Exhibit 10.1


 


PAYOFF AGREEMENT


 


This
Payoff Agreement dated as of November 10, 2010 (this “Agreement”) is
executed by and among Optelecom-NKF, Inc. (f/k/a Optelecom, Inc.), a
Delaware corporation (“Optelecom”), and Draka Holding N.V., a public company
with limited liability organized under the laws of The Netherlands (the “Holder”).


 


RECITALS


 


A.            Optelecom, the Holder, NKF
Vastgoed B.V., a private company with limited liability organized in the
Netherlands, and Optelecom-NKF, B.V. (f/k/a NKF Electronics, B.V.), a private
company with limited liability organized in the Netherlands (“NKF Electronics”),
entered into a Share Purchase Agreement dated March 8, 2005 (the “Purchase
Agreement”), pursuant to which Optelecom acquired all of the outstanding share
capital of NKF Electronics from NKF Vastgoed B.V. and the Holder (the “NKF
Share Purchase”).


 


B.            The purchase price paid by
Optelecom in connection with the NKF Share Purchase (the “NKF Purchase Price”)
consisted of cash and the issuance of a Subordinated Promissory Note dated March 8,
2005, as amended by the First Amendment thereto dated as of June 25, 2008,
from Optelecom to the Holder in the principal amount of Nine Million Euro
(€9,000,000) (the “Original Note”).


 


C.            On March 5, 2010,
Optelecom and the Holder entered into the Amended and Restated Subordinated
Promissory Note, a copy of which is attached hereto as Exhibit A (the “Note”),
which Note amended and restated the Original Note in its entirety.


 


D.            The Note is secured by (i) that
certain Deed of Pledge of Shares in Optelecom-NKF Holding B.V. (“ONH”) dated June 27,
2008 by and among Optelecom, the Holder and ONH (as amended, amended and
restated, supplemented or otherwise modified, the “35% Pledge Agreement”) under
which thirty-five percent (35%) of the issued share capital of ONH has been
pledged to the Holder to secure Optelecom’s obligations under the Note, as more
particularly described therein, (ii) that certain Deed of Pledge of an
Additional 30% of the Shares in the Capital of Optelecom-NKF Holding B.V. dated
March 5, 2010 by and among Optelecom, the Holder and ONH (as amended,
amended and restated, supplemented or otherwise modified, the “30% Pledge
Agreement” and collectively with the 35% Pledge Agreement, the “Pledge
Agreement”) under which an additional thirty percent (30%) of the issued share
capital of ONH was pledged to the Holder to secure Optelecom’s obligations
under the Note, as more particularly described therein, and (iii) that
certain Security Agreement dated as of March 5, 2010 (as amended, amended
and restated, supplemented or otherwise modified, the “Security Agreement”; and
together with the Pledge Agreement and any other agreement or instrument
delivered by Optelecom in favor of the Holder as security for the obligations
of Optelecom under the Note, collectively, the “Security Documents”), by
Optelecom to the Holder under which Optelecom granted a lien and security
interest to the Holder in all assets of Optelecom (excluding all shares and
other equity interests in all direct and indirect subsidiaries of Optelecom and
all assets of all subsidiaries of Optelecom).


 

















 


E.             Optelecom intends to enter
into a definitive agreement (the “Definitive Acquisition Agreement”) with a
third party acquiror (the “Acquiror”) pursuant to which the Acquiror will
acquire Optelecom in a merger or other form of business combination (the “Acquisition”).


 


F.             It is a condition of the
Acquiror to entering into the Definitive Acquisition Agreement that Optelecom
and the Holder enter into this Agreement.


 


G.            Optelecom and the Holder
have agreed to a reduction in the amount payable under the Note.


 


NOW,
THEREFORE, for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Optelecom and the Holder hereby agree as
follows:


 


1.             Incorporation of Recitals.  The recitals set forth above are incorporated
herein by reference.


 


2.             Note Amount.  Optelecom and the Holder hereby acknowledge
and agree that as of the date of the signing of this Agreement, the total
amount of principal outstanding under the Note was €8,982,456.


