CUSIP No. 004334 10 8 Page 1 of 8 Pages
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. )[FN1]
Accom, Inc.
(Name of Issuer)
Common Stock, $.001 par value
(Title of Class of Securities)
004334 10 8
(CUSIP Number)
Arthur W. Heggen Isabel Barzun, Esq.
American Bankers Insurance Reboul, MacMurray, Hewitt,
Group, Inc. Maynard & Kristol
11222 Quail Roost Drive 45 Rockefeller Plaza
Miami, Florida 33157 New York, New York 10111
Tel. (305)256-7155 Tel. (212) 841-5700
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 12, 1999
(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(e), 13d-1(f) or 13d-1(g), check the following
box [ ].
[FN1]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 or otherwise
subject to the liabilities of that section of the Act but shall be subject to
all other provisions of the Act.
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CUSIP No. 004334 10 8 Page 2 of 8 Pages
1) Name of Reporting Person American Bankers
I.R.S. Identification Insurance Group,
No. of Above Person Inc.
(Entities Only)
2) Check the Appropriate Box (a) [ ]
if a Member of a Group (b) [ ]
3) SEC Use Only
4) Source of Funds WC
5) Check if Disclosure of
Legal Proceedings is Not Applicable
Required Pursuant to
Items 2(d) or 2(e)
6) Citizenship or Place Florida
of Organization
Number of 7) Sole Voting 2,307,692 shares of
Shares Beneficially Power Common Stock, $.001
Owned by par value ("Common
Reporting Person Stock")(issuable
upon conversion of
convertible notes)
8) Shared Voting
Power -0-
9) Sole Disposi- 2,307,692 shares of
tive Power Common Stock par
value (issuable
upon conversion of
convertible notes)
10) Shared Dis-
positive Power -0-
11) Aggregate Amount Beneficially 2,307,692 shares of
Owned by Each Reporting Person Common Stock
(issuable upon
conversion of
convertible notes)
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
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CUSIP No. 004334 10 8 Page 3 of 8 Pages
13) Percent of Class
Represented by 18.6%
Amount in Row (11)
14) Type of Reporting
Person CO
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CUSIP No. 004334 10 8 Page 4 of 8 Pages
Schedule 13D
Item 1. Security and Issuer.
This statement relates to the Common Stock, $.001 par value (the
"Common Stock"), of Accom, Inc., a Delaware corporation (the "Issuer"). The
principal executive offices of the Issuer are located at 1490 O'Brien Drive,
Menlo Park, California 94025.
Item 2. Identity and Background.
(a) The undersigned is filing this statement on Schedule 13D on behalf
of American Bankers Insurance Group, Inc., a Florida corporation ("ABIG" or the
"Reporting Person"). The name of each executive officer and director of ABIG is
set forth on Schedule A hereto.
(b) The principal business address of ABIG is 11222 Quail Roost Drive,
Miami, Florida 33157. The principal business address of each executive officer
and director of ABIG is set forth on Schedule A hereto.
(c) The principal business of ABIG is a holding company for insurance
companies. The principal occupation of each executive officer and director of
ABIG is set forth on Schedule A hereto.
(d) None of the entities or individuals identified in this Item 2 has,
during the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
(e) None of the entities or individuals identified in this Item 2 has,
during the last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
This statement relates to the purchase by the Reporting Person of a 6%
Senior Subordinated Convertible Note due 2004 of the Issuer in the principal
amount of $3,000,000 (the "Note"), pursuant to a Note Purchase Agreement dated
as of March 12, 1999 among the Issuer and the purchasers named therein,
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CUSIP No. 004334 10 8 Page 5 of 8 Pages
including the Reporting Person (the "Purchase Agreement"). The Purchase
Agreement is attached hereto as Exhibit A, and any description thereof is
qualified in its entirety by reference thereto. The Form of Note is attached
hereto as Exhibit A to the Purchase Agreement, and any description thereof is
also qualified in its entirety by reference thereto. The Note is convertible
into an aggregate 2,307,692 shares of Common Stock, at a conversion price of
$1.30 per share (such number of shares and conversion price being subject to
adjustment as set forth in the Note). The aggregate purchase price of the Note
was $3,000,000, and the source of such funds was the working capital, or funds
available for investment, of the Reporting Person.
Item 4. Purpose of Transaction.
The Reporting Person has acquired the Note for investment purposes.
Pursuant to the Purchase Agreement, and as further described therein, the Issuer
has agreed that so long as ABIG holds at least 25% of the shares of Common Stock
issuable upon conversion of all outstanding Notes, it will nominate for election
to its Board of Directors an individual designated by ABIG, and will take all
reasonable action to ensure the election of such designee as a director.
Item 5. Interest in Securities of the Issuer.
(a) Based on a total of 10,125,164 shares of Common Stock outstanding
as of March 11, 1999, and giving effect to the conversion of the Note, the
Reporting Person owns 2,307,692 shares of Common Stock, or approximately 18.6%
of the Common Stock outstanding.
(b) The Reporting Person has sole power to vote or direct the voting
of and to dispose or to direct the disposition of the shares of Common Stock
referred to in paragraph (a) above.
(c) Except as described in this statement, neither the Reporting
Person nor any of the persons identified in Item 2 above has effected any
transaction in the Common Stock in the past 60 days.
(d) No other person has the power to direct the receipt of dividends
on, or the proceeds from sales of, the shares of Common Stock owned by the
Reporting Person.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to
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CUSIP No. 004334 10 8 Page 6 of 8 Pages
Securities of the Issuer.
As a condition to the Purchase Agreement, an Investor Rights Agreement
was entered into contemporaneously therewith, by and among the Issuer and the
investors named therein, including the Reporting Person (the "Investor Rights
Agreement"). The Form of Investor Rights Agreement is attached hereto as Exhibit
B to the Purchase Agreement, and any description thereof is qualified in its
entirety by reference thereto. The Investor Rights Agreement imposes certain
restrictions on the acquisition of additional securities of the Issuer by the
Reporting Person and the transfer of the shares of Common Stock issuable upon
conversion of the Note (the "Conversion Shares"), and grants to the Reporting
Person certain rights with respect to the registration under the Securities Act
of 1933, as amended, of the Conversion Shares and any other securities of the
Issuer issued in connection therewith.
