Document:

exv10w59

 

Exhibit 10.59

August 31,2004

James Miller

1607 434th Street East

Eatonville, WA 98328

Dear James,

On behalf of Cadence, I am pleased to offer you the position of Senior Vice President, Development
reporting to Mike Fister. Your compensation will include an annualized base salary of $375,000. You
will be eligible to receive an incentive bonus targeted at 75% of base salary under Cadence’s
Senior Executive Bonus Plan. Payment of this target bonus, in part or in full, is contingent upon
achievement of both your individual performance goals as well as achievement of the Company’s
corporate goals. Assuming you are employed with Cadence on the date the Senior Executive Bonus is
paid out for the second half of 2004, you will receive 60% of your annual target bonus, prorated
for the amount of time worked in the second half of 2004. Your Executive Bonus will also be
guaranteed at target for 2005. In addition, you will be issued an option to purchase 250,000
shares of Cadence Design Systems Common Stock and a grant of 50,000 shares of Incentive Stock
subject to approval by the Board of Directors’ Compensation Committee. If you accept our offer of
employment you will also receive a one time signing bonus of $400,000 with your first paycheck.
Please read the attached section entitled “Employment Terms” for further details regarding this
offer. This offer is contingent upon successfully passing the Cadence background verification.

Cadence offers a comprehensive Employee Benefits package including: 401(k); non-qualified deferred
compensation (NQDC) plan; and an Employee Stock Purchase Plan. We also provide a wide variety of
health and welfare benefits through Cadence Compositions. Under this plan, you will be able to
choose from several different options in each benefit area including
Medical, Dental, Vision, Life
and Disability Insurance. Additional details on all these benefits may be found in the accompanying
Employee Benefits pamphlet and will be discussed in depth at your New Employee Orientation.

Please check the Cadence Jumpstart flyer in your offer packet for further details on the
orientation schedule. When you attend the New Employee Orientation, please be prepared to provide
proper identification or work authorization documents in order to complete United States
Immigration forms.

Offers of employment remain open for a short period of time; unless otherwise notified; this offer
will expire on September 10, 2004. Because Cadence is an at-will employer as described in the
attached Employment Terms, nothing in this offer shall be construed as a promise of employment for
any fixed term or as a promise that cause is required for the termination of the employment
relationship.

James, we look forward to having you on our team!

Sincerely,

/s/ Tim
Burch

Tim Burch

Senior VP of Human Resources

& Organizational Development

Cadence
Design Systems, Inc. 555 River Oaks Parkway San Jose, CA 95134

Phone: 408.943.1234 World Wide Web: www.cadence.com

 

 

August 31, 2004

James Miller

Employment Terms

Senior Executive Bonus Plan

After 2004, your incentive opportunity under the Senior Executive Bonus Plan is
targeted at 75% of your annualized base salary. Actual payout amounts are determined
based on both company performance and your individual performance. Your bonus for the
second half of 2004 and 2005 is specified in Paragraph One of the offer letter above.

New Hire Stock Options and Incentive Stock

Your New Hire Stock Options will vest 25% at the end of your first year of employment and
monthly thereafter with full vesting occurring at the end of four years. The Incentive
Stock will vest 25% on the anniversary of the grant date and then 25% each anniversary
date thereafter, for four years. These proposed stock issuances must be approved by the
Compensation Committee of the Board of Directors. If approved, the Compensation Committee
will then grant you the options shortly after you join the company, at the average of the
high and low market price of the Company’s Common Stock on the date of grant. Please note
that the purchase price is not necessarily set on the day you start work with Cadence. A
package detailing your options (including vesting time frames) will be sent to you within
8-12 weeks of your start date.

New Hire Bonus

Cadence is offering you a special, one-time signing bonus of $400,000. This bonus will be
paid to you along with your first paycheck from Cadence. Should you resign from Cadence or
be terminated for cause within one year of your start date, you must return the $400,000
signing bonus to Cadence upon your termination.

