abraham TV that were held in a black and
white metal box
(ii) 5 high voltage couplers (for 10KV) developed in 1990 by Abraham, 1
of which has been delivered to Abraham. These are approximately 2 feet long and
8 inches in diameter. 2 red and 2 white units contained in 2 separate paper
boxes
(iii) 8 units of power line modems developed by Abraham in 1990, 4 of
which are contained in 4 pink plastic boxes and 4 of which are contained in 4
blue plastic boxes
(iv) 5 units of Abraham LAN (100kbps) developed in the spring of 1993
with all operating software on disks supplied by Woodward McCoach Consultants,
2 of which have been returned to Abraham. These units were held in white metal
boxes. Elcom shall release Woodward McCoach from any confidentiality restriction
in order to allow Abraham to cause Woodward McCoach to copy such operating
software for Abraham's use.
After a search of Elcom premises, Elcom represents that to the best of its
knowledge, it does not have any of the items set forth above. During the next
week, Elcom shall use reasonable efforts to locate such equipment. In the event
any such equipment is found, such equipment shall be promptly returned to
Abraham.
Date: Elcom Technologies Corporation
---------------------
By:
---------------------------
<PAGE>
[LOGO]CENTOCOR
June 19, 1996
Mr. Robert Sando
VP Finance
Elcom Technologies
78 Great Valley Parkway
Malvern, PA 19355
Re: Amendment to the existing lease for 78-84 Great Valley Parkway, Malvern,
PA.
Dear Robert:
Elcom Technologies Corporation has requested approval to occupy all 16,741
square feet in the combined areas known as 78 and 84 Great Valley Parkway per
Section II of the current executed lease agreement dated July 11, 1994.
Centocor Property Management Corporation II agrees to move their stored goods
and materials out of the space and lease the space to Elcom Technologies
Corporation starting August 1, 1996 per the current terms and conditions which
are as follows:
Minimum Rent (8/1/96 to 8/30/97):
Annual Monthly
16,741 sq.ft. @ $8.25/sq.ft.= $138,113.25 $11,509.44
Free Rent Allowance:
For the month of July, 1996, Elcom Technologies Inc. may occupy the
entire 16,741 square feet while only paying for 8,230 square feet at the
current monthly minimum rent of $4,812.50.
Additional Rent (7/1/96 to 8/30/96):
Annual Monthly
16,741 sq.ft. @ $2.36/sq.ft.= $39,508.76 $3,292.40
Additional Rent (9/1/96 to 8/30/97):
Annual Monthly
16,741 sq.ft. @ $2.48/sq.ft.= $41,517.68 $3,459.81
<PAGE>
[LOGO]CENTOCOR
- --------------------------------------------------------------------------------
In summary, the monthly rent payments (minimum plus additional) for July 1996 is
$8,104.90, and August 1996 is $14,801.84 per month. The monthly payments from
September 1996 until September 1997 are $14,969.25.
Note: Upon execution of this leasing amendment, all previous amendments are
terminated. All other terms and conditions of the existing lease agreement
remain in effect without modifications, additions or deletions. Exhibit C -
Furniture Plan/Inventory will be revised to include the additional space and
associated furnishings.
It is further agreed that if both parties do not reach agreement on the terms
and conditions for an extension of the current lease on or before the last day
of February 1997, then the lease agreement will terminate as scheduled at
midnight on August 30, 1997.
Sincerely,
Richard F. Newmiller, P.E.
Director, Engineering and Facilities
Acceptance Signatures:
________________________________________________________________________________
Robert Sando VP Finance Date
/s/ Richard F. Newmiller 6/20/96
________________________________________________________________________________
Richard F. Newmiller Director, Engineering & Facilities Date
<PAGE>
[LOGO]CENTOCOR
July 11, 1994
Mr. Robert B. Sando
Controller
Elcom Technologies
5 Great Valley Parkway
Malvern, PA 19355
Dear Mr. Sando,
Enclosed please find one original signed copy of your lease at 78 Great Valley
Parkway. As agreed, we will finalize the draft attachment Exhibit C - Furniture
Plan/Inventory within the next 80 days.
We are in receipt of your security deposit check (#1367) in the amount of
$5,500.00. Please make future rental checks payable to Centocor Property
Management Corp II and forward payments directly to:
Mr. Robert J. Caso
Director - Accounting Operations
Centocor, Inc.
200 Great Valley Parkway
Malvern, PA 19355
If you have any questions, please contact me. Welcome to our campus!
Sincerely,
/s/ Richard F. Newmiller
Richard F. Newmiller, P.E.
Director, Facilities and Engineering
Enclosures
cc: Legal File G. Hobbs
R. Caso R. Kaplan
P. Wulfing Geis Realty Group, Inc.
<PAGE>
LEASE - "SCHEDULE"
<TABLE>
<S> <C>
I. Names and Addresses of Parties.
A. Landlord CENTOCOR PROPERTY MANAGEMENT CORP. II,
a Delaware corporation
B. Landlord's Address 200 Great Valley Parkway
Malvern, PA 19355
Attention: Corporate Secretary
C. Tenant ELCOM TECHNOLOGIES CORPORATION
a Pennsylvania corporation
D. Doing Business as (Same as C.)
E. Tenant's Address 78 Great Valley Parkway, Malvern PA 19355
II. Premises.
A. Suite Number 78 Great Valley Parkway and a portion of
84 Great Valley Parkway as identified below in
IIC.2 below and depicted on Exhibit "A"
attached to this Lease to be occupied in
the order as noted below.
B. Name and Address of of Building 40-84 Great Valley Parkway (Bldg. #5)
East Whiteland Township
Chester County, Pennsylvania
C. Rentable Area of Premises 1. For Rent Calculation:
7/15/94 - 8/30/94: 4,000 SF of Rentable Area
9/1/94 - 8/30/95: 4,000 SF of Rentable Area
9/1/95 - 8/30/96: 7,000 SF of Rentable Area
9/1/96 - 8/30/97: 10,000 SF of Rentable Area
2. For Actual Occupancy:
7/15/94 - 8/30/94: 4,990 SF of Rentable Area*
9/1/94 - 8/30/95: 4,990 SF of Rentable Area*
9/1/95 - 8/30/96: 8,230 SF of Rentable Area**
9/1/96 - 8/30/97: 10,105 SF of Rentable Area**
* - depicted on Exhibit "A" as 78 Great
Valley Parkway
** - depicted on Exhibit "A" as all of 78
and a portion of 84 Great Valley
Parkway
Subject to right of Tenant under Section 1 of
the Lease to occupy all 16,741 SF in 78 and 84
Great Valley Parkway unless occupied by
Centocor
- i -
</TABLE>
<PAGE>
D. Rentable Area of Building 84,759 Square Feet
III. Length of Term.
A. Term 7/15/94 through 8/30/97
B. Commencement Date 7/15/94
C. Expiration Date 8/30/97
IV. Minimum Rent.
Tenant shall pay to Landlord a guaranteed annual minimum rent (the
"Minimum Rent") for each of the following periods during the Term, as follows:
TIME PERIOD ANNUAL AMOUNT MONTHLY INSTALLMENT
7/15/94 - 8/30/94 $ -0- $ -0-
9/1/94 - 8/30/95 33,000.00 2,750.00
9/1/95 - 8/30/96 57,750.00 4,812.50
9/1/96 - 8/30/97 82,500.00 6,875.00
Subject to Tenant obligations for Rent for 16,741 SF if Tenant occupies all of
78 and 84 Great Valley Parkway in accordance with Section 1 of the Lease.
V. Use of Premises.
Subject to the provisions this Lease, Tenant shall use the Premises
solely for the purpose of conducting the business of: administrative offices,
research and development and light assembly for research and development with
possible light assembly of Tenant's modem products.
VI. Additional Rent.
In addition to the Minimum Rent, Tenant shall pay the following as
Additional Rent for Tenant's Operating Expense Allocation:
Fixed Operating Cost Allocation:
7/15/94 - 7/31/94 $2.25 PSF/yr $375.00*
8/1/94 - 8/30/94 $2.25 PSF/yr $750.00*
Annually: Monthly:
9/1/94 - 8/30/95 $2.25 PSF/yr $ 9,000.00 $ 750.00**
9/1/95 - 8/30/96 $2.36 PSF/yr 16,520.00 1,376.67**
9/1/96 - 8/30/97 $2.48 PSF/yr 24,800.00 2,066.67**
Subject to Tenant obligations for Rent for 16,741 SF if Tenant occupies all of
78 and 84 Great Valley Parkway in accordance with Section 1 of the Lease.
* - In addition, Tenant shall pay for all Tenant Utility Costs (as defined in
the Lease) during the period 7/15/94 through 8/30/94.
** - In addition, Tenant shall pay for all Tenant Utility Costs (as defined in
the Lease)
- ii -
<PAGE>
VII. Security Deposit.
Tenant, contemporaneously with the execution of this Lease, has
deposited as security with Landlord the sum of Five Thousand Five Hundred
Dollars ($5,500.00).
VIII. Broker.
Geis Realty Group, Inc. and The Burns company (the "Brokers") are the
only persons who acted as brokers in connection with this Lease.
IX. Exhibits and Addenda.
The following exhibits and addenda are attached hereto and made a part
of this Lease:
Exhibit "A" - Premises Plan
Exhibit "B" - Description of Existing HVAC Equipment
Exhibit "C" - Furniture Plan/Inventory
THIS "SCHEDULE" AND THE "TERMS" WHICH ARE ATTACHED HERETO (INCLUDING ALL
EXHIBITS AND ADDENDA) CONSTITUTE THIS LEASE BETWEEN LANDLORD AND TENANT.
IN WITNESS WHEREOF the parties hereto, intending to be legally bound
hereby, have caused this Lease to be duly executed the 11th day of July, 1994.
LANDLORD: CENTOCOR PROPERTY MANAGEMENT CORP. II
Attest/
Witness: /s/[SIGNATURE APPEARS HERE] By: /s/[SIGNATURE APPEARS HERE]
------------------------ -------------------------
TENANT: ELCOM TECHNOLOGIES CORPORATION
Attest/
Witness: /s/[SIGNATURE APPEARS HERE] By: /s/ Robert B. Sando
------------------------ -------------------------
7/11/94 Robert B. Sando
- iii -
<PAGE>
LEASE - TERMS
1. Premises. Landlord hereby leases to Tenant and Tenant hereby leases
--------
from Landlord the premises described in Parts II.A and II.C.2 of the Schedule
(the "Premises") in the building identified in Part II.B. of the Schedule (the
"Building") (the Building and the land upon which it is situate are hereinafter
referred to as the "Property"), for the Term and subject to the covenants,
terms, provisions and conditions of this Lease. Notwithstanding the foregoing
sentence, provided there is no pending Event of Default, Centocor is not
occupying the space and Landlord has given its approval to Tenant for its
expansion, Tenant shall have the right at any time during the Term of this
Lease, to occupy the entire 16,741 square feet of space comprising 78 and 84
Great Valley Parkway whereupon Tenant shall pay Rent calculated for 16,741
square feet. The Premises shall include those items of Landlord's furniture
that is listed on an inventory that has been prepared by Tenant and approved by
Landlord before execution of this Lease.
2. Term. The Term and Tenant's obligation to pay rent and occupy the
----
Premises shall (a) commence on the Commencement Date set forth above in Part
III.B. of the Schedule and (b) end, without the necessity for notice from
either party to the other, at midnight on the Expiration Date set forth above
in Part III.C. of the Schedule.
3. Rent.
----
(a) Tenant shall pay, without demand and without deduction or
setoff, to Landlord the monthly installment of Minimum Rent set forth above in
Part IV, of the Schedule on the first day of each calendar month during the
Term. If the Commencement Date shall fall on a day other than the first day of
a calendar month, the Minimum Rent shall be apportioned pro rata on a per diem
basis for the period between the Commencement date and the first day of the
following calendar month and such apportioned sum shall be paid on the
Commencement Date.
(b) If Tenant fails to pay any Minimum Rent within five (5) days
after the day it is due and payable, Tenant shall pay a late payment charge
equal to five percent (5%) of such unpaid amount. This late payment charge is
intended as liquidated damages to compensate Landlord for its additional
administrative costs resulting from Tenant's late payment, and is agreed by
Landlord and Tenant to be a reasonable estimate of the additional administrative
costs which Landlord will incur as a result of such late payment. The collection
of this late payment charge will not constitute a waiver by Landlord of any
default by Tenant under this Lease or preclude Landlord's exercise of all or any
of Landlord's remedies after such default.
4. Additional Rent.
---------------
(a) The following terms shall have the meanings set forth below:
(I) "Additional Rent" means all of the sums payable
by Tenant under this paragraph and all other sums payable by Tenant elsewhere
under this Lease, whether or not the same are expressly designated as additional
rent.
(II) The term "Operating Costs" shall mean the costs
to Landlord, determined by Landlord of operating and maintaining the Building
including without limitation: (A) charges for, and taxes on, the furnishing to
the Building of all water and sewer service, all electricity for common area and
exterior lighting; (B) costs of maintenance of the Building and Property,
security, landscaping and snow removal; (C) charges for governmental permits
required in connection with the operation of the Building; (D) wages, salaries
and benefits of employees of Landlord or of any
- 1 -
<PAGE>
management company (including an affiliate of Landlord) to the extent they are
employed in the management, operation and maintenance of the Building; (E)
premiums for hazard, rent, liability, worker's compensation and other insurance
maintained by Landlord for the Building; (F) costs arising under service
contracts for the Building; (G) Real Estate Taxes (defined below); (H) legal
fees, auditing fees and other professional and consulting fees required in
connection with the operation of the Building (but not with respect to
collections or disputes with tenants); (I) costs of repair and maintenance of
the Property; (J) management fees (whether payable to a third-party management
company, or an affiliate of Landlord); (K) fees and assessments payable to the
Great Valley Owners Association pursuant to the Declaration of Covenants
applicable to the Property; and (L) the cost of all other items (including,
without limitation, replacements and improvements) which under generally
accepted accounting principles constitute operating or maintenance costs which
are allocable to the Building or any portion thereof. The term "Operating Costs"
shall not include: (A) depreciation (other than on personal property and
equipment); (B) interest and principal or other payments on any encumbrances or
indebtedness of Landlord; (C) ground rents; (D) costs actually reimbursed
through insurance proceeds to repair or replace damage by fire or insured other
casualty; (E) commissions payable to leasing brokers, any costs relating to
activities for the solicitation and execution of leases of space within the
Building; (F) expenditures for capital improvements (including lease payments
for capital improvements) except expenditures necessary to maintain the Building
in good order and condition, those incurred which reduce or are intended to
reduce Operating Costs, and capital expenditures required by law; in which cases
the cost thereof shall be included in Operating Costs to the extent of the
expected useful life as determined by Landlord in accordance with generally
accepted accounting principles applicable to the remainder of the Term; (G) the
cost of correcting defects in the construction of the Building or in the
Building equipment to the extent of any recovery by Landlord under warranties;
(H) any insurance premium to the extent that Landlord is reimbursed (other than
by payment of shares of Operating Costs) for it by Tenant under this Lease or by
any other tenant in the Building pursuant to its lease; (I) the cost of any work
or services performed or facilities furnished to any tenant of the Building to a
materially greater extent or in a manner materially more favorable to such
tenant than that performed for or furnished to Tenant; (J) the cost of
alterations of leased space in the Building; and (K) the cost of any utility
services included in Tenant Utility Costs (herein defined) or consumed by other
tenants within their respective demised premises.
(iii) "Operating Costs Allocation" means that amount payable by
Tenant as Additional Rent for Operating Costs which Landlord has allocated to
the Premises.
(iv) "Real Estate Taxes" means all real estate taxes and
assessments, general or special, ordinary or extraordinary, foreseen or
unforeseen (other than any tax, assessment, levy or other charge (other than any
income tax) by any federal, state or local law now or hereafter imposed directly
or indirectly upon Landlord with respect to this Lease or the value thereof, or
upon Tenant's use or occupancy of the Premises or upon the Minimum Rent,
Additional Rent or any other sums payable under this Lease) assessed or imposed
upon the Property and any tax however designated, which may be levied or imposed
in substitution, in whole or in part, for any tax or in addition to or increase
any tax which would otherwise be included within the definition of Real Estate
Taxes.
(v) The amounts payable by Tenant for its Operating Costs
Allocation (covering Operating Expenses including Real Estate Taxes) shall be
fixed at the amounts listed in Part VI of the Schedule.
(b) With respect to electricity, natural gas, propane and/or steam
or any other fuel or energy furnished to the premises or for equipment supplying
HVAC to the Premises, Tenant shall pay for all such energy consumed and
consumption shall be measured either by Landlord's submeter or by the public
utility of which Tenant is a metered customer. If consumption is measured by a
public
-2-
<PAGE>
utility of which Tenant is a metered customer, then Tenant shall pay such public
utility the charges therefor when due. If consumption is measured by Landlord's
submeter then Tenant shall pay to Landlord, within fifteen (15) days after
receipt from Landlord of each statement of the amount due, Tenant's share of
Landlord's actual cost of supplying such quantity of such forms of fuel or
energy as is consumed by Tenant ("Tenant Utility Costs"). Tenant Utility Costs
shall be determined by Landlord solely on the basis of usage as shown on
submeters installed at or for the Premises. The calculation of the billing in
said statement shall be determined by Landlord (i) for electricity on the basis
of the applicable PECO general services rate as applied to Tenant's electricity
consumption for the Premises, and (ii) for propane, natural gas or other
utilities on the basis of the average cost per unit per billing period charged
to Landlord. For purposes of this paragraph, Tenant shall have responsibility
in the first year of the Term of this Lease for utilities consumed with respect
to the areas occupied by Tenant as separately metered, and in the second and
third years of the Term for all utilities consumed in all 16,741 square feet
comprising 78 and 84 Great Valley Parkway.
5. Services.
--------
(a) Landlord agrees that, from after the Commencement Date,
it shall provide or cause to be provided for the Tenant and the Premises only
the following services:
(i) Heat, ventilation, and air-conditioning ("HVAC")
reasonably required for the comfortable occupation of the Premises during
Ordinary Business Hours (which, for purposes of this Lease, shall be deemed
the regular hours of Tenant's operations in the Premises), subject to the
following: (A) Landlord shall not be responsible for the failure of the heating
or air-conditioning system to provide heating or air-conditioning for
comfortable occupation of the Premises if such failure occurs to an area of the
Premises and results from that area being occupied by more persons than can be
reasonably accommodated by the equipment or that the combined electrical load of
Tenant's equipment and Tenant's lighting fixtures exceeds the General Load
Capacity (as herein defined); (B) Tenant agrees at all times to cooperate fully
with Landlord and to abide by all the regulations and requirements which
Landlord may prescribe for the proper functioning and protection of the heating
and/or air-conditioning system; and (C) the foregoing heating and
air-conditioning services shall be subject to any statute, ordinance, rule,
regulation, resolution or recommendation for energy conservation which may be
promulgated by any governmental agency or organization and which Landlord in
good faith may elect to abide by. Landlord is providing such HVAC services with
existing equipment more particularly described on Exhibit "C" which equipment
Landlord shall maintain during the Term. Landlord shall not be responsible to
provide or install any additional equipment to provide HVAC at levels greater
than that which can be provided by the equipment that presently exists in the
Building.
(ii) A reasonably sufficient quantity of water for
drinking, for lavatory and toilet fixtures (as applicable), for fire sprinkler
systems within the Building and those for laboratory fixtures that exist in the
Premises upon the execution of this Lease.
(iii) Maintenance of public areas of the Property in
clean condition and in good working order, and the sidewalks in good repair and
reasonably free of accumulations of snow and ice.
(iv) All necessary maintenance and repairs (structural
and non-structural) to the Building to keep the Building in good order and
condition, including repairs to the structural components of the Premises, all
repairs which may be needed to the mechanical, HVAC, electrical and plumbing
systems and in servicing the Premises (including repairs to any supplemental and
non-standard fixtures or other improvements installed or made by or at the
request of Tenant requiring maintenance of a type or nature not customarily
provided by Landlord to office lessees of the
-3-
<PAGE>
Property). Tenant shall be obligated for all plate glass windows and doors of
the Premises. Except as expressly otherwise provided in this Lease, Landlord is
not responsible to provide any repairs or maintenance of or to the Premises.
(v) Electric energy for general light and power use in the
Premises, but in no event exceeding such wattage per square foot of the Premises
as is provided by the electrical distribution equipment that exists in the
Premises when this Lease is executed for basic lighting and electrical outlets
based upon the electrical distribution equipment, wiring and fixtures installed
in or for the Premises on the date this Lease is executed (the "General Load
Capacity"), in addition to the electric energy required by Tenant for
distribution of the Building's HVAC systems to the Premises and all propane or
natural gas and steam that serves as fuel for heat and any hot water supplied to
fixtures in the Premises, all subject to the following:
(A) Tenant shall permit Landlord to install submeters
in the Premises or elsewhere in the Building for the purpose of measuring
Tenant's consumption of electric energy in the Premises.
(B) With respect to light fixtures in the Premises,
Tenant at Tenant's expense shall furnish and install all replacement fluorescent
tubes, starters, lamps and ballasts required in the Premises.
(C) Tenant's use of electric energy in the Premises
shall not at any time exceed the capacity of any of the electrical conductors
and equipment in or serving the Premises, which capacity will be determined by
Landlord for the Premises.
(b) Except with the prior express written approval of Landlord, Tenant
shall not install any equipment of any kind whatsoever which might necessitate
any changes, replacements or additions to any of the heating, ventilating, air-
conditioning, electric, water, sewer or other systems serving the Premises or
any other portion of the Property, or to any of the services required of
Landlord under this Lease. Tenant shall have the obligation to provide its own
phone and data systems equipment including, without limitation, all wiring
required therefor, and the Landlord's express written approval (which shall not
be unreasonably withheld or delayed) shall be required prior to the installation
thereof in the Premises.
(c) As to any services provided by Landlord to the Premises or Property,
Landlord shall not be responsible or liable in any way for any failure, defect
in supply or character of, interruption or inadequacy in the quantity or quality
of the same where caused by war, civil commotion, governmental restrictions or
regulatios, strikes, labor disturbances, inability to obtain adequate supplies
or materials, casualties, repairs, replacements, or act or omission or
requirement of the public utility serving the Property, or any other cause
beyond Landlord's actual control whether similar or dissimilar to the foregoing.
(d) Landlord agrees that as of the Commencement Date of this lease for
the space to be occupied in the first year of the Term, the HVAC, electrical and
plumbing equipment serving and lighting fixtures in such space shall be
operational and functioning and at the beginning of the second and third years,
respectively, for the additional space to be occupied at the beginning of each
such year, the HVAC, electrical and plumbing equipment serving and lighting
fixtures in such space shall be operational and functioning for the additional
space occupied.
6. Insurance.
---------
-4-
<PAGE>
(a) Tenant, at Tenant's sole cost and expense, shall maintain throughout
the Term all of the following insurance:
(i) insurance against loss or damage to all of Tenant's
furniture, fixtures, equipment, machinery and any other personal property now or
thereafter located on the Premises by fire such other casualties as may be
included in the forms of all-risk insurance from time to time most commonly
available, in an amount equal to at least the cash values of such property;
(ii) insurance on an occurrence basis against claims for
personal injury (including death) and property damage and with broad form
contractual liability coverage, under a policy or policies of comprehensive
general liability insurance or commercial general liability insurance, with such
limits as may be reasonably requested by Landlord from time to time, but not
less than $5,000,000 per occurrence; and
(iii) Worker's Compensation insurance insuring against and
satisfying Tenant's obligations and liabilities under the worker's compensation
laws of the state in which the Property is located.
Each policy shall have attached thereto an endorsement to the effect that no act
or omission of Tenant shall affect the obligation of the insurer to pay the full
amount of any loss sustained. Each policy shall be in such form as Landlord may
from time to time require. Tenant shall provide to Landlord proof of that
insurance which Tenant is obligated to maintain under this Lease and, upon
request of the Landlord, supply to Landlord a copy of the applicable insurance
policy or policies.
(b) Landlord shall maintain throughout the Term all of the following
insurance:
(i) Comprehensive general liability insurance relating to
the Property (including, without limitation, the common areas); and
(ii) Property insurance for the Property written on a fire and
extended coverage, or all-risk, basis.
The costs of the premiums for such insurance and of any endorsements thereto to
the extent allocable to the Property shall be part of Operating Costs.
(c) Each of the parties hereto hereby releases the other and the other's
partners, agents and employees, to the extent of each party's insurance
coverage, from any and all liability for any loss or damage which may be
inflicted upon the property of such party even if such loss or damage shall be
brought about by the fault or negligence of the other party, its partners,
agents or employees; provided, however, that this release shall be effective
only with respect to loss or damage occurring during such time as the
appropriate policy of insurance shall contain a clause to the effect that this
release shall not affect said policy or the right of the insured to recover
thereunder. If any policy does not permit such a waiver, and if the party to
benefit therefrom requests that such a waiver be obtained, the other party
agrees to obtain an endorsement to its insurance policies permitting such waiver
of subrogation if it is commercially available and if such policies do not
provide therefor. If an additional premium is charged for such waiver, the party
benefiting therefrom, if it desires to have the waiver, agrees to pay to the
other the amount of such additional premium promptly upon being billed therefor.
(d) Tenant may carry any insurance required by this Lease under a
blanket policy, applicable to the Premises for the risks and in the amounts
required pursuant to this paragraph, provided that all requirements of this
paragraph shall be complied with in respect of such policy and
-5-
<PAGE>
that such policy shall provide that the coverage thereunder for the Premises and
occurrences in, on or about the Premises shall not be diminished by occurrences
elsewhere.
(e) Tenant covenants that it will not do or commit, or suffer or
permit to be done or committed, any act or thing as a result of which any policy
of insurance of any kind on or in connection with the Premises or the Property
or any part thereof shall become void or suspended, or the insurance risk on the
Property or any part thereof shall (in the opinion of any insurer or proposed
insurer) be rendered more hazardous. Tenant shall pay as Additional Rent, within
fifteen (15) days after being billed therefor, the amount of any increase of
premiums for such insurance resulting from any breach of this covenant by
Tenant. If Tenant creates, suffers or permits any risk against which insurance
cannot be obtained, whether such creation, sufferance or permission is or is not
a default, Landlord shall, without limitation of Landlord's rights and remedies
in the event of a default, nevertheless have the right to terminate this lease
upon written notice to Tenant but only if Tenant does not cease such activity
creating the uninsured risk within five (5) days after notice from Landlord.
7. Tenant's Trade Fixtures. Tenant shall have the right to install
-----------------------
trade fixtures required by Tenant or used by it in its business and, if
installed by Tenant, to remove any or all such trade fixtures from time to time
during this Lease, and Tenant shall remove all such trade fixtures prior to the
expiration or termination of this Lease; provided, however, that Tenant shall
not remove any such trade fixture, without the prior written consent of
Landlord, if the removal of such trade fixtures will impair the structure of the
Building or the Premises. Tenant shall repair and restore any damage or injury
to the Premises caused by the installation and/or removal of any such trade
fixtures. In the event that Tenant fails to remove all such trade fixtures
prior to the expiration or termination of this Lease, Landlord may remove all
such trade fixtures and dispose of them without notice or obligation to Tenant
and Tenant shall reimburse Landlord for Landlord's cost of such removal and
disposal.
8. Signs. Landlord will provide one standard identification sign
-----
adjacent to the main entrance of the Premises and a listing on the directory for
the Building located at the street entrance to the Property. Tenant not install
any signs on the exterior of the Premises or within the Premises which may be
visible from the outside of the Premises.
9. Repairs and Condition of Premises.
----------------------------------
(a) Tenant covenants that at the expiration or earlier
termination of this Lease, Tenant shall leave the Premises, and during the Term
will keep the Premises, in good order and condition (reasonable wear and tear
excepted). Tenant will make all necessary repairs and replacements to the
Premises; provided, however, that Tenant is not responsible to provide any
maintenance, repair or service which is expressly Landlord's obligation
hereunder. Tenant shall use every reasonable precaution against fire.
(b) Tenant shall at all times remove all dirt, rubbish, waste and
refuse from the Premises, keep and maintain the Premises in a clean, neat and
sanitary condition throughout the Term and at the Expiration Date will also have
removed all of Tenant's property therefrom, to the end that Landlord may again
have and repossess the entire Premises in good order and condition. Any and all
janitorial service desired by Tenant for the Premises shall be contracted for by
Tenant directly with a janitorial contractor and the cost and payment thereof
shall be the sole responsibility of Tenant and Landlord shall have no obligation
to provide any janitorial services.
(c) In the event that any repair is required by reason of the
removal of Tenant's property or any negligence or abuse of Tenant or its agents,
employees, invitees or of any other person using the Premises with Tenant's
express or implied consent, Landlord may make such repair and
-6-
<PAGE>
Tenant shall, within fifteen (15) days of receipt of a written statement from
Landlord, pay to Landlord the costs of such repair as Additional Rent.
(d) Tenant shall provide at Tenant's sole cost and expense all
trash removal including, without limitation, all municipal trash, residual (or
industrial) trash, biological, hazardous and radioactive refuse or waste and all
recyclables. Tenant shall comply with all legal requirements applicable to the
disposal and/or recycling of any of the foregoing. No portion of the Property
shall be used or maintained for the dumping of rubbish or debris except in
dumpsters or receptacles at locations approved by the Landlord. Trash, garbage
and other waste shall be dumped in such containers collections at least weekly.
Hazardous or contaminated waste shall only be stored inside the Premises until
it is disposed of by the Tenant in strict compliance with all applicable law.
(e) Attached to this Lease as Exhibit "B" is an inventory of
furniture and other personal property owned by Landlord and being leased to
Tenant as part of the Property (hereinafter the "Furniture"). Tenant shall
maintain the Furniture and shall return it to Landlord at the expiration or
earlier termination of this Lease in the same condition as existed on the
Commencement Date, ordinary wear and tear excepted. If Tenant wishes to
rearrange or reconfigure any of the Furniture that is modular or attached
components, Tenant shall have such rearrangement or reconfiguration performed at
Tenant's expense by the contractor who supplied such Furniture to the Landlord.