Item 7. Material to be Filed as Exhibits.
Exhibit A -- Purchase Agreement (Appears at Page 9)
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CUSIP No. 004334 10 8 Page 7 of 8 Pages
Signature
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: March 18, 1999
AMERICAN BANKERS INSURANCE GROUP, INC.
By:/s/Arthur W. Heggen
Name: Arthur W. Heggen
Title: Executive Vice President
& Secretary
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CUSIP No. 004334 10 8 Page 8 of 8 Pages
SCHEDULE
EXECUTIVE OFFICERS AND DIRECTORS OF ABIG
The business address for the purposes of this statement of each person
listed below is c/o American Bankers Insurance Group, Inc., 11222 Quail Roost
Drive, Miami, Florida 33157. The occupation of each person listed below refers
only to his or her relationship to ABIG.
Name Occupation Citizenship
Gerald N. Gaston President, Chief U.S.
Executive Officer
and Vice Chairman
of the Board
Robert K. Landon Chairman of the Board U.S.
Eugene E. Becker Executive Vice U.S.
President
Floyd G. Denison Executive Vice U.S.
President
Arthur W. Heggen Executive Vice
President and
Secretary
William H. Allen, Jr. Director U.S.
Nicholas A. Buoniconti Director U.S.
Armando M. Codina Director U.S.
Peter J. Dolara Director U.S.
Darryl L. Jones Director U.S.
James F. Jorden Director U.S.
Jack F. Kemp Director U.S.
Bernard P. Knoth Director U.S.
Eugene M. Matalene, Jr. Director U.S.
Albert H. Nahmad Director U.S.
Nicholas J. St. George Director U.S.
Robert C. Strauss Director U.S.
George E. Williamson, II Director U.S.
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EXHIBIT A
NOTE PURCHASE AGREEMENT, dated as of March 12, 1999 among ACCOM, INC.,
a Delaware corporation (the "Company"), American Banking Insurance Group, Inc.
("American Bankers") and the several other purchasers named in Annex I hereto
(American Bankers and such other purchasers being sometimes referred to herein
individually as a "Purchaser" and collectively as the "Purchasers").
WHEREAS, the Company is engaged in designing, manufacturing, selling
and supporting systems and workstations used for digital video editing, image
manipulation, effects creation and image storage; and
WHEREAS, the Company wishes to sell to the Purchasers, on the Closing
Date (as hereinafter defined), an aggregate $3,500,000 principal amount of 6%
Senior Subordinated Convertible Notes Due 2004 of the Company, convertible into
shares of the Common Stock, $.001 par value (the "Common Stock") of the Company,
on the terms and conditions contained herein; and
WHEREAS, the Purchasers, severally, wish to purchase said notes, on
the terms and subject to the conditions hereinafter set forth;
WHEREAS as a material inducement to the Purchasers to enter into this
Agreement and to consummate the transactions contemplated hereby, the Company
and the other parties thereto desire to execute and deliver the Investor Rights
Agreement, dated as of the Closing Date, among the Company and the Purchasers,
substantially in the form annexed as Exhibit B hereto (the "Registration Rights
Agreement"), in order to include the Common Stock issuable to the Purchasers
upon conversion of the Notes as "Registrable Securities" thereunder;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereby agree as follows:
I.
THE NOTES
SECTION 1.01 Purchase and Sale of the Notes. (a) Subject to the terms
and conditions set forth herein, the Company shall execute, sell and deliver to
each Purchaser, and each Purchaser, severally and not jointly, shall purchase
from the Company on the Closing Date (as hereinafter defined), a 6% Subordinated
Note Due 2004 of the Company, dated the Closing Date, substantially in the form
of Exhibit A hereto (such Notes, and any note or notes issued in exchange or
substitution therefor, being hereinafter called the "Notes") in the principal
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amount set forth opposite the name of such Purchaser on Annex I hereto under the
heading "Principal Amount".
(b) As payment in full for the Notes being purchased by it hereunder,
and against delivery thereof as aforesaid, on the Closing Date, each Purchaser
shall pay to the Company, by wire transfer of immediately available funds to an
account designated by the Company 100% of the principal amount of such Note.
SECTION 1.02 Closing Date. The closing of the sale and purchase of the
Notes to the Purchasers shall take place at the offices of Reboul, MacMurray,
Hewitt, Maynard & Kristol, 45 Rockefeller Plaza, New York, New York 10111, at 10
a.m., New York time, on March 12, 1999, or at such other date and time as may be
mutually agreed upon between the Purchasers and the Company (such date and time
of closing being herein called the "Closing Date").
II.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to each Purchaser as follows:
SECTION 2.01 Organization, Qualifications and Corporate Power. (a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and is duly licensed or qualified to do
business as a foreign corporation and is in good standing in each other
jurisdiction in which it owns or leases any real property or in which the nature
of business transacted by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not have a
Material Adverse Effect. The Company has the power and authority (i) to own and
hold its properties and to carry on its business as currently conducted, (ii) to
execute, deliver and perform this Agreement, (iii) to execute, deliver and
perform the Registration Rights Agreement, (iii) to issue, sell and deliver the
Notes and (iv) to issue and deliver the shares (the "Conversion Shares") of
Common Stock issuable upon conversion of the Notes.
(b) Except as set forth on Schedule 2.01(b), the Company (i) does not
own of record or beneficially, directly or indirectly, any outstanding capital
stock or securities convertible into capital stock or other equity securities of
any other corporation or limited liability company and (ii) is not a partner or
joint venturer in any partnership, joint venture or similar non-corporate
business enterprise.
