-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cje/dyvoAVVMBcBPfdhhpfWXxs0CTM5ZniUhFe1/FDLpgNXYbnRuKgvoaXK2Z/zv uX6qT8VU8sRP6LN3jZWTJQ== 0000894579-97-000171.txt : 19971023 0000894579-97-000171.hdr.sgml : 19971023 ACCESSION NUMBER: 0000894579-97-000171 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19971022 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ELXSI CORP /DE// CENTRAL INDEX KEY: 0000712843 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 770151523 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-35748 FILM NUMBER: 97699002 BUSINESS ADDRESS: STREET 1: 4209 VINELAND ROAD SUITE J-I STREET 2: C/O ELXSI CITY: ORLANDO STATE: FL ZIP: 32811 BUSINESS PHONE: 4078491090 MAIL ADDRESS: STREET 1: 4209 VINELAND ROAD STREET 2: SUITE J-1 CITY: ORLANDO STATE: FL ZIP: 32811 FORMER COMPANY: FORMER CONFORMED NAME: ELXSI CORP /DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: ELXSI LTD DATE OF NAME CHANGE: 19870920 FORMER COMPANY: FORMER CONFORMED NAME: TRILOGY LTD DATE OF NAME CHANGE: 19870127 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MILLEY ALEXANDER M CENTRAL INDEX KEY: 0001000247 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 4209 VINELAND RD STREET 2: STE J-1 CITY: ORLANDO STATE: FL ZIP: 32811 BUSINESS PHONE: 4078499800 MAIL ADDRESS: STREET 1: 4209 VINELAND RD STREET 2: STE J-1 CITY: ORLANDO STATE: FL ZIP: 32811 SC 13D/A 1 SEC FILING SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D/A (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a) (Amendment No. 11 )1 ELXSI Corporation ________________________________________________________________________________ (Name of Issuer) Common Stock, par value $.001 per share (and Associated Common Stock Purchase Rights) ________________________________________________________________________________ (Title of Class of Securities) 268613-205 ________________________________________________________________________________ (CUSIP Number) Alexander M. Milley, 3600 Rio Vista Avenue, Suite A, Orlando, Florida 32805 (407) 849-1090 ________________________________________________________________________________ (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) October 8, 1997 ________________________________________________________________________________ (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ] Note. Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. (Continued on following pages) Page 1 of 24 Pages The Exhibit Index appears on page 16 1 The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D CUSIP No. 268613-205 Page 2 of 24 Pages ________________________________________________________________________________ 1) NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Alexander M. Milley ________________________________________________________________________________ 2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] ________________________________________________________________________________ 3) SEC USE ONLY ________________________________________________________________________________ 4) SOURCE OF FUNDS* N/A ________________________________________________________________________________ 5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] ________________________________________________________________________________ 6) CITIZENSHIP OR PLACE OF ORGANIZATION USA ________________________________________________________________________________ NUMBER 7) SOLE VOTING POWER OF 1,191,151** SHARES _________________________________________________________ BENEFICIALLY 8) SHARED VOTING POWER OWNED BY -0- EACH _________________________________________________________ REPORTING 9) SOLE DISPOSITIVE POWER PERSON 1,191,151** WITH _________________________________________________________ 10) SHARED DISPOSITIVE POWER -0- ________________________________________________________________________________ 11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,191,151** ________________________________________________________________________________ 12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* CERTAIN SHARES [ ] ________________________________________________________________________________ 13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 24.1% ________________________________________________________________________________ 14) TYPE OF REPORTING PERSON* IN ________________________________________________________________________________ *SEE INSTRUCTIONS BEFORE FILLING OUT! ** Includes: (i) shares held by other persons joining in this filing; and (ii) shares that Mr. Milley and other persons joining in this filing have the right to acquire. Excludes shares that Mr. Milley has the right to acquire in more than 60 days. SCHEDULE 13D CUSIP No. 268613-205 Page 3 of 24 Pages ________________________________________________________________________________ 1) NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Milley Management Incorporated ________________________________________________________________________________ 2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] ________________________________________________________________________________ 3) SEC USE ONLY ________________________________________________________________________________ 4) SOURCE OF FUNDS* N/A ________________________________________________________________________________ 5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] ________________________________________________________________________________ 6) CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ________________________________________________________________________________ NUMBER 7) SOLE VOTING POWER OF -0- SHARES _________________________________________________________ BENEFICIALLY 8) SHARED VOTING POWER OWNED BY 177,342** EACH _________________________________________________________ REPORTING 9) SOLE DISPOSITIVE POWER PERSON -0- WITH _________________________________________________________ 10) SHARED DISPOSITIVE POWER 177,342** ________________________________________________________________________________ 11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 177,342** ________________________________________________________________________________ 12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] ________________________________________________________________________________ 13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.8% ________________________________________________________________________________ 14) TYPE OF REPORTING PERSON* CO ________________________________________________________________________________ *SEE INSTRUCTIONS BEFORE FILLING OUT! ** Consists entirely of shares held by another person joining in this filing. SCHEDULE 13D CUSIP No. 268613-205 Page 4 of 24 Pages ________________________________________________________________________________ 1) NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON ELX Limited Partnership ________________________________________________________________________________ 2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] ________________________________________________________________________________ 