10. Alterations. Tenant shall not, without on each occasion first
-----------
obtaining Landlord's prior written consent (which shall not be unreasonably
withheld or delayed), make or permit to be made any alterations, improvements or
additions to the Premises. Landlord shall have the right to condition or deny
approval for any alterations based upon the effect of such alterations on the
Building, any of the systems or equipment in the Building or any of the services
that are to be provided by Landlord under this Lease. Furthermore, Landlord can
set any conditions that it deems necessary for the grant of its approval to
Tenant including, without limitation, a requirement that the Tenant use
contractors who have provided to Landlord warranty coverage to landlord for any
portion of the Building that may be affected by the improvements, additions or
alterations. All alterations, improvements and additions that may be expressly
permitted by Landlord shall be performed in a good and workmanlike manner and in
compliance with all laws, ordinances, orders, rules and other governmental
requirements and will be performed by contractors approved by Landlord. Except
as otherwise provided herein with respect to trade fixtures, all alterations,
improvements, additions, repairs and all other property attached to or used in
connection with the Premises or any part thereof made or installed on the
Premises by or on behalf of Tenant shall immediately upon completion or
installation thereof be and become part of the Premises and the property of
Landlord without payment therefor by Landlord and shall be surrendered to
Landlord upon the expiration or earlier termination of the term of this Lease.
All additions, alterations and improvements made by Tenant shall be maintained
by Tenant. Tenant shall give to Landlord "as built" drawings of any
improvements, alterations or additions made by Tenant to the Premises within
thirty (30) days after the improvements, alterations or additions. By notice
given to Tenant, Landlord may require that any alterations, additions and
improvements made in or upon the Premises be removed by Tenant. In that event,
Tenant will remove such alterations, additions and improvements at Tenant's sole
cost and will restore the Premises to the condition in which they were before
such alterations, additions and improvements were made.
11. Landlord's Right of Entry. Tenant agrees to permit Landlord and
-------------------------
the authorized representatives of Landlord and of the holder of any mortgage or
any prospective mortgagee to enter the Premises at any time in response to an
emergency (including avoid damage to the Property or to persons or property)
and, with at least one day's prior telephonic or written notice to Tenant,
otherwise at all reasonable times and upon reasonable notice for the purpose of
making inspections to satisfy itself that Tenant has complied with the
provisions of this Lease, making any necessary repairs to the Premises,
performing any work therein that may be necessary by reason of Tenant's failure
to make
-7-
<PAGE>
such repairs or perform any such work required of Tenant under this Lease, or
making any alterations, improvements or repairs to the Building or for any
purpose in connection with the management or operation of the Property. Nothing
herein shall imply any duty upon the part of Landlord to make any such
inspection and nothing herein shall imply any duty on the part of Landlord to do
any other work which under any provision of this Lease Tenant may be required to
perform and the performance thereof by Landlord shall not constitute a waiver of
Tenant's default in failing to perform it. Landlord shall not in any event be
liable for inconvenience, annoyance, disturbance or other damage to Tenant by
reason of any of the foregoing and the obligations of Tenant under this Lease
shall not thereby be affected in any manner whatsoever. Landlord also shall have
the right to enter the Premises at all reasonable times to exhibit the Premises
to any prospective tenant or mortgagee thereof, within the last nine (9) months
of the Term and to any prospective purchaser or mortgagee thereof or any
prospective mortgagee at any time during the Term. No entry into the Premises by
Landlord by any means will constitute a forcible or unlawful entry into the
Premises, or a detainer of the Premises, or an eviction, actual or constructive,
of Tenant from the Premises or any part thereof, nor will such entry entitle
Tenant to damages or an abatement of the rent or other sums due hereunder.
12. Non-Abatement of Rent. Except as expressly provided herein, it is
---------------------
understood and agreed that damage to or destruction of all or any portion of the
Premises by fire or by any other cause shall not terminate this Lease nor
entitle Tenant to surrender the Premises or to terminate this Lease nor in any
way affect Tenant's obligation to pay the Minimum Rent, Additional Rent and
other sums payable hereunder. Tenant's covenants to pay the Minimum Rent,
Additional Rent and all other sums payable hereunder are independent of any
other covenant, agreement, term or condition of this Lease.
13. Governmental Regulations; Covenants Affecting the Property.
----------------------------------------------------------
(a) Tenant shall throughout the Term, at Tenant's sole cost and
expense, promptly comply with all laws and ordinances and notices, orders,
rules, regulations and requirements of all federal, state and local governments
and appropriate departments, commissions, boards and officers thereof, and
notices, orders, rules and regulations of the National Board of Fire
Underwriters, or any other body now or hereafter constituted exercising similar
functions, relating to all or any part of the Premises (except those for repairs
and maintenance which Landlord is obligated by the terms of this Lease to
perform or for which Landlord is to be reimbursed as an Operating Cost) or to
the use or manner of use of the Premises. If to comply with the foregoing
sentence, Tenant is required to install a capital improvement whose useful life,
as reasonably determined by Landlord, shall exceed the Term of this Lease and
such capital improvement is one which Landlord will actually use after the Term
of the Lease and is not specifically required because of the specific use or
occupancy of the Tenant, Landlord shall have the option of either (i) requiring
Tenant to install such improvement and provide a credit to Tenant as reasonably
determined by Landlord for the portion of the improvement's cost atttributable
to the portion of its useful life period beyond the Term of this Lease (without
regard to any early termination) or (ii) installing the improvement itself in
which case the Tenant shall pay to Landlord within ten (10) days after being
invoiced the amount reasonably determined by Landlord of the cost of such
improvement attributable to the portion of its useful life during the Term of
this Lease.
(b) Tenant shall also abide by all terms and conditions of those
certain Protective Covenants for Great Valley Corporate Center (the "Covenants")
to which the Property is subject and the terms and conditions of the Covenants
are incorporated herein by reference.
14. Environmental Matters.
---------------------
(a) Without otherwise limiting Tenant's obligations under the
provisions of this Lease relating to compliance with government regulations,
Tenant shall conduct,and cause to be conducted, all operations and activities at
the Premises in compliance with, and shall in all other
-8-
<PAGE>
respects applicable to the Premises comply with, all present and future
applicable statutes, ordinances, governmental regulations, orders and
directives, and all applicable requirements of common law (all of the foregoing
being hereinafter referred to collectively as the "Environmental Laws"),
concerning (i) operations at the Premises, (ii) handling of any materials
including without limitation radioactive and biohazardous materials, (iii)
emission, release or discharge of any pollutant into the air, the presence or
passage of any effluent or pollutant or the discharge of any effluent or
pollutant into any water or soil, or the presence, passage or release of any
substance or matter, or (iv) the storage, treatment, disposal, presence or
passage of any solid waste, industrial waste, or hazardous waste or substance
at, from or connected with operations at any premises. Tenant shall obtain all
permits, licenses, or approvals and shall make and file all notifications and
registrations as required by Environmental Laws in a timely manner. Tenant shall
at all times comply with the terms and conditions of any such permits, licenses,
approvals, notifications and registrations.
(b) Tenant shall provide to Landlord copies of the following,
forthwith after each shall have been submitted, prepared or received by Tenant
or any occupant of the Premises:
(i) all applications and associated materials submitted to
any governmental agency for compliance with any Environmental Law;
(ii) all documents and other information relating in any way
to the Premises submitted to any governmental agency in response to a request
purporting to be pursuant to any Environmental Law;
(iii) any notification, registration, record, report or
manifest, and supporting information, submitted or maintained in connection with
any Environmental Law;
(iv) any permit, license, approval, amendment or modification
thereof obtained under any Environmental Law; and
(v) any correspondence, notice of violation, summons, order,
complaint, or other document received by Tenant or any occupant of the Premises
pertaining to compliance with any Environmental Law.
(c) Tenant shall indemnify and hold harmless Landlord of, from and
against any and all expense, loss or liability suffered by Landlord by reason of
Tenant's breach of any of the provisions of this paragraph, including, but not
limited to, (i) any and all expenses that Landlord may incur in complying with
any Environmental Laws, (ii) any and all costs that Landlord may incur in
studying, containing, removing, remedying, mitigating, or otherwise responding
to, the release of any hazardous substance or waste at or from the Premises,
(iii) any and all costs for which Landlord may be liable to any governmental
agency for studying, containing, removing, remedying, mitigating, or otherwise
responding to, the release of any hazardous substance or waste at or from the
Premises, (iv) any and all fines or penalties assessed upon landlord by reason
of a failure of Tenant to comply with the provisions of this paragraph, (v) any
and all loss of value of the Property by reason of such failure to comply, and
(vi) any and all legal fees and costs incurred by Landlord in connection with
any of the foregoing.
(d) No subsequent modification or termination of this Lease by
agreement of the parties, or otherwise shall be construed to waive, or to
modify, any provisions of this paragraph, unless the termination or modification
agreement or other document so states in writing.
(e) The terms utilized in this paragraph shall be defined as they
are defined in the Environmental Laws as amended from time to time or in future
federal legislation and/or regulations
-9-
<PAGE>
and in corresponding present or future provisions of law and/or regulations in
the state, county and/or municipality where the Premises are located.
(f) Tenant shall promptly notify Landlord of any inspection of
the Premises conducted or to be conducted by any governmental agency or
authority with respect to environmental conditions relating to the Premises or
Tenant's use thereof.
15. Use of Premises. Tenant shall continuously occupy and use the
---------------
Premises solely for conducting the business specified in Part V. of the
Schedule. The Premises may not be used or occupied in whole or in part for any
other purpose. The business to be conducted by Tenant at the Premises shall be
conducted under the name set forth above in Part I.D. of the Schedule.
16. Mechanics' Liens, etc.
---------------------
(a) Tenant will not create or permit to be created or
remain, and will discharge, any lien, encumbrance, or charge (levied on account
of any imposition or any mechanic's, laborer's, or materialman's lien) which
might be or become a lien, encumbrance or charge upon the Premises, the
Property, or any part thereof or the income therefrom, and Tenant will not
suffer any other matter or thing whereby the estate, rights and interest of
Landlord in the Premises, the Property or any part thereof might be impaired;
provided that any mechanic's, laborer's or materialman's lien may be discharged
in accordance with the provisions set forth below.
(b) If any mechanic's, laborer's or materialman's lien
shall at any time be filed against the Premises, the Property or any part
thereof, Tenant, within fifteen (15) days after notice of the filing thereof,
will cause it to be discharged of record by payment, deposit, bond, order of
the court of competent jurisdiction or otherwise.
(c) Nothing in this Lease shall be deemed or construed in
any way as constituting the consent or request of Landlord, express or implied,
to any contractor, subcontractor, laborer, or materialman for the performance of
any labor or the furnishing of any materials for any specific alteration,
addition, improvement or repair to the Premises or any part thereof. Nothing in
this Lease or in any other document executed by Landlord shall be construed to
constitute an acknowledgement that any work done or material provided by any
contractor, subcontractor or materialman of Tenant was done or provided for the
immediate use and benefit of Landlord.
(d) Prior to the making of any alterations, additions or
improvements to the Premises and in any event within ten (10) days following the
execution of any contract for such work, Tenant shall cause to be filed in the
Office of the Prothonotary of the county in which the Premises are located
waivers of mechanic's and materialmen's liens in form satisfactory to Landlord's
counsel, such waivers to be binding on all subcontractors and materialmen.
17. Indemnification and Release of Landlord.
---------------------------------------
(a) Tenant agrees to indemnify and save harmless Landlord
from and against any and all claims, losses, liabilities and expenses
(including, without limitation, attorneys' fees and court costs) arising in
connection with (i) the occupancy, conduct or operation of the Premises or from
any work or thing whatsoever done or failed to be done in and on the Premises,
(ii) any breach or default on the part of Tenant in the performance of any
covenant or agreement on the part of Tenant to be performed pursuant to the
terms of this Lease or under any law, (iii) any act, neglect or negligence of
Tenant, or any of its agents, contractors, servants, employees, or licensees, or
(iv) any accident, injury, or damage whatsoever caused to any person, firm, or
corporation occurring during the Term, in or about the Property, other than
caused by the willful misconduct of Landlord. In case any action or proceeding
-10-
<PAGE>
be brought against Landlord by reason of any such claim. Tenant, upon notice
from Landlord, covenants at Tenant's cost and expense to resist or defend action
or proceeding or to cause it to be resisted or defended by an insurer.
(b) Tenant hereby releases landlord, its principals, agents,
employees and contractors from, all claims for death, personal injury or damage
to property or business sustained by Tenant or any person claiming by, through
or under Tenant resulting from fire, accident, defect in the Premises or the
Property, any defect in or any failure of any equipment, machinery, utilities,
appliances or apparatus in the Premises or the Property, failing of fixtures or
other items, leakage of water, snow or ice, broken glass, or any other event
whatsoever, other than caused by the willful misconduct of Landlord and any
failure of Landlord to perform any of its obligations under this lease.
(c) The foregoing indemnification and release shall survive
the expiration or sooner termination of this lease.
18. Covenant of Quiet Enjoyment. Landlord covenants that Tenant,
---------------------------
upon paying the Minimum Rent, Additional Rent and other charges herein provided
for and upon observing and keeping all covenants, agreements and conditions of
this Lease on its part to be kept, shall have quiet enjoyment of the Premises
during the Term without disturbance by anyone claiming by or through Landlord,
subject, however, to the exceptions, reservations and conditions of this Lease.
19. Condemnation.
------------
(a) If twenty-five percent (25%) or more of the Premises, or
if all or a substantial portion of the Building or the Property is taken or
condemned for a public or quasi-public use under any statute or by right of
eminent domain by any competent authority or sold in lieu of such taking or
condemnation, such that in the sole opinion of Landlord the Building is not
economically operable as before without substantial alteration or
reconstruction, this Lease shall terminate as of the date the right of
possession vests in the condemnor (the "Taking Date"). The rent herein reserved
shall be apportioned and paid in full by Tenant to Landlord to the Taking Date
and all rent prepaid for periods beyond the Taking Date shall forthwith be
repaid by Landlord to Tenant and neither party shall thereafter have any
liability hereunder. Tenant shall have a right to make a claim against the
condemnor for moving and related expenses which are payable to tenants under the
Eminent Domain Code of Pennsylvania. Except as aforesaid, Tenant hereby waives
all claims against Landlord and all claims against the condemnor, and Tenant
hereby assigns to Landlord all claims against the condemnor including, without
limitation, all claims for leasehold damages and diminution in the value of
Tenant's leasehold interest.
(b) If twenty-five percent (25%) or less of the Premises is
so taken or condemned, then this Lease shall terminate as of the Taking Date as
to the portion of the Premises so taken or condemned and this Lease shall
continue in full force as to the remainder of the Premises with the Minimum Rent
and Additional Rent abating only to the extent of the rentable area of the
Premises so taken or condemned.
(c) If the condemnor should take only the right to
possession for a fixed period of time or for the duration of an emergency or
other temporary condition, then, notwithstanding anything hereinabove provided,
this Lease shall continue in full force and effect with an abatement of Minimum
Rent and Additional Rent to the extent of the amounts payable by the condemnor
with respect to any period of time prior to the expiration or sooner termination
of this Lease, and Tenant shall pay to Landlord any deficiency between the
amount thus payable by the condemnor and the amount of such rent, while
Landlord shall pay over to Tenant any excess of the amount of the award over
the amount of such rent.
-11-
<PAGE>
20. Fire or Other Casualty.
----------------------
(a) If the Premises or the Building is damaged by fire or
other insured casualty, Landlord will give Tenant written notice of the time
that the Landlord has determined in its sole discretion will be needed to repair
the damage, and the election, if any, that Landlord has made according to the
provisions below. Such notice will be given no later than thirty (30) days after
the fire or other insured casualty (the "Notice Date").
(b) If the Premises or the Building is damaged by fire or
other insured casualty to an extent Landlord has determined in its sole
discretion can be repaired within one hundred twenty (120) days after the Notice
Date, Landlord will promptly begin to repair the damage after the Notice Date
and will diligently pursue the completion of such repair subject to delays for
insurance adjustment and to delays beyond the Landlord's control; provided
Landlord shall have no duty to repair or replace any personal property of Tenant
or any alterations, improvements or additions made by Tenant to the Premises. In
that event this Lease will continue in full force and effect except that the
Minimum Rent and Additional Rent will be abated on a pro rata basis from the
date of the fire or casualty until the date of the completion of such repairs
(the "Repair Period") based on the proportion of the rentable area of the
Premises that Tenant is unable to use during the Repair Period.
(c) If the Premises or the Building is damaged by fire or
other insured casualty to an extent Landlord has determined in its sole
discretion cannot be repaired within one hundred twenty (120) days after the
Notice Date, then (i) Landlord may terminate this Lease as of the date of the
damage by written notice given to Tenant on or before the Notice Date or (ii)
Tenant may cancel this Lease as of the date of the damage by written notice
given to Landlord within ten (10) days after Landlord's delivery of a written
notice that the repairs cannot be made within one hundred twenty (120) days. If
neither Landlord nor Tenant so elects to cancel this Lease, Landlord will
diligently proceed to repair the Building and Premises, subject to delays for
insurance adjustment and to delays beyond Landlord's control, and Minimum Rent
and Additional Rent will be abated on a pro rata basis during the Repair Period
based on the proportion of the rentable area of the Premises that Tenant is
unable to use during the Repair Period.
(d) If the Premises or the Building is damaged by uninsured
casualty, or if the proceeds of insurance are insufficient to pay for the repair
of any damage to the Premises or the Building, Landlord will have the option
either to elect to repair the damage or to cancel this Lease as of the date of
the casualty by written notice given to Tenant on or before the Notice Date.
(e) If any damage by fire or other casualty is the result of
the willful misconduct or negligent act or omission of Tenant, its agents,
contractors, employees or invitees, Minimum Rent and Additional Rent will not be
abated. Tenant will have no right to terminate this Lease on account of any
damage to the Premises or the Building, except as set forth in this Lease.
21. Assignment and Subletting. Tenant shall not mortgage, pledge or
-------------------------
encumber this Lease, collaterally or otherwise. Tenant shall not assign this
Lease, or sublet the whole or any part of the Premises, or suffer or permit the
use and occupancy therof by anyone other than Tenant and its employees. This
prohibition against assigning or subletting shall be construed to include a
prohibition against any assignment or subletting by operation of law or by any
transfer, sale, pledge, or other disposition, in any single transaction or
cumulatively during the Term, of fifty percent (50%) or more of the ownership
interest in Tenant.
22. Subordination.
-------------
-12-
<PAGE>
(a) This Lease shall be subject and subordinate at all times to any
mortgage, deed of trust or other encumbrance heretofore or hereafter placed upon
the Premises or the Property and of all renewals, modifications, consolidations,
replacements and extensions thereof (all of which are hereinafter referred to
as, collectively a "Mortgage") except to the extent that any Mortgage provides
that this Lease is superior to that Mortgage. This provision shall operate
automatically and without the necessity of any further act on the part of Tenant
to effectuate such subordination. Tenant agrees, at the request of any person
who may acquire Landlord's estate by foreclosure or transfer in lieu of
foreclosure, to attorn to such person and to execute, acknowledge and deliver,
upon demand by Landlord, any holder of a Mortgage or such person who may acquire
Landlord's estate, but in no event later than ten (10) days after such demand,
such further instruments evidencing and confirming such subordination of this
Lease and such instruments evidencing such attornment obligation. Tenant hereby
irrevocably appoints Landlord the attorney-in-fact of Tenant (such power of
attorney being coupled with an interest), to execute, acknowledge and deliver
any such instruments for and in the name of Tenant.
(b) Notwithstanding the foregoing, any holder of any Mortgage may
at any time subordinate its Mortgage to this Lease, without Tenant's consent, by
notice in writing to Tenant, and thereupon this Lease shall be deemed prior to
such Mortgage without regard to their respective dates of execution, delivery
and recording and in that event such holder shall have the same rights with
respect to this Lease as though this Lease had been executed, delivered and
recorded prior to the execution, delivery and recording of such Mortgage.
23. Estoppel Certificate.
--------------------
(a) Tenant agrees at any time and from time to time, within fifteen (15)
days after the Landlord's written request or that of any mortgagee of Landlord,
to execute, acknowledge and deliver to Landlord a written instrument in
recordable form certifying (i) whether this Lease is in full force and effect
and if there have been modifications, supplements, side agreements or
amendments, and if so, stating such modifications, supplements, side agreements
and amendments; (ii) the dates to which Minimum Rent, Additional Rent and other
charges have been paid; (iii) the amount of any prepaid rents or to the best of
Tenant's knowledge, credit due Tenant, if any; (iv) that Tenant has accepted
possession and has occupied the Premises, the Commencement Date and whether any
option to extend the Term has been exercised and if so, the Expiration Date; (v)
whether, to the best knowledge of Tenant, Landlord is in default in the
performance of any covenant, agreement or condition contained in this Lease and,
if so, specifying each such default of which Tenant may have knowledge; (vi)
that no notice has been received by Tenant of any default which has not been
cured or, if such default has not been cured, what Tenant intends to do in order
to effect the cure; and (vii) and such other matters as Landlord or Landlord's
mortgagee may reasonably require. Any such instrument delivered pursuant to this
paragraph may be relied upon by Landlord, any prospective purchaser of the
Property any mortgagee or prospective mortgagee thereof, any assignee of
Landlord's interest in this Lease or of any mortgage upon the Property or any
purchaser of an interest in Landlord.
(b) If within ten (10) days after Landlord's written request for an
instrument in accordance with the provisions hereof Tenant has not delivered
such instrument, Landlord may elect to send Tenant Landlord's certificate
setting forth the information described above. Tenant's failure to execute,
acknowledge and deliver to Landlord the written instrument described above
within five (5) days after delivery of Landlord's certificate shall constitute
an acknowledgement by Tenant, which may be relied upon by Landlord, any
prospective purchaser of the Property, any mortgagee or prospective mortgagee
thereof, any assignee of Landlord's interest in this Lease or any mortgage upon
the Property, or any purchaser or an interest in Landlord that the information
set forth on Landlord's certificate is true and correct and shall constitute, as
to any person entitled to rely as aforesaid and to the extent set forth therein,
a waiver of any defaults by Landlord which may exist prior to the date of
- 13 -
<PAGE>
such request. Furthermore, Tenant irrevocably appoints Landlord as Tenant's
attorney-in-fact to execute and deliver on Tenant's behalf Landlord's
certificate if Tenant does not execute, acknowledge and deliver an instrument
within such fifteen (15) day period.
24. Curing Tenant's Defaults. Subject to the provisions below requiring
------------------------
Landlord in certain instances to give to Tenant written notice of Tenant's
default and an opportunity to cure such default (but not subject thereto in the
event of an emergency situation (as reasonably determined by Landlord)), if
Tenant shall be in default in the performance of any of its obligations
hereunder, Landlord may (but shall not be obligated to do so), in addition to
any other rights it may have in law or equity, cure such default on behalf of
Tenant, and Tenant shall reimburse Landlord upon demand for any sums paid or
costs incurred by Landlord in curing such default, including interest at the
Default Rate, from the respective dates of Landlord's making of the payments and
incurring of the costs, on all sums advanced by Landlord as aforesaid, which
sums and costs together with interest thereon shall be deemed Additional Rent
payable hereunder.
25. Notices; Payment of Rent. All notices, demands, requests, consents,
------------------------
certificates and waivers from either party to the other shall be in writing and
sent by United States registered or certified mail, return requested, postage
prepaid, or by overnight express delivery service or by courier service, against
written receipt or signed proof of delivery addressed to the party at the
address set forth above in Part 1. of the Schedule 1, or to such other address
as the party to receive the notice, demand, request, consent, certificate or
waiver may hereafter designate by written notice to the other. All payments of
rent hereunder shall be made to Landlord at the address from time to time
designated as aforesaid for the giving of notice. All notices, demands,
requests, consents, certificates and waivers shall be deemed, given and
effective two business days following the date deposited in the United States
mail and on the next business day it delivered to an overnight express delivery
service or courier service.
26. Condition of Title and of Premises. Tenant represents that Tenant has
----------------------------------
been given the opportunity to examine the Premises, the title thereto, the
zoning thereof, the street or streets, sidewalks, parking areas, curbs and
access ways adjoining them any surface and subsurface conditions thereof, and
the present uses and nonuses thereof, and Tenant accepts them in the condition
or state in which they now are, or any of them now is, without representation,
covenant or warranty, express or implied, in fact or in law, by Landlord and
without recourse to Landlord, as to the title thereto, encumbrances thereon,
appurtenances, the nature, condition or usability thereof or the use or uses to
which the Premises or any part thereof may be put. Except as may be expressly
set forth in this Lease, the Premises is being leased to Tenant strictly in
"as-is" condition.
27. Surrender. At the expiration or earlier termination of this Lease,
---------
Tenant shall surrender the Premises (including any items of Landlord's
furniture) in good order and condition, reasonable wear and tear excepted. If
Landlord requires Tenant to remove any alterations, improvements or additions
which were made by or on behalf of Tenant, Tenant shall remove the same prior to
the expiration or earlier termination of this Lease, at Tenant's sole cost, and
shall restore the Premises to the condition in which they were before such
alterations, improvements and additions were made. All alterations,
improvements and additions not so removed will conclusively be deemed to have
been abandoned by Tenant and may be appropriated, sold, stored, destroyed or
otherwise disposed of by Landlord without notice to Tenant to any other person
and without obligation to account for them. Tenant will pay Landlord all
expenses incurred in connection with Landlord's disposition of such property,
including without limitation the cost of repairing any damage to the Premises
caused by the removal of such property. Tenant's obligation to observe and
perform this covenant will survive the expiration or earlier termination of this
Lease.
- 14 -
<PAGE>
28. Holdover. If Tenant or any person claiming through Tenant shall retain
--------
possession of the Premises or any part thereof after the expiration or earlier
termination of this Lease and, if Landlord shall have expressly consented, in
writing, to such continuation of possession, such possession shall be (unless
the parties hereto shall otherwise have agreed in writing) deemed to be under a
month-to-month tenancy which shall continue until either party shall notify the
other, in writing, at least thirty (30) days prior to the end of any calendar
month, that the party giving such notice elects to terminate such tenancy at the
end of such calendar month, in which event such tenancy shall so terminate.
Anything contained in the preceding sentence to the contary notwithstanding, the
Minimum Rent payable with respect to each such monthly period shall be two
hundred percent (200%) of the Minimum Rent payable for the last month of the
Term and, otherwise, month-to-month tenancy with Landlord's express consent
shall be upon the same terms and subject to the same conditions, as those which
are set forth in this Lease; however, Tenant shall have no right to exercise any
option to extend the Term, option to purchase or right of first refusal. The
provisions hereof shall not be deemed to limit or constitute a waiver of any
other rights or remedies of Landlord provided in this Lease or at law or in
equity and applicable to unlawful retention of possession or otherwise.
Landlord's acceptance of rent under the provisions hereof shall not be deemed
consent to the holdover.
29. Defaults; Landlord's Remedies; Tenant's Remedies.
------------------------------------------------
(a) It shall be a default if any of the following shall occur:
(i) Tenant does not pay in full when due any and all
installments of Minimum Rent or Additional Rent or any other charge and such
default continues for ten (10) days after the same is due;
(ii) Tenant violates or fails perform or comply with any
covenant or condition (other than the payment of Minimum Rent or Additional Rent
or except as otherwise provided below) herein contained and such default
continues for a period of thirty (30) days after Tenant receives written notice
from Landlord, provided as to those matters which cannot reasonably be cured in
such thirty (30) day period, such period shall be extended for a reasonable time
provided Tenant has commenced such cure within thirty (30) days and is
proceeding with due diligence and in good faith;
(iii) Tenant removes or attempts to remove Tenant's property
therefrom other than in the ordinary course of business or vacates or abandons
the Premises without having first paid to Landlord in full all Minimum Rent and
Additional Rent and charges that may have become due as well as all which will
become due thereafter;
(iv) Tenant mortgages, pledges, encumbers or assigns this
Lease or sublets the whole or part of the Premises in violation of the
provisions of this Lease;
(v) Tenant fails to take possession and occupy the Premises
on the Commencement Date;
(vi) Tenant records this Lease, a short form of this Lease or
a memorandum of this Lease without the consent of Landlord;
(vii) An involuntary case under the federal bankruptcy law as
now or hereafter constituted is commenced against Tenant or any guarantor or
surety of Tenant's obligations under this Lease ("Guarantor"), or under any
applicable federal or state bankruptcy, insolvency, reorganization or other
similar law, or there is filed against Tenant or a Guarantor petition seeking
the appointment of a receiver, liquidator or assignee, custodian, trustee,
sequestrator (or similar official) of
-15-
<PAGE>
Tenant or a Guarantor or any substantial part of Tenant's or Guarantor's
property, or seeking the winding-up or liquidation of Tenant's or Guarantor's
affairs and such involuntary case or petition is not dismissed within sixty (60)
days after the filing thereof, or if Tenant or a Guarantor commences a voluntary
case or institutes proceedings to be adjudicated as bankrupt or insolvent or
consents to the entry of an order for relief under the bankruptcy laws as now or
hereafter constituted, or any other applicable federal or state bankruptcy or
insolvency or other similar law, or consents to the appointment of or taking
possession by a receiver or liquidator or assignee, trustee, custodian,
sequestrator (or other similar official) of Tenant or a Guarantor or of any
substantial part of Tenant's or a Guarantor's property, or if Tenant or any
Guarantor makes any assignment for the benefit of creditors or admits in writing
its inability to pay its debts generally as they become due or fails to pay
generally its debts as they become due or if Tenant is levied upon and is about
to be sold out upon the Premises by any sheriff, marshal or constable or if
Tenant or its stockholders or Board of Directors or any committee thereof takes
any corporate action in contemplation, preparation or furtherance of or for any
of the foregoing; or
(viii) A material adverse change in the financial condition of
Tenant or a Guarantor.
(b) In any such event set forth above, Landlord may exercise any one or
more of the following remedies at the sole option of Landlord.
(i) Landlord may, in a writing delivered to Tenant, declare
immediately due and payable the Minimum Rent, the Additional Rent and all other
charges due hereunder for the entire unexpired balance of the Term, in addition
to any rent or charges already due and payable, as if by the terms of this
Lease the whole balance of unpaid rent and other charges were due on that day
payable in advance.
(ii) Landlord may terminate this Lease by written notice to
Tenant, and, on the date specified in the notice, Tenant's right to possession
shall cease and this Lease will be terminated (except as to Tenant's liability
set forth in the following sentence). If Landlord terminates this Lease,
Landlord may recover from Tenant a judgment for damages computed as follows, in
addition to its other remedies:
(A) the unpaid rent (both Minimum and Additional Rent)
which has accrued up to the time of such termination plus interest from the
dates such rent was due to the date of the judgment at the Default Rate; plus
(B) unpaid rent which would have accrued (had this Lease
continued) after termination until the date of the judgment; plus
(C) any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course would be likely to
result therefrom including, without limitation, the cost of repairing the
Premises and reasonable attorneys' fees; plus
(D) at Landlord's election, such other amounts in
addition to or in lieu of the foregoing as may be permitted by applicable law.