Non-Qualified
Deferred Compensation (NQDC) Plan

As a participant of the Non-Qualified Deferred Compensation Plan (NQDC), you will
eligible to defer up to 80% of your salary and 100% of your bonus income — without the
annual IRS limitations imposed on tax-qualified retirement plans, such as the 401(k) plan.
By deferring income into the NQDC plan, you can reduce your taxable wage base. Taxes on
both the deferred income and earnings on investments are not assessed until you begin to
receive distributions. New participants are eligible to enroll twice each year; January 1
and July 1. Participants will automatically receive enrollment and detailed plan
information during the stated enrollment periods.

Relocation Assistance

You will be given assistance to relocate your primary residence to the greater San Jose
area. This assistance will be provided by ReloAction, our third party provider, and
coordinated by our Corporate Staffing group. Cadence will contract with ReloAction to
provide you with relocation assistance pursuant to Cadence’s Homeowner Relocation Policy,
including home sale assistance through our Market Value Purchase
program. ReloAction will
specifically provide you with a furnished apartment in the San Jose area up to June 30,
2005. Further, Cadence will reimburse you for a reasonable number of roundtrip coach-fare
tickets from San Jose area to Washington during your time in Temporary Living. Cadence
will also provide you with $15,000 as your incidental moving allowance.

 

 

Vacation

As an executive, you may take personal time off at your discretion, with your
manager’s approval. Thus, you will not accrue vacation, and you will have a good deal
of flexibility with respect to taking time off from work.

Immigration

In accordance with the Immigration Reform and Control Act of 1986, you must be a
United States citizen or have authorization to work in the United
States. In either
case, verification of your right to work is required within 72 hours of employment.

Confidentiality and Non Disclosure

Cadence has a policy of non-disclosure to anyone within our company of any
confidential and/or proprietary information regarding your current employer and/or
anyone else with whom you have by reason of your employment signed or are covered by
a non-disclosure or similar agreement. Accordingly, please do not use, or disclose to
Cadence any proprietary information belonging to your employer or any other person or
company with which you have signed an agreement.

Employment

Cadence is an at will employer. You are not being promised any particular term of
employment. The employment relationship may be terminated by either you or Cadence at
any time, with or without cause, and with or without notice. No one at Cadence is
empowered, unless specifically authorized in writing by the Corporate VP of Human
Resources, to make any promise, express or implied that employment is for any minimum
or fixed term or that cause is required for the termination of employment
relationship.

Please take your time reading through this entire packet. Should you have
any questions regarding its content, feel free to give me a call. Kindly
sign/complete and return the enclosed documents as instructed on the
checklist in the provided self-addressed stamped envelope.

**                    **

This is to
verify my acceptance of the above stated offer and employment terms:

	 	 	 	 	 
	/s/ James Miller

	 	September 2, 2004
	 	Sept. 15, 2004
	 

	 	 
	 	 
	James Miller

	 	Today’s Date
	 	Desired Start Date
	 
	 	 	 	 
	Please also provide your birth date to facilitate Benefits processing.	 	March 26, 1962
	 

	 	 	 	 
	 

	 	 	 	Birth Date
	Preferred Name (Nickname) if applicable.      Jim<PAGE>

                                                                     EXHIBIT 4.1

THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE
TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii)
THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE
REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT REGISTRATION UNDER THE
ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS SUCH
TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL
BE ENDORSED UPON ANY DEBENTURE ISSUED IN EXCHANGE FOR THIS DEBENTURE.

                            ELCOM INTERNATIONAL, INC.

                    AMENDED 10% CONVERTIBLE SENIOR DEBENTURE

                               DUE APRIL 23, 2013

DATE OF ISSUANCE:________________, 2003                           $<<M__IN_NOS>>

      ELCOM INTERNATIONAL, INC., a Delaware corporation (the "Company"), for
value received, hereby promises to pay to <<Name>> or permitted, registered
assigns (the "Holder") on April 23, 2013 (the "Maturity Date") at the offices of
the Company, 10 Oceana Way, Norwood, Massachusetts 02062, the principal amount
of <<M__in_words>> Dollars ($<<M__in_nos>>), which shall be payable in cash or
by check. Simple interest on the principal amount of this Debenture shall be
paid at the rate of ten percent (10%) per annum accrued through the Maturity
Date or through the conversion date, and payable by the issuance of
payment-in-kind additional Debentures equal to the amount of interest due. The
principal amount of this Debenture and any additional Debentures issued in
payment of accrued interest shall be paid upon the Maturity Date. Issuance of
this amended Debenture renders null and void the original Debenture issued to
the Holder on ________________, 2003.