3) SEC USE ONLY ________________________________________________________________________________ 4) SOURCE OF FUNDS* N/A ________________________________________________________________________________ 5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] ________________________________________________________________________________ 6) CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ________________________________________________________________________________ NUMBER 7) SOLE VOTING POWER OF 590,200 SHARES _________________________________________________________ BENEFICIALLY 8) SHARED VOTING POWER OWNED BY -0- EACH _________________________________________________________ REPORTING 9) SOLE DISPOSITIVE POWER PERSON 590,200 WITH _________________________________________________________ 10) SHARED DISPOSITIVE POWER -0- ________________________________________________________________________________ 11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 590,200 ________________________________________________________________________________ 12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] ________________________________________________________________________________ 13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 12.7% ________________________________________________________________________________ 14) TYPE OF REPORTING PERSON* PN ________________________________________________________________________________ *SEE INSTRUCTIONS BEFORE FILLING OUT! SCHEDULE 13D CUSIP No. 268613-205 Page 5 of 24 Pages ________________________________________________________________________________ 1) NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Cadmus Corporation ________________________________________________________________________________ 2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] 3) SEC USE ONLY ________________________________________________________________________________ 4) SOURCE OF FUNDS* WC ________________________________________________________________________________ 5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] ________________________________________________________________________________ 6) CITIZENSHIP OR PLACE OF ORGANIZATION Massachusetts ________________________________________________________________________________ NUMBER 7) SOLE VOTING POWER OF 177,342 SHARES _________________________________________________________ BENEFICIALLY 8) SHARED VOTING POWER OWNED BY -0- EACH _________________________________________________________ REPORTING 9) SOLE DISPOSITIVE POWER PERSON 177,342 WITH _________________________________________________________ 10) SHARED DISPOSITIVE POWER -0- ________________________________________________________________________________ 11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 177,342 ________________________________________________________________________________ 12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] ________________________________________________________________________________ 13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.8% ________________________________________________________________________________ 14) TYPE OF REPORTING PERSON* CO ________________________________________________________________________________ *SEE INSTRUCTIONS BEFORE FILLING OUT! SCHEDULE 13D CUSIP No. 268613-205 Page 6 of 24 Pages ________________________________________________________________________________ 1) NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Elliot Kirkland L.L.C. ________________________________________________________________________________ 2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] ________________________________________________________________________________ 3) SEC USE ONLY ________________________________________________________________________________ 4) SOURCE OF FUNDS* N/A ________________________________________________________________________________ 5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] ________________________________________________________________________________ 6) CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ________________________________________________________________________________ NUMBER 7) SOLE VOTING POWER OF 231,109** SHARES _________________________________________________________ BENEFICIALLY 8) SHARED VOTING POWER OWNED BY -0- EACH _________________________________________________________ REPORTING 9) SOLE DISPOSITIVE POWER PERSON 231,109** WITH _________________________________________________________ 10) SHARED DISPOSITIVE POWER -0- ________________________________________________________________________________ 11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 231,109** ________________________________________________________________________________ 12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] ________________________________________________________________________________ 13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.8% ________________________________________________________________________________ 14) TYPE OF REPORTING PERSON* OO ________________________________________________________________________________ *SEE INSTRUCTIONS BEFORE FILLING OUT! ** Includes shares that Eliot Kirkland L.L.C has the right to acquire. 7 Alexander M. Milley ("AMM"), Milley Management Incorporated, a Delaware corporation ("MMI"), ELX Limited Partnership, a Delaware limited partnership ("ELX"), Cadmus Corporation, a Massachusetts corporation ("Cadmus"), and Eliot Kirkland L.L.C., a Delaware limited liability company ("Kirkland"), hereby amend their statement on Schedule 13D dated September 8, 1989 (the "Original Statement"), as amended by the Amendment No. 1 to the Original Statement dated October 2, 1989 ("Amendment No. 1"), the Amendment No. 2 to the Original Statement dated January 29, 1990 ("Amendment No. 2"), the Amendment No. 3 to the Original Statement dated November 6, 1992 ("Amendment No. 3"), the Amendment No. 4 to the Original Statement dated June 4, 1993 ("Amendment No. 4"), the Amendment No. 5 to the Original Statement dated October 8, 1993 ("Amendment No. 5"), the Amendment No. 6 to the Original Statement dated November 30, 1993 ("Amendment No. 6"), the Amendment No. 7 to the Original Statement dated December 20, 1994 ("Amendment No. 7"), the Amendment No. 8 to the Original Statement dated January 31, 1995 ("Amendment No. 8"), the Amendment No. 9 to the Original Statement dated September 20, 1995 ("Amendment No. 9") and the Amendment No. 10 to the Original Statement dated January 7, 1996 (intended to be January 7, 1997) ("Amendment No. 10"; and the Original Statement as amended by Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4, Amendment No. 5, Amendment No. 6, Amendment No. 7, Amendment No. 8, Amendment No. 9 and Amendment No. 10, the "Amended Statement"), filed with respect to the Common Stock, par value $.001 per share (the "Common Stock"), of ELXSI Corporation, a Delaware corporation (the "Issuer"). The Original Statement as amended by Amendment No. 1, Amendment No. 2 and Amendment No. 3 (the "Earlier Filings") were executed and filed by AMM, MMI, ELX and Cadmus jointly with other persons and entities, in accordance with Rule 13d-1(f)(1) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Each of Amendment No. 4, Amendment No. 5, Amendment No. 6, Amendment No. 7 and Amendment No. 8 (the "Later Filings") was executed and filed by AMM, MMI, ELX, Cadmus, Winchester National, Inc., a Delaware corporation, and/or Winter Pond Partners, L.P., a Delaware limited partnership (liquidated and dissolved in May 1994). Amendment No. 9 and Amendment No. 10 were, and this Amendment No. 11 is being, executed and filed by AMM, MMI, Cadmus, ELX and Kirkland (the "Amended Statement Filers") jointly with each other in accordance with such Rule, but not with any of the other persons or entities who joined in the Earlier Filings and/or Later Filings. The information reported in Amendment No. 4, Amendment No. 5, Amendment No. 6, Amendment No. 7, Amendment No. 8, Amendment No. 9, Amendment No. 10 and/or this Amendment No. 11 relates solely to the Amended Statement Filers and other entities who joined in the execution and filing thereof, and not to any of such other persons or entities who joined in the Earlier Filings and/or Later Filings. Accordingly, each Amended Statement Filer hereby disclaims any responsibility for (i) the filing of any reports or information required under Section 13(d) of the Exchange Act and Regulation 13D-G promulgated thereunder relating to any of such other persons or entities, (ii) the timeliness of any such filing, and (iii) the completeness and accuracy of any such report or information. The Issuer entered into a Rights Agreement, dated as of June 4, 1997 (the "Rights Agreement"), with Continental Stock Transfer & Trust Company, as Rights Agent. 8 Pursuant to the Rights Agreement, the Board of Directors declared a dividend of one Common Stock Purchase Right (each, a "Right") for each share of Common Stock outstanding at the opening of business on June 16, 1997. All shares of Common Stock of the Company issued on or after such date will also have one attached Right. Therefore, each outstanding share of Common Stock carries an associated Right and, unless otherwise expressly indicated herein or in the Amended Statement, all references to Common Stock shall include the associated Rights. This Amendment No. 11 is being filed in order to report that: 1. On each of September 19, 1997 and September 24, 1997 Cadmus purchased 2,000 shares of Common Stock (or 4,000 shares in the aggregate) in the over-the-counter market (the "September 1997 O-T-C Purchases"). 2. On October 1, 1997 Cadmus formally commenced an offer to purchase shares of Common Stock from a portion of the group of stockholders that own less than 100 shares of Common Stock (after giving effect to the Issuer's May 1992 1-for-25 reverse split of outstanding shares (the "1992 Reverse Split")) (the "1997 Odd-Lot Offer"); and that pursuant to the 1997 Odd-Lot Offer Cadmus has, to date, purchased an aggregate of 195 shares of Common Stock (the "Initial 1997 Odd-Lot Purchases"). 3. Effective May 22, 1997 the Issuer granted to AMM nonqualified stock options to purchase an aggregate of 42,500 shares of Common Stock (the "1997 Plan Nonqualified Options") pursuant to the Issuer's 1997 Incentive Stock Option Plan (the "1997 Plan"), which 1997 Plan Nonqualified Options become 100% exercisable on November 22, 1997. 4. Effective October 8, 1997 the Issuer granted to AMM nonqualified stock options to purchase an aggregate of 40,000 shares of Common Stock (the "1993 Plan Nonqualified Options"; and together with the 1997 Plan Nonqualified Options, the "1997 Nonqualified Options") pursuant to the Issuer's 1993 Incentive Stock Option Plan (the "1993 Plan"), which 1993 Plan Nonqualified Options become 100% exercisable on April 10, 1998. 5. In February 1997 the Board of Directors of the Issuer agreed to: (i) extend the term of the Series A Warrants to purchase 50,000 shares of Common Stock at $3.125 per share ("Series A Warrants") held by Kirkland from September 30, 1996 to September 30, 1998, in consideration of Kirkland's agreement to increase the exercise price thereof to $3.75 per share, and (ii) extend the term of the Series C Warrants to purchase 68,762 shares of Common Stock at $4.36 per share ("Series C Warrants") held by Kirkland from January 31, 1997 to January 31, 1999, in consideration of Kirkland's agreement to increase the exercise price thereof to $5.23 per share (the "Warrants Extension"). 6. In June 1997 the subsidiaries of Azimuth Corporation, a Delaware corporation ("Azimuth"), identified in (and defined as the "Azimuth Subsidiaries" in) Amendment 9 No. 10 completed a third-party refinancing of the Azimuth Subsidiary Loans (as defined in Amendment No. 10) with the result that (among other things) such Loans were paid-off and satisfied-in-full in accordance with the terms of the Azimuth Transactions Agreement (as defined in Amendment No. 10) and the related collateral security interests and loan documentation were terminated the ("Azimuth Transactions Termination"). 7. On June 30 1997 Cadmus purchased from Bank of America Illinois (now named Bank of America National Trust and Savings Association ("BANTSA")) the 6,517 shares of Series AAA 5% Cumulative Redeemable Preferred Stock, par value $1.00 per share, of Azimuth (the "Series AAA") issued to BANTSA on December 30, 1996 under the Azimuth Transactions Agreement. The purchase price to Cadmus was $2,000,000, and the funds therefor were provided through a loan made to Cadmus by the Issuer's wholly-owned subsidiary, ELXSI, a California corporation ("ELXSI") (the "ELXSI-to-Cadmus Loan"). Except as set forth herein, there has been no material change in the facts set forth in the Amended Statement with respect to any of the Amended Statement Filers. Items and sub-items not expressly addressed herein are inapplicable with respect to the Amended Statement Filers, or the responses to them with respect to the Amended Statement Filers either are negative or have not changed from those of the Amended Statement. Item 2. Identity and Background (b) The business address of each Amended Statement Filer has been moved to 3600 Rio Vista Avenue, Suite A, Orlando, Florida 32805. (Their telephone number remains unchanged.) Item 3. Source and Amount of Funds or Other Consideration Of the transactions enumerated in the fourth narrative paragraph of this Amendment No. 11, only the September 1997 O-T-C Purchases, the Initial 1997 Odd-Lot Purchases and the 1997 Odd-Lot Offer involved or will involve the payment or transfer of funds for the purchase of securities of the Issuer. The source of the funds of the September 1997 O-T-C Purchases, totalling $40,750 (or $9.875 per share for the first 2,000 shares and $10.25 per share for the second 2,000 shares, plus in each case a $0.125 per share commission/mark-up), was Cadmus's own working capital funds. The source of the funds of the Initial 1997 Odd-Lot Purchases, totalling $2,028.75 (or $10.255 per share for 135 shares and $10.75 per share for the remaining 60 shares), was Cadmus's own working capital funds. The source of the funds for other purchases that may be made pursuant to the 1997 Odd-Lot Offer will be Cadmus's own working capital funds. 