(iii) Landlord may terminate Tenant's right of possession and
may re-enter and repossess the Premises by legal proceedings, force or
otherwise, without terminating this Lease.
-16-
<PAGE>
(iv) After re-entry or retaking or recovering
of the Premises, whether by termination of this Lease or not, Landlord may, but
shall be under no obligation to, make such alterations and repairs, if any, as
Landlord may deem then necessary or advisable and relet the Premises or any part
or parts thereof, either in Landlord's name or otherwise, for a term or terms
which may at Landlord's option be less than or exceed the period which otherwise
would have constituted the balance of the Term and at such rent or rents and
upon such other terms and conditions as in Landlord's sole discretion may seem
advisable and to such person or persons as may in Landlord's discretion seem
best. Tenant shall be liable for any loss of rent for such period as would be
the balance of the Term and any renewal or extension for which Tenant had become
bound prior to a default of this Lease plus the cost and expenses of reletting
and of redecorating, remodeling or making repairs and alterations to the
Premises for the purpose of reletting, the amount of such liability to be
computed monthly and to be paid by Tenant to Landlord from time to time upon
demand. Landlord shall in no event be liable for, nor shall any damages or other
sums to be paid by Tenant to Landlord be reduced by, failure to relet the
Premises or failure to collect the rent from any reletting. Tenant shall not be
entitled to any rents received by Landlord in excess of the rents provided for
in this Lease. Tenant agrees that Landlord may file suit to recover any sums
falling due under the terms of this clause from time to time and that no suit or
recovery of any portion due Landlord hereunder shall be any defense to any
subsequent action brought for any amount not theretofore reduced to judgment in
favor of Landlord. Tenant, for Tenant and Tenant's successors and assigns,
hereby irrevocably constitutes and appoints Landlord as agent for Tenant and
Tenant's successors and assigns to collect the rents due or to become due under
all subleases of the Premises or any parts thereof without in any way affecting
Tenant's obligation to pay any unpaid balance of rent or any other sum due or to
become due hereunder. Notwithstanding any reletting without termination,
Landlord may at any time thereafter elect to terminate this lease for Tenant's
previous breach.
Whenever Landlord shall have the right to re-enter the Premises,
it shall have the right to remove all persons and property from the Premises and
either treat such property as abandoned or, at Landlord's option, store it in a
public warehouse or elsewhere at the cost of and for the account of Tenant, all
without service of notice or resort to legal process and without being deemed
guilty of trespass, or becoming liable for any loss or damage which may be
occasioned thereby.
Tenant waives the right to any notice to remove as may be
specified in the Landord and Tenant Act of Pennsylvania, Act of April 6, 1951,
as amended, or any similar or successor provision of law, and agrees that five
(5) days notice shall be sufficient in any case where a longer period may be
statutorily specified.
(c) In addition to, and not in lieu of any of the foregoing
rights granted to Landlord:
(I) IF TENANT SHALL DEFAULT IN THE PAYMENT
OF THE RENT HEREIN RESERVED OR IN THE PAYMENT OF ANY OTHER SUMS DUE HEREUNDER BY
TENANT, TENANT HEREBY AUTHORIZES AND EMPOWERS ANY PROTHONOTARY OR ATTORNEY OF
ANY COURT OF RECORD TO APPEAR FOR TENANT IN ANY AND ALL ACTIONS WHICH MAY BE
BROUGHT FOR SAID RENT AND/OR SAID OTHER SUMS; AND/OR TO SIGN FOR TENANT AN
AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN ACTION OR ACTIONS FOR THE
RECOVERY OF SAID RENTAL AND/OR OTHER SUMS; AND IN SAID SUITS OR IN SAID ACTION
OR ACTIONS TO CONFESS JUDGMENT AGAINST TENANT FOR ALL OR ANY PART OF SAID
RENTAL AND/OR SAID OTHER SUMS, AND FOR INTEREST AND COSTS, TOGETHER WITH AN
ATTORNEYS' COMMISSION FOR COLLECTION OF FIVE PERCENT (5%). SUCH AUTHORITY SHALL
NOT BE EXHAUSTED BY ONE EXERCISE THEREOF, BUT JUDGMENT MAY BE CONFESSED AS
AFORESAID FROM TIME TO TIME AS OFTEN AS ANY OF SAID RENTAL AND/OR OTHER SUMS
SHALL FALL DUE OR BE IN ARREARS, AND SUCH POWERS MAY BE
- 17 -
<PAGE>
EXERCISED AS WELL AFTER THE TERMINATION OR EXPIRATION OF THE TERM OF THIS LEASE.
(II) WHEN THIS LEASE OR TENANT'S RIGHT OR
POSSESSION SHALL BE TERMINATED BY COVENANT OR CONDITION BROKEN, OR FOR ANY OTHER
REASON, EITHER DURING THE TERM OF THIS LEASE, AND ALSO WHEN AND AS SOON AS SUCH
TERM SHALL HAVE EXPIRED, IT SHALL BE LAWFUL FOR ANY ATTORNEY AS ATTORNEY FOR
TENANT TO FILE AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN ACTION AND
JUDGMENT IN EJECTMENT AGAINST TENANT AND ALL PERSONS CLAIMING UNDER TENANT FOR
THE RECOVERY BY LANDLORD OF POSSESSION OF THE PREMISES, FOR WHICH THIS LEASE
SHALL BE ITS SUFFICIENT WARRANT, WHEREUPON, IF LANDLORD SO DESIRES, A WRIT OF
EXECUTION OR OF POSSESSION MAY ISSUE FORTHWITH, WITHOUT ANY PRIOR WRIT OR
PROCEEDINGS, WHATSOEVER, AND PROVIDED THAT IF FOR ANY REASON AFTER SUCH ACTION
SHALL HAVE BEEN COMMENCED THE SAME SHALL BE DETERMINED AND THE POSSESSION OF THE
PREMISES HEREBY DEMISED REMAIN IN OR BE RESTORED TO TENANT, LANDLORD SHALL HAVE
THE RIGHT UPON ANY SUBSEQUENT DEFAULT OR DEFAULTS, OR UPON THE TERMINATION OF
THIS LEASE AS HEREINBEFORE SET FORTH, TO BRING ONE OR MORE ACTION OR ACTIONS AS
HEREINBEFORE SET FORTH TO RECOVER POSSESSION OF THE SAID PREMISES.
IN ANY ACTION OF EJECTMENT OR FOR RENT IN ARREARS, LANDLORD SHALL FIRST CAUSE TO
BE FILED IN SUCH ACTION AN AFFIDAVIT MADE BY IT OR SOMEONE ACTING FOR IT SETTING
FORTH THE FACTS NECESSARY TO AUTHORIZE THE ENTRY OF JUDGMENT, OF WHICH FACTS
SUCH AFFIDAVIT SHALL BE CONCLUSIVE EVIDENCE, AND IF A TRUE COPY OF THIS LEASE
(AND OF THE TRUTH OF THE COPY SUCH AFFIDAVIT SHALL BE SUFFICIENT EVIDENCE) BE
FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL AS A
WARRANT OF ATTORNEY, ANY RULE OF COURT, CUSTOM OR PRACTICE TO THE CONTRARY
NOTWITHSTANDING.
30. Remedies Cumulative. All remedies available to Landlord hereunder
-------------------
and at law and in equity shall be cumulative and concurrent. No termination of
this Lease nor taking or recovering possession of the Premises shall deprive
Landlord of any remedies or actions against Tenant for rent, for charges or for
damages for the breach of any covenant, agreement or condition herein contained,
nor shall the bringing of any such action for rent, charges or breach of
covenant, agreement or condition, nor the resort to any other remedy or right
for the recovery of rent, charges or damages for such breach be construed as a
waiver or release of the right to insist upon the forfeiture and to obtain
possession. No re-entering or taking possession of the Premises, or making of
repairs, alterations or improvements thereto, or reletting thereof, shall be
construed as an election on the part of Landlord to terminate this Lease unless
written notice of such election be given by Landlord to Tenant. The failure of
Landlord to insist upon strict and/or prompt performance of the terms,
agreements, covenants and conditions of this Lease or any of them, and/or the
acceptance of such performance thereafter shall not constitute or be construed
as a waiver of Landlord's right to thereafter enforce the same strictly
according to the terms thereof in the event of a continuing or subsequent
default.
31. Nonwaiver. Any failure of Tenant or Landlord to enforce any remedy
---------
allowed for the violation of any provision of this Lease shall not imply the
waiver of any such provision, even if such violation is continued or repeated,
and no express waiver shall affect any provision other than the one specified in
such waiver and only for the time and in the manner specifically stated. No
receipt of monies by Landlord from Tenant after the termination of this Lease
shall in any way (a) alter the length of the Term or of Tenant's right of
possession hereunder, or (b) after the giving of any notice, reinstate, continue
or extend the Term or affect any notice given to Tenant prior to the receipt of
such monies, it being agreed that after the service of notice or the
commencement of a suit or after final judgment for
- 18 -
<PAGE>
possession of the Premises, Landlord may receive and collect any rents due, and
the payment of said rents shall not waive or affect said notice, suit or
judgment.
32. Security Interest. Landlord shall have and Tenant hereby grants to
-----------------
Landlord a continuing security interest for all rent and other sums of money
becoming due hereunder from Tenant, upon all goods, wares, equipment, fixtures,
accounts (subject to Tenant's right to make prior pledges in connection with the
ordinary operation of Tenant's business), furniture and inventory and personal
property of Tenant situate on the Premises. Such property situate on the
Premises shall not be removed therefrom without the consent of Landlord until
all arrearages in Minimum Rent and Additional Rent as well as any and all other
sums of money then due to Landlord hereunder shall first have been paid and
discharged. In the event of a default under this Lease, Landlord shall have, in
addition to any other remedies provided herein or by law, all rights and
remedies under the Uniform Commercial Code, including without limitation the
right to sell the property described above at public or private sale upon five
(5) days' notice to Tenant. Tenant hereby agrees to execute such financing
statements and other instruments necessary or desirable in Landlord's discretion
to perfect the security interest hereby created. Any statutory lien for rent is
not hereby waived, the express contractual lien hereby granted being in addition
to and supplementary thereto. Notwithstanding the foregoing provisions, Tenant
hereby appoints Landlord the attorney-in-fact of Tenant for the limited purpose
of executing such financing statements.
33. Expenses of Enforcement. Tenant shall pay upon demand all
-----------------------
Landlord's costs, charges and expenses including the fees and out-of-pocket
expenses of counsel, agents and others retained by Landlord incurred in
enforcing Tenant's obligations hereunder or incurred by Landlord in any
litigation, negotiation or transaction in which the Tenant causes the Landlord
without the Landlord's fault to become involved or concerned.
34. Security Deposit. Landlord acknowledges receipt from Tenant of the
----------------
sum set forth above in Part VII of the Schedule to be retained by Landlord as
security for the faithful performance and observance by Tenant of the covenants
and conditions of this Lease. It is expressly understood and agreed that
notwithstanding anything to the contrary contained in any law or statute now
existing or hereafter passed (a) Tenant shall not be entitled to any interest
whatsoever on the cash security so deposited, (b) Landlord shall not be
obligated to hold such cash security in trust or in a separate account, and (c)
Landlord shall have the right to commingle such cash security with its other
funds. In the event tenant defaults under this Lease in connection with, but not
limited to, the payment of Minimum Rent or Additional Rent or other sums payable
hereunder or other performance, Landlord may use, apply or retain the whole or
any part of the cash security so deposited to the extent required for the
payment of any Minimum Rent and any Additional Rent and any other sums payable
hereunder as to which Tenant is in default or on account of any sum which
Landlord may expend or may be required to expend by reason of Tenant's default
in respect of any of the covenants or conditions of this Lease. If any portion
of the cash security is used, applied or retained by Landlord for any purpose
set forth above, Tenant shall, within ten (10) days after demand therefor is
made by Landlord , deposit cash with Landlord in an amount sufficient to restore
the cash security to its original amount. In the event that Tenant shall fully
and faithfully comply with all of the covenants and conditions of this Lease,
the cash security shall be returned to Tenant after the Expiration Date of this
Lease and surrender of the Premises to Landlord. In the event of a sale of the
Property to a bona fide purchaser, Landlord shall have the right to transfer to
such purchaser the aforesaid cash security, and Landlord thereupon shall be
released by Tenant from all liability for the return thereof, and Tenant agrees
to look solely to the new landlord for the return thereof.
35. Brokers. Tenant represents and warrants to Landlord that Tenant
-------
has had no dealings, negotiations or consultations with respect to the Premises,
the Property or this transaction with any broker or finder except the Brokers
and that no broker or finder, with the exception of the Brokers.
- 19 -
<PAGE>
called the Premises or the Property to Tenant's attention for lease or took any
part in any dealings, negotiations or consultations with respect to the
Premises, the Property or this Lease. In the event that any broker or finder
other than the Brokers claims to have submitted the Premises or the Property to
Tenant, to have induced Tenant to lease the Premises or to have taken part in
any dealings, negotiations or consultations with respect to the Premises, the
Property or this Lease, Tenant will be responsible for and will indemnify and
save Landlord harmless from and against all costs, fees (including, without
limitation, attorneys' fees), expenses, liabilities and claims incurred or
suffered by Landlord as a result thereof. Landlord shall pay to Gels Realty the
commission due under Landlord's agreement with Gels Realty and Gels Realty shall
pay to The Burns Company the portion of the commission due to the The Burns
Company as cooperating broker. Landlord shall have no direct obligation to The
Burns Company for any commission.
36. Captions. The captions in this Lease are for convenience only and
--------
are not a part of this Lease and do not in any way define, limit, describe or
amplify the terms and provisions of this Lease or the scope or intent thereof.
37. Entire Agreement, Interpretation. The lease - Schedule, Lease -
--------------------------------
Terms and any exhibits and addenda attached thereto represent the entire
agreement between the parties hereto and there are no collateral or oral
agreements or understandings. Landlord and Landlord's agents have made no
representations, agreements, conditions, warranties, understandings or
promises, either oral or written, other than as set forth herein, with respect
to this Lease, the Premises or otherwise. This Lease shall not be modified in
any manner or terminated except by an instrument in writing executed by the
parties. Without limitation of the provisions which survive the expiration or
termination of this Lease, it is expressly agreed by Landlord and Tenant that
the indemnification provisions shall survive such expiration or termination.
The masculine (or neuter) pronoun, shall include the masculine, feminine and
neuter genders and the singular number shall include the singular and plural
number.
38. Definitions.
-----------
(a) The word "Landlord" is used herein to include the
Landlord named above and any subsequent Landlord of the Premises, as well as
their respective heirs, personal representatives, successors and assigns, each
of whom shall have the same rights, remedies, powers, authorities and privileges
as it would have had it originally signed this Lease as Landlord, including the
right to proceed in its own name to enter judgment by confession or otherwise,
but any Landlord of the Premises, whether or not named herein, shall have no
liability hereunder after it ceases to hold title to the Premises. If Landlord
is in breach or default with respect to Landlord's obligations or otherwise
under this Lease, Tenant shall look solely to the equity of Landlord in the
Premises for the satisfaction of Tenant's remedies. It is expressly understood
and agreed that Landlord's liability under the terms, covenants, conditions,
warranties and obligations of this Lease shall in no event exceed the loss of
Landlord's equity interest in the Premises.
(b) The word "Tenant" is used herein to include each and
every one of the persons named above as Tenant as well as their heirs, personal
representatives, successors and permitted assigns, each of whom shall be under
the same obligations, liabilities and disabilities and have only such rights,
privileges and powers as it would have possessed had it originally signed this
Lease as Tenant. Without limiting the foregoing, it is agreed that any party who
shall hereafter come within the meaning of the word "Tenant" hereunder shall be
deemed to have granted all powers with respect to confessions of judgment and
the entering of an amicable action in ejectment as fully set forth herein as if
such party had been a signatory party to this Lease. Each and every one of the
persons named above as Tenant shall be bound jointly and severally by the terms,
covenants and agreements contained herein. Any notice required or permitted by
the terms of this Lease may be given by or to
- 20 -
<PAGE>
any one of the persons named above as Tenant, and shall have the same force and
effect as if given by or to all of them.
(c) The "Default Rate" as used herein shall be the rate per
annum which is three percent (3%) in excess of the Prime Rate but not less than
fifteen percent (15%) per annum.
39. Authority. If Tenant signs this Lease as a corporation, each of the
---------
persons executing this Lease on behalf of Tenant warrants to Landlord that
Tenant is a duly authorized and existing corporation, that Tenant is qualified
to do business in the state in which the Premises are located, that all
Tenant's corporate and franchise taxes have been paid to date, that Tenant has
the full right and authority to enter into this Lease, and that each and every
person signing on behalf of Tenant is authorized to do so. Upon Landlord's
request, Tenant will provide evidence satisfactory to Landlord confirming these
representations.
40. Severability. If any provision of this Lease found by a court of
------------
competent jurisdiction to be illegal, invalid or unenforceable, the remainder of
this Lease will not be affected, and in lieu of each provision which is found to
be illegal, invalid, or unenforceable, there will be added as a part of this
Lease a provision as similar to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable.
41. Waiver of Jury Trial. Landlord and Tenant waive trial by jury in
--------------------
any action, proceeding or counterclaim brought by either of them against the
other on all matters arising out of this Lease, the use and occupancy of the
Premises, the relationship of Landlord and Tenant, or claim of injury or damage.
If Landlord commences any summary proceeding for nonpayment of rent, Tenant will
not interpose (and waives the right to interpose) any counterclaim in any such
proceeding.
42. Governing Law and Venue. This Lease will be governed by the law
-----------------------
of the Commonwealth of Pennsylvania and will be construed and Interpreted
according to that law. Venue on any action arising out of this Lease will be
proper only in the Court of Common Pleas of Chester county, Pennsylvania or in
the Eastern District Court for the District of Pennsylvania.
43. Time. Time is of the essence of this Lease and all of its
----
provisions.
44. Recordation. Tenant shall not record this Lease, a short form of
-----------
this Lease or a memorandum of this Lease without the prior written consent of
Landlord, and any such attempted recordation shall be void and of no force or
effect and shall constitute a default hereunder; and Tenant hereby appoints
Landlord its attorney-in-fact to file any instrument to remove or discharge from
record any such recordation.
45. Inability to Perform. If Landlord is delayed or prevented from
--------------------
performing any of its obligations under this Lease by reason of any of the
following, the period of such delay or prevention shall be deemed added to the
time herein provided for the performance of any such obligation by Landlord:
strikes or other labor troubles; governmental restrictions and limitations;
civil commotion, war or other national emergency; delay in transportation;
accidents; floods; fire damage or other casualties; weather conditions; acts or
omissions of the other party of this Lease; delays by utility companies in
providing utility services and/or facilities to the Property; delays by
governmental and/or utility company authorities in issuing approvals; delays by
governmental authorities to act pursuant to requests of Landlord or Landlord's
contractors or suppliers; or concealed conditions encountered in the performance
of work below the surface of the ground or concealed or unknown conditions in an
existing structure.
[Remainder of this final page of "Lease - Terms" intentionally left blank]
-21-
<PAGE>
Exhibit "A" - Premises Plan
July 11, 1994
[GRAPHIC OF FLOOR PLAN]
78 - 84 Great Valley Parkway
- ----------------------------
Approximately 10,105 Square Feet
(Cross-Hatched Area)
Year 1: 78 GVP, 4,990 Square Feet
Year 2: 78 GVP, 4,990 Square Feet
84 GVP, 3,240 Square Feet
Year 3: 78 GVP, 4,990 Square Feet
84 GVP, 3,240 Square Feet
84 GVP, 1,875 Square Feet
<PAGE>
EXHIBIT "B"
Description of Existing HVAC Equipment
78 GVP: Trane Model #TTA180B400BA
AC -- 15 Ton Unit (2 - 7 1/2 Ton Compressors)
Heat -- Electric
84 GVP: Three (3) York #SS122-G275-17A
AC -- 10 Ton Units
Heat -- Propane
One (1) Trane #TTA060A300B0
AC -- 5 Ton Unit
Heat -- Electric
One (1) Trane #TTD736B100C0
AC -- 3 Ton Unit
Heat -- Electric
<PAGE>
Exhibit C - Draft Only
------------------------------
Furniture Plan / Inventory
NOTE: Exhibit C contains 2 items. Item #1 is the loose and semi-detached
furniture inventory as listed below. Item #2 is a floor plan indicating all
affixed office equipment/cubicles.
================================================================================
ASSET DESCRIPTION QUANTITY
================================================================================
Executive Blue Chairs - Padded Arm - Rollers 60
Executive Cream Color Chairs - Arms - Rollers 5
Stationary Cream Color Visitor Chairs - Arms 11
Executive Brown Leather Chairs 2
Regular Arm Chairs - Rollers 1
Executive Wooden Wall-Mount White AV Board 10
Conference Room Table 1
Regular Brown Chair - Padded Arm - Rollers 1
Executive Brown Wooden Round 36" Table 9
Executive Round Wood-Top Only Steelcase Table 1
Executive Brown Wood Desk 11
Executive Brown Wood Credenza w/Overhead Shelves Attached 11
Regular File Cabinet - Steel - 4 Drawer 1
Regular 3-Shelf Steel Bookcase 5
Regular 2-Shelf Steel Bookcase 2
Executive Wood-Top Only Steelcase Desk 5
Executive Wood-Top Only Steelcase Cadenza w/Overhead Shelf 5
Modular Matching Wooden Exec. Desk w/Matching Credenza w/Overhead Shelves 1
Secretary Tan Chair - Rollers 1
Secretary Chair - Red - Arms - Rollers 4
Cream Padded Lobby Chairs 2
Wooden Speakers Podium 1
Ordinary Long Work Steel Tables 2
Secretary Wood-Top Only Steelcase Desk 3
Regular Round Wood-Top Only - 36" Steelcase Table 5
Regular Steelcase Desk 4
Regular Steelcase Credenza 1
Lady Kenmore 24.7 Cu. Ft. Refrig. - Over/Under 1
Regular White AV Board 1
4-Drawer Steelcase File Cabinet 3
Ideal Paper Shredded Model 2601A 1
================================================================================
Landlord guarantees that all items listed in Exhibit C will not be removed or
borrowed at any time from the leased office space during the term of the lease.
* This draft will be finalized and signed by representation of both parties
after the furniture plan is finalized and approved.
<PAGE>
PATENT AND TECHNICAL INFORMATION
LICENSE AGREEMENT
THIS AGREEMENT, dated September 21 , 1995, is entered into by Elcom
--
Technologies Corporation, a corporation of Pennsylvania, having its principal
place of business at 78 Great Valley Parkway, Malvern, PA 19355 (herein called
LICENSEE) and by Jack R. Harford, of 111 Harmony School Road, Flemington, NJ
08822 (herein CALLED LICENSOR).
I. BACKGROUND OF AGREEMENT
1.00 LICENSOR is the owner of certain PATENTS and TECHNICAL information
relating to powerline surge protection devices.
1.01 LICENSEE wishes to acquire the right to use such PATENTS and
TECHNICAL INFORMATION.
1.02 LICENSEE wishes to be granted a LICENSE in the LICENSED TERRITORY and
LICENSED MARKETS (Field Of Use) as described in PARAGRAPHS 2.03, 2.04, 2.05 and
2.06.
II. DEFINITIONS
As used herein, the following terms shall have the meanings set forth
below:
2.00 PATENT or PATENTS means the following United States and Canadian
patents, and all divisions, continuations, reissues, substitutes, and extensions
thereof:
Letters Patent
1) U.S. Patent NO. 4,870,528 Expiration Date: Sep.26, 2006
2) U.S. Patent No. 4,870,534 Expiration Date: SEP.26, 2006
3) Canadian Patent No. 1,332,439 Expiration Date: Oct.11, 2011
4) Canadian Patent Ser. NO. 609,983 Expiration Date: TBD (2011)
5) Patents or Patent Applications filed by LICENSOR that are in the field
of powerline surge protection.
1
<PAGE>
2.01 TECHNICAL INFORMATION means unpublished research and development
information, unpatented inventions, know-how, trade secrets, and technical data
in the possession of LICENSOR at the effective date of this Agreement which are
needed to produce LICENSED PRODUCTS and which LICENSOR has the right to provide
to LICENSEE.
2.02 LICENSED TERRITORY means the United States, its territories, and
possessions, and Canada. Elcom will be granted the first right of refusal of
European and Far Eastern Markets at the appropriate time
2.03 LICENSED MARKETS (FIELD OF USE) means markets which LICENSOR grants
the right to LICENSEE to pursue via any means of advertising, promotion, direct
mail, and sales representatives which target the markets as defined in 2.04,
2.05 and 2.06.
2.04 CONSUMER LICENSED MARKET means all end user consumer sales through
retail distribution channels - including but not limited to retail electronics
stores, computer stores, resellers, systems integrators configuring and selling
products for use in the home, including home-based businesses.
2.05 HOME BUILDER LICENSED MARKET means sales to builders, contractors or
other vendors servicing the home building market.
2.06 GOVERNMENT LICENSED MARKET means Federal, State, and Local
Governmental Agencies, including the Military which includes the US Army, US
Navy, US Air Force, and US Marines.
2.07 PRIVATE LABELING means products manufactured by LICENSEE, for sale as
a brand name not identified directly with LICENSEE.
2.08 LICENSED PRODUCTS means products which in the absence of this
agreement would infringe at least one claim of a PATENT or products which are
made using a process or machine covered by a claim of a PATENT, or products
made, at least in part, using TECHNICAL INFORMATION.
2.09 SALES for the purpose of computing royalties, means shipment from any
inventory maintained at the manufacturing or warehousing facility used by
LICENSEE. Where products are not sold, but are otherwise disposed of, the
release for shipment of such products for the purposes of computing royalties
shall be the same as if the product were being sold at prevailing prices.
2.10 EFFECTIVE DATE means September 21 , 1995.
----
III. PATENT LICENSE
2
<PAGE>
3.00 LICENSOR hereby grants to LICENSEE, to the extent of LICENSED
TERRITORY, an EXCLUSIVE LICENSE to LICENSED MARKET 2.04 (CONSUMER), and a NON-
EXCLUSIVE LICENSE to LICENSED MARKETS 2.05 (HOME BUILDER) and 2.06 (GOVERNMENT),
under PATENTS to make, use, sell LICENSED PRODUCTS with the exceptions noted in
Sections 3.01 and 3.02. Nothing in this Agreement is intended to preclude the
export or sale for export of products licensed in the Agreement to be sold or
otherwise disposed of and on which royalties shall have been paid as provided
for in Sections 5.01, 5.02, and 5.03 of this Agreement, subject, however, to the
understanding that no rights are granted or implied in respect to such exported
products under any patent of LICENSOR or any other person in any foreign
country.
3.01 It is acknowledged that LICENSOR is president of Zero Surge Inc.
(herein called ZSI), a New Jersey corporation, and that ZSI currently has a NON-
EXCLUSIVE LICENSE for the CONSUMER market as described in Section 2.04. It is
agreed that LICENSOR will execute a separate agreement with ZSI to permit them
to retain their existing customer base, including their existing dealers and
sales representatives, but that they will not be permitted to expand their
penetration of this LICENSED MARKET, and that they will refrain from active
pursuit of this LICENSED MARKET. ZSI sales in this CONSUMER LICENSED MARKET was
less than $1,000,000 in 1994 and in this CONSUMER LICENSED MARKET sales will be
capped at $1,000,000 per year during the term of this LICENSE AGREEMENT. The
LICENSOR will warrant to the LICENSEE that all sales for the CONSUMER LICENSE
MARKET beyond the sales cap of $1,000,000 will be referred to the LICENSEE who
will pay ZSI a sales commission of 5% of the referred sales, provided the
referred party is not already an existing customer of the LICENSEE. Terms for
payment are to be 60 days after delivery of product to the referred party.
In recognition of the potential buying power of LICENSEE, it is agreed that,
when parts and/or sub-assemblies are ordered by LICENSEE for use with LICENSED
PRODUCTS, LICENSEE will inform ZSI management of the impending order. ZSI
management will be offered the option to increase LICENSEES purchase quantity by
up to 10% (unless otherwise agreed), said 10% order increase quantity to be
purchased from LICENSEE by ZSI for 5% over the direct purchase plus delivery
charges, plus a $50.00 transaction fee. Terms for payment are to be net 60 days
after delivery to ZSI.
3.02 It is acknowledged that Price Wheeler Corp. (herein called PWC), a
New Jersey corporation, formerly had a NON-EXCLUSIVE LICENSE for the CONSUMER
LICENSED MARKET as described in Section 2.04 which has expired and it will not
be renewed for this CONSUMER LICENSED MARKET and they will be required to
refrain from this CONSUMER LICENSED MARKET.
IV. TECHNICAL INFORMATION LICENSE
4.00 LICENSOR hereby grants to LICENSEE, to the extent of LICENSED
TERRITORY, and LICENSED MARKETS, a LICENSE to use the TECHNICAL
3
<PAGE>
INFORMATION to make LICENSED PRODUCTS, with the exceptions noted in Sections
3.01 and 3.02.
4.01 LICENSOR shall within thirty (30) days of the EFFECTIVE DATE of this
agreement make available, or has heretofore made available, to LICENSEE for its
use TECHNICAL INFORMATION in LICENSOR'S possession used to make LICENSED
PRODUCTS. LICENSOR agrees to disclose to LICENSEE, upon execution of this
Agreement, any of LICENSOR'S pending United States Patent Applications
identified in Section 2.00 of this Agreement not previously disclosed to
LICENSEE.
4.02 LICENSEE shall not disclose any unpublished TECHNICAL INFORMATION
furnished by LICENSOR pursuant to Section 4.01 above to third parties during the
term of this Agreement, or any time thereafter, provided, however, that
disclosure may be made of any such TECHNICAL INFORMATION at any time: (1) with
the prior written consent of LICENSOR, or (2) to the extent necessary to
purchasers of LICENSEE'S products or services, or (3) after the same shall have
become public through no fault of LICENSEE or purchasers of LICENSEE'S products
or services.
4.03 LICENSEE shall not use any TECHNICAL INFORMATION furnished by
LICENSOR other than in the manufacture of LICENSED PRODUCTS and only during the
term of this Agreement, provided however, that other use of such TECHNICAL IN-
FORMATION may be made: (1) with the prior written consent of LICENSOR, or (2)
after the same shall have become public through no fault of LICENSEE or
purchasers of LICENSEE'S products or services.
4.04 LICENSOR represents that the material lists, drawings,
specifications, instructions, and other elements of TECHNICAL INFORMATION to be
supplied or already supplied by him under this Agreement have been used by him
in the manufacture of LICENSED PRODUCTS, but does not otherwise warrant the
accuracy of this information; nor does LICENSOR warrant that LICENSED PRODUCTS
produced in accordance with such information will be free from claims of
infringement of the patents, design rights, or copyrights of any third party.