SECTION 2.02 Authorization of Agreements; Etc. (a) Each of (i) the
execution and delivery by the Company of this Agreement, the Registration Rights
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Agreement and the Notes, (ii) the performance by the Company of its obligations
hereunder and thereunder and (iii) the issuance and delivery by the Company of
the Conversion Shares issuable upon conversion of the Notes have been duly
authorized by all requisite action and will not violate any provision of law,
any order of any court or other agency of government, the Certificate of
Incorporation or Bylaws of the Company, or any provision of any material
indenture, agreement or other instrument to which the Company is a party or by
which it or its properties or assets is bound or affected, or conflict with,
result in a material breach of or constitute (with due notice or lapse of time
or both) a material default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any material lien, charge
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Company.
(b) The Conversion Shares have been duly reserved for issuance upon
conversion of the Notes, and will be validly issued and outstanding, fully paid
and nonassessable shares of Common Stock. Neither the issuance, sale and
delivery of the Notes nor the issuance and delivery of the Conversion Shares
upon conversion of the Notes is subject to any preemptive rights of stockholders
of the Company or to any right of first refusal or other similar right in favor
of any person.
SECTION 2.03 Validity. This Agreement has been duly executed and
delivered by the Company and constitutes, and each of the Notes and the
Registration Rights Agreement, when executed and delivered as contemplated by
this Agreement, will constitute, legal, valid and binding obligations of the
Company, enforceable in accordance with their respective terms.
SECTION 2.04 Authorized Capital Stock; Options, Etc. (a) The Company
is authorized to issue 2,000,000 shares of Preferred Stock, none of which are
outstanding and 20,233,497 shares of Common Stock of which 10,125,164 shares of
Common Stock are issued and outstanding, 1,000,000 shares of Common Stock are
reserved for issuance upon exercise of the Warrants issued on December 10, 1998
(the "Warrants") and 1,000,000 shares of Common Stock are reserved for issuance
upon the exercise of options (the "Options") currently outstanding or to be
awarded at the discretion of the Company's Board of Directors pursuant to the
Company's stock incentive plans. The shares of capital stock of the Company are
not subject to, nor were they issued in violation of, any preemptive rights of
the stockholders of the Company or to any right of first refusal or other
similar right in favor of any person.
(b) Except for the Warrants and the Options, and as contemplated
hereby (i) no subscription, warrant, option, convertible security or other right
(contingent or other) to purchase or acquire any equity securities of the
Company is authorized or outstanding, (ii) there is not any commitment of the
Company to issue any warrant, option, convertible security or other such rights
or to distribute to holders of any class of its equity securities in respect
thereof, any evidences of indebtedness or assets, and (iii) the Company has no
obligation (contingent or other) to purchase, redeem or otherwise acquire any of
its equity securities or any interest therein, to declare, make or pay any
dividend or make any other distribution in respect thereof.
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SECTION 2.05 SEC Documents; Financial Statements. (a) Except as set
forth in Schedule 2.05(a) hereto, the Company has timely filed all forms,
reports, statements and documents, including amendments thereto, required to be
filed by it with the Securities and Exchange Commission (the "Commission")
through the date of this Agreement (collectively, the "SEC Documents"). Each SEC
Document (i) as of its filing date, complied with the requirements of the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, as the case may be, and the rules and regulations of the Commission
thereunder, and (ii) did not at the time it was filed contain any untrue
statement of a material fact or omit to state a material fact required to be
state therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
(b) The Company has furnished to the Purchasers (i) the audited
balance sheet of the Company as of September 30, 1998, the related audited
statement of income, stockholders' equity and cash flow for the fiscal year then
ended, audited and certified without qualification by the independent certified
public accountants of the Company, (ii) the draft balance sheet of the Company
as of December 31, 1998, the related draft statement of income, stockholders'
equity and cash flow for the three-month period year then ended, and (ii) the
unaudited balance sheet of the Company as of January 31, 1999 and the related
unaudited statement of income and cash flow for the month then ended, certified
by the principal financial officer of the Company. Such financial statements
have been prepared from and are in accordance with the books and records of the
Company, have been prepared in accordance with generally accepted accounting
principles consistently applied, and fairly present the financial position of
the Company as of such respective dates and the results of its operations, and
(in the case of such audited and draft financial statements) stockholders equity
and cash flows for the respective periods then ended in accordance with
generally accepted accounting principles except for the absence of notes and, in
the case of the January 31, 1999 financial statements, subject to year-end
adjustments which consist only of normal year-end accruals and the absence of
notes. Except as reflected in such balance sheets, the Company had no material
(individually or in the aggregate) obligations or liabilities of the type
required to be disclosed on a balance sheet (including, without limitation, the
footnotes thereto) prepared in accordance with generally accepted accounting
principles, whether absolute, accrued or contingent, as of the respective dates
of such balance sheets. There has been no material adverse change in the
business, assets, properties, operations, condition (financial or other) or
prospects of the Company since December 31, 1998.
SECTION 2.06 Events Subsequent to December 31, 1998. Since December
31, 1998, except as set forth on Schedule 2.06(a) hereto or as contemplated
hereby, the Company has not (i) changed or amended its Certificate of
Incorporation or By-laws, (ii) issued any equity securities, bonds or other
corporate securities, (iii) borrowed any amount or incurred any liabilities
(absolute or contingent) that would be required to be disclosed on a balance
sheet as of the date hereof prepared in accordance with generally accepted
accounting principles, except current liabilities incurred, and liabilities
under contracts entered into, in the ordinary course of business, (iv)
discharged or satisfied any lien or paid any obligation or liability (absolute
or contingent) other than current liabilities shown on its balance sheet as of
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December 31, 1998 referred to in Section 2.05 hereof and current liabilities
incurred since that date in the ordinary course of business, (v) declared or
made any dividend, payment or distribution to stockholders or purchased or
redeemed any equity or other securities, (vi) mortgaged, pledged or subjected to
lien any of its assets, tangible or intangible, other than liens of current real
property taxes not yet due and payable (other than with respect to acquisitions
of personal property in the ordinary course of business), (vii) sold, assigned
or transferred any of its material tangible assets, (viii) acquired any material
tangible assets or properties, (ix) canceled or compromised any debts or claims,
except in the ordinary course of business, (x) sold, assigned or transferred any
Intangible Rights (as defined in Section 2.12 below) or permitted any license,
permit, or other form of authorization relating to an Intangible Right to lapse,
(xi) suffered any material losses, or waived any rights of material value,
whether or not in the ordinary course of business, (xii) received notification
of cancellation, or canceled or waived any rights which, individually or in the
aggregate, are material with respect to any currently existing agreement,
contract, right or understanding, (xiii) made any changes in officer
compensation or (xiv) entered into any transaction except in the ordinary course
of business.