 


3.             Reduction in Note Amount.  The Holder agrees to accept the sum of (w) €6,300,000,
plus (x) all accrued and unpaid interest through the date of the
payment to the Holder of the Payoff Amount (as defined below) on the total
amount of principal outstanding under the Note (and not, for the avoidance of
doubt, €6,300,000), plus (y) the Holder’s out-of-pocket costs and
expenses (including the reasonable costs and expenses of its counsel and
accountants) incurred in connection with the negotiation, execution and
delivery of this Agreement, not to exceed U.S.$25,000 in the aggregate (the sum
of (w), (x) and (y), the “Payoff Amount”) in full satisfaction of all
amounts and obligations due and payable under the Note, subject to the
following conditions (the “Payoff Conditions”):


 


(a)           prior to the closing of the
Acquisition, the Payoff Amount shall be paid to the Holder by wire transfer of
immediately available funds to the Holder’s account listed on Schedule 1.3(a) to
the Purchase Agreement (the “Bank Account”) or at such other bank as may be
specified in writing from time to time not later than two (2) business
days prior thereto by the Holder to Optelecom; and;


 


(b)           the payment of the Payoff
Amount to the Holder shall occur prior to March 8, 2011;


 


(c)           at the time of the payment
of the Payoff Amount to the Holder, the aggregate cash consideration that is
contemplated to be paid (directly or indirectly) to the holders of equity
interests in Optelecom in connection with the Acquisition plus any dividends or
distributions made by Optelecom after the date hereof in respect of any of its
equity interests shall not exceed U.S.$9,300,000;  and


 


(d)           there shall not have
occurred and be continuing at the time of the payment of the Payoff Amount to
the Holder any Event of Default under the Note or any event or


 


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condition
that, without giving effect to Section 2(e) of the Note, would become
an Event of Default under the Note.


 


If
any of the Payoff Conditions are not satisfied, then the Holder shall not be
obligated to accept any reduced payoff of the Note, including, without
limitation, the Payoff Amount, and the Holder shall have, and may exercise, all
rights and remedies under the Note and the Security Documents, and all other
rights and remedies available at law and in equity.


 


4.             [Intentionally Deleted].


 


5.             Consent of the Holder.  The Holder, by its execution of this
Agreement, hereby consents, in accordance with Section 8.2 of the Note, to
Optelecom entering into a Definitive Acquisition Agreement and consummating the
Acquisition, subject to the satisfaction of the Payoff Conditions.


 


6.             Satisfaction of Note.  Upon the satisfaction of the Payoff
Conditions, (i) the Holder agrees that the Note shall be deemed satisfied
in full; (ii) each of the Security Documents shall terminate automatically
and shall have no further force and effect; and (iii) Optelecom shall be
released from all claims, causes of action, obligations, liabilities, payments,
damages and other amounts or obligations arising under the Note and the
Security Documents (the “Obligations”), (iv) and all pledged collateral
under the Security Documents shall be released from any and all liens created
thereunder in accordance with the applicable terms and conditions of the
Security Documents, including, without limitation, Article 16 of the
Pledge Agreement and Section 8.04 of the Security Agreement.  The release of Optelecom from the Obligations
is effective and operative upon the satisfaction of the Payoff Conditions,
including the Holder’s receipt of the Payoff Amount, without the necessity of
execution of any other or further release or document by the Holder.  The Holder agrees to execute and deliver such
other documents, agreements, instruments or other writings as may be reasonably
requested by Optelecom to effect such release. 
The Holder represents and warrants to Optelecom that the Holder has not
assigned or transferred or purported to assign or transfer and prior to March 8,
2011 will not assign or transfer the Note and/or any of the Obligations or any
portion thereof or any interest therein, and agrees to indemnify, defend and
hold Optelecom harmless from and against any Obligations based on, or arising
out of, whether directly or indirectly, any such assignment or transfer, or
purported assignment or transfer (and, for the avoidance of doubt, the parties
agree that a merger or a sale of substantially all the assets of the Holder, or
a change in control of the Holder, will not constitute such an assignment or
transfer).  Optelecom acknowledges that
if, for any reason, any of the Payoff Amount is voided or rescinded or must
otherwise be returned by the Holder as a result of Optelecom’s insolvency,
bankruptcy or as otherwise required by applicable law, Optelecom’s obligations
and liabilities under the Note and the Security Documents shall be reinstated
to that extent.  In addition, in the
event the aggregate cash consideration paid to the holders of equity interests
in Optelecom in connection with the Acquisition plus any dividends or
distributions made by Optelecom after the date hereof in respect of any of its
equity interests exceeds U.S.$9,300,000, notwithstanding any other provision of
this Agreement and notwithstanding the Holder’s prior receipt of the Payoff
Amount, Optelecom’s obligations and liabilities to the Holder under the Note
and the Security Documents shall be reinstated automatically to the extent of €2,682,456
principal amount (with interest thereon from the date of the closing of the
Acquisition).