10 Item 4. Purpose of Transaction September 1997 O-T-C Purchases. The purpose the September 1997 O-T-C Purchases was to increase Cadmus's investment in the Issuer at a time when shares of Common Stock were available at what it considered to be a favorable price. 1997 Odd Lot-Offer. Cadmus's 1997 Odd-Lot Offer was made pursuant to a letter, dated September 24, 1997, a form of which is filed herewith as Exhibit B, addressed to each of those holders of so-called "odd-lots" of Common Stock (i.e., less than 100 shares, after giving effect to the 1992 Reverse Split) ("Odd-Lot Holders") as are described in the following sentence. To date, such letter has been mailed to only those Odd-Lot Holders who (the Issuer's records reflect): (i) exchanged their pre-1992 Reverse Split Common Stock certificates for post-1992 Reverse Split Common Stock certificates and (ii) hold 51-75 shares of Common Stock (such Odd-Lot Holders, the "Initial Odd-Lot Offerees"). The terms of the 1997 Odd-Lot Offer are that Cadmus will purchase shares tendered pursuant thereto at the closing sale price per share of Common Stock on the trading day immediately preceding the post-mark or other forwarding date of the tendering Odd-Lot Holders' respective return of materials. In addition, in no event will Cadmus purchase pursuant to the 1997 Odd-Lot Offer a number of shares of Common Stock that, together with all other shares of Common Stock purchased by Cadmus in the preceding 12 months, would constitute more than 2% of the outstanding shares of Common Stock. Including the shares purchased in the September 1997 O-T-C Purchases for this purpose, Cadmus will not purchase more than approximately 89,000 shares of Common Stock pursuant to the 1997 Odd-Lot Offer. At present, to the Issuer's knowledge: (A) approximately 127,281 shares of Common Stock are held by Odd-Lot Holders, and (B) approximately 6,917 shares of Common Stock are held by Initial Odd-Lot Offerees. The purpose the 1997 Odd-Lot Offer is to: (i) help to increase Cadmus's investment in the Issuer at a time when shares of Common Stock may be available at what it considers to be favorable prices, and (ii) in a way that is not coercive and may be advantageous to Odd-Lot Holders (i.e., by allowing them an opportunity to sell Common Stock on a commission-free basis), help the Issuer to reduce the burden and expense of communicating with Odd-Lot Holders who may (in any event) wish to sell their shares. 1997 Nonqualified Options. The stated purpose of both the 1997 Plan and 1993 Plan is to establish as close an identity as feasible between the interests of the Issuer and those of selected directors, officers and key employees of the Issuer, and also to attract, retain, motivate and reward persons of superior ability, training and experience. Warrants Extension. The purpose of the Warrants Extension was to accept the request of AMM, on behalf of Kirkland (and the I Trust (as defined in Amendment No. 7), which holds 150,500 Series A Warrants) that the expiration date of the Series A Warrants and Series C Warrants be extended in return for the agreement of Kirkland (and the I Trust) that the exercise price thereof will be increased over the then-current $3.125 and $4.36 per share of Common Stock (respectively) to a higher price. In approving such request and extending the terms of the Series A Warrants and Series C Warrants 11 (as set forth in item 5 of the fourth narrative paragraph of this Amendment No. 11), the Board of Directors wished to help to maintain the pre-existing identity of interests between the Issuer and AMM (the Chairman, President and Chief Executive Officer of the Issuer) and to continue to motivate AMM in the Issuer's behalf. Azimuth Transactions Termination. The purpose of the Azimuth Transactions (as defined in Amendment No. 10) was to provide a temporary "bridge" of revolving credit to the Azimuth Subsidiaries on terms that were intended to earn ELXSI a return on investment not generally available in the market place. The cost to the Azimuth Subsidiaries of the financing provided by ELXSI under the Azimuth Transactions Agreement was relatively high compared to those that would eventually become available to them from third-parties, and since the time of the closing of the Azimuth Transactions (on December 30, 1996) the Azimuth Subsidiaries were continuously seeking to replace such financing with lower-cost, permanent financing. With the payment and satisfaction of the indebtedness owed to ELXSI by the Azimuth Subsidiaries in the Azimuth Transactions Termination, and ELXSI's realization of the other values provided under the Azimuth Transactions Agreement, ELXSI did in fact realize a return from the Azimuth Transactions not generally available in the market place. The Azimuth Transactions Termination transactions are memorialized in a letter agreement executed by ELXSI, Azimuth and the Azimuth Subsidiaries in the form filed herewith as Exhibit C. ELXSI-to-Cadmus Loan. The purpose of the ELXSI-to-Cadmus Loan was to provide an additional opportunity to earn ELXSI a return on investment not generally available in the market place. The terms of the ELXSI-to-Cadmus Loan are as follows: (A) June 30, 1999 maturity date, with all principal payable at that time; (B) interest accruing from origination at 15% per annum, payable quarterly; and (C) secured by a pledge of the Azimuth Series AAA shares. In addition, in connection with the ELXSI-to-Cadmus Loan Cadmus agreed to pay to ELXSI a $100,000 closing fee and all of its fees and expenses in connection with ELXSI's borrowing of funds for on-lending to Cadmus. (Such funds were obtained by ELXSI under its existing amended and restated credit agreement with BANTSA, a waiver under which BANTSA granted for such purpose.) The terms of the ELXSI-to-Cadmus Loan are memorialized in a Secured Promissory Note made and executed by Cadmus in the form filed herewith as Exhibit D. (a) Depending on the level of responses it receives to the Odd-Lot Offer made to the Initial Odd-Lot Offerees, Cadmus may or may not determine to formally extend the Odd-Lot Offer to other Odd-Lot Holders. In addition, from time to time after the date hereof, any one or more of AMM, MMI, ELX, Cadmus or Kirkland may purchase or acquire additional shares of Common Stock (or options or warrants to purchase additional shares of Common Stock); however, there are currently no definitive plans or proposals to do so. Item 5. Interest in Securities of the Issuer (a) AMM. The aggregate number of shares of Common Stock beneficially owned by AMM is 1,191,151. Of these shares: (i) 25,000 are outstanding shares held by 12 AMM; (ii) 125,000 are purchasable upon exercise of presently exercisable options granted by the Issuer to AMM; (iii) 42,500 are purchasable