SECTION 2.07 Actions Pending, Etc. (a) Except as set forth in the SEC
Documents, there is no action, suit or proceeding pending or, to the knowledge
of the Company, threatened against or affecting the Company, or any of its
properties or rights, before any court or by or before any governmental body or
arbitration board or tribunal, nor is there any judgment, decree, injunction or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator against the Company, nor to the knowledge of the Company, does
there exist any basis for any action, suit, investigation or proceeding against
the Company which, if adversely determined, could reasonably be expected to have
a material adverse effect on the business, assets, properties, operating
condition (financial or otherwise) of the Company (a "Material Adverse Effect").
The foregoing includes, without limiting its generality, actions pending against
the Company or, to the knowledge of the Company, against any employee or
prospective employee (or any reasonable basis for any of the foregoing known to
the Company) involving his or her prior employment or use, in connection with
the Company's business, of any information or techniques which might be alleged
to be proprietary to his or her former employer(s). To the knowledge of the
Company, no labor organizational efforts are currently being made with respect
to any of its employees.
(b) There are no actions, suits, proceedings or claims pending before
or by any court, arbitrator, regulatory authority or government agency against
or affecting the Company that might enjoin the transactions contemplated by this
Agreement.
SECTION 2.08 Property and Assets. The Company owns or has the right to
use pursuant to a valid lease or other agreement, all real and personal
properties and assets currently used by the Company or necessary to conduct its
business as heretofore conducted. Each such lease or agreement to which the
Company is a party and under which it is a lessee of any property, is a valid
and subsisting agreement without any material default of the Company thereunder
and, to the knowledge of the Company, without any material default thereunder of
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any other party thereto. The possession by the Company of such property has not
been disturbed nor has any claim been asserted in writing against the Company
adverse to its rights in such leasehold interests.
SECTION 2.09 Taxes. The Company has duly filed or caused to be filed
(or obtained valid, currently effective extensions for filing) all Federal,
state, local and foreign income, franchise, excise, payroll, sales and use,
property and withholding tax returns, reports, estimates and information and
other statements or returns (collectively "Tax Returns") required to be filed by
or on behalf of it pursuant to any applicable federal, state, local or foreign
tax laws for all years and periods for which such Tax Returns have become due.
All such Tax Returns were true, correct and complete in all material respects as
filed and correctly reflect the Federal, state, local and foreign income,
franchise, excise, payroll, sales and use, property, withholding and other
taxes, duties, imposts and governmental charges (and charges in lieu of any
thereof), together with interest and penalties thereon (collectively "Taxes"),
required to be paid or collected by (or allocable to) the Company. The Company
(i) has paid or caused to be paid to the appropriate taxing authorities all
Taxes owed by it for all years and periods through the date hereof and (ii) has
properly and fully accrued on its unaudited financial statements referred to in
Section 2.05 above all Taxes with respect to the Company that are not yet due
for all periods up to and including January 31, 1999 except, in each case, any
taxes the payment of which is being contested in good faith by appropriate
proceedings by the Company and in respect of which adequate reserves are
reflected on the financial statements of the Company. There is no pending or
threatened audit, dispute or claim concerning any Tax Return or Tax liability of
the Company as to which the Company either (i) has been notified by any tax
authority or (ii) otherwise has reason to know of.
SECTION 2.10 Material Contracts and Commitments. Except as disclosed
in Schedule 2.10, all material provisions of all material contracts and
commitments (including, without limitation, mortgages, indentures, loan
agreements, customer contracts and supplier contracts) to which the Company is a
party, are, to the knowledge of the Company, valid and enforceable obligations
of the Company. The Company (i) is not in default in any material respect in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in such contract or commitment and (ii) has not been
notified in writing of any claim that any such contract is not valid and
enforceable in accordance with its terms for the periods stated therein or that
there is under any such contract any existing default or event of default or
event which with notice or lapse of time or both would constitute such a
default. For the purposes of this Section 2.10, a contract or commitment of the
Company shall not be deemed material unless it is either (i) an SEC Document or
(ii) any other contract or commitment of the Company that (A) is a contract or
group of related contracts which exceeds $100,000 in amount on an annual basis,
(B) contains warranties by the Company materially in excess of those customary
in its business or (C) cannot be performed in the normal course within one year
after the Closing Date or cannot be canceled within such period by the Company
or its assignee, without breach or greater than nominal penalty. Set forth on
Schedule 2.10 is a list of each material contract or commitment of the Company
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that is not an SEC Document. True and complete copies or descriptions of each
contract or commitment listed on said Schedule 2.10 have been made available to
the Purchasers and their counsel.
NOTE: If there are to be contracts listed on schedule 2.10, we
will need to see it as soon as possible.
SECTION 2.11 Software. (a) Except as set forth on Schedule 2.11, the
Company (i) holds valid licenses (the "Software Licenses") to all copies of
material operating and applications computer software programs and databases
used by the Company in the conduct of the Company's business (collectively, the
"Software"), other than any portion thereof (collectively, the "Proprietary
Software") that was developed by or under contract with the Company and (ii)
either owns outright, or has a perpetual, royalty-free license to, the
Proprietary Software. The Company has not sold, licensed, leased or otherwise
transferred or granted any interest or rights to any Proprietary Software other
than in connection with the sale of the Company's product and services. The
Company has not received any written notice that the use of its Proprietary
Software infringes upon or violates any patent, copyright, trade secret or other
proprietary right of any other person. The Company has taken all steps
reasonably necessary to protect its right, title and interest in and to the
Software.