      This Debenture is issued pursuant to a Subscription Agreement between the
Company and the Holder (the "Subscription Agreement"), a copy of which agreement
is available for inspection at the Company's principal office. Any "Permitted
Transferee" (as defined in Paragraph G.3. hereof) of the Debenture, by their
acceptance hereof, shall be entitled to the rights and assume the obligations of
the Holder in the Subscription Agreement with respect to the Debenture.
Reference to the Subscription Agreement shall in no way impair the absolute and
unconditional obligation of the Company to pay both principal and interest
hereon as provided herein. This Debenture is one of the Debentures being issued
and sold in the offering (the "Offering") by the Company of $1,264,251 of the
Debentures pursuant to a Confidential Private Placement Memorandum dated April
18, 2003, as the same may be amended or supplemented (the "Memorandum"). The
Board of Directors of the Company authorized an amended maximum Offering of
$1,500,000 (the "Maximum Offering Amount"). An initial closing was held by the
Company at such time as subscriptions for an aggregate of $500,000 in Debentures
were received by the Company. The Memorandum contemplated that the Company may
hold additional closings from time to time (each, an "Additional Closing"), at
the Company's discretion, until either (i) the Company received subscriptions
for the Maximum Offering Amount of the Debentures, or (ii) May 17, 2004 (as
amended).

<PAGE>

A. SECURITY.

      This Debenture is secured pursuant to that certain Collateral Agency and
Security Agreement, dated as of April 23, 2003, among Andres Escallon (the
"Agent") as Collateral Agent, the Company and each of the holders named therein
(the "Security Agreement"), pursuant to which the Agent, and its successors and
assigns, has been appointed Collateral Agent for perfection and enforcement
purposes, which Security Agreement is incorporated herein by reference as if
fully set forth herein. The Security Agreement terminates on April 23, 2005.

B. CONVERSION OF DEBENTURE .

      The Debenture shall be convertible at the election of the Holder at any
time commencing on April 23, 2005 and ending April 23, 2013; provided that,
prior to April 23, 2005, should the Company record two sequential quarters of
profitability with respect to its continuing operations (i.e. net income from
continuing operations), as reflected in the most recent Annual Report on Form
10-K or Quarterly Report on Form 10-Q filed by the Company pursuant to the
Exchange Act of 1934, as amended (the "Exchange Act"), the Holder may convert
the Debenture at the Holder's option by delivery of a written request to the
Company, along with this Debenture. Notwithstanding the above, the Debenture
shall be converted automatically, without any further action or approval on the
part of the Holder thereof, upon the occurrence of the following:

      1. CHANGE OF CONTROL. Without any further action on the part of the
Company, upon a "Change in Control" of the Company. A "Change in Control" shall
be deemed to have occurred upon the occurrence of the following:

            a. The sale or transfer for value of eighty (80) percent or more of
the Company's assets on a consolidated basis, as reflected on the most recently
filed balance sheet contained in the Company's Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, filed pursuant to the Exchange Act, to any other
person or entity that is not, immediately prior to execution of the definitive
agreement(s) for such asset sale, an affiliate ("affiliate," as used in this
paragraph, shall have the same meaning as in Paragraph G.3.);

            b. A reorganization, consolidation or merger into or with another
corporation or other entity (other than to create a holding company) as a result
of which the holders of shares of the Company's Common Stock, par value $0.01
per share (the "Common Stock"), as determined to be such immediately prior to
the execution of the relevant merger agreement, beneficially own, directly or
indirectly, less than fifty (50) percent of the combined voting power of the
then-outstanding securities of such reorganized, consolidated or merged entity
following consummation of such reorganization, consolidation or merger; or

            c. A person or entity becomes the beneficial owner of fifty percent
(50%) or more of the then outstanding shares of Common Stock or of securities
convertible into Common Stock, on a fully-diluted basis;

                                        2
<PAGE>

            2. COMPANY OPTION. As of April 23, 2007, at the option of the
Company, or the date that is ten (10) business days after the Company exercises
such option by sending a notice thereof to the Holder at his or her registered
address by first-class mail describing such automatic convertion.