upon exercise of options (the 1997 Plan Nonqualified Options) granted by the Issuer to AMM and exercisable within 60 days; (iv) 112,347 are outstanding shares held by Kirkland; (v) 50,000 are purchasable upon exercise of presently exercisable, Series A Warrants held by Kirkland; (vi) 68,762 are purchasable upon exercise of presently exercisable, Series C Warrants held by Kirkland; (vii) 590,200 are outstanding shares held by ELX; and (viii) 177,342 are outstanding shares held by Cadmus. On a percentage basis these shares represent approximately 24.1% of the outstanding shares of the Common Stock (calculated and determined in accordance with Rule 13d-3(d)(1) under the Exchange Act). The foregoing excludes (in accordance with Rule 13d-3(d)(1) under the Exchange Act) the 40,000 shares of Common Stock purchasable upon exercise of the 1993 Plan Nonqualified Options. If these 40,000 shares were included in the foregoing: (a) the aggregate number of shares of Common Stock beneficially owned by AMM would be 1,231,151, and (b) on a percentage basis that number of shares would represent approximately 24.7% of the outstanding shares of the Common Stock (calculated and determined in accordance with Rule 13d-3(d)(1) under the Exchange Act). See sub-item 5(b) below for disclosure of the relationship between AMM and each of MMI, ELX, Cadmus and Kirkland. MMI. The aggregate number of shares of Common Stock beneficially owned by MMI is 177,342, all of which are outstanding shares held by Cadmus. On a percentage basis these shares represent approximately 3.8% of the outstanding shares of the Common Stock (calculated and determined in accordance with Rule 13d-3(d)(1) under the Exchange Act). See sub-item 5(b) below for disclosure of the relationship between MMI and Cadmus. ELX. The aggregate number of shares of Common Stock beneficially owned by ELX is 590,200, all of which are outstanding shares held by ELX. On a percentage basis these shares represent approximately 12.7% of the outstanding shares of the Common Stock (calculated and determined in accordance with Rule 13d-3(d)(1) under the Exchange Act). Cadmus. The aggregate number of shares of Common Stock beneficially owned by Cadmus is 177,342, consisting entirely of outstanding shares held by Cadmus. On a percentage basis these shares represent approximately 3.8% of the outstanding shares of the Common Stock (calculated and determined in accordance with Rule 13d- 3(d)(1) under the Exchange Act). Kirkland. The aggregate number of shares of Common Stock beneficially owned by Kirkland is 231,109. Of these shares: (i) 112,347 are outstanding shares held by Kirkland; (ii) 50,000 are purchasable upon exercise of presently exercisable, Series A Warrants held by Kirkland; and (iii) 68,762 are purchasable upon exercise of presently exercisable, Series C Warrants held by Kirkland. On a percentage basis these shares represent approximately 4.8% of the outstanding shares of the Common Stock (calculated and determined in accordance with Rule 13d-3(d)(1) under the Exchange Act). 13 (b) Each of AMM, ELX, Cadmus and Kirkland has the sole power to vote and to direct the vote, and the sole power to dispose of and to direct the disposition of, the shares of Common Stock reported hereinabove as being held by such Amended Statement Filer. MMI does not directly hold any of the Issuer's securities reported herein but, inasmuch as MMI is a controlling stockholder of Cadmus, MMI may be deemed to share (with Cadmus and/or AMM) the power to vote and to direct the vote, and to share (with Cadmus and/or AMM) the power to dispose of and to direct the disposition of, the shares of Common Stock reported hereinabove as being held Cadmus. AMM's beneficial ownership of shares held (or subject to warrants held) by: (i) Kirkland arises solely from his capacity as sole manager, President and a member thereof, (ii) ELX arises solely from his capacity as sole general partner thereof, and (iii) MMI and Cadmus arises solely from his capacity as sole director, President and a stockholder of MMI and his capacity as a director, President and (indirectly, through MMI) a controlling shareholder of Cadmus; and this filing shall not be construed as an admission that AMM is otherwise, for purposes of Section 13 of the Exchange Act or otherwise, the beneficial owner of any of the shares of Common Stock of the Issuer reported herein as being held by MMI, ELX, Cadmus or Kirkland. MMI's beneficial ownership of shares held by Cadmus arises solely from its capacity as a controlling shareholder thereof. This filing shall not be construed as an admission that any of MMI, ELX, Cadmus or Kirkland is otherwise, for purposes of Section 13 of the Act or otherwise, the beneficial owner of the shares of Common Stock of the Issuer reported herein as being held by any other Amended Statement Filer, and each of MMI, ELX, Cadmus and Kirkland hereby disclaims beneficial ownership of such shares. (c) Reference is hereby made to the descriptions and discussions of the September 1997 O-T-C Purchases, the Initial 1997 Odd-Lot Purchases and the 1997 Nonqualified Options appearing elsewhere in this Amendment No. 11, which descriptions and discussions are hereby incorporated herein by reference in response to this sub-item. Item 6. Contracts, Arrangements, Understanding or Relationships With Respect to Securities of the Issuer 1997 Nonqualified Options. The 1997 Plan Nonqualified Options and 1993 Plan Nonqualified Options are each governed by the terms of the relevant Nonqualified Stock Option Plan Option Grant document (the "1997 Nonqualified Options Agreements") from the Issuer to AMM. The following is a brief description of the terms of the 1997 Nonqualified Options Agreements. The 1997 Nonqualified Options Agreements relating to: (i) the 1997 Plan Nonqualified Options permit AMM to purchase (in the aggregate) up to 42,500 shares of Common Stock at a price of $6.00 per share, and (ii) the 1993 Plan Nonqualified Options permit AMM to purchase (in the aggregate) up to 40,000 shares of Common Stock at a price of $9.25 per share. The 1997 Plan Nonqualified Options become exercisable on November 22, 1997 and expire on May 22, 2007. The 1993 Plan Nonqualified Options become exercisable on April 10, 1998 and expire on May October 10, 2007. AMM may exercise the 1997 Nonqualified Options by delivery of a written notice to a designated 14 officer of the Issuer. Unless the shares acquired upon exercise have been registered under the Securities Act of 1933, AMM must provide the Issuer with a letter to the effect that the shares are being purchased for his own account for investment and not with a view to distribution or resale, and to such other effects as the Issuer deems necessary to comply with Federal and state securities laws. The exercise price may be paid in cash, by delivery and assignment to the Issuer of securities of the Issuer owned by AMM or by a combination of these; alternatively, AMM may purchase the shares through a "cashless" exercise. The Issuer's obligation to deliver the shares of Common Stock upon exercise of