(b) Upon consummation of the transactions contemplated by this
Agreement, the Company will continue to own all the Software owned by it, free
and clear of all claims, liens, encumbrances, obligations and liabilities, other
than any such liabilities disclosed in the SEC Documents, and, with respect to
all agreements for the lease or license of Software which require consents or
other actions as a result of the consummation of the transactions contemplated
by this Agreement in order for the Company to continue to use and operate such
Software after the Closing Date, the Company will have obtained such consents or
taken such other actions so required.
(c) Any programs, modifications, enhancements or other inventions,
improvements, discoveries, methods or works of authorship included in the
Software that were created by employees of the Company were made in the regular
course of such employees' employment with the Company using the Company's
facilities and resources and, as such, constitute "works made for hire".
SECTION 2.12 Intangible Rights. The Company owns or has the right to
use pursuant to a valid license or other agreement all patents, trademarks,
trade names, service marks, processes, copyrights, technology, knowhow and other
proprietary rights (other than Software) owned by the Company (collectively,
with all unexpired registrations and pending applications for the registration
or renewal thereof and all licenses (other than Software Licenses) and other
agreements to which the Company is a party which relate to such intangible
rights of third parties which the Company is authorized to use, "Intangible
Rights") used by it or necessary to provide, sell and produce the products and
services provided and sold by it, and to conduct its business as heretofore
conducted. The Company is in compliance in all material respects with its
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contractual obligations relating to the protection of such of the Intangible
Rights used by it pursuant to licenses or other contracts and the consummation
of the transactions contemplated hereby will not alter or impair any such
Intangible Rights. To the knowledge of the Company, all such Intangible Rights
are valid and enforceable and the Company has not received notice that any
claims are currently being asserted with respect to the use by the Company of
any of the Intangible Rights for patent, copyright or trademark infringement.
To the knowledge of the Company, no person is infringing on or violating the
Intangible Rights used by the Company.
SECTION 2.13 Governmental Approvals. Other than filings required in
connection with federal and state securities laws all of which, to the extent
required to be made on or prior to the Closing Date, have been made, subject to
the accuracy of the representations and warranties of the Purchasers set forth
in Article III hereof, no registration or filing with, or consent or approval
of, or other action by, any Federal, state or other governmental agency or
instrumentality is or will be necessary for (i) the valid execution, delivery
and performance of this Agreement, the Registration Rights Agreement or the
Notes by the Company, (ii) the issuance, sale and delivery by the Company of the
Notes hereunder, or (iii) the conduct of the business of the Company after the
Closing Date in substantially the manner as currently conducted and as proposed
to be conducted after the Closing Date.
SECTION 2.14 Condition of Assets. Except as set forth on Schedule
2.14, all material tangible personal property, fixtures and equipment comprising
the assets of the Company are in good state of repair (ordinary wear and tear
excepted) and operating condition and are sufficient and adequate to conduct the
business of the Company on the date hereof and as proposed to be conducted after
the Closing Date.
SECTION 2.15 Offering of Notes. Neither the Company nor, to the
knowledge of the Company, any person authorized by the Company, as agent,
broker, dealer or otherwise in connection with the offering or sale of the Notes
has taken or will take any action (including without limitation any offer,
issuance or sale of any security under circumstances which would require the
integration of such security with the Notes under the Securities Act of 1933, as
amended (the "Securities Act") or the rules and regulations of the Commission
thereunder) which would subject the offering, issuance or sale of the Notes to
the registration provisions of the Securities Act, assuming the accuracy of the
representations and warranties of the Purchasers contained in Article III
hereof.
SECTION 2.16 Certain Transactions. Except as set forth on Schedule
2.16 and in the SEC Documents, there are no existing material arrangements or
proposed material transactions between the Company and (i) any officer, director
or stockholder of the Company or any member of the immediate family of any of
the foregoing persons (such officers, directors, stockholders and family members
being hereinafter individually referred to as a "Related Party"), or (ii) any
business (corporate or otherwise) which a Related Party owns, directly or
indirectly, or in which a Related Party has an ownership interest.
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SECTION 2.17 Compliance With Laws, Etc. (a) The business and
activities of the Company have been and are being conducted in compliance with
all provisions of all applicable Federal, state and local statutes, ordinances,
rules and regulations, except where noncompliance would not have a material
adverse effect on the business, assets, properties, operating condition
(financial or otherwise) or prospects of the Company (a "Material Adverse
Effect"). The Company is not in violation of or in default under (i) any order,
judgment or decree of any court, arbitration panel or other tribunal or (ii) any
administrative order, rulemaking, procedure, policy or other published
declaration of any Federal, state or local governmental agency or other
authority, except where such violation or default would not have a Material
Adverse Effect.
(b) The Company holds all governmental licenses, permits, franchises
and other governmental authorizations necessary to the ownership of its
properties or the conduct of its business as currently conducted, except where
the failure to hold such licenses, permits, franchises or other authorizations
would not have a Material Adverse Effect, and all such licenses, permits,
franchises and other governmental authorizations will remain in full force and
effect immediately following the Closing Date, and will not in any way be
affected by, or terminate or lapse by reason of, the consummation of the
transactions contemplated hereby.
SECTION 2.18 Employee Benefit Plans. (a) The Company has complied and
currently is in compliance in all material respects, both as to form and
operation, with the applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the Internal Revenue Code of
1986, as amended (the "Code"), with respect to each "employee benefit plan" as
defined under Section 3(3) of ERISA (a "Plan") which the Company (i) has ever
adopted, maintained, established or to which any of the same has been required
to contribute to or has ever contributed or (ii) currently maintains or to which
any of the same currently contributes or is required to contribute or (iii)
currently participates in or is required to participate in.
(b) The Company has never maintained, adopted or established,
contributed or been required to contribute to, or otherwise participated in or
been required to participate in, a "multiemployer plan" (as defined in Section
3(37) of ERISA). No amount is due or owing from the Company on account of a
"multiemployer plan" (as defined in Section 3(37) of ERISA) or on account of any
withdrawal therefrom.