      The principal amount of, and accrued interest on, the Debentures will be
convertible into shares of the Company's Common Stock, at the rate of 100% of
$0.1246, the "Fair Market Value" per share of the Common Stock (the "Conversion
Price").

            3. CONVERSION PROCESS. Conversion of the Debenture shall be
effectuated by surrendering the Debenture (with a copy, by facsimile or courier,
to the Company) to the Company with the form of conversion notice attached
hereto as Exhibit A, executed by the Holder evidencing such Holder's intention
to convert this Debenture or a specified portion (as above provided) hereof, and
accompanied, if required by the Company, by proper assignment hereof in blank.
The Company shall use its best efforts to have the shares of Common Stock issued
and delivered to the Holder thereof within seven (7) business days of the
receipt of the conversion form and Debenture(s). The Holder shall pay any and
all stock transfer fees. No fractions of shares or scrip representing fractions
of shares will be issued on conversion, but the number of shares issued shall be
rounded to the nearest whole share, based on the total number of shares of
Common Stock to be issued to any one holder. The date on which notice of
conversion is given shall be deemed to be the date on which the Holder has
delivered this Debenture, with the conversion notice duly executed, to the
Company, or, if earlier, the date set forth in such notice of conversion if this
Debenture is received by the Company within five (5) business days thereafter.

            4. REGISTRATION RIGHTS AGREEMENT. Upon the conversion of the
Debenture, the Common Stock issued to the Holder shall be subject to the a
Registration Rights Agreement between the Company and the initial holders of the
Debentures, relating to the filing of a registration statement covering the
resale of such Common Stock.

C. ANTI-DILUTION PROVISIONS.

      1. ADJUSTMENT ON SUBSEQUENT EQUITY ISSUANCE. Except for the sale of the
Debentures in the Offering, in the event of any sale of Common Stock, or any
securities convertible into Common Stock, by the Company (the "Subsequent Equity
Issuance"), at a price less than the initial Conversion Price (or the subsequent
applicable conversion price), the Conversion Price will be adjusted on
weighted-average basis based on the sum of the fully-diluted capital stock of
the Company times the then applicable Conversion Price (initially, $0.1246),
plus the total amount of the proceeds raised in the Subsequent Equity Issuance,
divided by the sum of the number of fully-diluted shares issued prior to such
issuance plus the number of shares issued in such issuance. No adjustment,
however, will occur in any case for (i) the exercise (or conversion) of
securities outstanding on any date of closing with respect to the Offering, (ii)
stock issued upon the exercise of a warrant outstanding prior to April 23, 2003
or the exercise of stock options, stock or other stock-based awards to
employees, directors or consultants, so long as such options, stock or awards
are granted under an existing plan or pursuant to a stock incentive plan or
other grant approved by the Board of Directors, (iii) the issuance or sale of
securities in any acquisition of a business or assets approved by the Board of
Directors, or (iv) the issuance or sale of securities upon conversion of any
Debentures issued in the Offering.

                                        3
<PAGE>

      Notwithstanding anything herein to the contrary, if the Company's Common
Stock is listed on the Nasdaq National Market or the Nasdaq SmallCap Market on
the date of any adjustment referred to in Paragraph C, the Company will not be
required to issue to the Holder and any other holders of the Debentures, Common
Stock in excess of 19.999% of the Company's outstanding Common Stock on April
23, 2003 at a price below the market price of the Common Stock on such date, or
such greater number of shares of Common Stock permitted pursuant to Nasdaq Rule
4350(i), upon conversion of the Debentures, unless and except to the extent
allowed under Nasdaq rules. In such case, the Company, at its option, may:

            a. Obtain stockholder approval permitting such issuances in
accordance with Nasdaq rules; or

            b. Honor the conversion of this Debenture by the Holder; provided,
that, this Debenture shall be adjusted on a proportionate basis with all other
Debentures issued in this Offering by converting the maximum portion of each
such Debenture (and remitting the remaining portion of each Debenture to the
applicable holder thereof) to shares of the Company's Common Stock without
violating Nasdaq Rule 4350(i). No fractions of shares or scrip representing
fractions of shares will be issued upon such adjustment, but the number of
shares issued shall be rounded to the nearest whole share, based on the total
number of shares of Common Stock to be issued to any one holder.