the 1997 Nonqualified Options is subject to AMM's satisfaction of all applicable Federal, state and local tax withholding obligations. The 1997 Nonqualified Options may not be transferred by AMM except by will or the laws of descent and distribution. In the case of the 1993 Plan Nonqualified Options: (a) if AMM ceases to be eligible to exercise such Options they may nevertheless be exercised within 90 days of his becoming ineligible if the Issuer consents thereto in writing or if AMM became ineligible through retirement, and (b) in the event of AMM's death or disability, the option may be exercised by AMM's executor or heir within the one-year period following his death or disability. The 1997 Plan Nonqualified Options Agreement is subject to the terms and conditions of the 1997 Plan, which is incorporated by reference into this Amendment No. 11 as Exhibit E. Item 7. Material to be Filed as Exhibits Exhibit A -- Joint Filing Agreement, dated September 20, 1995, among Alexander M. Milley, Milley Management Incorporated, ELX Limited Partnership, Cadmus Corporation and Eliot Kirkland L.L.C. (incorporated by reference to Exhibit A to Amendment No. 9) Exhibit B -- Form of letter, dated September 24, 1997, addressed to Odd-Lot Holders with respect to the 1997 Odd-Lot Offer Exhibit C -- Form of letter (captioned "Satisfaction and Termination of Loan Agreements"), dated June ___, 1997, from ELXSI to Azimuth Corporation, Delaware Electro Industries, Inc., Contempo Design, Inc. and Contempo Design West, Inc. regarding the Azimuth Transactions Termination Exhibit D -- Form of Secured Promissory Note made by Cadmus Corporation payable to the order of ELXSI Exhibit E -- ELXSI Corporation 1997 Incentive Stock Option Plan (incorporated by reference to Annex A to ELXSI Corporation's definitive Proxy Statement, dated April 14, 1997, filed with the Securities and Exchange Commission (File No. 0- 11877)) 15 After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: October 22, 1997 MILLEY MANAGEMENT INCORPORATED /s/ Alexander M. Milley By:/s/ Alexander M. Milley - ----------------------------------- ----------------------------------- Alexander M. Milley, Alexander M. Milley individually President ELX LIMITED PARTNERSHIP CADMUS CORPORATION By:/s/ Alexander M. Milley By:/s/ Alexander M. Milley - ----------------------------------- ----------------------------------- Alexander M. Milley Alexander M. Milley Sole General Partner President ELIOT KIRKLAND L.L.C. By:/s/ Alexander M. Milley - ---------------------------------- Alexander M. Milley President 16 EXHIBIT INDEX Exhibit Document Page - ------- ------------------------------------------------ ---- A Joint Filing Agreement, dated September 20, 1995, among Alexander M. Milley, Milley Management Incor- porated, ELX Limited Partnership, Cadmus Corporation and Eliot Kirkland L.L.C. B Form of letter, dated September 24, 1997, addressed 17 to Odd-Lot Holders with respect to the 1997 Odd-Lot Offer C Form of letter (captioned "Satisfaction and Termination 19 of Loan Agreements"), dated June ___, 1997, from ELXSI to Azimuth Corporation, Delaware Electro Indus- tries, Inc., Contempo Design, Inc. and Contempo Design West, Inc. regarding the Azimuth Transactions Termination D Form of Secured Promissory Note made by Cadmus 21 Corporation payable to the order of ELXSI E ELXSI Corporation 1997 Incentive Stock Option Plan (incorporated by reference to Annex A to ELXSI Corporation's definitive Proxy Statement, dated April 14, 1997, filed with the Securities and Exchange Commission (File No. 0-11877)) EX-99.B 2 FORM OF LETTER TO CERTAIN ODD-LOT HOLDERS 17 EXHIBIT B ELXSI Corporation 3600 Rio Vista Avenue, Suite A Orlando, Florida 32805 (407) 849-1090 (407) 849-0625 Fax September 24, 1997 [Name of Odd-Lot Holder] [Address of Odd-Lot Holder] Dear _____________: Our shareholder records indicate that you are the holder of ___ shares of ELXSI Corporation ("Company") common stock, par value $.001 per share ("Common Stock"), plus a corresponding number of Rights1 (collectively with the Common Stock, "Shares"). The Common Stock is currently trading in the $9 1/2-$11 1/2 range, and if you were to sell your Shares through a broker, their minimum or odd-lot commission may very well be quite substantial in relation to the aggregate sale price. This is to advise you that the Company has arranged for Cadmus Corporation, a Massachusetts corporation ("Cadmus")2, to offer you the opportunity to sell your Shares to them in a private transaction, free of any commissions, at the market price indicated in item 3 on the next page. This offer is being made to all holders Common Stock with less than 100 post-split shares of Common Stock ("Odd-Lot Holders"). Because of regulatory constraints, Cadmus will not purchase more than approximately 93,000 Shares (approximately 2%) pursuant to this offer. At present, Odd-Lot Holders hold approximately 127,281 shares of Common Stock. The offer will be held open indefinitely, until such time as the regulatory maximum is reached or termination for any other reason by Cadmus (which it reserves the right to do for at any time, without notice). If you would like to sell your shares of Common Stock to Cadmus (free of commissions), please: - -------- 1 Issued under that certain Rights Agreement, dated as of June 4, 1997, between the Company and Continental Stock Transfer & Trust Company, as Rights Agent. 2 Alexander M. Milley, the Company's Chairman, President and Chief Executive officer, is the Chairman, President and a controlling shareholder of Cadmus. Cadmus currently owns 173,147 Shares, or approximately 3.7% of those outstanding. Including those Shares, Mr. Milley beneficially owns, directly or indirectly, 1,144,456 Shares, or approximately 23.3% of those outstanding (as determined and calculated in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended). 18 1. Sign the back of your Common Stock certificate in the space provided for that purpose. That signature must correspond exactly as your name appears on the face of such certificate. 2. Have your signature on the back guaranteed by a bank or broker with a "Medallion Program Signature Guarantee" stamp. 3. Send your endorsed Common Stock certificate to Cadmus, address: 3600 Rio Vista Avenue, Suite A, Orlando, Florida 32805. The method of delivery of your Shares certificate is at the option and risk of the sender. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. 