LICENSOR shall not, except as provided in this Article IV, be under any
liability arising out of the supplying of information under, in connection with,
or as a result of this contract, whether on warranty, contract, negligence, or
otherwise.
4.05 LICENSOR agrees to advise LICENSEE of anticipated technical
improvements affecting the licensed products and to provide timely information
about such improvements.
V. ROYALTIES
5.00 LICENSEE shall pay as a license execution fee the sum of $50,000
which shall be non refundable and not creditable against the royalty called for
under Sections 5.01, 5.02, or 5.03.
4
<PAGE>
5.01 LICENSEE shall pay to LICENSOR a continuing royalty of 5% of the
total collected dollar amount collected by LICENSEE for the sale of LICENSED
PRODUCTS as described in 2.08, or otherwise disposed of under the LICENSE to
PATENTS granted under Section 3.00.
5.02 LICENSEE shall pay LICENSOR a continuing royalty of 2.5% of the total
collected dollar amount collected by LICENSEE for the sale of LICENSED PRODUCTS
as described in 2.08, for the LICENSED PRODUCTS used, sold, or otherwise
disposed of under the TECHNICAL INFORMATION license granted under Article IV.
5.03 During the term of this Agreement the combined royalty of Section
5.01 and 5.02 for any given LICENSED PRODUCTS shall not exceed 5% of the total
collected dollar amount collected by LICENSEE for the sale of LICENSED PRODUCTS
for the LICENSED PRODUCTS used, sold, or otherwise disposed of.
VI. MINIMUM ROYALTIES
6.00 LICENSEE shall pay to LICENSOR royalties as stated in Section V, but
in no event shall royalties for a calendar year for practice of the PATENTS and
TECHNICAL INFORMATION in the LICENSED TERRITORY and LICENSED MARKETS be less
than the following minimum royalties during each of the calendar years
indicated, to maintain valid LICENSE status:
Minimum Royalty,
U.S. $ per Calendar Year
LICENSE in the
specified
territories and markets.
<TABLE>
<CAPTION>
-------------------------------------------
Calendar Year License
===========================================
<S> <C>
1996 $ 50,000 *
-------------------------------------------
1997 $ 50,000
-------------------------------------------
1998 $ 50,000
-------------------------------------------
1999 $ 50,000
-------------------------------------------
2000 **
-------------------------------------------
</TABLE>
* $50,000 Payable to LICENSOR upon the earlier of the completion of the
consumer version of the surge suppression product, to be introduced at the
January 1996 CES trade show in Las Vegas, NV, or January 15, 1996.
** Year 2000, LICENSEE has the right of first refusal for a fee structure
and terms similar to this License Agreement.
5
<PAGE>
6.01 LICENSOR may, by written notice to LICENSEE, terminate this Agreement
during any February subsequent to the year 1999, if LICENSEE has not used, sold,
or otherwise disposed of LICENSED PRODUCT sufficient to generate earned
royalties as provided by Sections 5.01, 5.02, and 5.03 of this Agreement in the
total amount of two hundred thousand dollars ($200,000) in the aggregate.
VII. SALES EFFORTS
7.0 LICENSEE agrees to promote their product(s) which use the PATENTS or
TECHNICAL INFORMATION in the following manner:
LICENSEE agrees to display the product at key trade shows and exhibitions,
regularly advertise at retail and in the trade press. By continuing exposure of
the product and its unique features through brochures, flyers, press releases
and articles aimed at the licensed areas as well as by ongoing sales training
and promotion in the channels selected for maximum distribution and sale.
VIII. SUBLICENSING
8.00 LICENSEE shall have the right to sublicense with written
authorization from LICENSOR. Any such sublicense shall include provisions
consistent with this agreement. Any disposition of products under any such
sublicense shall be subject to royalty payment and recording requirements to
LICENSOR under this Agreement.
IX. PRIVATE LABELING
9.00 PRIVATE LABELING is permitted provided the product so private labeled
is offered for sale in the LICENSED MARKETS and LICENSED TERRITORIES, and
complies with all other terms of this LICENSE.
X. PAYMENTS
10.00 Not later than 60 days after the close of the preceding month,
LICENSEE shall furnish to LICENSOR a written statement in such detail as
LICENSOR may reasonably require of all amounts due pursuant to Sections 5.01,
5.02, and 5.03 for the monthly periods ending on the last days of the preceding
months, and shall pay to LICENSOR all amounts due to LICENSOR at that time. No
Royalty payments are due in 1996 until the advance minimum royalty payment of
$50,000 for 1996 has been exceeded. In the event that the amounts due at the end
of any calendar year do not equal the minimum royalties specified in Section VI
for said calendar year, LICENSEE shall pay to LICENSOR on or before the last day
of the following January, the amount required to satisfy the minimum royalty
obligation for the preceding calendar year. Such amounts are due at the dates
the statements are due. If no amount is accrued during any month, a written
statement to that effect shall be furnished.
6
<PAGE>
10.01 Payments provided for in this Agreement, when 45 days overdue, shall
bear interest at a rate per annum equal to one percent (1%) in excess of the
"PRIME RATE" published by "The Wall Street Journal" at the time such payment is
due, and for the time period until payment is received by LICENSOR.
10.02 If this Agreement is for any reason terminated before all of the
payments herein provided for have been made (including minimum royalties for the
year in which the agreement is terminated), LICENSEE shall immediately submit a
terminal report and pay to LICENSOR any remaining unpaid balance even though the
due date as above provided has not been reached.
XI. REPRESENTATIONS AND DISCLAIMER OF WARRANTIES
11.00 LICENSOR SHALL HAVE NO LIABILITY WHATSOEVER TO LICENSEE OR ANY
OTHER PERSON FOR OR ON ACCOUNT OF ANY INJURY, LOSS, OR DAMAGE, OF ANY KIND OR
NATURE, SUSTAINED BY, OR ANY DAMAGE ASSESSED OR ASSERTED AGAINST, OR ANY OTHER
LIABILITY INCURRED BY OR IMPOSED UPON LICENSEE OR ANY OTHER PERSON, ARISING OUT
OF OR IN CONNECTION WITH OR RESULTING FROM (a) THE PRODUCTION, USE, OR SALE OF
ANY APPARATUS OR PRODUCT, OR THE PRACTICE OF THE PATENTS' (b) THE USE OF ANY
TECHNICAL INFORMATION, TECHNIQUES, OR PRACTICES DISCLOSED BY LICENSOR; (c) ANY
ADVERTISING OR OTHER PROMOTIONAL ACTIVITIES WITH RESPECT TO ANY OF THE
FOREGOING, AND LICENSEE SHALL HOLD LICENSOR, ITS OFFICERS, EMPLOYEES, OR AGENTS,
HARMLESS IN THE EVENT LICENSOR, OR ITS OFFICERS, EMPLOYEES, OR AGENTS, IS HELD
LIABLE.
XII. TERMINATION
12.00 LICENSEE'S obligations under this Agreement, including the
obligation to pay royalties for the practice of the invention under any of the
PATENTS licensed herein shall end upon the expiration of all of the PATENTS,
unless the Agreement is sooner terminated.
12.01 LICENSEE'S obligations under certain Sections of this Agreement
relating to the TECHNICAL INFORMATION including the obligation to pay royalties
for the use of the TECHNICAL INFORMATION as specified in Section 5.02 shall
terminate with this License Agreement, but obligations under Sections 4.03,
4.04, and 4.05 of this Agreement shall survive termination and continue until
such time that LICENSOR elects to abandon such terms. LICENSEE shall notify
LICENSOR of the date of first commercial use or sale promptly thereafter.
12.02 Termination of part of this Agreement in accordance with Section
12.01 above, or otherwise, shall not excuse LICENSEE from the payment of a
royalty in accordance with the royalty provisions of Article 5 applicable to the
surviving part. Minimum royalty payments due under article 6 shall be pro-
rated. Survival of this Agreement in part shall not
7
<PAGE>
deprive LICENSOR of the right to enforce its proprietary rights against LICENSEE
that are applicable to the terminated part of the agreement.
12.03 If either party shall be in default of any obligation hereunder, or
shall be adjudged bankrupt, or become insolvent, or make an assignment for the
benefit of creditors, or file a petition in bankruptcy, or be placed in the
hands of a receiver or a trustee in bankruptcy, then the other party may
terminate this Agreement by giving sixty (60) days' notice by Registered Mail to
the other party, specifying the basis for termination. If within sixty (60) days
after the receipt of such notice, the party who received notice shall remedy the
condition forming the basis for termination, such notice shall cease to be
operative, and this Agreement shall continue in full force.
12.04 Notwithstanding the provisions of Section 4.03 and 4.04, in the
event this Agreement terminates prior to ten (10) years from the date of the
first commercial use or sale of products or services utilizing the TECHNICAL
INFORMATION, LICENSEE agrees: (1) that it will not use or sell LICENSED PRODUCT
incorporating or made using TECHNICAL INFORMATION for a period of ten (10) years
subsequent to the date of first commercial use of TECHNICAL INFORMATION if such
use has occurred, or the EFFECTIVE DATE of this agreement; and (2) that it will
promptly transfer to LICENSOR all written copies of unpublished TECHNICAL
INFORMATION in its possession and delete all TECHNICAL INFORMATION from all
computer data bases.
12.05 Termination of this agreement may be made by LICENSEE with sixty
(60) days written notice. Unpaid annual minimum Royalty payments are to be pro-
rated to the termination date.
XIII. LITIGATION
13.00 LICENSEE shall notify LICENSOR of any suspected infringement of the
PATENTS in the LICENSED TERRITORY. The sole right to institute a suit for
infringement rests with LICENSOR. LICENSEE agrees to cooperate with LICENSOR in
all respects, to have any of LICENSEE'S employees testify when requested by
LICENSOR, and to make available any records, papers, information, specimens, and
the like. Any recovery received pursuant to such suit shall be retained by
LICENSOR.
13.01 In the event LICENSEE agrees to underwrite all costs pursuant to
any infringement suit, LICENSEE shall be entitled first to payment of all legal
expenses and costs of suit from any proceeds of the settlement. In addition,
LICENSEE shall be entitled to 50% of the balance of any judgment less the legal
expenses and costs, with LICENSOR being entitled to the balance. Licensor shall
cooperate and assist with the prosecution of such case at no additional charge
to LICENSEE.
13.02 During the term of this Agreement, LICENSEE shall bring to
LICENSOR'S attention any prior art or other information known to LICENSEE which
is relevant to the patentability or validity of any of the PATENTS and which
might cause a court to deem any
8
<PAGE>
of the PATENTS wholly or partly inoperative or invalid. LICENSEE shall
particularly specify such prior art or other information to LICENSOR at the time
it learns thereof and not less than ninety (90) days prior to bringing any
action against LICENSOR asserting the invalidity of any of the PATENTS.
XIV. Patents
14.00 LICENSOR shall have the sole right to file, prosecute, and maintain
all of the PATENTS covering the INVENTIONS that are the property of LICENSOR and
shall have the right to determine whether or not, and WHERE, to file a patent
application, to abandon the prosecution of any patent or patent applications, or
to discontinue the maintenance of any patent or patent applications.
XV. Records
15.00 LICENSEE shall keep accurate records of all operations affecting
payment hereunder, and shall permit LICENSOR or its duly authorized agent to
inspect all such records and to make copies of or extracts from such records
during regular business hours throughout the term of this Agreement and for a
reasonable period of not less than one (1) year thereafter.
XVI. Nonassignability
16.00 This agreement imposes personal obligations on LICENSEE. LICENSEE
shall not assign any rights under this Agreement not specifically transferable
by its terms without the written consent of LICENSOR. LICENSOR may assign its
rights hereunder with written authorization from LICENSEE.
XVII. Severabillty
17.00 The parties agree that if any part, term, or provision of this
Agreement shall be found illegal or in conflict with any valid controlling law,
the validity of the remaining provisions shall not be affected thereby.
17.01 In the event the legality of any provision of this Agreement is
brought into question because of a decision by a court of competent jurisdiction
of any country in which this Agreement applies, LICENSOR, by written notice to
LICENSEE, may revise the provision in question or may delete it entirely so as
to comply with the decision of said court.
XVIII. Publicity
18.00 In publicizing anything made, used, or sold under this Agreement,
LICENSEE shall not use the name of LICENSOR or otherwise refer to any
organization related to LICENSOR, except with the written approval of LICENSOR.
References to the patents and
9
<PAGE>
technology may be used, with reference to "Series Mode", and "Adaptive Filter",
descriptions of the technology, being encouraged.
XIX. WAIVER, INTEGRATION, ALTERATION
19.00 The waiver of a breach hereunder may be effected only by a writing
signed by the waiving party and shall not constitute a waiver of any other
breach.
19.01 This License Agreement, Employment Agreement and Stock Option
Agreement dated September 21, 1995 represents the entire understandings between
the parties, and supersedes all other agreements, express or implied, between
the parties. The License Agreement represents the entire understandings between
the parties concerning the PATENTS and TECHNICAL INFORMATION as defined in
Article 2.
19.02 A provision of this Agreement may be altered only by a writing
signed by both parties, except as provided in Section 17.01, above.
XX. MARKING
20.00 LICENSEE shall place in a conspicuous location on any product made
or sold under any PATENT, a patent notice in accordance with 35 U.S.C. 287.
LICENSEE agrees to mark any products made using a process covered by any PATENT
with the number of each such patent and, with respect to PATENTS, to respond to
any request for disclosure under 35 U.S.C. 287(b)(4)(B) by only notifying
LICENSOR of the request for disclosure.
XXI. COOPERATION
21.00 Each party shall execute any instruments reasonably believed by the
other party to be necessary to implement the provisions of this Agreement.
XXII. CONSTRUCTION
22.00 This Agreement shall be construed in accordance with the substantive
laws of the State of New Jersey of the United States of America.
XXIII. EXPORTATION OF TECHNICAL INFORMATION
23.00 LICENSEE agrees to comply with the laws and rules of the United
States Government regarding prohibition of exportation of TECHNICAL INFORMATION
furnished to LICENSEE either directly or indirectly by LICENSOR.
10
<PAGE>
XXIV. NOTICES UNDER THE AGREEMENT
24.00 For the purpose of all written communications and notices BETWEEN
the parties, their addresses shall be:
LICENSOR: J. Rudy Harford
111 Harmony School Road
Flemington, New Jersey 08822
and
LICENSEE: Elcom Technologies Corp.
78 Great Valley Parkway
Malvern, PA 19355
or any other addresses of which either party shall notify the other party in
writing.
IN WITNESS WHEREOF the parties have caused this Agreement to be executed by
their duly authorized officers on the respective dates and at the respective
places herein set forth.
LICENSEE
ELCOM TECHNOLOGIES CORPORATION
By: /s/ Robert Vito Date: Sept. 21, 1995
--------------------------------- --------
Robert Vito
Title: President
LICENSOR
Jack R. Harford
By: /s/ Jack R. Harford Date: Sept. 21, 1995
--------------------------------- --------
Jack R. Harford
/s/ [SIGNATURE IS NOT LEGIBLE].9.21.95
----------------------------------
WITNESS
11
<PAGE>
ADDENDUM TO PATENT AND TECHNICAL INFORMATION
LICENSE AGREEMENT
This Agreement is made this 5th day of August, 1996 (hereinafter the "effective
date") by and between ELCOM Technologies Corporation (hereinafter referred to as
"ELCOM") and Jack R. Harford, of 111 Harmony School, Flemington, New Jersey
(hereinafter referred individually by full name or referred to collectively as
"HARFORD").
BACKGROUND
WHEREAS, ELCOM and HARFORD entered into a certain Patent And Technical
Information License Agreement, dated September 21, 1995 and attached hereto as
Exhibit A (hereinafter referred to as the "LICENSE AGREEMENT"; and
WHEREAS, Jack R. HARFORD and ELCOM entered into a certain Employment Agreement
and Stock Option Agreement, attached hereto as Exhibits B and C, respectively;
and
WHEREAS, ELCOM and HARFORD now desire to amend the LICENSE AGREEMENT in
accordance with Section 19.02 of the LICENSE AGREEMENT.
NOW, THEREFORE, in consideration of the mutual promises and convenants herein
contained, the parties hereto agree as follows:
1. AMENDMENT TO SECTION II OF LICENSE AGREEMENT
--------------------------------------------
1.1 The definition of the term PATENT or PATENTS contained in Section II of
the LICENSE AGREEMENT shall include any and all United States or Canadian
patents, existing now or developed in the future by HARFORD in the field of
surge suppression and all divisions, continuations, reissues, substitutes, and
extentions thereof.
1.2 HARFORD hereby retains all ownership rights of any kind or nature
whatsoever, associated with the PATENTS in the United States and Canada.
1.3 HARFORD agrees to file for foreign patents in any country other then
Canada that ELCOM requests and Elcom shall have the exclusive license for all
surge suppression products for all markets in these foreign countries. HARFORD
shall cooperate in any way ELCOM requests associated with ELCOM establishing or
enforcing ELCOM's rights with respect to this Section 1.3 in foreign countries.
ELCOM shall reimburse HARFORD for any out of pocket costs incurred by HARFORD
associated with this Section 1.3.
1.4 ELCOM and HARFORD hereby agree that any intellectual property developed by
HARFORD during his employment with ELCOM that is in the file of power-line
communication or ELCOM's product lines is the exclusive property of ELCOM.
This Section 1.4 excludes intellectual property related to surge suppression.
1.5 ELCOM and HARFORD hereby agree that any intellectual property not covered
by Section 1.4 herein and developed by HARFORD during his employment with ELCOM
is exclusive property of HARFORD.
Page 1 of 3
<PAGE>
2. EXTENSION OF RIGHTS AND OBLIGATIONS UNDER THE LICENSE AGREEMENT.
----------------------------------------------------------------
2.1 The Parties hereto agree to extend and continue on an uninterrupted basis,
all of the rights, duties and obligations contained in the LICENSE AGREEMENT
from the period beginning December 31, 1999 through the period ended
December 31, 2020.
3. EFFECTIVE DATE
--------------
This Agreement is effective as of the date of execution.
4. NOTICES
-------
Any notice required to be given pursuant to this Agreement shall be in writing
and mailed by certified or registered mail, return receipt requested, or
delivered by a national overnight express service such as Federal Express.
5. JURISDICTION AND DISPUTES
-------------------------
A. This Agreement shall be governed by the laws of the state of New Jersey.
B. All disputes hereunder shall be resolved in the applicable state or federal
courts of New Jersey. The parties consent to the jurisdiction of such courts,
agree to accept service of process by mail, and waive any jurisdictional or
venue defenses otherwise available.
6. AGREEMENT BINDING ON SUCCESSORS
-------------------------------
This Agreement shall be binding on and shall inure to the benefit of the parties
hereto, and their heirs, and administrators, successors, and assigns.
7. WAIVER
------
No waiver by either party of any default shall be deemed as a waiver of any
prior or subsequent default of the same or other provisions of this Agreement.
8. SEVERABILITY
------------
If any provision hereof is held invalid or unenforceable by a court of competent
jurisdiction, such invalidity shall not effect the validity or operation of any
other provision and such invalid provision shall be deemed to be severed from
the Agreement.
9. ASSIGNABILITY
-------------
This Agreement, excluding the Exhibits hereto, and the rights and obligations
thereunder with respect to HARFORD, where personal to HARFORD, may not be
assigned by any act of HARFORD without the prior written consent of an Officer
of ELCOM. ELCOM shall have the unfettered right to assign this Agreement to a
successor in interest to ELCOM or to a purchaser of a portion of the assets of
ELCOM.
Page 2 of 3
<PAGE>
10. INTEGRATION
-----------
This Agreement and the Exhibits attached hereto constitute the entire
understanding of the parties, and revokes and supersedes all other prior
agreements between the parties and is intended as a final expression of their
Agreement. It shall not be modified or amended except in writing signed by the
parties hereto and specifically referring to this Agreement. This Agreement
shall take precedence over any other documents that may be in conflict
therewith.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have each caused to be affixed hereto its or his/her hand and seal the day
indicated.
/s/ Jack R. Harford
__________________________________ ------------------------------
ELCOM Technologies Corporation Jack R. Harford
By: /s/ Robert A. Vito
-------------------------------
Robert A. Vito, President
Date: August 5,1996 Date: August 5, 1996
----------------------------- -------------------------
Page 3 of 3
<PAGE>
TESTING, LICENSE & SUPPLY AGREEMENT FOR TSK
This Agreement is made this 5th day of August, 1996 (hereinafter the "effective
date") by and between ELCOM Technologies Corporation (hereinafter referred to as
"ELCOM") and X-Com, Inc., an Arkansas corporation with offices located in
Pocomoke, Maryland and David Erisman, an individual resident in Pocomoke
Maryland (hereinafter referred to individually by full name or collectively
referred to as "X-COM").
BACKGROUND
WHEREAS, X-COM is the owner of certain patents and patents pending and technical
information relating to modulation technology, more fully described on Exhibit A
attached hereto (hereinafter collectively referred to as "TSK"; and
WHEREAS, ELCOM is in the business of manufacturing and selling certain power
line communications products and is desirous of determining the feasibility of
and of utilizing TSK in its current and future products.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained, the parties hereto agree as follows:
1. DEFINITIONS
-----------
As used herein, the following terms shall have the meanings set forth below:
A. TSK - means the United Stated Patents, United States Patents Pending and
SOFTWARE and TECHNICAL INFORMATION contained on Exhibit A attached hereto.
B. TECHNICAL INFORMATION -means unpublished research and development
information, unpatented inventions, know-how, trade secrets, and technical data
in possession of X-COM at the effective date of this Agreement which are needed
to produce PRODUCTS and which X-COM has the right to provide to ELCOM.
C. PRODUCTS - means both of the following:
(i) any and all products that use both the AC power-line and TSK
(as herein defined) to communicate over the AC power-line within
residential premises.
(ii) any and all products that use both the AC power-line and TSK
(as herein defined) to communicate over the AC power-line in small
businesses.
D. TERM - means the period beginning on the day of execution of this Agreement
and ending exactly thirty six (36) consecutive months after the PRODUCTS are
offered for commercial sale by ELCOM in the regular course of ELCOM's business.
In no event shall this thirty six (36) month period begin to expire later then
six (6) months after a PRODUCTION READY AC CHIP SET is delivered to ELCOM.
Page 1 of 12
<PAGE>
E. TERRITORY - means the entire world.
F. CHIP SETS - means 1 or more integrated circuits, which, when connected
together, implement the TSK modulation and demodulation technology. Each
integrated circuit consists of a silicon die, with part or all of the TSK
modulation/demodulation function implemented in the silicon, bonded to a metal
lead frame, and surrounded by a robust inert material (plastic or ceramic). The
lead frame is brought outside the package, and is formed into leads, which are
soldered to a printed circuit board with standard high volume production
equipment CHIP SETS refers to those chip sets which incorporate some or all of
the TSK modulation.
G. SILICON MACRO CELLS - means the implementation of TSK technology in a bare
integrated circuit, where the TSK technology circuits are only part of the total
integrated circuit. In this case, the TSK technology is used as a functional
block, along with other functional blocks, all integrated together on a single
monolithic die. Circuits are implemented in this fashion to accomplish complex
higher level functions, while minimizing the number of integrated circuits (and
therefore the circuit board area) required. An example would be a complete
microcomputer circuit, with several TSK circuits attached to the microcomputer,
and used as a complete communication signal processing part. SILICON MACRO
CELLS refers to those silicon macro cells which incorporate some or all of the
TSK modulation.
H. DIES - means a bare integrated circuit which is not attached to a singular
package lead frame, or packaged in a plastic or ceramic material. DIES are
typically used in multi-chip modules, where DIES are electrically connected by
wire-bonding. The benefit of doing so is to reduce the space required below
that required by individually packaged integrated circuits. The DIES are
physically mounted to the base of the multi-chip module, then wire bonded to
each other and to the multi-chip module lead frame, and therefore, to the
outside leads of the module. DIES refers to those dies which incorporate some
or all of the TSK modulation.
I. INTEGRATED CIRCUIT - means a silicon device which has been manufactured
with multiple circuit function elements on a single monolithic silicon chip (a
die). Typically the chip (or die) is enclosed in a plastic or ceramic housing,
through which the leads extend. The leads allow attachment of the integrated
circuit to a circuit board, and also provide a means for signals to get in and
out of the part. INTEGRATED CIRCUIT means those integrated circuits which
incorporate some or all of the TSK modulation.
J. SOFTWARE - means any software necessary to make the TSK modulation operate
in the PRODUCTS.
K. PRODUCTION READY AC CHIP SET - means a part provided by X-COM or its
designe to ELCOM which meets ELCOM's quality and performance standards and which
is put into an ELCOM product, that modulates and demodulates over the
alternating current (AC) power line and that is sold to ELCOM customers in the
regular course of ELCOM's business. PRODUCTION AC READY CHIP SET means those AC
chip sets which incorporate some or all of the TSK modulation.
L. ELCOM's current PRODUCTS include one transmitter and one receiver and these
PRODUCTS use one (1) CHIP SET in the transmitter and one CHIP SET in the
receiver.
Page 2 of 12
<PAGE>
M. ASIC means Application Specific Integrated Circuit. ASIC means those
application specific integrated circuits which incorporate some or all of the
TSK modulation.
2. TESTING PERIOD & RIGHTS.
-----------------------
A. X-COM hereby grants to ELCOM the rights to test TSK, in any way ELCOM deems
appropriate, for use in the development of the PRODUCTS only during the term of
the TESTING PERIOD, as defined in section 2.A.(v) below, under the following
terms and conditions:
(i) David Erisman (hereinafter "ERISMAN") shall be available on an
as needed basis at ELCOM's facilities in Malvern, Pennsylvania. ELCOM
will provide ERISMAN with forty eight (48) hours notice. In no event
shall ERISMAN be required to be at ELCOM's place of business in
Malvern, Pennsylvania more then seven (7) full days during any 30 day
period. Erisman will also be available at X-COM's facility in
Pocomoke, Maryland for consultation on an as needed basis provided
that such availability shall not work an undue hardship on ERISMAN.
(ii) X-COM shall make a fully qualified engineer available for up to
an additional ten (10) days during any thirty (30) day period at
ELCOM's place of business in Malvern, Pennsylvania.
(iii) The X-COM facility and equipment located in Pocomoke, Maryland
shall be available on as needed basis for any and all testing purposes
provided that such availability shall not work an undue hardship on X-
COM.
(iv) ERISMAN and X-COM shall fully disclose all aspects of the TSK
technology to ELCOM technical personnel that is reasonably necessary
to incorporate TSK in the PRODUCTS.
(v) The "TESTING PERIOD" shall begin upon the execution of this
Agreement and shall continue for an uninterrupted period of ninety
(90) days. This period may be extended only by the mutual consent of
all Parties to this Agreement. This ninety (90) day period may be
reduced to thirty (30) days or sixty (60) days at the sole discretion
of ELCOM. In the event that ELCOM reduces the TESTING PERIOD under
this Section, any payments due under Section 2.B. below shall be
ratably reduced.
B. ELCOM shall make the following payments to X-COM for all services rendered
by X-COM and ERISMAN during the TESTING PERIOD:
(i) $10,000.00 (ten thousand dollars) for each thirty (30) day
period during the 90 day TESTING PERIOD. In no event shall the amount
payable under this Section 2.B. (i) exceed $30,000.00 (thirty thousand
dollars). Any payments due X-Com under this Section 2.B.(i) shall be
made on the first day of each thirty (30) day period.
Page 3 of 12
<PAGE>
(ii) Additionally, ERISMAN and/or any other engineer provided by X-COM
shall receive a $100.00 (one hundred dollars) per day allowance for
all out of pocket travel and living expenses for any days spent in
Malvern, Pennsylvania
3. EXCLUSIVE ELCOM OPTION.
----------------------
A. X-COM hereby grants to ELCOM the option to exercise all of the exclusive
rights enumerated in Section 4 and Section 5 herein for a period beginning on
the effective date of this Agreement and ending on a date thirty days(30) after
the completion of the TESTING PERIOD, as defined in section 2.A.(v)herein.
ELCOM shall exercise said option by providing written notification to X-COM no
later then thirty (30) days after the completion of the TESTING PERIOD.
B. In the event that ELCOM exercise its Option under this Section 3, X-COM
shall be due all amounts enumerated in Section 5 and 6 herein in accordance with
the terms of payment outlined in Section 5 and 6 herein.
C. In the event that ELCOM does not exercise the Option contained in this
Section 3, this Agreement shall be null and void for all purposes whatsoever
except for the rights duties and obligations contained in Section 11 and Section
12 of this Agreement.
4. EXCLUSIVE USE OF TSK.
--------------------
A. Except as provided in this Section 4.A.(i) below, X-COM hereby grants to
ELCOM the exclusive right to use any and all of TSK in any way ELCOM, desires in
the development, manufacture and sale of the PRODUCTS in the TERRITORY for the
entire TERM of this Agreement.
(i) ELCOM and X-COM shall mutually select the initial manufacturer of the
CHIP SETS. Any subsequent manufacturers of CHIP SETS shall be selected by
ELCOM, subject to the prior written approval of X-COM and said approval
shall not be unreasonably withheld.
B. X-COM hereby grants to ELCOM, at no charge of any kind or nature
whatsoever,the unlimited right to use the Trademarks, Service Marks of X-COM as
detailed on Exhibit A attached hereto. X-COM hereby grants to ELCOM the right to
register all Trademarks, Service Marks and registered Marks of X-COM in any
country where these Marks are not registered by X-COM. X-COM shall remain the
sole owner of said Trademarks, Service Marks and registered Marks as detailed on
Exhibit A.
C. ELCOM is solely responsible for obtaining and maintaining at its own sole
cost and expense all trademark and copyright protection which is additional to
that presently owned by X-COM. However, upon the termination of this agreement
for any reason other then X-COM's uncured breach of this agreement all such
trademark and copyright protection which related to the TSK technology shall be
and become the property of X-COM and ELCOM shall cooperate in the execution of
all necessary paperwork for accomplishing same.
Page 4 of 12
<PAGE>
D. X-COM reserves the right to inspect any goods bearing any trademark owned
by X-COM. Such inspection be only for purposes of insuring the integrity of X-
COM's trademarks and shall not be understood as making X-COM a guarantor of or
otherwise responsible for the design or quality of any product bearing said
trademark.
5. EXCLUSIVE SUPPLY OF CHIPS SETS AND DIES AND SILICON MACRO
---------------------------------------------------------
CELLS AND SOFTWARE FOR PRODUCTS ONLY.