      2. DIVIDENDS, STOCK SPLITS, ETC.

      In the event that, at any time while the Debenture is outstanding, the
outstanding shares of Common Stock are, as a result of a stock split, stock
dividend, combination or exchange of shares, exchange for other securities,
reclassification, reorganization, redesignation, merger, consolidation,
recapitalization or other such change, including without limitation any
transaction described in Section 424(a) of the Internal Revenue Code of 1986,
increased or decreased or changed into or exchanged for a different number or
kind of shares of stock or other securities of the Company, then the Conversion
Price will be multiplied by a fraction of which the numerator is the number of
shares of Common Stock (excluding treasury shares, if any) outstanding before
such event and of which the denominator is the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section will
become effective immediately following the record date for determination of the
stockholders entitled to receive such distribution and will become effective
immediately following the effective date in case of a stock split, combination,
exchange, reclassification, reorganization, redesignation, merger,
consolidation, or recapitalization.

                                        4
<PAGE>

D. RIGHT OF FIRST REFUSAL.

      In the event that the Company shall determine to offer and sell Debentures
in any Additional Closing to any individual, corporation, partnership,
association, trust or other entity or organization, including any government or
political subdivision or an agency or instrumentality thereof (a "Person"), the
Company shall notify the Holder (unless such Holder is an employee or officer of
the Company) in writing of the proposed issuance, the principal amount of
Debentures to be sold, the date on or about which such sale is to be consummated
and the price and other terms and conditions thereof, at least ten (10) calendar
days prior to the proposed date for consummation of the sale of such Debentures
in an Additional Closing. For a period of five (5) calendar days after the
Holder's receipt of the notice referred to in the foregoing sentence, the Holder
(unless such Holder is an employee or officer of the Company) shall have the
option to purchase all, but not less than all, of such Debentures to be sold in
the Additional Closing on a pro rata basis, upon the same price, terms and
conditions as such Debentures are proposed to be issued to such Person. If all
eligible Holders do not purchase all such Debentures, that portion of the
principal amount of such Debentures that is not purchased may be offered to any
Person, up to the Maximum Offering Amount. Eligible Holders shall exercise such
the right of first refusal provided by this Section by the delivery of written
notice to such effect to the Company specifying the principal amount of
Debentures that such Holder desires to purchase. If an eligible Holder exercises
its purchase option under this Section, it shall purchase such Debentures at the
date set for consummation of the proposed sale of Debentures to such Person.

E. COVENANTS OF COMPANY.

      1. POSITIVE COVENANTS. The Company covenants and agrees that, so long as
this Debenture shall be outstanding, it will:

            a. Comply with and observe all of the terms and conditions of the
Security Agreement;

            b. Promptly pay and discharge all lawful taxes, assessments, and
governmental charges or levies imposed upon the Company or upon its income and
profits, or upon any of its property, before the same shall become in default,
as well as all lawful claims for labor, materials and supplies which, if unpaid,
might become a lien or charge upon such properties or any part thereof;
provided, however, that the Company shall not be required to pay and discharge
any such tax, assessment, charge, levy or claim so long as the validity thereof
shall be contested in good faith by the Company, or where the failure to so pay
would not have a material adverse effect on the Company;

            c. Do or cause to be done all things reasonably necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises and comply with all material laws applicable to the Company, except
where the failure to comply would not have a material adverse effect on the
Company;

            d. At all times reasonably maintain, preserve, protect and keep its
property used in the conduct of its business in good repair, working order and
condition, normal wear and tear excepted, except where the failure to comply
would not have a material adverse effect on the Company;

                                        5
<PAGE>

            e. To the extent necessary for the operation of its business, keep
adequately insured by reputable insurers, all property of a character usually
insured by similar corporations and carry such other insurance as is usually
carried by similar corporations, except where the failure to obtain insurance
would not have a material adverse effect on the Company;

            f. Prior to the issuance of any Common Stock by the Company
following this Offering, reserve for issuance a sufficient number of authorized
but unissued shares of such Common Stock to allow for their issuance hereunder
upon conversion of the Debenture; and

            g. At all times keep true and correct books, records and accounts.