4. Include with your endorsed Common Stock certificate your address (if different from above) and phone number. Within two weeks of its receipt the certificate, Cadmus will forward you a check for your Shares, in an amount equal to the closing sale price per share of Common Stock (as reported by NASDAQ) on the trading day immediately preceding the post-mark or other forwarding date of your return materials. If you are unable to locate your Shares certificate, please contact our transfer agent at the address and number below. They will send you the paperwork necessary to receive a replacement certificate. If you wish to accept the offer, once you receive your replacement certificate you should follow the instructions above. The transfer agent is: Continental Stock Transfer & Trust Company, Lost Securities Department, 2 Broadway, New York, NY 10004; Tel. (212-509-4000). If you have any questions, please feel free to call me directly, at (407) 849-1090. Sincerely Carol J. Crawford Investor Relations EX-99.C 3 FORM OF AZIMUTH TRANSACTIONS TERMINATION AGREEMENT 19 EXHIBIT C ELXSI 4209 Vineland Road Suite J-1 Orlando, Florida 32811 June ___, 1997 Azimuth Corporation Delaware Electro Industries, Inc. Contempo Design, Inc. Contempo Design West, Inc. c/o Azimuth Corporation 4209 Vineland Road Suite J-1 Orlando, Florida 32811 Satisfaction and Termination of Loan Agreements Dear Sirs: Reference is hereby made to: (i) that certain Recapitalization Agreement, dated as of December 30, 1996 (the "Recapitalization Agreement"), by and among Azimuth Corporation, a Delaware corporation ("Azimuth"), Delaware Electro Industries, Inc., a Delaware corporation ("DEI"), Contempo Design, Inc., an Illinois corporation ("CDI"), Contempo Design West, Inc., a Delaware corporation ("CDW"; and, collectively with Azimuth, DEI and CDI, the "Group Members"), ELXSI, a California corporation ("ELXSI"), and Bank of America Illinois; (ii) the Group Loan Documentation (as defined in the Recapitalization Agreement); and (iii) the three $9,650,000 maximum principal amount New Revolving Notes, each dated December 30, 1996 (the "New Subsidiary Notes") made by (respectively) DEI, CDI and CDW (the "Subsidiaries") payable to the order of ELXSI. Capitalized terms used and not defined herein have the respective meanings ascribed to such terms under the Recapitalization Agreement. 1. Acknowledgement of Payment. ELXSI hereby acknowledges receipt this day of $5,550,000, constituting payment in full of the outstanding principal amount of the Subsidiary Loans plus the accrued but unpaid interest thereon. Promptly after the date hereof, the Subsidiaries will pay or cause to be paid to ELXSI the full amount of the accrued but unpaid interest on such Subsidiary Loans. 2. Termination of Group Loan Documentation. Effective as of the date hereof: (i) each of the Credit (as defined in each Subsidiary Loan Agreement), each of the Group Loan Documentation and each New Subsidiary Note are hereby terminated by mutual consent, and (ii) the Group Loan Documentation and New Subsidiary Notes shall no longer be of any force or effect; provided, however, that the foregoing shall not effect a termination of: (a) any provision of any of the Group Loan Documentation that, by the terms thereof, is intended to survive a termination of such Group Loan Documentation, 20 or (b) the obligations of the Subsidiaries under the second sentence of the foregoing paragraph 1. 3. Security Interests. In connection with the foregoing terminations, ELXSI hereby: (i) releases the Group Security, and (ii) assigns, transfers and delivers to the appropriate Group Member, without recourse, representation or warranty, all of ELXSI's right, title and interest in and to the Collateral and Pledged Property. 4. Further Assurances. From time to time after the date hereof, as and when requested by any party hereto, each other party hereto shall execute and deliver, or cause to be executed and delivered, such documents and instruments and shall take, or cause to be taken, such further or other actions as such requesting party may reasonably deem necessary or desirable in order to further effect or evidence the transactions contemplated hereby and to otherwise carry out the intent and purposes of this agreement. 5. Governing Law. This agreement shall be governed by and construed in accordance with the laws of the State of Illinois (without regard to the choice of law principles thereof). Kindly indicate your acceptance of and agreement with the foregoing by executing a counterpart of this letter in the space provided below, whereupon it shall become a binding agreement among us. Very truly yours, ELXSI By: -------------------------------- Title: Accepted and Agreed to, as of the date first above written: AZIMUTH CORPORATION DELAWARE ELECTRO INDUSTRIES, INC. By: By: ------------------------------- -------------------------------- Title: Title: CONTEMPO DESIGN, INC. CONTEMPO DESIGN WEST, INC. By: By: ------------------------------- -------------------------------- Title: Title: EX-99.E 4 FORM OF ELXSI-TO-CADMUS LOAN NOTE 21 EXHIBIT D THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OFFERED FOR SALE UNLESS REGISTERED PURSUANT TO SUCH ACT OR UNLESS IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AN EXEMPTION FROM REGISTRATION IS AVAILABLE. CADMUS CORPORATION SECURED PROMISSORY NOTE $2,000,000 June 30, 1997 FOR VALUE RECEIVED, the undersigned, Cadmus Corporation, a Massachusetts corporation ("Payor"), hereby unconditionally promises to pay to the order of ELXSI, a California corporation ("Payee"), the principal sum of TWO MILLION AND 00/100 DOLLARS ($2,000,000) on June 30, 1999 (the "Maturity Date"), or such earlier date as may otherwise be provided for herein, plus interest at the rate and on the date provided for herein. This Promissory Note (this "Note") has been issued to evidence and set forth the terms of a $2,000,000 loan (the "Loan") made on June 30, 1997 by the Payee to the Payor. The Loan was made in order to finance the purchase by the Payor of 6,517 shares of Series AAA 5% Cumulative Redeemable Preferred Stock, par value $1.00 per share, of Azimuth Corporation (the "Stock"). As part of the terms of the Loan, the Payor has agreed: (i) to pay to the Payee a 5% (or $100,000) closing fee (the "Loan Fee") ; and (ii) to pay or reimburse the Payee for all of its fees and expenses in connection with its borrowing of such Loan funds for on-lending to the Payor (the "Loan Expenses"). Section 1. Interest, Payments and Prepayments. 1.1. The unpaid principal balance of this Note shall bear interest at a rate per annum equal to fifteen percent (15%). 1.2. Interest hereunder shall be due payable quarterly in arrears, on the last day of March, June, September and December, commencing with September 30, 1997. 1.3. Payments and prepayments of principal and interest on this Note shall be made in lawful money of the United States of America by wire or bank transfer, or as otherwise designated by Payee, in immediately available funds to an account designated in writing by Payee. 22 1.4. If the date on which any payment is required to be made pursuant to the provisions of this Note occurs on a Saturday, Sunday or legal holiday observed in the State of New York, such payment shall be due and payable on the immediately succeeding date which is not a Saturday, Sunday or legal holiday so observed. 1.5. The principal and interest on this Note may be voluntarily prepaid, in whole or in part, at any time and from time to time, provided that any principal amount so prepaid shall be accompanied by payment of the accrued but unpaid interest thereon. Prepayments shall be applied first to interest and then to principal. 