------------------------------------
A. For the entire TERM of this Agreement, X-COM grants ELCOM the exclusive
right to purchase and/or manufacture and/or use all CHIP SETS and DIES and
SILICON MACRO CELLS and SOFTWARE used for the production of the PRODUCTS only
at the price established under this Section 5. In no event shall this provision
be understood as prohibiting X-COM from granting to any third party the right to
purchase, and or manufacture, and/or use CHIP SETS, and/or DIES and/or SILICON
MACRO CELLS for applications other then in the PRODUCTS, as defined herein.
B. In order for ELCOM to maintain the exclusive rights contained in Section
5.A. herein and to maintain the prices established under Section 5.D., ELCOM
must comply with either of the following two provisions:
(i) ELCOM purchases from any manufacturer a minimum of fifty thousand
and one (50,001) of CHIP SETS and/or DIES and/or SILICON MACRO CELLS in total
for each twelve (12) month period after the TERM of this Agreement has ended.
(ii) ELCOM pays the corresponding Royalty to X-COM equivalent to the
Royalty due under this Section 5 for fifty thousand and one (50,001) CHIP SETS.
Said exclusive rights contained in this Section 5.B. shall be maintained on a
consecutive twelve (12) month period basis. Except as mutually agreed upon by
all Parties to this Agreement, and, subject to the first sentence of this
Section 5.B., ELCOM's exclusive rights under this Section 5 shall terminate upon
the completion of ten (10) years from the effective date of the Agreement.
C. Upon the expiration of the period established under Section 5.B., herein or
upon termination of this Agreement for any reasonable business cause, X-COM
hereby grants to ELCOM the right to purchase from X-COM or its Licensee an
unlimited number of CHIP SETS and DIES AND SILICON MACRO CELLS and SOFTWARE at
the price established under this Section 5 for a thirty six (36) month period.
D. ELCOM shall pay a Royalty directly to X-COM for each CHIP SET or ASIC
manufactured or purchased by ELCOM in accordance with the following schedule.
Said Royalty shall be calculated based upon the premis that one CHIP SET or ASIC
is put into a transmitter and one CHIP SET or ASIC is put into a receiver. In
the event that ELCOM purchases or manufacturers a SILICON MACRO CELL or DIES or
INTEGRATED CIRCUIT which is not part of a CHIP SET said Royalties outlined
below shall nonetheless be due X-COM.
Page 5 of 12
<PAGE>
(1) CHIP SETS operating at a data through put rate of 10 Mbps or less over the
ac power line:
Cumulative Quantity Price per CHIP SET or ASIC
------------------- --------- ----------------
1- 1,000 x
1,001- 50,000 x
50,001- 100,000 x
over 100,000 x
(ii) CHIP SETS operating at a data through put rate of 11 Mbps or more over the
ac power line:
Cumulative Quantity Price per CHIP SET or ASIC
------------------- --------------------------
1- 1,000 x
1,001- 50,000 x
50,001- 100,000 x
over 100,000 x
(iii) SOFTWARE and all updates and/or corrections and/or enhancements of
SOFTWARE shall be provided to ELCOM at no charge.
E. Any payments due X-Com under this Section 5 shall be due sixty (60) days
subsequent to shipment by the manufacturer to ELCOM. Any late payments shall
bear interest at an annual rate of twelve percent (12%), or at the highest rate
permitted by law whichever is less, and reasonable attorneys fees incurred by X-
COM for collection.
F. ELCOM shall purchase a minimum of one thousand (1,000) PRODUCTION READY AC
CHIP SETS during each twelve month period during the TERM of this Agreement.
G. In the event of a change in ownership of X-Com, Inc., and/or the sale or
assignments of TSK by any person or organization, ELCOM shall retain all of its
rights, duties and obligations under this Agreement. In the event of a change in
ownership of ELCOM, X-COM shall retain all of its rights, duties and obligations
under this Agreement.
H. In the event of the Bankruptcy in any form of X-Com, Inc. and/or David
Erisman, ELCOM shall retain all of its rights, duties and obligations under
this Agreement. In the event of the voluntary or involuntary filing for
Bankruptcy protection in U.S. Bankruptcy Court by ELCOM, X-COM shall have the
right to terminate this Agreement immediately.
6. ADDITIONAL CONSIDERATION TO X-COM
---------------------------------
A. Upon the exercise of ELCOM's exclusive option under Section 3 herein, ELCOM
hereby agrees to pay X-COM the following amounts:
(i) ELCOM hereby agrees to pay X-COM a one time exclusivity fee due
and payable as follows:
Immediately upon ELCOM receiving from X-COM
the first PRODUCTION READY AC CHIP SET.................$50,000.00
Page 6 of 12
<PAGE>
Six months after ELCOM receives the first PRODUCTION
READY AC CHIP SET:
10,000 Shares of ELCOM's Common Stock.
(ii) In the event that ELCOM terminates this Agreement for any
reason whatsoever, X-COM shall retain all payments made (or due and
owing) through the date of termination and ELCOM shall not be required
to make any further payments under this Section 6. ELCOM shall further
be required to pay X-COM for any outstanding invoices and any work in
progress at the date of Termination.
7. DEVELOPMENT OF PATENTS AND/OR COMPUTER SOFTWARE.
-----------------------------------------------
A. In the event that any patents are developed as a result of the work done in
furtherance of this Agreement said Patents shall be owned as follows:
(i) Patents which are primarily related to TSK shall be owned
solely by X-COM.
(ii) Patents which are primarily related to power line technology
shall be owned solely by ELCOM.
(iii) Patents which are jointly developed shall be jointly owned and
prosecuted and funded by X-COM and ELCOM and shall be jointly owned by
X-COM and ELCOM. Jointly developed as use in this Section 7 shall mean
that significant engineering participation is provided by ELCOM and X-
COM and shall not include financial consideration. Jointly owned
patents that are not primarily related to TSK shall be subject to the
terms and conditions of this Agreement. In the further event that this
Agreement fails to provide a royalty being incurred as to the
invention covered by said patent neither party shall neither make use
or sell under such patent without written permission of the other
party. Said written permission shall not be unreasonably withheld.
(iv) Any computer software created as a result of this Agreement
(other than modifications made by ELCOM to SOFTWARE herein before
defined) shall be owned solely by the Party creating said computer
software. All SOFTWARE as furnished by X-COM or ERISMAN shall remain
the property of X-COM or ERISMAN both in its original form and in any
modified form created by ELCOM.
8. NON-EXCLUSIVE USE OF TSK IN RESIDENCES AND SMALL BUSINESS.
---------------------------------------------------------
A. X-COM hereby grants to ELCOM the non-exclusive right to use any and all of
TSK in any finished product offered for sale by ELCOM in the TERRITORY for use
in residences and small businesses for the entire TERM of this Agreement.
Finished Product as used in this Section 8 shall not include any CHIP SETS,
ASICs, DIES, INTEGRATED CIRCUITS, MACRO CELLS and SOFTWARE sold individually for
any reason whatsoever.
Page 7 of 12
<PAGE>
B. X-COM hereby grants to ELCOM, at no charge of any kind or nature
whatsoever, the unlimited right to use the Trademarks, Service Marks and other
registered Marks of X-COM as detailed on Exhibit A attached hereto. X-COM
hereby grants to ELCOM the right to register all Trademarks, Service Marks and
Registered Marks of X-COM in any country where these Marks are not registered by
X-COM. X-COM shall remain the sole owner of said Trademarks, Service Marks and
Registered Marks listed on Exhibit A for any and all purposes whatsoever.
C. ELCOM is solely responsible for obtaining and maintaining at its sole cost
and expense all trademark and copyright protection which is additional to that
presently owned by X-COM. However, upon the termination of this Agreement for
any reason other then X-COM's uncured breach of this Agreement all such
trademark and copyright protection which relates to the TSK technology shall be
and become the property of X-COM and ELCOM shall cooperate in the execution of
all necessary paperwork for accomplishing same.
D. ELCOM hereby agrees to display the TSK trademark on all products which
incorporate the TSK digital modulation provided by X-COM during the Term of this
Agreement.
E. In order to maintain its non-exclusive rights under this Section 8, ELCOM
must begin development in said non-exclusive market(s) within thirty six (36)
months of the effective date of this Agreement. Development for purposes of
this Section 8 shall mean the expenditure of significant engineering time and
funds for the purposes contemplated under this Section 8.
F. X-COM grants ELCOM the non-exclusive right to purchase and/or use all CHIP
SETS and DIES and SILICON MACRO CELLS and SOFTWARE in the TERRITORY for use in
Finished Products, as defined in this Section 8 above, to be used primarily
within a residence and/or small business at the price mutually agreed upon by
both Parties hereto at the time in question. Except as mutually agreed upon by
all Parties to this Agreement, ELCOM's non-exclusive rights under this Section 8
shall terminate upon the completion of ten (10) years from the effective date of
this Agreement.
G. In the event that X-COM grants an exclusive license within one year of the
effective of this Agreement for the use of TSK in a cable-modem product to any
organization that is not affiliated with X-COM, ELCOM hereby agrees not to use
TSK in any cable modem product only.
9. SUPPORT OF TSK
--------------
A. For the TERM of this Agreement, X-COM agrees to provide reasonable on-cite
technical support to ELCOM for the development of the existing PRODUCTS at the
rate of five hundred dollars ($500.00) per professional per day. Elcom shall
also pay one hundred dollars ($100.00) per professional per day for living
expenses. Said rate is based on the rate established in Section 2.B. herein
($10,000.00 per month divided by 20 working days). X-COM agrees to provide
off-cite technical support to ELCOM at the rate of four hundred dollars
($400.00) per eight hour professional day.
Page 8 of 12
<PAGE>
10. REPRESENTATION AND WARRANTIES
-----------------------------
A. X-COM represents and warrants that, to the best of its knowledge, TSK is
unique and original, is clear of any claims or encumbrances, and does not, to
the best knowledge and belief of X-COM, infringe upon the rights of any third
parties.
B. X-COM warrants that it is authorized to enter into this agreement and that
its performance thereof will not conflict with any other agreement.
C. THE EXPRESS WARRANTIES SET FORTH IN THIS PARAGRAPH ARE THE ONLY WARRANTIES
MADE, AND THERE ARE NO OTHER WARRANTIES, EXPRESS OF IMPLIED, AND SPECIFICALLY
THERE ARE NO IMPLIED WARRANTIES OF MERCHANTABLITY OR FITNESS FOR A PARTICULAR
PURPOSE.
11. CONFIDENTIALITY AND SECURITY
----------------------------
A. X-COM recognizes that during the course of its work with ELCOM, it may have
occasion to receive information from ELCOM that is marked by ELCOM to be
confidential or proprietary, including information relating to TSK as it relates
to PRODUCT development with ELCOM, inventions, patent, trademarks and copyright
applications, improvements, know-how, specifications, drawings, cost or pricing
data, process flow diagrams, customer or vender lists, bills, ideas, and/or any
other written material referring to same (hereinafter referred to collectively
as the "CONFIDENTIAL INFORMATION"). Except as provided in this Agreement, both
during the term of its work with ELCOM and for a period of five (5) years
thereafter:
(i). X-COM agrees to maintain in confidence such CONFIDENTIAL INFORMATION
for all purposes whatsoever.
(ii). X-COM further agrees to use all reasonable precautions to ensure
that all such CONFIDENTIAL INFORMATION is properly protected and kept from
unauthorized persons or disclosure.
(iii). If requested by ELCOM, X-COM agrees to promptly return to ELCOM all
materials, writings and drawings, equipment, models, mechanisms, and the
like obtained from or through ELCOM including, but not limited to, all
CONFIDENTIAL INFORMATION.
(iv). X-COM agrees that it will not, without first obtaining prior written
permission from an Officer of ELCOM:
(a) Directly or indirectly utilize such CONFIDENTIAL INFORMATION in its
own business;
(b) Manufacture and/or sell any product that is based in whole or
in part on such CONFIDENTIAL INFORMATION; or
(c) Disclose such CONFIDENTIAL INFORMATION to any third party.
Page 9 of 12
<PAGE>
12. CONFIDENTIALITY AND SECURITY
----------------------------
A. ELCOM recognizes that during the course of its work with X-COM it may have
occasion to receive from X-COM information that is marked by X-COM to be
confidential or proprietary, including information relating to TSK as it relates
to PRODUCT development with X-COM, inventions, patent, trademarks and copyright
applications, improvements, know-how, specifications, drawings, cost or pricing
data, process flow diagrams, customer or vendor lists, bills, ideas, and/or any
other written material referring to same (hereinafter referred to collectively
as the "CONFIDENTIAL INFORMATION"). Except as provided in this Agreement, both
during the term of its work with X-COM and for a period of five (5) years
thereafter:
(i). ELCOM agrees to maintain in confidence such CONFIDENTIAL INFORMATION
for all purposes whatsoever.
(ii). ELCOM further agrees to use reasonable precautions to ensure that
all such CONFIDENTIAL INFORMATION is properly protected and kept from
authorized persons or disclosure.
(iii). If requested by X-COM, ELCOM agrees to promptly return to X-COM all
materials, writings and drawings, equipment, models, mechanisms, and the
like obtained from or through X-COM including but not limited to, all
CONFIDENTIAL INFORMATION.
(iv). ELCOM agrees that it will not, without first obtaining prior written
permission from an Officer of X-COM:
(a) Directly or indirectly utilize such CONFIDENTIAL INFORMATION in its
own business;
(b) Manufacture and/or sell any product that is based in whole or in
part on such CONFIDENTIAL INFORMATION; or
(c) Disclose such CONFIDENTIAL INFORMATION to any third party.
13. INDEMNIFICATION
---------------
X-COM hereby agrees to defend, indemnify, and hold ELCOM, its officers,
directors, agents, and employees, harmless against all costs, expenses, and
losses (including reasonable attorney fees and costs) incurred through claims of
third parties against ELCOM based on any breach by X-COM of its representations
and warranties, to the best of X-COM's knowledge, under this Agreement. This
indemnification shall be in accordance with applicable law.
14. EFFECTIVE DATE
--------------
This Agreement is effective as of the date of execution.
Page 10 of 12
<PAGE>
15. INDEPENDENT CONTRACTOR
----------------------
X-COM's performance of its duties and obligations under this Agreement is in its
capacity as an independent contractor. Accordingly, nothing contained in this
Agreement shall be construed as establishing an employer/employee, partnership,
agency, brokerage, or joint venture relationship between X-COM and ELCOM.
16. NOTICES
-------
Any notice to be given pursuant to this Agreement shall be in writing and mailed
by certified or registered mail, return receipt requested, or delivered by a
national overnight express service such as Federal Express.
17. JURISDICTION AND DISPUTES
-------------------------
A. This Agreement shall be governed by the laws of Delaware.
B. All disputes hereunder shall be resolved in the applicable state or federal
courts of Delaware. The parties consent to the jurisdiction of such courts,
agree to accept service of process by mail, and waive any jurisdictional or
venue defenses otherwise available.
18. AGREEMENT BINDING ON SUCCESSORS
-------------------------------
This Agreement shall be binding on and shall inure to the benefit of the parties
hereto, and their heirs, and administrators, successors, and assigns.
19. WAIVER
------
No waiver by either party of any default shall be deemed as a waiver of any
prior or subsequent default of the same or other provisions of this Agreement.
20. SEVERABILITY
------------
If any provision hereof is held invalid or unenforceable by a court of competent
jurisdiction, such invalidity shall not effect the validity or operation of any
other provision and such invalid provision shall be deemed to be severed from
the Agreement.
21. ASSIGNABILITY
-------------
This Agreement and the rights and obligations thereunder with respect to X-COM
may be assigned by X-COM as long as X-COM fulfills its support obligations under
Section 9 herein. ELCOM shall have the right to assign this Agreement to a
successor in interest to ELCOM or to a purchaser of a portion of the assets of
ELCOM.
Page 11 of 12
<PAGE>
22. INTEGRATION
-----------
This Agreement and the Exhibits attached hereto constitute the entire
understanding of the parties, and revokes and supersedes all prior agreements
between the parties and is intended as a final expression of their Agreement. It
shall not be modified or amended except in writing signed by the parties hereto
and specifically referring to this Agreement. This Agreement shall take
precedence over any other documents that may be in conflict therewith.
23. ACCOUNTING RECORDS
------------------
X-COM shall have reasonable access to review any and all of ELCOM's financial
accounting records necessary to enforce any of the provisions of this Agreement.
All records reviewed as a result of this Section 23 shall remain at all times
the sole and exclusive property of ELCOM. Any information obtained as a result
of access to said accounting records may not be utilized or disclosed in any
manner whatsoever by X-COM except for the enforcement of the provisions of this
Agreement.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have each caused to be affixed hereto its or his/her hand and seal the day
indicated.
____________________________________ ______________________________
ELCOM Technologies Corporation X-Com, Inc.
By: /s/ Robert A. Vito /s/ David Erisman
--------------------------------- ------------------------------
Robert A. Vito David Erisman
Title: President Title: President
Date: 8/5/96 Date: 8-5-96
------------------------------- -------------------------
/s/ David Erisman 8-5-96
- ------------------------------------ Date:-------------------------
David Erisman, Individual
Page 12 of 12
<PAGE>
[LETTERHEAD OF X-COM INC.]
- --------------------------------------------------------------------------------
EXHIBIT A
---------
U.S Patent 5,406,584 issued to David E. Erisman on April 11, 1995.
Assignee: X-COM Inc.
Future patents in the field of TSK. This include updates, amendments, and
Continuation-In Part of TSK patents.
<PAGE>
STOCK OPTION AGREEMENT
----------------------
AGREEMENT made this day of , 1996, by and among Elcom Technologies
Corporation, a corporation organized under the laws of the Commonwealth of
Pennsylvania (hereinafter referred to as "ELCOM"), and , an individual
employee of ELCOM hereinafter referred to as "EMPLOYEE").
BACKGROUND
----------
WHEREAS; ELCOM's corporate charter currently permits ELCOM to issue up
to Twenty Million (20,000,000) shares of common stock; and
WHEREAS, as of the execution of this Agreement, ELCOM's total issued,
and outstanding shares of common stocks is approximately Thirteen Million five
hundred thousand (13,500,000) shares.
WHEREAS, ELCOM desires to grant to EMPLOYEE an option to purchase
shares of ELCOM Technologies Corporation's common stock.
NOW, THEREFORE, in consideration of the mutual promises herein and other
valuable considerations, ELCOM and EMPLOYEE agree as follows:
1. Prior Agreements. EMPLOYEE and ELCOM have previously entered into the
following Agreement:
EMPLOYEE agrees that any options to purchase Elcom Common Stock under any of the
above agreements listed in this Section 1 are hereby canceled and declared null
and void for all purposes whatsoever.
1. Grant of Options. Subject to all of the terms and conditions of this
----------------
Agreement, ELCOM hereby grants to EMPLOYEE options to purchase a total of
Shares of ELCOM's common stock at the price of per share in accordance
with the following schedule:
Number of Shares Date Exercisable Expiration Date
---------------- ---------------- ---------------
Page 1 of 4
<PAGE>
Any Options not exercised by the Expiration Date listed above shall be
terminated in full for all purposes whatsoever.
2.1 Sale of Company. In the event that a controlling interest (over 50%) of
---------------
ELCOM is sold to a third party, other than the Public markets, EMPLOYEE may
exercise one hundred percent (100%) of all options granted under Section 2
herein. EMPLOYEE must exercise said options within sixty (60) days of
notification of the acquisition of a controlling interest by a third party. Any
Options not exercised by EMPLOYEE within this sixty (60) day period will
terminate in full upon expiration of said sixty (60) day period.
3. Termination of Employment. In the event that EMPLOYEE terminates
-------------------------
employment with ELCOM for any reason whatsoever, including death or disability,
all Options to purchase ELCOM common stock granted under this Agreement shall
terminate in full and be declared null and void for all purposes whatsoever,
sixty (60) days subsequent to the date of EMPLOYEE's last day of active
employment with ELCOM. EMPLOYEE shall receive no further vesting of Options
under Section 2 herein, after EMPLOYEE's last day of active employment with
ELCOM.
4. Registration of Options. In the event that ELCOM makes an initial public
-----------------------
offering (the"IPO") of its common stock pursuant to rules established by the
United States Securities and Exchange Commission and the NASDAQ stock exchange,
the options granted in Section 2 of this Agreement shall be registered with the
Securities and Exchange Commission pursuant to the following schedule:
Six (6) months after completion of the IPO..........25% (twenty five percent)
Eighteen (18) months after completion of the IPO....25% (twenty five percent)
Thirty (30) months after completion of the IPO......25% (twenty five percent)
Forty two (42) months after completion of the IPO...25% (twenty five percent)
5. Restrictions and Regulations. EMPLOYEE agrees that any Shares of
----------------------------
ELCOM's common stock purchased under this Stock Option Agreement will be subject
to the restrictions and regulations outlined in this Agreement and that these
SHARES may be subject to further restrictions and regulations. Said
restrictions and regulations may be imposed at any time by ELCOM at the sole
discretion of ELCOM and without the approval of EMPLOYEE.
5.1 In addition to the aforementioned restrictions, EMPLOYEE agrees that any
Shares purchased by EMPLOYEE pursuant to this Agreement, shall be subject to all
of the restrictions, regulations and non-dilution provisions of the ELCOM
Private Placement Memorandum dated, July 12, 1996.
6. Exercise of Option EMPLOYEE may exercise any Options earned in
------------------
accordance with Section 2, herein, in any number that EMPLOYEE elects.
Page 2 of 4
<PAGE>
7. Adjustment of Option Shares. Prior to any public offering of ELCOM
---------------------------
shares, if the outstanding common shares of Elcom Technologies Corporation, are
changed into or exchanged for a different number or kind of shares or other
securities of Elcom Technologies Corporation or of another corporation, whether
through reorganization, share split-up, combination of shares, merger or
consolidation, then these shares shall be substituted for each common share of
Elcom Technologies Corporation then subject to this Stock Option Agreement. The
number and kinds of shares or other securities into which each such ELCOM share
is so changed or for which each ELCOM share is exchanged shall be at the sole
discretion of ELCOM.
8. Time For Payment For Shares. The option price of the Shares to be
---------------------------
purchased pursuant to the exercise of Options under this Agreement shall be paid
in full at the time of the exercise of the options.
9. Method of Exercising Option. EMPLOYEE shall provide ELCOM
---------------------------
with at least five (5) business days prior written notice in order to exercise
any options under this Agreement. EMPLOYEE shall comply with all procedures
established by ELCOM from time to time concerning exercising any options under
this Agreement.
10. Modification. This Agreement shall be effective as of the date hereof
------------
and, unless sooner terminated under the provisions of this Agreement, shall
remain in effect until December 31, 2002. No modification or amendment of this
Agreement shall be effective unless in writing and signed by the parties hereto.
11. Notices. All notices or other communications required or
-------
permitted to be given under the terms of this Agreement shall be in writing,
delivered personally, or sent via certified mail, postage prepaid, return
receipt requested.
12. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes all prior negotiations,
understandings and agreements of any nature with respect to the subject matter
hereto. No amendment, waiver or discharge of any of the provisions of this
Agreement shall be effective against any part, unless that party shall have
consented thereto in writing.
13. Binding Effect. This Agreement shall be binding upon execution
--------------
by ELCOM and inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, successors, and assigns.
14. Governing Law. This Agreement shall be construed, interpreted
-------------
and enforced in accordance with the laws of the Commonwealth of Pennsylvania.
Page 3 of 4
<PAGE>
IN WITNESS WHEREOF, ELCOM and EMPLOYEE have set their hands and seals
hereto the day and year first above written.
ATTEST: Elcom Technologies Corporation
BY:
- ---------------------------------- -------------------------------
Robert B. Sando, Secretary Robert A. Vito, President
-------------------------------
EMPLOYEE
Page 4 of 4
<PAGE>
ELCOM TECHNOLOGIES CORPORATION
MANUFACTURER SALES REPRESENTATIVE & DISTRIBUTION AGREEMENT
This Agreement is entered into this ______ day of March, 1996 by and between
Elcom Technologies Corporation, a Pennsylvania Corporation with offices at 78
Great Valley Parkway, Malvern, Pennsylvania (hereinafter "ELCOM") and
a corporation with offices located in (hereinafter
the "SALES REPRESENTATIVE").
BACKGROUND:
WHEREAS, ELCOM has developed and manufactures certain electronic devices that
are described more fully on the attached Exhibit A (hereinafter referred to
collectively as the "PRODUCTS"); and
WHEREAS, SALES REPRESENTATIVE has represented that it has the abllity and is
desirous of selling and marketing the PRODUCTS; and
WHEREAS, ELCOM desires to appoint SALES REPRESENTATIVE to sell and market the
PRODUCTS to a certain geographic area only.
NOW, THEREFORE, in consideration of the promises and agreements set forth
herein, the parties, each intending to be legally bound hereby, do promise and
agree as follows:
1. PRIOR AGREEMENTS
1.1 Prior to the date of this Agreement SALES REPRESENTATIVE and ELCOM may or
may not have entered into prior oral and/or written agreements concerning the
sale of the ELCOM'S PRODUCTS. Except for any ELCOM Non-Disclosure Agreement, all
prior oral or written agreements of any kind or nature whatsoever associated
with the sale of the PRODUCTS are hereby terminated and declared NULL AND VOID
for all purposes whatsoever.
2. DEFINITIONS
As used in this Agreement, the following terms shall have the meaning specified:
2.1 "Territory" shall mean the places indicated on Exhibit B attached hereto.
2.2 "Sale" or "Sales" shall mean actual shipments of PRODUCTS by ELCOM to a
Customer, and the issuing of an invoice to such Customer for payment for
PRODUCTS. Acceptance or booking of a purchase order by ELCOM shall not
constitute a Sale hereunder.
Page 1 of 12
<PAGE>
2.3 "Customer" shall mean any individual, corporation, partnership or any other
business organization which purchases PRODUCTS from ELCOM.
3. APPOINTMENT OF SALES REPRESENTATIVE
3.1 Except as provided in Section 4 herein, ELCOM hereby appoints SALES
REPRESENTATIVE for the Term of this Agreement, as an exclusive sales
representative for the sale and marketing of the PRODUCTS in the Territory.
SALES REPRESENTATIVE understands and agrees that except as provided for in
Section 4 herein, SALES REPRESENTATIVE has exclusive rights to sell and/or
market the PRODUCTS in the Territory. SALES REPRESENTATIVE understands that he
does not have any rights to sell or market any of the PRODUCTS to any customer
located outside of the Territory unless said Customer is a direct branch or
subsidiary of a Customer headquartered in the Territory and said SALES
REPRESENTATIVE obtains the prior written consent of ELCOM to sell to said
customers located outside the Territory.
3.2 It is expressly understood and agreed that ELCOM hereby retains all rights
not expressly granted hereunder to SALES REPRESENTATIVE as to the sale and
marketing of the PRODUCTS.
3.3 SALES REPRESENTATIVE shall have no right to appoint any SUB-SALES
REPRESENTATIVE or distributor or other Representatives of any kind or nature
whatsoever without the prior written approval of the ELCOM.
3.4 SALES REPRESENTATIVE may purchase PRODUCTS directly from ELCOM for the
purpose of reselling said PRODUCTS only with the express written consent of
ELCOM. In the event of said purchase of PRODUCTS for the purpose of resale,
SALES REPRESENTATIVE shall pay ELCOM directly for all PRODUCTS received by SALES
REPRESENTATIVE.
4. SALES BY ELCOM IN THE TERRITORY
4.1 Except as provided for in Section 4.2 herein, during the Term of this
Agreement, ELCOM (or its subsidiary corporation) may sell PRODUCTS directly to
any Customer of any kind or nature whatsoever located in the Territory. In the
event that SALES REPRESENTATIVE initiates a contact with a potential customer
located within the Territory and ELCOM converts said customer to an ELCOM
account, SALES REPRESENTATIVE shall be due a one percent (1.0%) sales
commissions on all sales to said customer for the remaining original Term (not
including extensions or renewals) of this Agreement. SALES REPRESENTATIVE shall
not be due any other commissions, including any commissions under Section 9
herein, or any other compensation of any kind associated with sales to said
customer. ELCOM is specifically authorized hereunder to sell the PRODUCTS
through various television marketing mediums including but not limited to QVC
and the Home Shopping Network. SALES REPRESENTATIVE shall not be due any
commissions of any kind whatsoever for any sales placed through said television
marketing mediums.
4.2 During the Term of this Agreement, ELCOM shall not hire any Sales
Representative to sell or market the PRODUCTS in the Territory.
Page 2 of 12
<PAGE>
5. TERM
5.1 This Agreement shall be effective as of the date of execution indicated
above and shall extend for a period of one (1) year from the date of execution
unless terminated in accordance with Section 17 herein.
6. DUTIES OF SALES REPRESENTATIVE AND RESTRICTIONS OF SALES REPRESENTATIVE
6.1 SALES REPRESENTATIVE shall use its best efforts in the Territory to promote
the Sales of the PRODUCTS, and obtain orders for the Sale of the PRODUCTS,
subject to written acceptance by ELCOM, at such prices and upon such terms and
conditions as ELCOM shall communicate to the SALES REPRESENTATIVE from time to
time.
6.2 SALES REPRESENTATIVE shall meet all of its obligations outlined in Exhibit
C attached hereto. Failure by SALES REPRESENTATIVE to meet any of its
obligations outlined in Exhibit C attached hereto shall be a material breach of
this Agreement.
6.3 SALES REPRESENTATIVE shall quote only such prices of PRODUCTS, terms and
conditions of sale, and make only such representations concerning PRODUCTS as to
quality, performance, capacity, and capability, as may be currently in effect
and authorized in writing by ELCOM. SALES REPRESENTATIVE will not make any
representation, guarantee or warranty with respect to PRODUCTS except as
authorized in writing by ELCOM.
6.4 SALES REPRESENTATIVE shall, on a monthly basis, report in writing to ELCOM
the prospects for future Sales of PRODUCTS in the Territory, including Sales
Forecasts, and the nature of the SALES REPRESENTATIVE'S operations and efforts
on behalf of ELCOM within the Territory.
6.5 SALES REPRESENTATIVE shall make no allowances or adjustments in accounts or
authorize any Customer to return any PRODUCTS, unless given specific advance
Return Material Authorization ("RAM") in writing by ELCOM.
6.6 Except as authorized in writing from ELCOM, SALES REPRESENTATIVE shall not
collect any payment of any kind or nature whatsoever associated with the Sale of
the PRODUCTS. Upon the request of ELCOM, SALES REPRESENTATIVE shall assist ELCOM
in the collection of payments due ELCOM.