      2. NEGATIVE COVENANT. The Company covenants and agrees that, so long as
this Debenture shall be outstanding, it will not incur, repay, or exercise any
call option to redeem, any outstanding principal amount of any indebtedness for
"Borrowed Money," except as follows (the term "Borrowed Money" shall have the
same meaning as set forth in the Security Agreement):

            a. Prior to April 23, 2005, the Company may incur, repay, or
exercise any call option to redeem indebtedness for Borrowed Money, the
aggregate principal amount of which does not exceed $1,500,000, upon the
approval of the holders (or their Permitted Transferees) of 51% of the aggregate
principal amount of all of the Debentures issued in the Offering (the
"Majority-in-Interest"); and

            b. Following April 23, 2005, the Company may incur, repay, or
exercise any call option to redeem indebtedness for Borrowed Money, (i) the
aggregate principal amount of which does not exceed $1,500,000, without any
action or approval on the part of the holders of the Debentures, and (ii) the
aggregate principal amount of which exceeds $1,500,000, upon the approval of the
Majority-in-Interest.

      Upon the Company's incurrence of indebtedness for Borrowed Money, as
permitted pursuant to subparagraphs 2.a. and 2.b. hereof, this Debenture shall
be subordinated in right of payment and action to the payment in full of such
new indebtedness. Upon the incurrence of any such indebtedness, the Holder
hereby agrees to execute and deliver to the Company such documents as the
Company shall reasonably request to evidence such subordination.

F. ADDITIONAL PROVISIONS.

      This Debenture is subject to the following additional provisions:

      1. DENOMINATIONS. The Debentures are issuable in denominations of One
Thousand Dollars ($1,000 U.S.) and integral multiples thereof.

      2. WITHHOLDING. The Company shall be entitled to withhold from all
payments of principal of, and interest on, this Debenture any amounts required
to be withheld under the applicable provisions of the United States income tax
laws or other applicable law at the time of such payments.

      3. INVESTMENT REPRESENTATIONS. This Debenture has been issued subject to
investment representations of the original purchaser hereof and may be
transferred or exchanged

                                        6
<PAGE>

only in compliance with the Securities Act of 1933, as amended (the "Act") and
other applicable securities laws. Prior to due presentment for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture be overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary.

      4. OBLIGATIONS ABSOLUTE. No provision of this Debenture shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, and interest on, this Debenture at the time, place and
rate, and in the coin or currency, herein prescribed. This Debenture and all
other Debentures now or hereafter issued of similar terms are direct obligations
of the Company. This Debenture ranks equally and ratably with all other
Debentures now or hereafter issued under the terms set forth in the Offering.
Any partial payment of interest or principal hereunder shall be paid on a
prorated basis among all of the Debentures based on the amount of the then
unpaid principal.

      5. NO RECOURSE AGAINST INDIVIDUALS. No recourse shall be had for the
payment of the principal of, or the interest on, this Debenture, or for any
claim based hereon, or otherwise in respect hereof, against any incorporator,
stockholder, officer, employee or director, as such, past, present or future, of
the Company or any successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived. The obligation of the
Company on this Debenture is primary and exclusive.

      6. COMPLIANCE WITH SECURITIES LAWS. The Holder of this Debenture, by
acceptance hereof, agrees that this Debenture is being acquired for investment
and that such Holder will not offer, sell or otherwise dispose of this Debenture
or the shares of Common Stock issuable upon conversion hereof except under
circumstances which will not result in a violation of the Act or any applicable
state Blue Sky law or similar laws relating to the sale or transfer of
securities.