 


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7.             Representations and
Warranties.


 


(a)           Optelecom hereby makes the
following representations and warranties:


 


(i)            it is duly formed, validly
existing, and in good standing under the laws of the jurisdiction of its
formation, has the ability to perform its obligations under this Agreement and
has all necessary power and authority to execute and deliver this Agreement;


 


(ii)           the execution and delivery
by it of this Agreement and the performance by it of its obligations under this
Agreement have been duly authorized by all necessary action, does not require
the consent of any third parties except for such consents as have been properly
obtained, and does not and will not contravene, violate, result in a breach of,
or constitute a default under (1) its certificate of incorporation or
bylaws, (2) any law or regulation of any governmental body or any
decision, ruling, order, or award by which such entity or any of its properties
may be bound or affected, or (3) any agreement, indenture or other
instrument to which it is a party or by which any of its properties may be
bound or affected;


 


(iii)          this Agreement, when executed
and delivered to the Holder, and the obligations of Optelecom hereunder, will
be the legally valid and binding obligations of Optelecom, enforceable against
it in accordance with their terms, subject only to applicable bankruptcy,
insolvency and similar laws affecting the enforcement of creditors rights
generally, and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).


 


Optelecom’s
covenants, agreements, representations and warranties made in this Agreement
shall be continuing and shall be true and correct as of the date hereof and
shall survive the termination of this Agreement.


 


(b)           The Holder hereby makes the
following representations and warranties:


 


(i)            it is duly formed, validly
existing, and in good standing under the laws of the jurisdiction of its
formation, has the ability to perform its obligations under this Agreement and
has all necessary power and authority to execute and deliver this Agreement;


 


(ii)           the execution and delivery
by it of this Agreement and the performance by it of its obligations under this
Agreement have been duly authorized by all necessary action, does not require
the consent of any third parties except for such consents as have been properly
obtained, and does not and will not contravene, violate, result in a breach of,
or constitute a default under (1) its articles of association or other
governing documents, (2) any law or regulation of any governmental body or
any decision, ruling, order, or award by which such entity or any of its
properties may be bound or affected, or (3) any agreement, indenture or
other instrument to which it is a party or by which any of its properties may
be bound or affected;


 


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(iii)          this Agreement, when
executed and delivered to Optelecom, and the obligations of the Holder
hereunder, will be the legally valid and binding obligations of the Holder,
enforceable against it in accordance with their terms, subject only to
applicable bankruptcy, insolvency and similar laws affecting the enforcement of
creditors rights generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).


 


The
Holder’s covenants, agreements, representations and warranties made in this
Agreement shall be continuing and shall be true and correct as of the date
hereof and shall survive the termination of this Agreement.


 


8.             Forms.  The Holder shall deliver to Optelecom, on or
prior to the date on which Optelecom delivers the Payoff Amount to Holder two (2) original
copies of Internal Revenue Service Form W-8BEN (claiming the benefits of
any applicable income tax treaty), W-8ECI, W-8EXP and/or W-8IMY (or, in each
case, any successor forms), properly completed and duly executed by the Holder,
and such other documentation or information required under the Internal Revenue
Code of 1986, as amended (the “Code”), or reasonably requested by Optelecom to
establish that the Holder is not subject to (or is subject to a reduced rate
of) deduction or withholding of United States federal income tax with respect
to any payments to the Holder of principal, interest, fees or other amounts
payable under the Note, and the Holder also hereby agrees, from time to time
after the initial delivery by the Holder of such forms, certificates or other
evidence, whenever a lapse in time or change in circumstances renders such
forms, certificates or other evidence obsolete or inaccurate in any material
respect, that the Holder shall promptly deliver to Optelecom two (2) new
original copies of Internal Revenue Service Form W-8BEN, W-8ECI, W-8EXP
and/or W-8IMY, (or, in each case, any successor forms), properly completed and
duly executed by the Holder, and such other documentation required under the
Code and reasonably requested by Optelecom to confirm or establish that the
Holder is not subject to (or is subject to a reduced rate of) deduction or
withholding of United States federal income tax with respect to payments to the
Holder under the Note, or notify Optelecom of its inability to deliver any such
forms or other evidence


 


9.             Miscellaneous.


 


(a)           Timing.  The parties hereto specifically agree that
time is of the essence with respect to this Agreement.