(c) Notwithstanding anything else set forth herein, other than routine
contributions to Plans and routine claims for benefits and liability for
premiums due to the Pension Benefit Guaranty Corporation, the Company has not
incurred any liability with respect to a Plan that is currently due and owing
and has not yet been satisfied, including without limitation under ERISA
(including without limitation Title I or Title IV thereof), the Code or other
applicable law, and, to the knowledge of the Company, no event has occurred,
and, there exists no condition or set of circumstances (other than the
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contributions to, and accrual of benefits under, the normal terms of the Plans),
which could result in the imposition of any liability of the Company with
respect to a Plan.
(d) Except (i) as required by applicable law, (ii) as provided in any
insurance policy referred to in Section 2.19 hereof or (iii) as contemplated by
this Agreement, the Company has not committed itself, orally or in writing, (x)
to provide or cause to be provided to any person any payments or provision of
any "welfare" or "pension" benefits (as defined in Sections 3(1) and 3(2) of
ERISA) in addition to, or in lieu of, those payments or benefits set forth under
any Plan, (y) to continue the payment of, or accelerate the payment of, benefits
under any Plan, except as expressly set forth thereunder, or (z) to provide or
cause to be provided any severance or other post-employment benefit, salary
continuation, termination, disability, death, retirement, health or medical
benefit to any person (including without limitation any former or current
employee) except as set forth under any Plan.
(e) Notwithstanding any other provisions to the contrary set forth
herein, the Purchasers shall not assume any liability that the Company may have
incurred or may incur which arises out of, is a result of, or is in any way
related to, any Plan.
SECTION 2.19 Insurance. All policies of fire, liability, workers'
compensation, and other forms of insurance providing insurance coverage to or
for the Company for events or occurrences arising or taking place in the case of
occurrence type insurance, and for claims made and/or suits commenced in the
case of claims-made type insurance are in full force and effect and provide
insurance, including without limitation liability insurance, in such amounts and
against such risks as is customary for companies engaged in similar businesses
to the Company to protect the employees, properties, assets, businesses and
operations of the Company. Except as set forth in Schedule 2.19, all premiums
with respect to such policies covering all periods up to and including the date
as of which this representation is being made have been paid, and no notice of
cancellation or termination has been received with respect to any such policy.
All such policies will remain in full force and effect immediately following the
Closing Date, and will not in any way be affected by, or terminate or lapse by
reason of, the consummation of the transactions contemplated hereby.
SECTION 2.20 Absence of Certain Business Practices. Neither the
Company nor, to the knowledge of the Company, any officer, director, employee or
agent thereof, nor any other person or entity acting on behalf of the Company,
acting alone or together, has (i) received, directly or indirectly, any rebates,
payments, commissions, promotional allowances or any other economic benefits,
regardless of their nature or type, from any customer, supplier, governmental
employee or other person or entity with whom the Company has done business
directly or indirectly, or (ii) directly or indirectly, given or agreed to give
any gift or similar benefit to any customer, supplier, governmental employee or
other person or entity who is or may be in a position to help or hinder the
business (or assist the Company in connection with any actual or proposed
transaction) which in the case of either clause (i) or clause (ii) above, (a)
would reasonably be expected to subject the Company to any damage or penalty in
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any civil, criminal or governmental litigation or proceeding, (b) if not given
in the past, would reasonably be expected to have had Material Adverse Effect or
(c) if not continued in the future, would reasonably be expected to have a
Material Adverse Effect.
SECTION 2.21 Disclosure. The Company has furnished to the Purchasers a
copy of the Company's confidential Financing Memorandum dated February, 1999
(the "Memorandum"). Neither this Agreement nor the Memorandum, when taken as a
whole, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the information contained herein or therein not
misleading. The projections of financial results contained in the Memorandum
were prepared accurately by the Company based upon the assumptions described
therein that the Company in good faith believed to have been reasonable at the
time they were made. The Company specifically does not make any representation
and does not give any assurances that such projected financial results will be
achieved by the Company.
SECTION 2.22 Brokers' or Finders' Fees. Except as set forth on
Schedule 2.22 hereof, all negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Company directly
with the Purchasers, without the intervention of any person on behalf of the
Company in such a manner as to give rise to any claim by any person against the
Purchasers for a finder's fee, brokerage commission or similar payment.
SECTION 2.23 Environmental Matters. (a) For the purposes of this
Section 2.23, the following terms shall have the following meanings:
"Environmental Law" means any applicable federal, state or local
statute, law, ordinance, rule or regulation of the United States and any
other jurisdiction within the United States now effective and any order, to
which the Company is a party or is other wise directly bound, of the United
States or other jurisdiction within the United States now effective
relating to: (i) pollution or protection of the environment, including
natural resources; (ii) manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Substances; or (iii) exposure of persons, including employees, to Hazardous
Substances;
"Hazardous Substances" means any substance, whether liquid, solid or
gas (i) listed, identified or designated as hazardous or toxic under any
Environmental Law, (ii) which, applying criteria specified in any
Environmental Law, is hazardous or toxic, or (iii) the use or disposal of
which is regulated under Environmental Law.
(b) The Company has obtained and been in compliance with all of the
terms and conditions of all permits, licenses and other authorizations which are
required under, and has complied, in all material respects with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables which are contained in, any Environmental
Law.
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(c) To the knowledge of the Company, the Company has not discharged,
released or emitted into the air, water, surface water, ground water, land
surface or subsurface strata or transported to or from the property of the
Company any Hazardous Substance except in compliance in all material respects
with Environmental Law and except for incidental release of Hazardous Substances
in amounts or concentrations which would not reasonably be expected to give rise
to any claims or liabilities against the Company under any Environmental Law.
(d) The Company has not received any written notification from a
governmental agency that there is any violation of any Environmental Law with
respect to the business and properties of the Company, nor has the Company
received any written notification from a governmental agency pursuant to Section
104, 106 or 107 of the Comprehensive Environmental Response Compensation and
Liability Act, as amended.
SECTION 2.24 Regulations G and X. The Company is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (as defined, from time to time, in Regulation G promulgated by the Board
of Governors of the Federal Reserve System), and no part of the proceeds from
the Note will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock in
violation of Regulations G and X.
III.