6.7 SALES REPRESENTATIVE shall, at the SALES REPRESENTATIVE'S expense, send one
or more authorized attendees to sales training meetings which will be scheduled
from time to time by ELCOM.
6.8 SALES REPRESENTATIVE shall, in performance of tasks under the terms of this
Agreement, comply with all applicable state, Federal and local statutes and
regulations. SALES REPRESENTATIVE shall be responsible for reasonably
familiarizing itself with any applicable laws and with all compliance
requirements related thereto.
Page 3 of 12
<PAGE>
6.9 SALES REPRESENTATIVE shall be solely responsible for the payment of all
expenses incurred by it in the course of its performance hereunder, including,
but not limited to, travel, entertainment, and compensation of its salesmen and
other employees. SALES REPRESENTATIVE shall maintain workers' compensation and
other insurance as required by applicable law, and shall be solely responsible
for all other incidents and obligations that it incurs as an independent
contractor.
6.10 SALES REPRESENTATIVE must notify ELCOM in writing and receive prior written
authorization from an Officer of ELCOM before making any formal presentation to
any potential customer for any reason whatsoever associated with the PRODUCTS.
6.11 ELCOM specifically reserves the right to withhold permission from SALES
REPRESENTATIVE to contact any potential customer for any reason whatsoever. Any
decision by ELCOM in this respect shall be final and binding on the SALES
REPRESENTATIVE for all purposes whatsoever.
6.12 In the event that SALES REPRESENTATIVE does not comply with all provisions
of this Section 6, SALES REPRESENTATIVE shall not be entitled to any sales
commission under Section 9 herein for any reason whatsoever associated with said
transaction in violation of this Section 6.
6.13 All orders placed by SALES REPRESENTATIVE shall include the quantity and
name of each PRODUCT ordered and the method of shipment and shall be subject to
acceptance by the ELCOM. ELCOM specifically reserves the right to accept and/or
reject any or all orders placed by SALES REPRESENTATIVE for any reason
whatsoever.
6.14 SALES REPRESENTATIVE shall have no authority either implied or express to
bind ELCOM in any way whatsoever for any reason whatsoever.
7. DUTIES OF ELCOM
7.1 ELCOM shall supply SALES REPRESENTATIVE with reasonable quantities of
advertising and selling literature, samples, displays, drawings, and engineering
or other Product data as ELCOM may have available and which would be helpful in
advancing the Sales of PRODUCTS. SALES REPRESENTATIVE shall make effective use
of such items in the Territory, in accordance with its own best judgment and at
its own expense, and not be knowingly wasteful of such items.
7.2 Except as provided for in Section 4 herein, ELCOM shall in all instances
advise SALES REPRESENTATIVE of any inquiries regarding the purchase of PRODUCTS
received from any Customer or potential Customer in the Territory. Except as
provided for in Section 4 herein, any and all orders for PRODUCTS from Customers
in the Territory for shipment to such Customers in the Territory will be treated
as orders submitted by SALES REPRESENTATIVE, whether obtained by SALES
REPRESENTATIVE or by ELCOM, and a Full Commission shall be paid on
Page 4 of 12
<PAGE>
any Sale resulting from such orders to SALES REPRESENTATIVE in accordance with
Section 9 herein.
8. ORDER ACCEPTANCE AND SHIPMENTS
8.1 All orders for Sale of PRODUCTS resulting from solicitation by SALES
REPRESENTATIVE shall become binding on ELCOM only upon acceptance in writing by
ELCOM. ELCOM may, at any time and for any reason, reject any orders for Sale of
the PRODUCTS submitted by SALES REPRESENTATIVE or any Customer. ELCOM shall have
no liability to SALES REPRESENTATIVE as a result of such rejection of any orders
submitted by SALES REPRESENTATIVE or any Customer. SALES REPRESENTATIVE shall
not have the authority to accept any order on behalf of ELCOM for any reason
whatsoever.
8.2 All PRODUCTS will be shipped by ELCOM directly to the Customer from ELCOM'S
facility. Except for PRODUCTs purchased directly by SALES REPRESENTATIVE for
resale, all payments due under any invoice shall be made directly to ELCOM.
SALES REPRESENTATIVE shall not have the authority to collect funds or accept
payment on any invoices issued to Customers by ELCOM.
8.3 ELCOM may change or withdraw any quotation or acceptance of any order at
any time without obtaining the consent of SALES REPRESENTATIVE. ELCOM shall have
no liability to SALES REPRESENTATIVE for any such change or withdrawal, nor
shall SALES REPRESENTATIVE be entitled to any compensation in any form for any
such change or withdrawal.
9. COMMISSIONS
9.1 The sole source of compensation to SALES REPRESENTATIVE shall be
commissions payable pursuant to the terms of this Agreement and delineated in
this Section 9. SALES REPRESENTATIVE shall not receive any other compensation
from ELCOM for services rendered or for the reimbursement of any expenses
incurred by SALES REPRESENTATIVE pursuant to this Agreement.
9.2 Except as provided in Section 9.8 herein, SALES REPRESENTATIVE shall be
entitled to a sales commission of three percent (3.0%) of the Net Billing price
(as defined at 9.3 below) of all direct sales placed directly by SALES
REPRESENTATIVE, accepted by the COMPANY, shipped by the COMPANY and complying
with all of the Terms and Conditions of this Agreement.
9.3 Net Billing price shall include only the price of any PRODUCTS sold. Net
Billing price shall not include any of the following:
(a) Taxes, sales or otherwise
(b) Insurance
(c) Freight and/or shipping
Page 5 of 12
<PAGE>
(d) Commission
(f) Discounts, allowances or adjustments
9.4 All sales commissions due under this Agreement shall be paid to SALES
REPRESENTATIVE within forty-five (45) days of shipment by the COMPANY to the
customer. In the event that the COMPANY does not receive payment in full for
PRODUCTS shipped to the customer within ninety (90) days of shipment of PRODUCTS
to the customer, SALES REPRESENTATIVE shall have said commissions previously
paid by COMPANY charged against SALES REPRESENTATIVES current and future
commissions due under this Agreement.
9.5 The COMPANY shall not reimburse the SALES REPRESENTATIVE for any expenses
of any kind or nature whatsoever for any reason whatsoever without the prior
written consent of an Officer of the COMPANY.
9.6 COMPANY and SALES REPRESENTATIVE understand that any commission percentages
due under this paragraph may be subject to adjustment as agreed upon by the
COMPANY and SALES REPRESENTATIVE.
9.7 In the event that SALES REPRESENTATIVE purchases PRODUCTS directly from
ELCOM for the purpose of reselling said PRODUCTS or for any other reason
whatsoever, SALES REPRESENTATIVE shall be due its regular commission under
Section 9 herein.
9.8 This Sales Commission Schedule does not apply to any Licensing Agreements
between the COMPANY and any customer. Sales commissions in such event shall not
be the subject of this Agreement.
10. LIABILITY
10.1 SALES REPRESENTATIVE SHALL HAVE NO CLAIM AND MAKE NO CLAIM UNDER THIS
AGREEMENT, AGAINST ELCOM FOR COMPENSATION, DAMAGES, OR OTHERWISE, INCLUDING BUT
NOT LIMITED TO ANY CLAIM BASED ON THE FAILURE OF ELCOM TO MAKE SALES OF PRODUCTS
UNDER ORDERS SOLICITED BY SALES REPRESENTATIVE FOR ANY REASON WHATSOEVER EVEN if
DUE TO THE FAULT OF ELCOM EITHER DURING THE TIME THIS AGREEMENT IS IN EFFECT OR
THEREAFTER, EXCEPT FOR COMMISSIONS DUE SALES REPRESENTATIVE AS EXPRESSLY
PROVIDED FOR IN THIS AGREEMENT. ELCOM SHALL NOT BE LIABLE TO ANY EXTENT TO
REPRESENTATIVE EXCEPT FOR SUCH COMMISSIONS AND, IN PARTICULAR, SHALL NOT BE
LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
11. WARRANTIES AND OBLIGATIONS
Page 6 of 12
<PAGE>
11.1 ELCOM represents and warrants that it has the right and power to enter into
this Agreement and that there are no other agreements with any other party in
conflict with such grant.
11.2 ELCOM further represents and warrants that it has no actual knowledge that
the PRODUCT infringes on any valid rights of any third party.
11.3 SALES REPRESENTATIVE represents and warrants that it will use its best
efforts to promote, market, and sell the PRODUCTS.
12. NOTICES
12.1 Notice required to be given pursuant to this Agreement shall be in writing
and mailed by certified or registered mail, return receipt requested, or
delivered by a national overnight express service.
13. INTANGIBLE PROPERTY RIGHTS
13.1 ELCOM shall retain all right, title, and interest of any kind or nature
whatsoever in the PRODUCTS, any trademarks or tradenames associated with the
PRODUCTS, all technology used in the PRODUCTS or used to develop the PRODUCTS,
and to any modifications or improvements made thereto. SALES REPRESENTATIVE
shall not obtain any rights of any kind or nature whatsoever in the PRODUCTS or
anything associated with the PRODUCTS as a result of its responsibilities
hereunder. SALES REPRESENTATIVE agrees to execute any documents reasonably
requested by the ELCOM to effect any of the above provisions including a Non-
Disclosure Agreement consistent with Exhibit D attached hereto.
13.2 SALES REPRESENTATIVE acknowledges ELCOM'S exclusive rights in the PRODUCTS
and that the PRODUCTS are unique and original to the ELCOM and that ELCOM is the
owner thereof and the owner of all trademarks, tradenames, patents, and
technology associated with the PRODUCTS. Unless otherwise permitted by law,
SALES REPRESENTATIVE shall not, at any time during or after the Term of this
Agreement, dispute or contest, directly or indirectly, ELCOM'S exclusive right
and title to the PRODUCTS or trademarks and/or tradenames associated with the
PRODUCTS.
13.3 SALES REPRESENTATIVE shall have no rights to duplicate, translate,
decompile, reverse engineer, or adapt the PRODUCTS without ELCOM'S prior written
consent, nor shall SALES REPRESENTATIVE attempt to develop any PRODUCTS that are
similar in any way to the PRODUCTS.
14. PRODUCT WARRANTY
14.1 The warranty with respect to the PRODUCTS is as described in the warranty
agreement provided with each PRODUCT. This is the only warranty offered by
ELCOM. ELCOM does not warrant that the PRODUCTS will meet the requirements of
any end user.
Page 7 of 12
<PAGE>
14.2 ELCOM does not extend to SALES REPRESENTATIVE any additional warranties,
express or implied, and SALES REPRESENTATIVE waives any and all claims to
damages.
14.3 Upon receipt of any warranty claim that is made in a timely and prompt
fashion, ELCOM shall make reasonable efforts to correct any significant error in
the PRODUCTS, provided such error related to the proper functioning of the
PRODUCTS and has not been caused by negligence on the part of the SALES
REPRESENTATIVE or any third party, malfunction, or other causes external to the
PRODUCTS. ELCOM'S liability is limited to replacement of the PRODUCTS.
14.4 THE WARRANTIES CONTAINED HEREIN ARE IN LIEU OF ALL OTHER WARRANTIES OR
CONDITIONS, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THOSE OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE IN NO EVENT SHALL ELCOM BE
LIABLE FOR DAMAGES, DIRECT OR INDIRECT, INCLUDING INCIDENTAL OR CONSEQUENTIAL
DAMAGES SUFFERED BY SALES REPRESENTATIVE, CUSTOMER, END USER, OR OTHER THIRD
PARTY, ARISING FROM BREACH OF ANY WARRANTY, NEGLIGENCE, OR ANY OTHER LEGAL
GROUND OF ACTION.
14.5 SALES REPRESENTATIVE shall be liable for any representations of warranties
made by it without written approval of ELCOM.
15. CONFIDENTIALITY
15.1 It is recognized that during the course of its work with ELCOM, SALES
REPRESENTATIVE may have occasion to review, or receive information that is
considered by ELCOM to be confidential or proprietary, including information
relating to the PRODUCTS, including inventions, patent, trademark and copyright
applications, improvements, know-how, specifications, drawings, cost data,
process flow diagrams, customer and supplier lists, pricing and/or marketing
information, bills, ideas, and/or any other written material referring to same
(referred to herein collectively as the "CONFIDENTIAL INFORMATION"). Both during
the Term of this Agreement and for 5 years thereafter, SALES REPRESENTATIVE
agrees not to disclose such CONFIDENTIAL INFORMATION for any reason whatsoever
without the prior written consent of ELCOM.
15.2 SALES REPRESENTATIVE further agrees to use all reasonable precautions to
ensure that all such CONFIDENTIAL INFORMATION is properly protected and kept
from unauthorized persons or disclosure.
15.3 If requested by ELCOM, SALES REPRESENTATIVE agrees to promptly return to
ELCOM all materials, writings, equipment, models, mechanisms, marketing and
pricing information, and the like obtained from or through ELCOM including, but
not limited to, all CONFIDENTIAL INFORMATION, all of which SALES REPRESENTATIVE
recognizes as the sole and exclusive property of ELCOM.
Page 8 of 12
<PAGE>
15.4 SALES REPRESENTATIVE agrees that it will not, without first obtaining the
prior written permission of ELCOM do any of the following:
(i) Directly or indirectly utilize any CONFIDENTIAL INFORMATION in its
own business;
(ii) Manufacture and/or sell any product that is based in whole or in part
on such CONFIDENTIAL INFORMATION;
(iii) Disclose such CONFIDENTIAL INFORMATION to any third party.
16. NONCOMPETITION
16.1 During the Term of this Agreement, SALES REPRESENTATIVE shall not serve as
a distributor or SALES REPRESENTATIVE in connection with any product that is
directly or indirectly competitive with any of the PRODUCTS that SALES
REPRESENTATIVE is distributing, promoting, or selling on behalf of ELCOM without
first obtaining the ELCOM'S written consent.
17. TERMINATION
The following termination rights are in addition to the termination rights that
may be provided elsewhere in this Agreement.
17.1 Immediate Right of Termination. ELCOM shall have the right to immediately
terminate this Agreement by giving written notice to SALES REPRESENTATIVE in the
event that any of the following occurs:
(i) SALES REPRESENTATIVE files a petition in bankruptcy or is adjudicated
bankrupt or insolvent, or makes an assignment for the benefit of
creditors, or an arrangement pursuant to any bankruptcy law, or if SALES
REPRESENTATIVE discontinues or dissolves its business or if a receiver is
appointed for SALES REPRESENTATIVE or for SALES REPRESENTATIVE'S business
and such receiver is not discharged within thirty (30) days.
(ii) ELCOM becomes aware of any illegal, unfair, or deceptive business
practices or unethical conduct whatsoever by SALES REPRESENTATIVE, whether
or not related to the PRODUCTS. ELCOM shall in its sole discretion make all
determinations as to what is a violation of this Section 17.1(ii).
17.2 Right to Terminate Upon Breach. Either party may terminate this Agreement
upon thirty (30) days written notice to the other party in the event of a breach
of any material provisions of this Agreement by the other party.
17.3 Right to Terminate Upon Failure to Perform. ELCOM shall have the right to
terminate this Agreement upon thirty (30) days written notice for failure to
meet Performance Goals as mutually agreed upon in Exhibit C attached hereto.
Page 9 of 12
<PAGE>
17.4 Right to Terminate Upon Notice. Either party shall have the right to
terminate this Agreement at any time and for any reason upon ninety (90) day's
written notice to the other party, such termination to become effective at the
conclusion of such ninety (90) day period.
17.5 Upon expiration or termination of this Agreement, SALES REPRESENTATIVE
shall thereafter cease the sale or distribution of the PRODUCTS.
17.6 Upon the expiration or termination of this Agreement, all rights granted to
SALES REPRESENTATIVE under this Agreement shall forthwith terminate and
immediately revert to ELCOM, and SALES REPRESENTATIVE shall discontinue all use
and/or sale of the PRODUCTS.
17.7 Upon expiration or termination of this Agreement, ELCOM will require that
SALES REPRESENTATIVE transmit to ELCOM, at no cost, all material relating to the
PRODUCTS.
17.8 It is understood and agreed that termination or expiration of this
Agreement shall not extinguish any of SALES REPRESENTATIVE'S obligations under
Sections 10, 11, 12, 13, 14 and 15 of this Agreement.
18. INFRINGEMENTS
18.1 SALES REPRESENTATIVE agrees to notify ELCOM promptly in the event SALES
REPRESENTATIVE becomes aware of any infringements of the PRODUCTS trademarks,
tradenames, or technology. ELCOM shall have the right, in its sole discretion,
to prosecute lawsuits against third persons for infringement of ELCOM'S rights
in the PRODUCTS or disclosure of CONFIDENTIAL INFORMATION. All costs and
expenses associated with such lawsuits shall be borne by the ELCOM, which shall
be entitled to any recovery received as a result thereof, whether by
adjudication or settlement.
18.2 SALES REPRESENTATIVE agrees to fully cooperate with the ELCOM and its
representatives in the prosecution of any suit associated with this Section 18.
19. INDEMNITY
19.1 SALES REPRESENTATIVE agrees to defend, indemnify, and hold ELCOM, and its
officers, directors, agents, and employees, harmless against all costs, expenses
and losses (including reasonable attorney fees and costs) incurred through
claims of third parties against ELCOM based on SALES REPRESENTATIVE'S breach of
any representations or warranties contained herein or as a result of any of
SALES REPRESENTATIVE'S actions or inactions.
20. INDEPENDENT CONTRACTOR
20.1 SALES REPRESENTATIVE'S performance of its duties and obligations under this
Agreement is in its capacity as an independent contractor. Accordingly, nothing
contained in this
Page 10 of 12
<PAGE>
Agreement shall be construed as establishing any employer/employee, partnership,
agency, brokerage, or joint venture relationship between SALES REPRESENTATIVE
and the ELCOM.
21. JURISDICTION AND DISPUTES
21.1 This Agreement shall be governed by the laws of Pennsylvania.
21.2 All disputes hereunder shall be resolved in the applicable state or federal
courts of Pennsylvania. The parties consent to the jurisdiction of such courts,
agree to accept service of process by mail, and waive any jurisdictional or
venue defenses otherwise available.
22. AGREEMENT BINDING ON SUCCESSORS
22.1 This Agreement shall be binding on and shall inure to the benefit of the
parties hereto, and their heirs, administrators, successors, and assigns.
23. WAIVER
23.1 No waiver by either party of any default shall be deemed as a waiver of any
prior or subsequent default of the same or other provisions of this Agreement.
24. SEVERABILITY
24.1 If any provisions hereof is held invalid or unenforceable by a court of
competent jurisdiction, such invalidity shall not effect the validity or
operation of any other provision, and such invalid provision shall be deemed to
be severed from the Agreement.
25. ASSIGNABILITY
25.1 The rights granted hereunder are personal to SALES REPRESENTATIVE and may
not be assigned by any act of SALES REPRESENTATIVE or by operation of law except
with the written consent of the ELCOM.
26. INTEGRATION
26.1 This Agreement and the Exhibits attached hereto and referred to herein
constitute the entire understanding of the parties, and revokes and supersedes
all prior agreements between the parties and is intended as a final expression
of the Agreement. It shall not be modified or amended except in writing signed
by the parties hereto. This Agreement shall take precedence over any other
documents that may be in conflict therewith.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have each caused to be affixed hereto it or his/her hand and seal the day
indicated.
Page 11 of 12
<PAGE>
Elcom Technologies Corporation SALES REPRESENTATIVE
- ------------------------------ --------------------------------
Signature Signature
Robert A. Vito
- ------------------------------ --------------------------------
Printed Name
President
- ------------------------------ --------------------------------
Title
- ------------------------------ --------------------------------
Date Date
<PAGE>
MANUFACTURER SALES REPRESENTATIVE & DISTRIBUTION
AGREEMENT
EXHIBIT A
---------
Product List
- ------------
ezPHONE
ezTV
exAUDIO
ezCOMM
ezGUARD
ezVIEW
<PAGE>
MANUFACTURER SALES REPRESENTATIVE & DISTRIBUTION AGREEMENT
EXHIBIT B
---------
SALES REPRESENTATIVE TERRITORY
The TERRITORY consists of the following states:
<PAGE>
MANUFACTURER SALES REPRESENTATIVE & DISTRIBUTION AGREEMENT
EXHIBIT C
---------
PERFORMANCE GOALS OF SALES REPRESENTATIVE
In addition to all other obligations of SALES REPRESENTATIVE under the attached
MANUFACTURER SALES REPRESENTATIVE & DISTRIBUTION AGREEMENT, SALES REPRESENTATIVE
hereby agrees to purchase directly from ELCOM the following dollar quantities of
each of the PRODUCTS no later than the Launch Dates of the PRODUCTS, as
indicated below:
<TABLE>
<CAPTION>
EXPECTED REQUIRED INITIAL
PRODUCT LAUNCH DATE PURCHASE AMOUNT
------- ----------- ---------------
<S> <C> <C>
ezPHONE April, 1996 $ 50,000.00
ezTV April, 1996 $ 50,000.00
ezAUDIO May, 1996 $ 50,000.00
ezGUARD June, 1996 $ 50,000.00
ezCOM June, 1996 $ 50,000.00
ezVIEW June, 1996 $ 50,000.00
-----------
Total $300,000.00
</TABLE>
SALES REPRESENTATIVE shall purchase the above PRODUCTS directly from ELCOM at
ELCOM's Level One (Distributor/Reseller) price. SALES REPRESENTATIVE hereby
agrees to make payment directly to ELCOM for the above dollar amounts upon
receipt of said PRODUCTS by SALES REPRESENTATIVE from ELCOM. In the event that
SALES REPRESENTATIVE does not fullfill all of its obligations under this Exhibit
C, SALES REPRESENTATIVE shall be in material breach of the attached MANUFACTURER
SALES REPRESENTATIVE & DISTRIBUTION AGREEMENT.
Alternatively, SALES REPRESENTATIVE can also satisfy the requirements of this
Exhibit C by obtaining a Purchase Order from a customer(s), acceptable to ELCOM,
for the dollar amounts listed above no later then the Launch dates, indicated
above. The total amount of all Purchase Orders required under this Exhibit C is
$300,000.00. SALES REPRESENTATIVE shall be entitled to a standard three percent
(3.0%) commission on any Purchase Orders placed under this paragraph.
The requirements of this Exhibit C have been established by ELCOM in
consideration of ELCOM granting certain exclusive selling rights in the
TERRITORY to SALES REPRESENTATIVE as outlined in the attached MANUFACTURER SALES
REPRESENTATIVE & DISTRIBUTION AGREEMENT.
____________________ _______________________
SALES REPRESENTATIVE DATE
<PAGE>
EXHIBIT D
SALES REPRESENTATIVE
NON-DISCLOSURE AGREEMENT
------------------------
THIS Agreement is made and entered into effective this_______ day of__________
1996, by and between Elcom Technologies Corporation (hereinafter "ELCOM") a
Pennsylvania Corporation, with offices located at 78 Great Valley Parkway,
Malvern, PA 19355 and (hereinafter "SALES REPRESENTATIVE").
WHEREAS, ELCOM desires to disclose to SALES REPRESENTATIVE certain of the
following valuable information developed by or being used by ELCOM associated
with ELCOM'S products:
. Specifications
. Designs
. Plans
. Drawings
. Computer Software
. Prototypes
. Patents
. Any and all Power Line Communication Technology and patents and/or
patent or trademark filings
. Marketing information and plans
. Product pricing information
. Product cost information
. Documents expressly marked confidential
For purposes of this Agreement, all of the above information shall herein be
referred to collectively as the "CONFIDENTIAL INFORMATION"; and
WHEREAS, SALES REPRESENTATIVE requires the disclosure of said CONFIDENTIAL
INFORMATION in order to perform its duty as a SALES REPRESENTATIVE of ELCOM.
NOW, THEREFORE, in consideration of the nature of the anticipated disclosures,
the business relationship between the parties and the promises and agreements
set forth herein, the parties each intending to be legally bound hereby do
promise and agree as follows:
1. During the term of this Agreement and for a period of five (5) years
thereafter, SALES REPRESENTATIVE shall not disclose to any person for any reason
whatsoever any CONFIDENTIAL INFORMATION without the prior written consent of an
Officer of ELCOM.
<PAGE>
2. SALES REPRESENTATIVE agrees to protect from disclosure all CONFIDENTIAL
INFORMATION.
3. No license or other right of any kind or nature whatsoever is either
granted or implied by the conveying of CONFIDENTIAL INFORMATION to SALES
REPRESENTATIVE. None of the CONFIDENTIAL INFORMATION which may be disclosed or
exchanged by ELCOM shall constitute any representation, warranty, assurance,
guarantee or inducement to the receiving party of any kind, and, in particular,
with respect to the non-infringement of trademarks, patents, copyrights, mask
protection rights, or any other intellectual property rights, or other rights of
third persons.
4. Neither this Agreement nor the disclosure or receipt of CONFIDENTIAL
INFORMATION shall constitute or imply any promise or intention to make any
purchase of products or services by ELCOM or its affiliated companies or any
commitment by ELCOM or its affiliated companies with respect to the present or
future marketing of any product or service.
5. All CONFIDENTIAL INFORMATION shall remain the property of ELCOM for any and
all purposes whatsoever and all tangible representation of the CONFIDENTIAL
INFORMATION shall be returned upon request of ELCOM with items being either
personally delivered by the receiving party or sent via registered mail or via
overnight mail service. SALES REPRESENTATIVE shall make no copies of
CONFIDENTIAL INFORMATION without the prior written consent of ELCOM.
6. The receiving party agrees that it will not, without the prior written
consent of an Officer of ELCOM, transmit, directly, or indirectly, the
CONFIDENTIAL INFORMATION received hereunder or any portion thereof to any person
for any reason whatsoever.
7. SALES REPRESENTATIVE agrees that all of its obligations undertaken herein
shall survive and continue after any termination of this agreement.
8. Damages. In the event of a breach of this Agreement by SALES
REPRESENTATIVE, in addition to monetary damages of any kind or nature
whatsoever, ELCOM shall be entitled to any and all other forms of legal and/or
equitable relief including but not limited to injunctive relief of any kind.
9. This AGREEMENT constitutes the entire understanding between the parties
hereto as to the CONFIDENTIAL INFORMATION and merges all prior discussions
between them relating thereto.
10. No amendment or modification of this AGREEMENT shall be valid or binding on
the parties unless made in writing and signed on behalf of each of the parties
by the respective duly authorized officers or representatives.
<PAGE>
11. TO THE EXTENT THAT any provisions or covenants of this AGREEMENT are found
by a court of competent jurisdiction to be invalid or unenforceable, those
provisions shall be reformed or modified so as to be enforceable and valid.
12. The parties are familiar with the principles of Pennsylvania commercial
law, and desire and agree that the laws of Pennsylvania shall apply in any
dispute arising with respect to this AGREEMENT. The parties agree to accept the
personal juiisdiction and venue of the Federal and State courts of the
Commonwealth of Pennsylvania in any dispute arising with respect of this
AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this agreement on the respective
dates entered below.
_____________________________________ ____________________________________
Elcom Technologies Corporation SALES REPRESENTATIVE
By: Robert A. Vito, President
---------------------------------- ____________________________________
(Printed Name & Title)
___________________________________ ____________________________________
Date Date
<PAGE>
[LETTERHEAD OF MELLON BANK, N.A. APPEARS HERE]
- --------------------------------------------------------------------------------
NUMBER: S848138 JULY 29, 1996
IRREVOCABLE LETTER OF CREDIT
FLEXTRONICS INTERNATIONAL LTD.
2241 LUNDY AVENUE
SAN JOSE, CA 95131
ATTN: MR. DON FREDERICK
GENTLEMEN:
WE HEREBY ISSUE OUR IRREVOCABLE LETTER OF CREDIT NO. S848138 IN YOUR FAVOR FOR
THE ACCOUNT OF ELCOM TECHNOLOGIES CORPORATION, 78 GREAT VALLEY PARKWAY, MALVERN,
PA 19355, FOR AN AGGREGATE AMOUNT UP TO USD 3,000,000.00 (THREE MILLION AND
00/100 U.S. DOLLARS), AVAILABLE BY YOUR DRAFTS AT SIGHT DRAWN ON MELLON BANK,
N.A., PITTSBURGH, PA, AND ACCOMPANIED BY THE FOLLOWING:
1. A WRITTEN STATEMENT PURPORTEDLY SIGNED BY ONE OF YOUR AUTHORIZED SIGNERS
STATING: "WE HEREBY CERTIFY THAT THE DRAFT ACCOMPANYING THIS STATEMENT
DRAWN UNDER YOUR LETTER OF CREDIT NO. S848138 REPRESENTS THE AMOUNT DUE
FLEXTRONICS INTERNATIONAL LTD. AS A RESULT OF THE FAILURE OF ELCOM
TECHNOLOGIES CORPORATION TO PAY INVOICES WITHIN THIRTY (30) DAYS AFTER
THE INVOICE DATE AS AGREED, THAT PAYMENT HAS BEEN DEMANDED AND NOT
RECEIVED."
AND
2. COPY(IES) OF RELATIVE INVOICE(S) MARKED UNPAID.
THIS LETTER OF CREDIT EXPIRES AT THIS OFFICE UPON THE EARLIER OF (1) DECEMBER
31, 1996; OR (2) OUR RECEIPT OF THE ORIGINAL OF THIS LETTER OF CREDIT
ACCOMPANIED BY YOUR STATEMENT REQUESTING THE CANCELLATION OF THIS LETTER OF
CREDIT.
EACH DRAFT MUST BE MARKED: "DRAWN UNDER MELLON BANK, N.A., PITTSBURGH, PA,
LETTER OF CREDIT NO. S848138."
EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATED HEREIN, THIS LETTER OF CREDIT IS
SUBJECT TO THE "UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993
REVISION), INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500."
WE HEREBY AGREE WITH YOU THAT DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE
TERMS OF THIS LETTER OF CREDIT WILL BE DULY HONORED IF PRESENTED TO US ON OR
BEFORE THE ABOVE STATED EXPIRATION DATE.