 


(b)             Entire Agreement.  This Agreement contains the entire agreement
between the parties and may be amended only in writing executed by each of the
parties.


 


(c)            Integration.  This Agreement supersedes all prior or
contemporaneous negotiations, promises, covenants, representations, or oral and
written agreements concerning any matter directly, indirectly or collaterally
related to the subject matter of this Agreement.  The Note, the Security Documents and this
Agreement, together, represent a complete integration of all prior and
contemporaneous agreements and understandings of the parties hereto.  No party relied on any representation or
warranty of any other person or party except as specifically set forth herein
or in the Note or Security Documents.  In
the event of any ambiguity and/or dispute


 


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regarding
interpretation of this Agreement, the interpretation of this Agreement shall
not be resolved by any rule of interpretation providing for interpretation
against the party who causes the uncertainty to exist or against the draftsman.


 


(d)           All notices, requests and other communications hereunder must be in
writing and will be deemed to have been duly given only if delivered personally
or by facsimile transmission against facsimile confirmation or mailed by an
internationally recognized overnight courier prepaid, to the parties at the
following addresses or facsimile numbers:


 


If
to Optelecom to:


 


Optelecom-NKF, Inc.


 


12920 Cloverleaf Center Drive


 


Germantown, Maryland  20874


 


Facsimile No.: (240) 912-3381


 


Attn:  President


 


with
a copy (which shall not constitute notice) to:


 


Venable LLP


 


8010 Towers Crescent Drive, Suite 300


 


Vienna, Virginia  22182


 


Facsimile No.:  (703) 821-8949


 


Attn:  Thomas W. France, Esq.


 


If
to the Holder to:


 


Draka Holding NV


 


De Boelelaan 7


 


P.O. Box 75979


 


1083 HJ Amsterdam


 


THE NETHERLANDS


 


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Facsimile No.:  31 20 5689 895


 


Attn:  Jacoba Bremer


 


with
a copy (which shall not constitute notice) to:


 


Sullivan & Worcester LLP


 


One Post Office Square


 


Boston, Massachusetts  02109


 


Facsimile No.:  (617) 338-2880


 


Attn:  Harry E. Ekblom, Jr.


 


All
such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 8(d), be deemed
given upon delivery, (ii) if delivered by facsimile transmission to the
facsimile number as provided for in this Section 8(d), be deemed given
upon facsimile confirmation, and (iii) if delivered by overnight courier
to the address as provided in this Section 8(d), be deemed given on the
earlier of the first business day following the date sent by such overnight
courier or upon receipt (in each case regardless of whether such notice, request
or other communication is received by any other person to whom a copy of such
notice is to be delivered pursuant to this Section 8(d)).  Any party from time to time may change its
address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other party hereto.


 


(e)           Binding Effect.  This Agreement shall be binding on and inure
to the benefit of the parties and their respective personal or legal
representatives, heirs, legatees, transferees, agents, servants, employees,
predecessors, successors and assignees.


 


(f)            Execution in Counterparts.  This Agreement may be signed in one or more
counterparts each of which shall be an original and all of which taken together
shall constitute one Agreement. 
Facsimile or electronic copies of these signatures may be exchanged
among the parties and shall be treated as originals.


 


(g)           Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect of conflicts of law principles.


 


(h)           Headings.  The
section headings and subheadings have been included for convenience only, and
shall not be part of this Agreement and shall not be taken as an interpretation
of any provision of this Agreement.


 


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(i)            Termination.  No waiver or termination of this Agreement
shall be binding unless executed in writing by the party who, pursuant to the
terms of this Agreement, has the right to waive any rights, conditions, or
obligations hereunder, or has the right to terminate this Agreement.


 


(j)            Enforceability.  No other person or party shall have any
rights whatsoever hereunder or shall be deemed a third party beneficiary
hereof.


 


(k)           Public Filing.  The Holder hereby acknowledges that Optelecom
will publicly file a copy of this Agreement with one or more filings with the
Securities and Exchange Commission.


 


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IN
WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of
the day and year first above written.


 


 


	
   

  	
  OPTELECOM-NKF, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  David B. Patterson

  
	
   

  	
  Name:
  David B. Patterson

  
	
   

  	
  Title:
  President & CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DRAKA
  HOLDING N.V.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  F.F. Dorjee

  
	
   

  	
  Name:
  F.F. Dorjee

  
	
   

  	
  Title:
  CEO

  



 


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