G. EVENTS OF DEFAULT.

      1. DEFAULT CONDITIONS. This Debenture shall become and be due and payable
upon written demand made by the Holder hereof if one or more of the following
events, herein called events of default, shall happen and be continuing:

            a. Default in the due observance or performance of any material
covenant, condition or agreement on the part of the Company to be observed or
performed pursuant to the terms hereof and such default shall continue uncured
for (30) days after written notice thereof, specifying such default, shall have
been given to the Company by the Majority-in-Interest;

            b. Application for, or consent to, the appointment of a receiver,
trustee or liquidator of the Company or of its property;

            c. General assignment by the Company for the benefit of creditors;

            d. Filing by the Company of a voluntary petition in bankruptcy or a
petition or an answer seeking reorganization, or an arrangement with creditors;

                                        7
<PAGE>

            e. Entering against the Company of a court order approving a
petition filed against it under the Federal or state bankruptcy laws, which
order shall not have been vacated or set aside or otherwise terminated within
ninety (90) days; or

            f. Material breach of the Company's covenants contained in the
Security Agreement.

      2. NOTICE OF DEFAULT. The Company agrees that notice of the occurrence of
any event of default will be promptly given to the Holder at his or her
registered address by first-class mail.

      3. ENFORCEMENT OF RIGHTS. In case any one or more of the events of default
specified above shall happen and be continuing, the Holder of this Debenture may
proceed to protect and enforce his rights by suit in the specific performance of
any covenant or agreement contained in this Debenture or in aid of the exercise
of any power granted in this Debenture or may proceed to enforce the payment of
this Debenture or to enforce any other legal or equitable rights as such Holder.

H.    PAYMENTS; REGISTRATION OF DEBENTURES; TRANSFER AND EXCHANGE OF DEBENTURES;
      REPLACEMENT OF DEBENTURES.

      1. PAYMENTS. Whenever any payment to be made shall be due on a Saturday,
Sunday or a public holiday under the laws of the Commonwealth of Massachusetts,
such payment may be made on the next succeeding business day, and such extension
of time shall in such case be included in the computation of payment of interest
due. Any payments made shall first be applied to the amount of outstanding
interest with respect to the Debenture. There shall be a five (5) day grace
period on any payment of principal or interest.

      2. REGISTRATION OF DEBENTURES. The Company shall maintain at its principal
office a register of the Debentures ("Debenture Register") and shall record
therein the names and addresses of the registered Holders of the Debentures, the
address to which notices are to be sent and the address to which payments are to
be made as designated by the registered Holder if other than the address of the
Holder, and the particulars of all permitted transfers, exchanges and
replacements of Debentures. No transfer of a Debenture shall be valid unless
made on such Debenture Register for the registered Holder or his executors or
administrators or his or their duly appointed attorney, upon surrender therefor
for exchange as hereinafter provided, accompanied by an instrument in writing,
in form and execution reasonably satisfactory to the Company. Each Debenture
issued hereunder, whether originally or upon transfer, exchange or replacement
of a Debenture or Debentures, shall be registered on the date of execution
thereof by the Company and shall be dated the date to which interest has been
paid on such Debentures or Debenture. The registered Holder of a Debenture shall
be that Person in whose name the Debenture has been so registered by the
Company. A registered Holder shall be deemed the owner of a Debenture for all
purposes of this Debenture and, subject to the provisions hereof, shall be
entitled to the principal, premium, if any, and interest evidenced by such
Debenture free from all equities or rights of setoff or counterclaim between the
Company and the transferor of such registered Holder or any previous registered
Holder of such Debenture.

                                        8
<PAGE>

      3. TRANSFER AND EXCHANGE OF DEBENTURES. Subject to compliance with federal
and applicable state securities laws, the registered Holder of any Debenture or
Debentures may, prior to maturity or prepayment thereof, surrender such
Debenture or Debentures at the principal office of the Company for transfer or
exchange only to:

            (a) a member of such Holder's immediate family and such Holder's
grandchildren,

            (b) a trust established for the benefit of the parties set forth in
Section 3(a), or