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS
Each Purchaser represents and warrants, severally and not jointly and
with respect to itself only, to the Company as follows:
SECTION 3.01 Experience. Such Purchaser has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and the risks of its investment in the Company and has the capacity to protect
its own interests.
SECTION 3.02 Economic Risk. Such Purchaser understands that the
purchase of the Notes hereunder is a speculative investment which involves a
high degree of risk of loss of such Purchaser's investment therein. Such
Purchaser is able to bear the economic risk of its investment in the Notes and
the Conversion Shares for an indefinite period of time, including the risk of a
complete loss of such Purchaser's investment in such securities. Such Purchaser
acknowledges that none of the Notes or the Conversion Shares have been
registered under the Securities Act and, therefore, cannot be sold unless
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subsequently registered under the Securities Act or an exemption from such
registration is available and that there are substantial restrictions on the
transferability of such securities under the Registration Rights Agreement.
SECTION 3.03 Investment. Such Purchaser is acquiring the Notes, and,
upon conversion thereof, will acquire the Conversion Shares, for investment for
its own account, not as a nominee or agent, and not with the view to, or for
resale in connection with, any distribution thereof. Such Purchaser understands
that the Notes to be purchased have not been, and will not be, registered under
the Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
such Purchaser's representations as expressed herein.
SECTION 3.04 Accredited Investor; Residency. Such Purchaser is an
"accredited investor" as defined in Rule 501 of Regulation D adopted by the
Commission under the Securities Act. Such Purchaser is a bona fide resident and
domiciliary (not a temporary or transient resident) of the State set forth under
such Purchaser's name set forth in Annex I hereto.
SECTION 3.05 Reliance on Exemptions. Each Purchaser understands that
the Notes are being offered and sold to the Purchasers in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and each Purchaser's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of each Purchaser set forth
herein in order to determine the availability of such exemptions and the
eligibility of each Purchaser to acquire the Securities.
SECTION 3.06 Governmental Review. Each Purchaser understands that no
United States federal or state agency or any other government or governmental
agency has passed or made any recommendation or endorsement of the Notes.
SECTION 3.07 Execution, Delivery and Performance. Such Purchaser has
full right, power and authority to execute and deliver this Agreement and the
Registration Rights Agreement and to perform such Purchaser's obligations
hereunder and thereunder. At or before the Closing Date, such Purchaser will
execute and deliver to the Company the Registration Rights Agreement, and such
Purchaser acknowledges and agrees that the Notes purchased hereunder will be
subject to the terms and provisions of the Registration Rights Agreement. This
Agreement and the Registration Rights Agreement, when so executed and delivered
by such Purchaser, will constitute valid and binding obligations of such
Purchaser, enforceable in accordance with their respective terms. No consent,
approval, authorization, order, filing, registration or qualification of or with
any court, governmental authority or third person is required to be obtained by
such Purchaser in connection with the execution and delivery of this Agreement
or the Registration Rights Agreement or the performance of such Purchaser's
obligations hereunder or thereunder.
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SECTION 3.08 Rule 144. Such Purchaser acknowledges that the Notes,
and, upon the conversion thereof, the Conversion Shares must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from such registration is available. Such Purchaser is aware of the
provisions of Rule 144 under the Securities Act ("Rule 144") which permit
limited resale of securities purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the securities, the availability of certain current
public information about the Company, the resale occurring not less than one
year after a party has purchased and paid for the security to be sold, the sale
being effected through a "broker's transaction" or in transactions directly with
a "market maker" and the number of securities being sold during any three month
period not exceeding specified limitations.
SECTION 3.09 Information. Each Purchaser and its counsel have been
furnished all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Notes which have
been specifically requested by such Purchaser or its counsel.[FN1] Each
Purchaser and its counsel have been afforded the opportunity to ask questions of
the Company and have received what such Purchasers believes to be satisfactory
answers to any such inquiries. In making the decision to purchase the Notes in
accordance with this Agreement, each Purchaser has relied solely upon
independent investigations made by it and not upon any representations made by
the Company other than those made or specifically referred to in this Agreement.
Each Purchaser represents and warrants that it has received all of the
information it considers necessary or appropriate for deciding whether to
purchase the Notes. Each Purchaser has conducted its own investigation of and
into: (i) the Company and its officers, financial condition, business and
prospects; (ii) the terms of the purchase of the Notes; and (iii) all other
matters that such Purchaser has deemed necessary or appropriate to make its
decision to purchase the Notes. Each Purchaser's decision to purchase the Notes
is based upon the public documents it has received from the Company and on the
Purchaser's own evaluation of the risks and merits of the purchase of the Notes.
The foregoing, however, does not limit or modify the representations and
warranties of the Company made or specifically referred to in this Agreement or
the right of each Purchaser to rely thereon.
SECTION 3.10 Brokers' or Finders' Fees. Except as set forth on
Schedule 3.10 hereto, all negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by such Purchaser
directly with the Company, without the intervention of any person on behalf of
such Purchaser in such a manner as to give rise to any claim by any person
against the Company for a finder's fee, brokerage commission or similar payment.
[FN1] If there will be agreements listed on Schedule 2.10, the Purchasers would
like to receive copies of them. Also, we may request copies of filed documents
not available on the Internet.
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IV.
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
SECTION 4.01 Conditions to the Obligations of the Purchasers with
respect to the Closing. The obligation of each Purchaser to purchase and pay for
the Notes being purchased by it hereunder on the Closing Date is, at such
Purchaser's option, subject to the satisfaction, on or prior to such date, of
the following conditions:
(a) Representations and Warranties to Be True and Correct. The
representations and warranties of the Company contained in Article II
hereof shall be true and correct on and as of the Closing Date with the
same effect as though such representations and warranties had been made on
and as of such date, and, if the date of this Agreement is not the Closing
Date, the Company shall have certified to such effect to the Purchasers in
writing.
(b) Performance. The Company shall have performed and complied with
all agreements and conditions contained herein required to be performed or
complied with by it prior to or at the Closing Date, and, if the date of
this Agreement is not the Closing Date, the Company shall have certified to
such effect to the Purchasers in writing.