- --------------------------------------------------------------------------------
<PAGE>
[LETTERHEAD OF MELLON BANK, N.A. APPEARS HERE]
VERY TRULY YOURS,
[SIGNATURE APPEARS HERE]
- ----------------------
AUTHORIZED SIGNATURE
<PAGE>
Letter of Credit Agreement [LETTERHEAD OF MELLON BANK APPEARS HERE]
================================================================================
TO: Mellon Bank N.A. ("Mellon")
In consideration of Mellon's issuing, for the account of Applicant as defined
below), one or more letters of credit (each a "Credit") for on or more
amendments to a Credit (each, an "Amendment"), Applicant agrees with Mellon,
intending to be legally bound, that the following terms and conditions shall
apply to each Credit and Amendment issued by Mellon:
================================================================================
A. General Terms and Conditions Applicable to all Credits and Amendments
- --------------------------------------------------------------------------------
B. Application for the Issuance of Credits; Amendments
- --------------------------------------------------------------------------------
(a) Applicant shall request the issuance of a Credit or an Amendment by
completing Mellon's then current form such purpose or by any other means
permitted by Mellon's then current procedures (each such request, an
"Application"). Each Application shall constitute a certification by Applicant
that any representation, warranty or commitment made by Applicant in this Letter
of Credit Agreement (together with any future modifications or extensions, this
"Agreement") is true and correct as of the date of such Application. Upon
Mellon's receipt of an Application, Mellon may elect but shall not be required
to issue a Credit (or an Amendment, as the case may be) in response thereto.
Applicant agrees that if Applicant desires to make an Application by other
means, such as microcomputer transmission, it may be necessary for Applicant to
execute one or more additional agreements, and any such agreement shall become
part of this Agreement.
(b) Applicant may, from time to time, request that Mellon issue a Credit for one
or more of Applicant's subsidiaries or affiliates (each, an "Additional
Applicant"). In connection with any such request, Applicant agrees to furnish
Mellon with such information as Mellon may require concerning such Additional
Applicant and to execute and cause to be executed such additional documents or
agreements a Mellon may require. Applicant agrees that it shall be jointly and
severally liable with any Additional Applicant for all obligations and
liabilities under this Agreement and any Credit issued for the account of such
Additional Applicant.
- --------------------------------------------------------------------------------
C. Applicant's Payment Obligations
- --------------------------------------------------------------------------------
(a) Applicant agrees to pay Mellon on demand and in same day Funds at Mellon's
principal office in Pittsburgh, Pennsylvania (or at such other place as Mellon
may designate):
(i) the U.S. Dollar Equivalent of each payment made by Mellon under any Credit:
and
(ii) a commission for each Credit issued by Mellon at such rate as Applicant and
Mellon mutually agree, and any and all expenses, obligations or charges paid or
incurred by Mellon (or any other financial institution with which Mellon deals
with respect to a Credit) in connection with any Credit and this Agreement.
(b) All payments to which Mellon is entitled pursuant to this Section 2 shall be
made to Mellon free and clear of and without deduction for any present or future
taxes (except taxes on Mellon's net income), exchange regulation charges or
other levies, deductions or withholdings of any kind.
(c) All payments to which Mellon is entitled pursuant to this Agreement shall be
made by Applicant in United States currently, unless Applicant and Mellon
otherwise mutually agree in advance.
(d) If any amounts payable to Mellon pursuant to this Agreement are not paid
when due, such amounts shall bear interest at the rate Mellon then charges for
delinquent payments. Mellon shall have the right to demand payment reasonably in
advance of any draw payment demand under a Credit, and such payment shall be due
on demand.
- --------------------------------------------------------------------------------
C. Examination of Credits, Instruments and Documents: Discrepancies
- --------------------------------------------------------------------------------
(a) Applicant will promptly examine a copy of each Credit and any Amendment sent
to applicant by Mellon and Applicant will, within one Business Day of
Applicant's receipt thereof, notify Mellon by telecommunication of any
discrepancy, irregularity or claim of non-compliance with Applicant's
instructions, as set forth in the appropriate Application. Applicant will be
conclusively deemed to have waived any such claim against Mellon in connection
with any Credit Amendment unless applicant notifies Mellon in accordance with
the preceding sentence.
(b) In the event Mellon notifies Applicant of any discrepancy between any
instrument or document presented under any Credit and the requirements of such
Credit and , in the exercise of Mellon's sole discretion, asks Applicant whether
it will accept such discrepancy, Applicant will, within one Business Day after
Applicant's receipt of such notice (or such shorter interval as circumstances
may require and Mellon shall advise Applicant), notify Mellon by
telecommunication whether or not Applicant accepts the same. Applicant will be
conclusively deemed to have waived any claim of improper honor or dishonor of
any Credit unless Applicant notifies Mellon in accordance with the preceding
sentence.
- --------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
4. General Instructions
- --------------------------------------------------------------------------------
Except as written instructions expressly to the contrary have been given to
Mellon by Applicant in any Application that has been accepted by Mellon,
Applicant agrees that (i) any advice of the issuance of a Credit or an Amendment
may, at Mellon's option, be sent either to the named beneficiary under a Credit
(a "Beneficiary") or to any advising bank (which may include any of Mellon's
affiliates); (ii) drafts under any Credit may, at the drawer's option, be drawn
"without recourse"; (iii) Mellon may accept or pay, as complying with the terms
of any Credit, any draft, payment demand or other document otherwise in order
that is signed or issued by the purported administrator, executor, trustee in
bankruptcy, debtor in possession, assignee for the benefit of a creditor,
liquidator, receiver, successor, legal representative or other party that Mellon
reasonably determines is the de facto or de jure successor to the powers, rights
or privileges of the party who is authorized under the Credit to draw or issue
such draft, payment demand or other document; and (iv) Mellon and any other
financial institution with which Mellon deals with respect to a Credit may
accept documents of any character that comply with the provisions of the Uniform
Customs and Practice for Documentary Credits (1993 Revision International
Chamber of Commerce Publication No. 500, and any subsequent revisions thereof
(the "UCP"). In addition, Applicant agrees that Mellon may, in its sole
discretion, give notice, in accordance with the terms of the Credit, of
non-renewal or termination to any Beneficiary of a Credit that contains an
automatic renewal provision.
- --------------------------------------------------------------------------------
5. Responsibilities and Limitations Thereon
- --------------------------------------------------------------------------------
(a) Applicant agrees that Mellon shall not be responsible for, and Applicant's
obligation to pay or reimburse Mellon shall not be affected by (i) acts or
omissions of any other financial institution with which Mellon deals with
respect to a Credit, or any Beneficiary or transferee of any Credit; (ii) the
validity, sufficiency, genuineness or collectibility of any documents or
instruments, or of any endorsements thereon; (iii) any breach of contract
between Applicant and any Beneficiary or any other party, or the use which may
be made of any Credit or funds obtained thereunder; (iv) the consequences of
compliance with laws, orders or regulations in effect in places of negotiation
or payment of any Credit; or (v) any failure of drafts or other payment demands
to bear reference or adequate reference to any Credit; of documents to accompany
drafts at negotiation, or, if so required by any Credit, to forward documents
separately from any drafts or payment demand; of negotiating or paying banks to
comply with Mellon's directions; of any party to surrender or take up any
Credit; or of any act or omission not done or omitted in bad faith. (b) Mellon
shall have no duty to inquire into: (i) the existence of any disputes or
controversies between Applicant and any Beneficiary or any other person, or (ii)
the truth, accuracy or occurrence of any fact or event referred to in any
certificate, document or instrument presented under or in connection with any
Credit. Mellon's sole obligation shall be limited to honoring requests for
payment made under and in compliance with any Credit notwithstanding: (A) any
assistance which Mellon may have rendered in connection with the preparation of
the wording of the Credit or any certificate, document or instrument required to
be presented thereunder; or (B) any awareness or knowledge Mellon may have
concerning any transaction relating to any Credit. Mellon shall have no duty to
determine or control or otherwise monitor the distribution or beneficial use of
the proceeds of any draw on any Credit, or to take any action with respect to
the Beneficiary for any breach of warranty claim.
- --------------------------------------------------------------------------------
6. Representations and Warranties; Covenants
- --------------------------------------------------------------------------------
(a) Representations and Warranties. Applicant represents and warrants to Mellon
as of the effective date of this Agreement and as of the date of each
Application, that:
(i) Applicant is an entity of the type set forth next to its signature, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and duly qualified to do business in those
jurisdictions in which its ownership of property or the nature of its business
activities makes such qualification necessary.
(ii) Applicant has the requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder; and all such action has been
duly authorized by all necessary proceedings on Applicant's part.
(iii) Applicant has furnished to Mellon copies of Applicant's most recent
financial statements, which fairly represent Applicant's financial position as
of the date of such statements and the results of its operations and cash flows
for its fiscal period then ended, in conformity with generally accepted
accounting principles. Since the date of such financial statements, (A) there
has been no material adverse change in Applicant's financial condition or
business; and (B) except as set forth in said financial statements, there is no
litigation or governmental proceeding by or against Applicant pending or, to
Applicant's knowledge, threatened, that is likely to have a material adverse
effect on Applicant's financial condition or business.
(iv) The execution and delivery of this Agreement, the consummation of the
transactions herein contemplated and compliance with the terms and provisions
hereof will not conflict with or result in a breach of any of the terms of any
law or agreement or instrument to which Applicant is a party or by which
Applicant is bound, or constitute a default thereunder. No authorization,
consent, or other action by, and no registration or filing with, any official
body is or will be necessary or advisable in connection with Applicant's
execution, delivery or performance of this Agreement.
(v) This Agreement has been duly and validly executed and delivered by Applicant
and constitutes Applicant's legal, valid and binding obligation, enforceable in
accordance with its terms except, as to the enforcement of remedies, for
limitations imposed by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally or
by laws limiting the right of specific performance.
(b) Covenants. Applicant covenants to Mellon as follows:
(i) Promptly upon its becoming available to Applicant, Applicant will deliver to
Mellon all financial and other information Mellon may request.
(ii) Applicant will: (A) maintain its existence and rights in full force and
effect; (B) preserve, renew and keep in full force and effect the franchises,
licenses and rights necessary for the conduct of its business; and (C) qualify
and remain qualified to do business in each jurisdiction in which failure to
have or retain such qualification would have a material adverse effect on its
financial condition or business.
(iii) Applicant will comply with all applicable laws, regulations and orders.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
7. Set Off and Right to Demand Collateral
- --------------------------------------------------------------------------------
(a) Applicant's obligations and liabilities to Mellon and Mellon's claims of
every nature against Applicant arising under this Agreement or any Credit,
whether now or hereafter existing, are hereafter called Applicant's Obligation.
(b) Applicant grants Mellon a continuing lien and security interest for the
amount of Applicant's Obligations upon any and all property in which Applicant
has an interest that is now or hereafter in Mellon's actual or constructive
possession. Applicant also grants Mellon a continuing lien and right of setoff
for the amount of Applicant's Obligations on Applicant's deposits (general or
special) and credits with, and Applicant's claims against, Mellon at any time.
In addition, Applicant agrees that, at any time and from time to time upon
Mellon's demand, Applicant shall deliver and transfer to Mellon such collateral
or additional collateral as Mellon may require to secure Applicant's Obligations
to Mellon, and shall execute and deliver such documents and instruments, and do
such other things, as may be required in order for Mellon to have a valid first
priority security interest in such collateral.
- --------------------------------------------------------------------------------
8. Default
- --------------------------------------------------------------------------------
If Applicant fails to perform any of Applicant's Obligations, or as required
under any other agreements with Mellon, or if any of the following shall occur
(each such failure or occurrence, a "Default"): any final unappealable judgement
in a material amount shall be entered against Applicant; Applicant shall default
(beyond any grace or cure period) in the performance of any material obligation
to another party; any proceeding, suit or action for reorganization, dissolution
or liquidation shall be commenced by or against Applicant; Applicant's usual
business activity shall be suspended voluntarily or involuntarily, or
Applicant's business shall be liquidated; Applicant shall become insolvent as
defined under any applicable law; a petition under any of the provisions of any
applicable bankruptcy or insolvency law shall be filed by or against Applicant;
Applicant shall make any material misrepresentation to Mellon; or Applicant's
conditions or affairs shall so change that Mellon deems it security to be
impaired, credit risk increased, or otherwise deems itself to be insecure; then,
in any such event, all of Applicant's Obligations, even if not yet due, shall,
without notice or demand, become and be immediately due and payable without
notice of any kind, notwithstanding any notice or grace period otherwise allowed
under any instruments evidencing Applicant's Obligations.
- --------------------------------------------------------------------------------
9. Indemnity
- --------------------------------------------------------------------------------
Applicant agrees to indemnify and hold Mellon harmless from and against any and
all claims, losses, liabilities and expenses (including reasonable attorney's
fees, which may include internal time changes of counsel employed by Mellon)
resulting from or incurred in connection with this Agreement or any Credit and
not involving Mellon's bad faith.
- --------------------------------------------------------------------------------
10. Increased Costs
- --------------------------------------------------------------------------------
If any law, regulation or order, any change in any of the same or any
interpretation thereof by any court or administrative or governmental authority,
or any change in generally accepted accounting principles applicable to Mellon
shall, with respect to this Agreement, any Credit or related document: (i)
impose, modify or make applicable any reserve, capital, special deposit or
similar requirement, (ii) impose on Mellon any other condition; or (iii) subject
Mellon to any tax, charge, fee, deduction or withholding of any kind whatsoever,
and the result of any such event or any similar measure shall be to increase the
cost to Mellon of issuing or maintaining any Credit or reduce the amount of
principal or, interest on, or any fee or compensation receivable by Mellon, then
Applicant shall promptly pay to Mellon, on demand, all additional amounts
necessary to compensate Mellon for such increased costs. Mellon's calculation of
such increased costs shall show the manner of calculation and shall be
conclusive (absent manifest error) as to the amount thereof.
- --------------------------------------------------------------------------------
11. Miscellaneous
- --------------------------------------------------------------------------------
(a) Applicant shall furnish Mellon with a list of persons authorized to act for
Applicant in connection with this Agreement and any Application, Credit or
Amendment. Mellon shall be authorized and entitled to rely on any Application
and any other communication, message or conversation, received or purporting to
be received from any such persons or any other person reasonably believed by
Mellon to be duly authorized to act for Applicant.
(b) Applicant will not assign any of its rights or obligations under this
Agreement without Mellon's prior written consent.
(c) This Agreement shall continue in full force and effect as to all Credits
which Mellon may issue for Applicant's account. This Agreement is not a
commitment to issue any one or more Credits, and notwithstanding anything to the
contrary herein, Mellon shall be entitled to refuse to issue any Credit in
Mellon's complete discretion.
(d) No reasonably delay on Mellon's part in exercising any power or right
hereunder shall operate as a waiver of any power or right, and no single or
partial exercise of any power or right hereunder shall preclude any other or
further exercise thereof or the exercise of any other power or right. The rights
and remedies expressed herein are cumulative and not exclusive of any other
rights or remedies which Mellon or Mellon's assigns may otherwise have.
(e) Notice given by one party to the other in connection with this Agreement or
any Credit shall be in writing and be effective when received by the party
intended to receive such notice at, in the case of the Applicant, the address
set forth under its signature hereto, and, in the case of Mellon, the address
set forth at the head of this Agreement. Either party may change its address for
notice by a notice given in accordance herewith.
(f) Except and to the extend inconsistent with the specific provisions hereof,
this Agreement, each Credit hereunder and all transactions in connection
herewith and therewith shall be interpreted, construed and enforced according to
(i) the UCP, and, (ii) to the extent not inconsistent, the laws of the
Commonwealth of Pennsylvania, including, without limitation, the Uniform
Commercial Code.
(g) Applicant irrevocably submits in any legal proceeding relating to this
Agreement or any Application or Credit to the non-exclusive in personam
jurisdiction of any court sitting in the Commonwealth of Pennsylvania and agrees
to suit being brought in any such court and waives any objection to the venue of
any proceeding in any such court. Applicant further consents to being joined in
an legal proceeding brought against Mellon concerning any Credit issued for
Applicant's account and accepts the jurisdiction and venue of any court where
such proceeding is instituted.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
(a)The term "Applicant" shall be deemed to refer to the undersigned, and the
term "Mellon" shall be deemed to refer to Mellon Bank, N.A., its successors and
assigns.
(b)Unless the context requires otherwise, the term "Credit" shall be deemed to
include any Amendments thereto.
(c)Each Application accepted by Mellon shall merge into and become a part of
this Agreement.
(d)"Business Day" shall mean any day on which banks are not authorized or
required to be closed for business in Pittsburg, Pennsylvania.
(e)"U.S. Dollar Equivalent" shall mean, with respect to an amount in any
currency other than U.S. dollars, as of any day the amount of U.S. dollars into
which such amount in such currency may be converted at the spot rate at which
U.S. dollars are offered by mellon in Pittsburgh for such currency at
approximately 11:00 A.M., Pittsburgh time, on such date.
===============================================================================
B. Trade Credits
- -------------------------------------------------------------------------------
Applicant agrees that, in addition to the foregoing, the following terms and
conditions shall apply to any Credit issued by Mellon and designated by Mellon
as a Trade or Commercial Credit (each, a "Trade Credit").
- --------------------------------------------------------------------------------
1. Insurance
- --------------------------------------------------------------------------------
Applicant will keep all property shipped in connection with any Trade Credit
insured in amounts, against risks and with insurers satisfactory to Mellon and,
at Mellon's option, assign the policies or certificates of such insurance to
Mellon or make loss payable to mellon, and furnish mellon on request with
evidence of compliance with the foregoing. If Mellon at any time and in
connection with any Trade Credit deems such insurance inadequate, Mellon may
procure additional insurance at Applicant's expense.
- --------------------------------------------------------------------------------
2. Compliance with Legal Requirements
- --------------------------------------------------------------------------------
Applicant will procure all licenses and comply with all formalities necessary
for the import, export and shipping of any property, and shall comply with all
applicable domestic and foreign laws, regulations and orders (including those
relating to currency exchange) in connection with any Trade Credit;and,upon
Mellon's request, Applicant will promptly furnish Mellon with such evidence of
compliance as Mellon may require. Applicant hereby certifies and warrants to
Mellon that transactions with respect to any property shipped in connection with
any Credit are not prohibited under any United States of foreign law, regulation
or order and that any shipment covered by any Credit or any documents required
thereunder shall fully conform to all existing United States and foreign laws,
regulations and orders.
- --------------------------------------------------------------------------------
3. Security
- --------------------------------------------------------------------------------
Applicant hereby grants Mellon security interest in and recognizes and admits
Mellon's unqualified right to the possession and disposition of any and all
property shipped under or pursuant to or in connection with any Trade Credit or
in any way relative thereto, and in and to all shipping documents, warehouse
receipts, policies or certificates of insurance and other documents or
instruments accompanying relative to drafts or payment demands and in and to the
proceeds to each of the foregoing, all to be held by Mellon subject to the terms
of this Agreement as collateral security for the prompt and unconditional
payment of any and every of Applicant's Obligations.
- --------------------------------------------------------------------------------
4. Deliveries Under Trust Receipts
- --------------------------------------------------------------------------------
In addition to, and not in limitation of, the provisions of Section 3 of this
part B:(a) If Mellon, at Applicant's request and Mellon's discretion, delivers
to Applicant or Applicant's agent all or some of the goods or documents referred
to in or shipped in connection with any Trade Credit before full payment of all
Applicant's Obligations with respect thereto, Applicant agrees to hold any
goods so received in trust for Mellon, readily identifiable and stored
separately and intact under separate accounting, as Mellon's property, and to
execute and deliver to Mellon such trust receipts, security or other agreements
and financing statements, and to carry such insurance covering such goods or
documents (and to furnish such evidence of the same), as Mellon may request, and
to pay all costs and expenses incurred by Mellon (including reasonable
attorneys' fees) in connection with the same. Mellon's rights specified herein
shall be in addition to Mellon's rights under any applicable law or other
agreement.
(b)If Mellon, at Applicant's request and in Mellon's discretion, delivers to
Applicant or Applicant's agent all or some of the goods or documents referred to
in or shipped in connection with any Trade Credit before Mellon accepts, pays or
incurs a deferred payment obligation with respect to any of the related draft(s)
or demand(s) for payment, or if Mellon agrees to expedite the delivery of goods
prior to the arrival of the pertinent documents, Applicant authorizes Mellon to
accept and pay such draft(s) or demand(s) notwithstanding any discrepancies that
may arise in relation thereto.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
5. Miscellaneous
- --------------------------------------------------------------------------------
(a) Partial shipments may be made under any Trade Credit and Mellon may honor
the related draft or payment demand without inquiry, regardless of any apparent
disproportion between the quantity shipped and the amount of the related draft
or payment demand, and the total amount of the Credit and total quantity to be
shipped under the Credit.
(b) Mellon and any other financial institution with which Mellon deals with
respect to a Credit may receive and accept as a transport document under any
Trade Credit any document issued or purporting to be issued by or on behalf of
any carrier which acknowledges receipt of property for transportation, whatever
the specific provisions of such document.
(c) Neither Mellon nor any other financial institution with which Mellon deals
with respect to a Credit shall be responsible for, and Applicant's obligation to
pay or reimburse Mellon shall not be affected by: (i) the existence, character,
nature, quality, quantity, condition, packing, value or delivery of goods
purporting to be represented by documents, or any difference of goods from that
expressed in documents; (ii) any irregularity in connection with shipment,
including, without limitation, any actual or alleged default or fraud by the
shipper or others, the time, place, manner or order of shipment, non-shipment of
goods or partial or incomplete shipments, failure to arrive or delay in arrival
of goods or documents, or failure to give notice of shipment or arrival of goods
or documents; or (iii) consequences of compliance with laws, regulations,
orders or customs requirements in effect in places of negotiation or payment of
any Trade Credit.
IN WITNESS WHEREOF, Applicant has duly executed this Agreement as of the date
below.
- --------------------------------------------------------------------------------
[Correspondent Bank Name] [Customer Name]
By: By: Elcom Technologies Corporation
- --------------------------------------------------------------------------------
(Signature) (Signature)
Name: Name: /s/ Robert B. Sando
- --------------------------------------------------------------------------------
Robert B. Sando
Title: Title: Vice President - Finance
- --------------------------------------------------------------------------------
Effective Date: July 23, 1996
-------------------------
Type of Entity and Jurisdiction
of Organization: Pennsylvania Corporation
---------------------------
Address for Notice: Address for Notice:
78 Great Valley Parkway
- --------------------------------------------------------------------------------
Malvern, PA 19355
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
At a Meeting of the Board of Directors
XXX Elcom Technologies Corporation
- --------------------------------------------------------------------------------
.
- -------------------------------------------------------------------------------
a Corporation incorporated and existing under the laws of the Commonwealth of
-------------------
Pennsylvania
- --------------------------------------------------------------------------------
duly and legally held on July 26, 1996 a quorum being present and voting
throughout, the following resolutions were adopted:
Resolved, that the Vice President Finance
--------------------------------------------------------------
President
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
of this Corporation or any one of them be and are hereby authorized to incur
---
indebtedness on behalf of this Corporation by borrowing from or making other
financing or credit accommodations with Mellon
Bank, N.A.
---------------------------------------------------------------------------
("Bank") from time to time, upon such terms and conditions as they shall in
their sole discretion deem desirable. For such purpose these persons are
authorized to make, execute, and deliver the promissory notes, commercial and
XXXXX letter of credit agreements or other obligations of this Corporation, and
to assign and pledge as collateral security for any and all promissory notes or
obligations of this Corporation to Bank now or hereafter existing, any real or
personal property of this Corporation, or to sell or discount any of its
securities, bills, accounts receivable, notes, contract rights, drafts, or other
real or personal property, and any one of such officers is hereby authorized to
endorse or otherwise guarantee, on behalf of this Corporation, the payment of
any amounts due in connection with such property, to receipt to Bank when
withdrawing any of said property of this Corporation, and to execute and deliver
all instruments required by Bank in connection with any of the foregoing.
Further Resolved, that any one of such officers identified by title in the
immediately preceding resolution be and is hereby authorized to sell or cause to
be sold, at discount or otherwise, time drafts of this Corporation drawn upon
Bank, and for such purpose to execute and deliver time drafts of this
Corporation together with such one or more agreements between this Corporation
and Bank, and other documents, as maybe appropriate in the judgement of the
officer executing the same to assure the orderly sale of such drafts and to
provide for transactions incident thereto.
Further Resolved, that the actions of any one or more officers of this
Corporation in borrowing money from Bank heretofore for the account of this
Corporation, in assigning or pledging any of its property for the payment
thereof, or in doing any act authorized by these resolutions be and are hereby
ratified, confirmed, and approved.
Further Resolved, that the Corporation shall file with Bank a copy of these
Resolutions certified by an officer of the Corporation and a list of the
persons, together with specimens of their signatures, who are the present
holders of said offices; and that Bank shall be entitled as against this
Corporation to presume conclusively that the persons so certified continue to
hold the same offices respectively until Bank has received notice to the
contrary in writing from an officer of the Corporation.
Further Resolved, that these Resolutions shall have the force of a continuing
agreement with Bank, and shall be binding upon the Corporation until a
resolution amending them shall have been duly and legally adopted and Bank
furnished a certified copy thereof. The Undersigned certifies to the following:
that the Undersigned is an officer of said Corporation holding the title
indicated below; and that the foregoing Resolutions were duly and legally
adopted at the meeting set forth above, are in accordance with the articles and
by-laws of the Corporation, and are in full force and effect as of the date
shown below.
The Undersigned further certifies that as of the date shown below each person
identified by signature below is an officer of this Corporation holding the
office or offices identified opposite such persons signature, and that each such
signature is genuine.
- --------------------------------------------------------------------------------
Signatures
- --------------------------------------------------------------------------------
Title Signature:
Robert B. Sando x /s/ Robert B. Sando
- --------------------------------------------------------------------------------
Robert A. Vito /s/ Robert A. Vito
- --------------------------------------- ---------------------------------------
x
- --------------------------------------------------------------------------------
In Witness Whereof, I have hereunto set my hand and affixed the seal of the
Corporation.
- --------------------------------------------------------------------------------
Date Certifying Officer: (Name and Title)
7/26/96 x /s/ Robert B. Sando
- --------------------------------------------------------------------------------
(Corporate Seal)
Robert B. Sando
- --------------------------------------------------------------------------------
Director's Certification
- --------------------------------------------------------------------------------
I hereby certify that I am a Director of said Corporation and that the foregoing
is a correct copy of resolutions passed as therein set forth, and that the same
are now in full force.
- --------------------------------------------------------------------------------
Date Director's Signature:
x /s/ Robert A. Vito
- --------------------------------------- ---------------------------------------
Robert A. Vito, Chairman
<PAGE>
- --------------------------------------------------------------------------------
for value received, and intending to be legally bound, and in consideration of a
loan or other credit accommodation in
the amount of Three Million-------------00/100 Dollars ($ 3,000,000.00 )
-------------------------------------- -----------------
made by Mellon Bank N.A. ("Bank") to Elcom Technologies Corporation
---- ------------------------------
("Borrower(s)"), said obligation evidenced by a Letter of Credit Agreement dated
--------------------------
July 23, 1996, (the "Note") Undersigned does hereby sell, assign, transfer, set
- ------- --
over and pledge unto Bank, its successors and assigns, as collateral security
for the repayment of said obligation and any and all extensions or renewals
thereof in whole or in part, all Undersigned's right, title and interest in and
to a certain deposit(s) in Undersigned's name in Bank, the same being
Account #S-034276E and all renewals, replacements and substitutions of or for
- ------------------
such deposit(s) together with all moneys now or hereafter on deposit therein,
both principal and interest, and together also with the passbook(s) and/or
certificate(s), if any, evidencing the deposit(s), which passbook(s) and/or
certificate(s) shall be delivered to and retained by Bank. The interests
assigned to Bank hereby shall also secure any other existing or future
indebtedness, liability, or obligation and any and all extensions and renewals
thereof in whole or in part, whether direct or indirect, absolute or contingent,
individual, joint or several, now due or to become due; and whether owed as
drawer, maker, endorser, guarantor, surety, or otherwise to Bank by any
Undersigned or Borrower(s). Provided, however, the interests assigned hereby
shall not secure any Obligation (other than the Obligation evidenced by the
Note) which is defined as "consumer credit" by Federal Reserve Board Regulation
Z, 12 C.F.R. (S)226.1 et seq., and is not exempted from the application of that
Regulation. All obligations secured hereby shall be referred to herein as
"Obligation(s)".
In the event of a default under the terms of any Obligation, Bank is hereby
authorized, without notice to or demand upon Undersigned or Borrower(s), after
deducting from ????? deposit(s) any early withdrawal penalty which may be
required by applicable law or regulation, to apply as much of said moneys on
deposit as may be necessary to pay in full the amount then due and unpaid on
any Obligation. Failure of Bank to exercise its rights hereunder upon the
occurrence of any such event of default shall not affect Bank's ability to
exercise such rights upon the subsequent occurrence of any such event of
default.
Undersigned represents, warrants, covenants, and agrees that:
1. Undersigned has good and marketable title to the deposit(s), free and clear
of any security interest, lien, or encumbrance except the interests created
herein.
2. Undersigned is at least 18 years of age and under no legal disability or
incapacity.
3. Undersigned shall bear the risk of loss of, damage to, or destruction of any
passbook or certificate evidencing the deposit(s), whether or not in possession
of Bank. Bank shall be deemed to have exercised reasonable care in the custody
and preservation of any passbook(s) or certificate(s) in its possession if Bank
takes such action for that purpose as Undersigned shall request in writing, but
no omission on the part of Bank to take any action, whether or not requested by
Undersigned, shall of itself be deemed a failure to exercise reasonable care.
4. At any time, and from time to time, Bank may transfer into its own name, or
into the name of its nominee, all or any part of the deposit(s), thereafter
receiving all interest upon the same and applying the interest to any sums due
under any Obligation.
5. This Assignment shall continue in effect notwithstanding that from time to
time no Obligation may exist, and shall terminate only upon expiration of 90
days from the date of receipt by Bank of written notice of revocation by
Undersigned or upon receipt of notice of Undersigned's death; and in either of
such events this Assignment shall continue in effect nevertheless until every
existing Obligation is discharged. Upon such payment, Undersigned, when more
than one, hereby authorize Bank to deliver the passbook(s) or certificate(s), if
any, to any of Undersigned.
6. It is not intended that the provisions of this Assignment revoke, limit or
diminish in any manner or degree whatsoever Bank's rights in and to the
deposit(s) described herein, either arising or existing by operation of law or
heretofore or hereafter granted to Bank by the Undersigned.
7. This Assignment shall in all respects by governed by the laws of the state
where the Obligation is payable as reflected in the documents evidencing the
Obligation (except to the extent that federal law governs).
8. If any provision hereof shall for any reason be held invalid or
unenforceable, no other provision shall be affected thereby, and this Assignment
shall be construed as if the invalid or unenforceable provision had never been a
part of it.
The rights and privileges of Bank shall inure to the benefit of its successors
and assigns, and the duties and obligations of Undersigned shall bind
Undersigned's heirs, personal representatives, successors and assigns.