1.6. Nothing contained in this Note shall be deemed to establish or require the payment of a rate of interest in excess of the maximum rate legally enforceable. If the rate of interest called for under this Note at any time exceeds the maximum rate legally enforceable, or if any charges payable pursuant hereto are, according to applicable laws, construed to be interest which has the effect of causing the interest hereunder to exceed the maximum rate legally enforceable, the rate of interest and/or charges required to be paid hereunder shall be automatically reduced so that the interest hereunder does not exceed the maximum rate legally enforceable. If such interest rate and/or charges are so reduced and thereafter the maximum rate legally enforceable is increased, the rate of interest and/or fees required to be paid hereunder shall be automatically increased to the maximum rate legally enforceable, which in no event shall exceed the rate otherwise provided for in this Note. Section 2. Pledge of Stock. 2.1. In order to secure the prompt and complete payment and performance when due of all of the obligations of the Payor hereunder, the Payor DOES HEREBY pledge to the Payee, and grant to the Payee and continuing first priority security interest in, all of Payor's right, title and interest in, to and under the following (collectively, the "Collateral"): (i) the Stock; (ii) any and all dividends and distributions, sinking fund and redemption payments and liquidation payments (in each case, whether in the form of cash, securities or other property) paid on, under or with respect to any of the Stock or other Collateral; (iii) any consideration received from the sale, exchange, lease or other disposition of Stock or other Collateral; (iv) any and all other or additional stock or other securities or property (including cash) paid or distributed in respect of any Stock or other Collateral by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar rearrangement; and (v) any other item constituting products or proceeds of the Stock or other Collateral within the meaning of the Uniform Commercial Code of the State of New York. 2.2. The Payor covenants and agrees that it will, at his own cost and expense, defend its title to the Collateral and the Payee's right, title and interest therein granted hereunder, against the claims and demands of all persons and entities whomsoever. 2.3. Following, and during the continuance of, any Event of Default (as hereinafter defined), the Payee irrevocably makes, constitutes, and appoints the Payee (and all officers, employees, or agents designated by Payee) as the Payor's true and lawful agent, proxy and attorney-in-fact, with full power of substitution, for the purpose of 23 taking any action and to executing any document or instrument which the Payee may deem necessary or advisable to accomplish the purposes of this Note, including without limitation, to: (i) transfer record title to the Stock and other Collateral to the Payee (or its nominee or assignee); and (ii) vote the Stock and other Collateral. Section 3. Events of Default. In the event that: 3.1. Payor defaults in making any payment required to be made under this Note; or, after Payee's demand therefor, defaults in the payment of the Loan Fee or Loan Expenses; or 3.2. Payor fails to pay any principal of or interest on any indebtedness for borrowed money, or any guarantee thereof, beyond the period of grace, if any, provided with respect thereto, or Payor defaults in the observance or performance of any other term, covenant, agreement, condition, undertaking or provision contained in any agreement or instrument evidencing or securing or related to any such indebtedness for borrowed money or guarantee, if the effect thereof is to cause, or permit the holder or holders thereof (or a trustee or trustees on behalf of such holder or holders) to cause, and such holder or holders have caused, such indebtedness for money borrowed or guarantee to become due prior to its stated maturity; provided that the aggregate amount of all indebtedness affected as aforesaid shall equal or exceed $2,000; or 3.3. (i) Payor shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or shall make a formal or informal general assignment for the benefit of its creditors; or (ii) there shall be commenced against Payor any case, proceeding, or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 90 days; or (iii) Payor takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i) or (ii) above; or (iv) Payor shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; then, upon the occurrence and during the continuance of any such event (an "Event of Default"), Payee (unless there shall have occurred an Event of Default under Section 3.3, in which case the unpaid balance of this Note shall automatically become due and payable) may, by written notice to Payor, declare this Note due and payable, whereupon 24 the same shall become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived. Section 4. Miscellaneous. 4.1. All notices, requests, demands or other communications to or upon Payor or Payee shall be deemed to have been given or made when deposited in the mails, postage prepaid, addressed to Payor at 4209 Vineland Road, Suite J-1, Orlando, Florida 32811, and to Payee at the same address. No other method of giving notice is hereby precluded. 4.2. No failure or delay on the part of the Payee in exercising any right, power or privilege hereunder, and no course of dealing between Payor and Payee shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege hereunder preclude the simultaneous or later exercise of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Payee would otherwise have. No notice to or demand on Payor in any case shall entitle the Payee to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Payee to take any other or further action in any circumstances without notice or demand. 4.3. The Payor agrees to pay and save the Payee harmless against liability for the payment of all out-of-pocket expenses arising in connection with the enforcement of this Note, including without limitation the reasonable fees and expenses of counsel selected by the Payee. 4.4. Upon receipt of evidence reasonably satisfactory to Payor of the loss, theft, destruction or mutilation of this Note and of a letter of indemnity reasonably satisfactory to Payor from the Payee, and upon reimbursement to Payor of all reasonable expenses incident thereto, and upon surrender or cancellation of this Note, if mutilated, Payor will make and deliver a new Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note. 4.5. This Note shall be binding upon Payor and Payee and their respective successors and permitted assigns. This Note, and the rights and obligations hereunder, may not be assigned or delegated by Payor without the prior written consent of Payee. 4.6. This Note shall be interpreted, construed and enforced in accordance with the laws of the State of New York. CADMUS CORPORATION By: -------------------------------- Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----