            (c) an "Affiliate" of such Holder (collectively, the parties set
forth in Sections 3(a), 3(b) and this Section 3(c) shall be referred to herein
as the "Permitted Transferees"). An "Affiliate" of a Holder shall mean a person
that directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Holder; provided, however,
that any Permitted Transferee as a condition thereto shall execute and deliver
an acknowledgment of the terms hereof in form acceptable to the Company. Within
a reasonable time after notice to the Company from a registered Holder of its
intention to make such exchange to a Permitted Transferee and without expense
(other than transfer taxes, if any) to such registered Holder, the Company shall
issue in exchange therefor another Debenture or Debentures, in such
denominations as requested by the registered Holder (in multiples of $1,000),
for the same aggregate principal amount as the unpaid principal amount of the
Debenture or Debentures so surrendered and having the same maturity and rate of
interest, containing the same provisions and subject to the same terms and
conditions as the Debenture or Debentures so surrendered. Each new Debenture
shall be made payable to such Permitted Transferee or Transferees, or registered
assigns, as the registered Holder of such surrendered Debenture or Debentures
may designate, and such transfer or exchange shall be made in such a manner that
no gain or loss of principal or interest shall result therefrom. Transfers other
than to Permitted Transferees shall be prohibited. Notwithstanding the foregoing
sentence, in case of transfer by operation of law, the transferee agrees to
notify the Company of such transfer and of his address, and to submit
appropriate evidence regarding the transfer so that this Debenture may be
registered in the name of the transferee. This Debenture is transferable only on
the books of the Company by the registered Holder hereof, in person or by
attorney, on the surrender hereof, duly endorsed. Communications sent to any
registered Holder shall be effective as against all holders, Permitted
Transferees, or transferees by operation of law of the Debenture not registered
at the time of sending the communication.

      4. REPLACEMENT OF DEBENTURES. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of any Debenture and, if
requested in the case of any such loss, theft or destruction, upon delivery of
an indemnity bond or other agreement or security reasonably satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of such Debenture, the Company will issue a new Debenture, of like tenor and
amount and dated the date to which interest has been paid, in lieu of such lost,
stolen, destroyed or mutilated Debenture.

I. MISCELLANEOUS.

      1. AMENDMENT. Except as provided herein, any term of this Debenture may be
amended with the written approval of the Majority-in-Interest; provided,
however, that no amendment may modify the interest rate or the principal amount,
extend the Maturity Date,

                                        9
<PAGE>

adversely effect the repayment terms, or alter the conversion rate of this
Debenture without the consent of the Holder hereof.

      2. AUTHORIZATION. This Debenture has been issued by the Company pursuant
to authorization of the Board of Directors of the Company which provides for an
aggregate of up to $1,500,000 in face amount of Debentures to be issued in the
Offering.

      3. PRESENTATION FOR PAYMENT. Any amount of principal and interest
outstanding on the Maturity Date shall be paid to the registered Holder of this
Debenture upon presentation of this Debenture to the Company.

      4. GOVERNING LAW; CONSENT TO JURISDICTION. This Debenture shall be
construed and enforced in accordance with the laws of the State of Delaware. Any
proceeding arising out of or relating to this Debenture may be brought in the
courts of the Commonwealth of Massachusetts, County of Norfolk, and the Company
and the Holder each irrevocably submits to the exclusive jurisdiction of such
court in any such proceeding, waives any objection it may now or hereafter have
to venue or to convenience of forum, agrees that all claims in respect of such
proceeding shall be heard and determined only in any such court and agrees not
to bring any proceeding arising out of or relating to this Debenture in any
other court. The parties agree that either or both of them may file a copy of
this paragraph with any court as written evidence of the knowing, voluntary and
bargained agreement between the parties irrevocably to waive any objections to
venue or to convenience of forum. Process in any proceeding referred to in the
first sentence of this section may be served on any party anywhere in the world.

                            {Signature Page Follows}

                                       10
<PAGE>

            IN WITNESS WHEREOF, the Company has caused this Debenture to be
signed in its name by the undersigned.

                                        ELCOM INTERNATIONAL, INC.
                                        (the "Company")

                                        By: ____________________________________
                                            Robert J. Crowell, Chairman and
                                               Chief Executive Officer

Agreed to and Acknowledged:

_____________________________________
              <<NAME>>

("Holder")

                                       11

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