"Undersigned"
<PAGE>
- --------------------------------------------------------------------------------
refers individually and collectively to all makers of this assignment,
including, in the case of any partnership, all general partners of such
partnership individually and collectively, whether or not such partners sign
below. Undersigned shall each be jointly and severally bound by the terms
hereof.
- --------------------------------------------------------------------------------
Signatures
- --------------------------------------------------------------------------------
Witness the due execution hereof this 26 day of July , 1996
--------- ------------------- -----
- --------------------------------------------------------------------------------
Witness: Individual:
x x (Seal)
- ----------------------------------- ------------------------------------------
Address
- ----------------------------------- ------------------------------------------
Witness: Individual:
x x (Seal)
- ----------------------------------- ------------------------------------------
Address:
------------------------------------------
Corporation or Other Entity
Elcom Technologies Corporation
- ----------------------------------- ------------------------------------------
Attest/Witness: By: (Signature and Title)
Robert B. Sando, Vice President
x x Finance (Seal)
- ----------------------------------- ------------------------------------------
By: (Signature and Title)
x /s/ Robert B. Sando (Seal)
------------------------------------------
Business Address
78 Great Valley Parkway, Malvern, PA 19355
(Corporate Seal) ------------------------------------------
This space for Bank use only.
The signature of signatures appearing above compare favorably with the signature
card(s) in our files. Present aggregate balance in said deposit(s) is $
---------
Said Assignment has been noted on any applicable account ledger or has been
verified via an administrative terminal inquiry.
------------------------------------------
By:
x (Seal)
------------------------------------------
Date:
------------------------------------------
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of October 8, 1996, by and among ELCOM TECHNOLOGIES CORPORATION, a
Pennsylvania corporation (the "Company"), and each of the shareholders that
entered into a Subscription Agreement (each a "Subscription Agreement") with the
Company to purchase shares of Common Stock privately placed by the Company
between May 21, 1996 and August 22, 1996 (the "Private Placement") (being herein
referred to collectively as the "Shareholders" and individually as the
"Shareholder"). In order to induce the Shareholders to purchase the Shares, the
Company agreed to provide registration rights with respect to its Common Stock
as set forth in this Agreement.
The parties hereby agree as follows:
1. Securities Subject to this Agreement.
------------------------------------
(a) Definitions.
-----------
(i) The term "Shares" means the Common Stock issued by the Company in
the Private Placement.
(ii) The terms "Registrable Securities" and "Restricted Securities"
mean the Shares and any other securities issued in exchange for or as dividends
or other distribution on, or by way of a split of, the Shares.
(b) Restricted Securities. For the purposes of this Agreement,
---------------------
Restricted Securities will cease to be Restricted Securities when (i) a
registration statement filed pursuant to the Securities Act of 1933, as amended
(the "Act"), covering such Restricted Securities has been declared effective and
they have been disposed of pursuant to such effective registration statement,
(ii) they are distributed to the public pursuant to Rule 144 (or any similar
provision then in force) under the Act, (iii) they are eligible to be sold
pursuant to Rule 144(k) under the Act without limitation as to the amount of
securities to be sold or as to the manner of sale, or (iv) they have been
otherwise transferred and the Company has delivered new certificates or other
evidences of ownership for them not subject to any legal or other restriction on
transfer.
(c) Registrable Securities. As to any particular Registrable
----------------------
Securities, such Securities will cease to be Registrable Securities when they
cease to be Restricted Securities.
<PAGE>
Capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in the Subscription Agreement.
2. Demand Registration.
-------------------
(a) Request for Registration. At any time after twelve months
------------------------
after the Company's Common Stock becomes registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Shareholders holding at least a majority of the outstanding Registrable
Securities (the "Demand Shareholders") may make a written request for
registration under the Act of all or part of their Registrable Securities (the
"Demand Registration"); provided, however that, except as hereinafter provided,
the Company shall not be required to effect more than one Demand Registration.
In case the Company shall receive from the Demand Shareholders a written request
that the Company effect a registration under the Act pursuant to this Section
2(a), the Company will promptly give written notice of the proposed registration
to all other Shareholders, which holders will have ten days from the receipt of
such notice to advise the Company in writing of their election to include
Registrable Securities in such offering. In connection therewith, the Company
shall be obligated to proceed expeditiously to prepare and file with the
Securities and Exchange Commission (the "Commission") such registration
statement (but in no event more than 60 days after the receipt of any such
initial notice, except as permitted under subsection 2(b) below) and shall be
further obligated to use its reasonable best efforts, including the filing of
any amendments or supplements thereto, to have any such registration statement
declared effective under the Act and the rules and regulations promulgated
thereunder as soon as practical after the filing date thereof. If the number of
shares of Registrable Securities to be offered hereunder is restricted, the
number of shares to be included in the offering shall be determined pursuant to
the provisions of subsection 2(d) hereof.
(b) Limitations on Demand. Notwithstanding the foregoing, the
---------------------
Company shall not be obligated to file a registration statement relating to the
Demand Registration under subsection 2(a) hereof if counsel to the Company
renders an opinion to the effect that registration is not required for the
proposed transfer of Registrable Securities. In addition, the Company may delay
in filing a registration statement relating to the Demand Registration for not
more than 90 days if (i) the Company has filed, or is about to file, a
registration statement relating to the offering of any of the Company's
securities (the "Company's Securities"), and the managing underwriter of such
offering is of the opinion that the filing of a registration statement with
respect to the Demand Registration would adversely affect the offering by the
Company of the Company's Securities, or (ii) the Company's ability to pursue a
pending significant
-2-
<PAGE>
business opportunity (representing in excess of 10% of the Company's
consolidated revenues or total assets) might be materially adversely affected by
the filing of a registration statement with respect to the Demand registration,
whether due to the requirement that the Company disclose material non-public
information about the Company in connection with such registration or for other
reasons. The Company shall not exercise its rights to defer the filing of a
Demand Registration pursuant to the terms of this subsection 2(b) more than
twice in any 12-month period.
(c) Effective Registration and Expenses. A registration will not count as
-----------------------------------
the Demand Registration under subsection 2(a) hereof until it has become
effective; provided, however, that if the Demand Shareholders shall cause or
request the Company to withdraw any such registration statement, such
Shareholders may thereafter request the Company to reinstate such registration
statement, if permitted under the Act, or to file another Demand Registration,
in accordance with the procedures set forth herein, only upon agreeing in
writing to reimburse the Company for all Registration Expenses (as defined in
Section 6 hereof) over and above those Registration Expenses which the Company
would have incurred had such Demand Registration not been withdrawn. The Company
shall use its best efforts to cause the registration statement relating to any
Demand Registration to remain effective for the lesser of one year or the time
until all Registrable Securities involved therein have been sold. Except as
provided above and except for all underwriting discounts and selling commissions
and non-accountable expense allowances applicable to the Registrable Securities,
the Company will pay all Registration Expenses in connection therewith, whether
or not it becomes effective. The Company shall not be required to undergo or pay
for any special audit to effect any registration statement under this Section 2,
and if such a special audit would be required in order to file or effect a
registration statement hereunder, the Company shall be entitled to delay the
filing or effectiveness of such registration statement until a reasonable period
of time following the completion of such audit in the ordinary course of the
Company's activities; provided, however, that the Company shall not be entitled
to delay the filing or effectiveness of such registration statement if the
Demand Shareholders agree to pay for the cost of any such special audit.
(d) Priority on Demand Registrations. If the Demand Shareholders so elect,
--------------------------------
the offering of Registrable Securities pursuant to the Demand Registration shall
be in the form of an underwritten offering. In such event, if the managing
underwriter or underwriters of such offering advise the Company and the Demand
Shareholders in writing that in its or their opinion the aggregate amount of
Registrable Securities requested to be included in such offering exceeds the
amount of Registrable Securities that can be sold in such offering such that it
would
-3-
<PAGE>
materially and adversely affect the success of such offering or the price of the
Registrable Securities to be offered, then there shall be included in such
underwritten offering the amount of Registrable Securities which in the opinion
of such underwriters can be sold, and such amount shall be allocated pro rata
among the holders of such Registrable Securities requested to be included in
such registration based upon the number of Registrable Securities requested to
be included in such registration. If all the Registrable Securities requested to
be included in the Demand Registration have been included, the Company shall be
entitled to include that number of shares of its unissued Common Stock or any
other securities, including securities to be registered by the exercise of
"piggyback" registration rights, as are consented to by the managing
underwriter. In the event that not all of the Registrable Securities requested
to be included by the Demand Shareholders in the Demand Registration are
included, those Shareholders holding shares that are not so included (the
"Rejected Shares") shall be entitled to a second Demand Registration in the
manner described in this Section 2 with respect to the Rejected Shares.
(e) Selection of Underwriters. If the Demand Registration is in the form of
-------------------------
an underwritten offering, the Demand Shareholders shall select and obtain the
investment banker or investment bankers and manager or managers that will
administer the offering; provided that such investment bankers and managers and
--------
the underwriting arrangements and terms of any underwriting agreement and any
other agreement between the investment bankers and managers and the Company must
be reasonably satisfactory to the Company.
3. Piggyback Registration
----------------------
If the Company proposes to file a registration statement under the Act
with respect to an offering by the Company for its own account of its Common
Stock (other than a registration statement on Form S-4 or S-8 (or any form
substituting therefor) or filed in connection with an exchange offer or an
offering of securities solely to the Company's existing stockholders or
employees) at any time after twelve months after the Company's Common Stock
becomes registered pursuant to Section 12 of the Exchange Act, the Company shall
in each case promptly give written notice of such proposed filing to each of the
Shareholders and such notice shall offer each of the Shareholders the
opportunity to register such number of Registrable Securities as each such
Shareholder may request in writing within twenty days or such longer period as
shall be set forth in such written notice after receipt of such notice. The
Company shall use reasonable efforts to cause the managing underwriter or
underwriters of a proposed underwritten offering to permit the Shareholders to
include such securities in such offering on the same terms and conditions as any
similar
-4-
<PAGE>
securities of the Company included therein. Notwithstanding the foregoing, if
the managing underwriter or underwriters of such offering deliver a written
opinion to the Shareholders to the effect that the total amount of securities
which the Shareholders, the Company and any other persons or entities intend to
include in such offering would materially and adversely affect the success of
such offering, then the amount of securities to be offered for the account of
the Shareholders shall be reduced to the extent necessary to reduce the total
amount of securities to be included in such offering to the amount recommended
by such managing underwriter; provided that if securities are being offered for
--------
the account of other persons or entities as well as the Company, such reduction
shall not represent a greater fraction of the number of securities requested to
be registered by the Shareholders than the fraction of similar reductions
imposed on such other persons or entities over the amount of securities
requested to be registered by such holders. In connection with a piggyback
registration, the Company will bear all Registration Expenses which shall not
include underwriting discounts, selling commissions and non-accountable expense
allowances relating to the Registrable Securities.
4. Holdback Agreements
-------------------
To the extent not inconsistent with applicable law, each Shareholder
agrees not to effect any public sale or distribution of the issue being
registered or a similar security of the Company, or any securities convertible
into or exchangeable or exercisable for such securities, including a sale
pursuant to Rule 144 under the Act, during the 14 days prior to, and during the
90-day period beginning on, the effective date of the registration statement
referred to in Sections 2 or 3 hereof in which such Shareholder participates as
a selling stockholder (except as part of the registration), provided that (a)
--------
all other shareholders of the Company who also have shares included in the
registration statement referred to in Section 2 hereof and who own Common Stock
in amounts equal to or in excess of that owned by such Shareholders will also
defer their sales (except as part of the registration) for a similar period and
(b) the Company shall use its reasonable best efforts to obtain from all other
shareholders of the Company who also have shares included in the registration
statement referred to in Section 3 hereof and who own Common Stock in amounts
equal to or in excess of that owned by such Shareholders their agreement that
they will also defer their shares (except as part of the registration) for a
similar period.
5. Registration Procedures
-----------------------
-5-
<PAGE>
(a) Whenever a Shareholder (each a "Selling Shareholder") has requested
that any Registrable Securities be registered pursuant to Sections 2 or 3
hereof, the Company will use its best efforts to effect the registration and the
sale of such Registrable Securities in accordance with the intended method of
disposition thereof as promptly as reasonably practicable, and in connection
with any such request, the Company will as expeditiously as possible:
(i) furnish to each Selling Shareholder, and if requested, to
the Selling Shareholder's investment adviser, prior to filing a registration
statement, copies of such registration statement as proposed to be filed, and
thereafter such number of copies of such registration statement, each amendment
and supplement thereto (in each case including all exhibits thereto), the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as the Selling Shareholder may reasonably
request in order to facilitate the disposition of such Registrable Securities
owned by such Selling Shareholder;
(ii) use its reasonable best efforts to register or qualify such
Registrable Securities under the state securities or blue sky laws of such
jurisdictions, not to exceed ten in number, as the Selling Shareholders
reasonably request, or, in the event to a firm commitment underwritten offering,
such larger number of jurisdictions as the managing underwriter or underwriters
shall reasonably request, and do any and all other acts and things which may be
reasonably necessary or advisable to enable the Selling Shareholders to
consummate the disposition in such jurisdictions of such Registrable Securities
owned by such Selling Shareholders; provided that the Company will not be
required to (A) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this paragraph (ii), (B)
subject itself to taxation in any such jurisdiction, or (C) consent to general
service of process in any such jurisdiction;
(iii) use reasonable best efforts to cause the Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
by virtue of the business and operations of the Company to enable the Selling
Shareholders to consummate the disposition of such Registrable Securities;
(iv) notify the Selling Shareholders, at any time when a
prospectus relating thereto is required to be delivered under the Act, of the
happening of any event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material fact or omits
to state any material fact required to be stated therein or
-6-
<PAGE>
necessary to make the statements made therein, in the light of the circumstances
under which they were made, not misleading, and the Company will prepare a
supplement or amendment to such prospectus as soon as reasonably practicable
thereafter (except that the Company may avoid supplementing or amending such
prospectus for up to 45 days when such non-disclosure is in the interests of the
Company) so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an 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;
(v) enter into and perform customary agreements
(including, without limitation, an underwriting agreement containing customary
representations, underwriters' compensation and indemnity and other customary
terms and conditions) and take such other actions as are reasonably required in
order to expedite or facilitate the disposition of such Registrable Securities;
(vi) make available for inspection by the Selling
Shareholders, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
the Selling Shareholders or any such underwriter (collectively, the
"Inspectors"), all pertinent financial and other records, pertinent corporate
documents and properties and other pertinent information of the Company
(collectively, the "Records") as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company's officers,
directors and employees to supply all pertinent information reasonably requested
by any such Inspector in connection with such registration statement. Records
which the Company determines, in good faith, to be confidential and which it
notifies the Inspectors are confidential shall not be disclosed by the
Inspectors unless (A) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in the registration statement, (B) the
release of such Records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction, or (C) the information in such Records has been
made generally available to the public. The seller of Registrable Securities
agrees that it will, upon learning that disclosure of such Records is sought in
a court of competent jurisdiction, give notice to the Company and allow the
Company, at the Company's expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential;
(vii) in the event such sale is pursuant to an underwritten
offering, use reasonable best efforts to obtain a "cold comfort" letter from the
Company's independent certified public accountants in customary form and
covering such matters of the type customarily covered by "cold comfort" letters
as the
-7-
<PAGE>
Selling Shareholders or the managing underwriter reasonably request;
(viii) use reasonable best efforts to obtain an opinion
or opinions from counsel for the Company in customary form addressed to the
managing underwriter or underwriters, if any;
(ix) otherwise use reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering a period of twelve months, beginning within three months after the end
of the fiscal quarter in which the registration statement becomes effective,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Act; and
(x) use reasonable best efforts to cause all such Registrable
Securities to be listed on Nasdaq and each securities exchange, if any, on which
similar securities issued by the Company are then listed, provided that the
applicable listing requirements are satisfied.
(b) The Company may require each Selling Shareholder to furnish to the
Company such information regarding the distribution of the Registrable
Securities as the Company may from time to time reasonably request.
(c) Each Selling Shareholder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
5(a)(iv) hereof, the Selling Shareholders will forthwith discontinue disposition
of Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Selling Shareholder's receipt of the copies of
the supplemented or amended prospectus contemplated by Section 5(a) (iv) hereof,
and, if so directed by the Company, each Selling Shareholder will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies then in such Selling Shareholder's possession, of the prospectus covering
such Registrable Securities current at the time of receipt of such notice. In
the event the Company shall give any such notice, the Company shall extend the
period during which such registration statement shall be maintained effective
pursuant to this Agreement by the number of days during the period from and
excluding the date of the giving of such notice pursuant to Section 5(a) (iv)
hereof to and including the date when the Selling Shareholder shall have
received the copies of the supplemented or amended prospectus contemplated by
Section 5(a) (iv) hereof.
-8-
<PAGE>
6. Registration Expenses
---------------------
Except as set forth in Section 2(c) hereof or in the last sentence
of Section 3 and this Section 6, all expenses incident to the Company's
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registrable
Securities), rating agency fees, printing expenses, messenger and delivery
expenses, internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the fees and expenses incurred in connection with the listing of the securities
to be registered on each securities exchange on which such securities are
required to be listed, and fees and disbursements of counsel for the Company and
its independent certified public accountants (including the expenses of any
special audit conducted at the Company's option or "cold comfort" letters
required by or incident to such performance), securities acts liability
insurance (if the Company elects to obtain such insurance), the reasonable fees
and expenses of any special experts retained by the Company in connection with
such registration, and fees and expenses of other persons retained by the
Company (all such expenses being herein called "Registration Expenses") will be
borne by the Company; provided, however, that, in connection with the
registration or qualification of the Registrable Securities under state
securities laws, nothing herein shall be deemed to require the Company to make
any payments to third parties in order to obtain "lock-up," escrow or other
extraordinary agreements. Each Selling Shareholder shall pay the fees and
expenses of its counsel, underwriting discounts, commissions and non-accountable
expense allowances attributable to the sale of its Registrable Securities, and
its other out-of-pocket expenses.
7. Indemnification; Contribution
-----------------------------
(a) Indemnification by the Company. The Company shall agree to
------------------------------
indemnify, to the full extent permitted by law, each Shareholder, its officers,
directors and agents and each person who controls such Shareholder (within the
meaning of the Act), and any investment adviser thereof or agent therefor,
against all losses, claims, damages, liabilities and expenses (including
reasonable attorneys' fees) caused by any untrue or alleged untrue statement of
a material fact contained in any registration statement, prospectus or
preliminary prospectus or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
made therein (in the case of a prospectus, in the light of the circumstances
under which they were made) not misleading, except insofar as the same are
caused by or contained in any information
-9-
<PAGE>
with respect to such Shareholder furnished in writing to the Company by such
Shareholder for use therein or caused by such Shareholder's failure to deliver a
copy of the registration statement or prospectus or any amendments or
supplements thereto in accordance with the requirements of the Act after the
Company has furnished such Shareholder with a copy of the same. The Company will
also indemnify any underwriters of the Registrable Securities, their officers
and directors and each person who controls such underwriters (within the
meaning of the Act) to the same extent as provided above with respect to the
indemnification of the Shareholders.
(b) Indemnification by the Shareholders. In connection with any
-----------------------------------
registration statement in which a Selling Shareholder is participating, the
Selling Shareholder will furnish to the Company in writing such information and
affidavits with respect to such Shareholder as the Company reasonably requests
for use in connection with any such registration statement or prospectus and
shall indemnify, to the full extent permitted by law, the Company, its
directors, each of its officers who have signed the registration statement and
each person who controls the Company (within the meaning of the Act) against any
losses, claims, damages, liabilities and expenses (including reasonable
attorneys' fees) resulting from any untrue or alleged untrue statement of a
material fact or any omission or alleged omission of a material fact required to
be stated in the registration statement or prospectus or any amendment thereof
or supplement thereto, or necessary to make the statements therein (in the case
of a prospectus, in the light of the circumstances under which they were made)
not misleading, to the extent, but only to the extent, that such untrue
statement or omission is caused by or contained in any information or affidavit
with respect to such Shareholder or the shares or its investment therein
furnished in writing by such Shareholder, or caused by such Shareholder's
failure to deliver a copy of the prospectus or any amendments or supplements
thereto in accordance with the requirements of the Act after the Company has
furnished such Shareholder with a copy of the same.
(c) Conduct of Indemnification Proceedings. Any person entitled to
--------------------------------------
indemnification hereunder shall give prompt written notice to the indemnifying
party after the receipt by such person of any written notice of the commencement
of any action, suit, proceeding or investigation or threat thereof made in
writing for which such person may claim indemnification or contribution pursuant
to this Agreement and, unless in the reasonable judgment of such indemnified
party a conflict of interest may exist between such indemnified party and the
indemnifying party with respect to such claim, permit the indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to such
indemnified party. If the indemnifying party is not entitled to, or elects not
to,
-10-
<PAGE>
assume the defense of a claim, it will not be obligated to pay the fees and
expenses of more than one counsel with respect to such claim, unless in the
reasonable judgment of counsel for such indemnified party a conflict of interest
may exist between such indemnified party and any other of such indemnified
parties with respect to such claim, in which event the indemnifying party shall
be obligated to pay the reasonable fees and expenses of such additional counsel
or counsels. The indemnifying party will not be subject to any liability
for-any settlement made without its consent.
(d) Contributions. If the indemnification provided for in this
-------------
Section 7 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the 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, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or related to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as result of the losses, claims, damages,
liabilities an expenses referred to above shall be deemed to include, subject to
the limitations set forth in Section 7(c) hereof, any legal or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by an other method of allocation which does not take account of
the equitable consideration referred to in the immediately preceding paragraph.
If indemnification is available under this Section 7, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Section 7(a) and (b) hereof or indemnified party or any other
equitable consideration provided for in this Section 7(d).
-11-
<PAGE>
8. Participation in Underwritten Registrations
-------------------------------------------
A Selling Shareholder may not participate in any underwritten
registration hereunder unless such Shareholder (a) agrees to sell its securities
on the basis provided in any underwriting arrangements approved by the persons
entitled hereunder to approve such arrangements, and (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
9. Reporting Requirements
----------------------
The Company covenants that, after it becomes subject to the reporting
requirements of the Exchange Act, it will file the reports required to be filed
by it under the Act and the Exchange Act; and it will use reasonable efforts to
take such further action as any Shareholder may reasonably request to the extent
required to enable such Shareholder to sell Registrable Securities without
registration under the Act within the limitation of the exemptions provided by
Rule 144 under the Act, as such Rule may be amended or any similar rules or
regulations hereafter adopted.
10. Miscellaneous
-------------
(a) No Inconsistent Agreements. The Company will not hereafter enter
--------------------------
into any agreement with respect to its securities which is inconsistent with the
rights granted to the Shareholders in this Agreement.
(b) Amendments and Waivers. Except as otherwise provided herein, the
----------------------
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
without the written consent of the Company and Shareholders holding in the
aggregate at least 50% of the Shares that would otherwise qualify as Registrable
Securities hereunder.
(c) Notices. Any notice or other communications required or
-------
permitted hereunder shall be deemed validly given, made or served, when
delivered personally or by telecopier (except for legal process), or upon
receipt by the party entitled to receive the notice when sent by registered or
certified mail, postage prepaid, or by a recognized overnight delivery service,
addressed to the Company at 84 Great Valley Parkway, Malvern, Pennsylvania
19355, and to each Shareholder at his, her or its address set forth in his, her
or its Subscription Agreement or to such other address or addresses or
telecopier number as may hereafter be furnished to the Company in writing by
notice similarly given. Notice given by telecopier shall be deemed delivered on
the day the sender receives telecopier confirmation
-12-
<PAGE>
that such notice was received at the telecopier number of the addressee. Notice
given by mail as set out above shall be deemed received three days after the
date the same is postmarked.
(d) Successors and Assigns. This Agreement shall be binding upon the
----------------------
successors and assigns of each of the parties hereto and shall inure to the
benefit of their respective successors and permitted assigns. The rights
granted to a Shareholder hereunder may be transferred by such Shareholder to any
person to whom such Shareholder sells or transfers Registrable Securities in
accordance with the terms of this Agreement, provided that (i) the Company is
given written notice by the transferee at the time of such transfer stating the
name of the transferee and identifying the securities with respect to which such
rights are being assigned and (ii) such transferee, as a condition to such
transfer, shall deliver to the Company a written instrument by which it agrees
to be bound by the obligations imposed upon the Shareholders under this
Agreement. The Agreement shall not be assigned by the Company, by operation of
law or otherwise, without the prior written consent of the Shareholders holding
in the aggregate at least 50% of the Shares that would otherwise qualify as
Registrable Securities hereunder.
(e) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
Shareholders shall be enforceable to the fullest extent permitted by law.
(g) Entire Agreement. With respect to the Company and each
----------------
Shareholder individually, this Agreement, together with the Subscription
Agreements, including all Exhibits and Schedules referred to therein, is
intended to be a complete and exclusive statement of the agreement and
understanding of such parties in respect of the subject matter contained herein
and therein. There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein and therein. This Agreement
and the Subscription Agreements supersede all prior agreements and
understandings between the parties with respect to such subject matter.
(h) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed to be an
-13-
<PAGE>
original copy of this Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
(i) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal laws of the Commonwealth of Pennsylvania
applicable to contracts made and to be performed wholly therein without regard
to principles of conflict of laws.
-14-
<PAGE>
COMPUTATION OF PER SHARE LOSS
<TABLE>
<CAPTION>
Nine months ended Year ended September 3, 1993
-------------------------------------- ------------------------------------ (inception) to
September 30, 1996 September 30, 1995 December 31, 1995 December 31, 1994 December 31, 1993
-------------------------------------- ------------------------------------ -----------------
<S> <C> <C> <C> <C> <C>
Number of shares issued prior
to the first day of each
period 7,074,987 6,023,433 6,023,433 4,917,250
Effect of treasury stock
repurchases (weighted for 1995) (1,980,000) (657,778) (988,333)
Weighted shares outstanding
during the period through
December 31, 1993 4,684,813
Weighting effect for shares
issued during the year ended
December 31, 1994 752,092
Weighting effect for shares
issued during the
nine-month period ended
September 30, 1995 253,140
Weighting effect for shares
issued during the year ended
December 31, 1995 448,351
Weighting effect for shares
issued during the
nine-month period ended
September 30, 1996 752,052
-------------------------------------- ------------------------------------ -----------------
Subtotal 5,847,039 5,618,795 5,483,451 5,669,342 4,684,813
Common stock equivalent effect
(Note 1) - - -
Effect of "cheap" shares issued 474,632 474,632 474,632 474,632 474,632
Effect of "cheap" options issued 50,694 50,694 50,694 50,694 50,694
-------------------------------------- ------------------------------------ -----------------
Net weighted shares outstanding 6,372,365 6,144,121 6,008,777 6,194,668 5,210,139
====================================== ==================================== =================
Net loss per financial statements ($7,951,551) ($5,693,405) ($6,733,312) ($1,227,478) ($54,498)
====================================== ==================================== =================
Net loss per share $(1.25) $(.93) $(1.12) $(.20) $(.01)
====================================== ==================================== =================
</TABLE>
Note 1: Effect is antidilutive.
<PAGE>
[LOGO OF SACCO SWEENEY LLP APPEARS HERE]
CERTIFIED PUBLIC ACCOUNTANTS
Suite 201, Baederwood Office Plaza, 1653 The Fairway, Jenkintown, PA
19046 - (215)885-1660 - Fax (215)885-7545
October 15, 1996
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, DC 20549
Re: Elcom Technologies Corporation
Dear Sir/Madam:
Please be advised that we have read the registration statement to be filed
by Elcom Technologies Corporation in connection with its initial public offering
of common stock. We specifically focused on the disclosures relating to this
Firm under the caption "Experts." We agree with the statements made by Elcom
under the caption "Experts". We consent to the filing of this letter as an
exhibit to the registration statement.
Very truly yours,
Sacco Sweeney LLP
/s/ Angelo Sacco
----------------------
ANGELO SACCO, Partner
<PAGE>
EXHIBIT 21
Elcom Cash Management Corporation
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated March 1, 1996, relating
to the financial statements of Elcom Technologies Corporation, which appears
in such Prospectus. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
Price Waterhouse LLP
Philadelphia, Pennsylvania
October 15, 1996
<PAGE>
Consent of Independent Public Accounts
--------------------------------------
As independent public accountants, we hereby consent to the use in Elcom's
registration statement on Form S-1 and any other related registration statements
filed pursuant to Rule 462 under the Securities Act of our reports dated June
8, 1995 and October 20, 1994 and to all references to our firm included in such
registration statements.
/s/ Sacco Sweeney LLP
SACCO SWEENEY LLP
October 15, 1996
<PAGE>
[LETTERHEAD OF RATNER & PRESTIA APPEARS HERE]
October 15, 1996
Louis J. Petriello
CFO & Corporate Counsel
Elcom Technologies Corporation
78 Great Valley Parkway
Malvern, Pa 19355
Re: Registration Statement
Dear Lou:
We hereby consent to the summary of our opinion in the "Risk Factors-
Product Litigation" and "Legal Proceedings-Current Litigation" sections of
Elcom's registration statements on Form S-1 and any other related registration
statements filed pursuant to Rule 462 under the Securities Act and to the
reference to our firm in the "Experts" section of such registration statements.
Sincerely,
RATNER & PRESTIA
/s/ Benjamin E. Leace
----------------------
Benjamin E. Leace
BEL:sls
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-30-1996 DEC-31-1995
<CASH> 6,012,440 2,040,895
<SECURITIES> 0 0
<RECEIVABLES> 83,258 0
<ALLOWANCES> (4,200) 0
<INVENTORY> 3,006,972 0
<CURRENT-ASSETS> 9,173,837 2,040,875
<PP&E> 714,865 479,974
<DEPRECIATION> (169,396) (87,628)
<TOTAL-ASSETS> 10,571,064 2,614,043
<CURRENT-LIABILITIES> 4,845,065 4,092,685
<BONDS> 0 0
0 0
0 0
<COMMON> 22,161,697 7,100,532
<OTHER-SE> (16,661,839) (8,710,288)
<TOTAL-LIABILITY-AND-EQUITY> 10,571,064 2,614,043
<SALES> 522,505 0
<TOTAL-REVENUES> 522,505 0
<CGS> 417,420 0
<TOTAL-COSTS> 8,552,348 6,781,425
<OTHER-EXPENSES> (78,292) (48,113)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (7,951,551) (6,733,312)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (7,951,551) (6,733,312)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (7,951,551) (6,733,312)
<EPS-PRIMARY> (1.25) (1.12)
<EPS-DILUTED> (1.25) (1.12)
</TABLE>