(c) Opinion of Counsel. The Purchasers shall have received from
Gibson, Dunn & Crutcher LLP, counsel for the Company, an opinion dated the
Closing Date, satisfactory in form and substance to the Purchasers and
their counsel.
(d) All Proceedings to Be Satisfactory. All other proceedings to be
taken by the Company in connection with the transactions contemplated
hereby and all documents incident thereto shall be satisfactory in form and
substance to the Purchasers and their counsel, and the Purchasers and their
counsel shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
(e) Subordination and Intercreditor Agreement. A Subordination and
Intercreditor Agreement, among LaSalle Business Credit, Inc., the
Purchasers, Scitex Digital Video, Inc. and the Company, substantially in
the form annexed hereto as Exhibit C, shall have been executed and
delivered by the Company and the other parties thereto and shall be in full
force and effect as of the Closing Date.
(f) Registration Rights Agreement. The Registration Rights Agreement
shall have been executed and delivered by the Company and the other parties
thereto named in the Annexes thereto, and shall be in full force and effect
as of the Closing Date.
(g) Supporting Documents. On or prior to the Closing Date, the
Purchasers and their counsel shall have received copies of the following
supporting documents:
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(i) (1) a copy of the Certificate of Incorporation of the
Company, certified as of a recent date by the Secretary of State of
the State of Delaware, and (2) a certificate of said Secretary dated
as of a recent date as to the due incorporation and good standing of
the Company and listing all documents on file with said official;
(ii) a certificate of the Secretary or an Assistant Secretary of the
Company, dated the Closing Date and certifying (1) that attached thereto is a
true and complete copy of the Bylaws as in effect on the date of such
certification; (2) that attached thereto is a true and complete copy of
resolutions adopted by the board of directors of the Company authorizing the
execution, delivery and performance of this Agreement and the Registration
Rights Agreement, the issuance, sale and delivery of the Notes and, upon
conversion thereof, the issuance and delivery of the Conversion Shares and the
reservation of the Conversion Shares for issuance upon conversion of the Notes,
and that all such resolutions are still in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by each of
this Agreement, the Notes, and the Registration Rights Agreement; (3) that the
Certificate of Incorporation of the Company has not been amended since the date
of the last amendment referred to in the certificate delivered pursuant to
clause (i)(2) above; and (4) as to the incumbency and specimen signature of each
officer of the Company executing this Agreement, the Notes, the Registration
Rights Agreement, and any certificate or instrument furnished pursuant hereto or
thereto, a certification by another officer of the Company as to the incumbency
and signature of the officer signing the certificate referred to in this
paragraph (ii); and
(iii) such additional supporting documents and other information
with respect to the operations and affairs of the Company as the
Purchasers or their counsel may reasonably request.
All such documents shall be satisfactory in form and substance to the
Purchasers and their counsel.
(h) Legal Actions or Proceedings. No legal action or proceeding shall
have been instituted or threatened seeking to restrain, prohibit,
invalidate or otherwise affect the consummation of the transactions
contemplated hereby or which would, if adversely decided, have a Material
Adverse Effect.
(i) Blue Sky. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Notes.
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(j) Material Adverse Change. There shall have been no material adverse
change in the business, assets, properties, operations, condition
(financial or other) or prospects of the Company since December 31, 1998.
(k) Consents. The Company shall have obtained all necessary consents
required to be in order to consummate the transactions contemplated by this
Agreement, the Notes and the Registration Rights Agreement, including,
without limitation, the consent of LaSalle Business Credit, Inc.
SECTION 4.02 Conditions to the Obligations of the Company with respect
to the Closing. The obligation of the Company to issue and sell the Notes to the
Purchasers hereunder on the Closing Date is, at the Company's option, subject to
the satisfaction, on or before such date of the following conditions:
(a) Representations and Warranties to Be True and Correct. The
representations and warranties contained in Article III hereof shall be
true and correct on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such
date.
(b) Performance. Each Purchaser shall have performed and complied with
all agreements and conditions contained herein required to be performed or
complied with by it prior to or at the Closing Date.
(c) All Proceedings to Be Satisfactory. All proceedings to be taken by
the Purchasers in connection with the transactions contemplated hereby and
all documents incident thereto shall be satisfactory in form and substance
to the Company and its counsel, and the Company and said counsel shall have
received all such counterpart originals or certified or other copies of
such documents as they may reasonably request.
(d) Legal Actions or Proceedings. No legal action or proceeding shall
have been instituted or threatened seeking to restrain, prohibit,
invalidate or otherwise affect the consummation of the transactions
contemplated hereby or which would, if adversely decided, have a Material
Adverse Effect.
(e) Blue Sky. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Notes.
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V.
COVENANTS
SECTION 5.01 Certain Covenants of the Company. (a) During the period
from the date of this Agreement to the Closing Date, the Company will conduct
its business and operations according to its ordinary course of business
consistent with past practice and use its best efforts (A) to preserve its
relationships with business partners, suppliers, employees and customers and
(B) to maintain the contracts, agreements, commitments or understandings with
customers that are material to its business in full force and effect in
accordance with their terms up to and following the Closing Date. Without
limiting the generality of the foregoing, except as otherwise contemplated by
this Agreement or required by law, prior to the Closing Date, without the prior
written consent of the Purchasers and to the extent such acts are within the
control of the Company, the Company will not do any of the things listed in
clauses (i) through (xiv) of Section 2.06 above.
(b) Between the date of this Agreement and the Closing Date, the
Company will afford the representatives of the Purchasers reasonable access
during normal business hours to the offices, facilities, books and records of
the Company and the opportunity to discuss the affairs of the Company with
officers and employees of the Company familiar therewith. Such activities shall
be performed, so far as is reasonably possible, in such a manner as to avoid
disruption of normal operations.
SECTION 5.02 Financial Statements, Reports, Etc. The Company shall
furnish to (i) each Purchaser, for so long as such Purchaser (or Permitted
Transferee (as such term is defined in the Registration Rights Agreement)) shall
hold any outstanding Note, (ii) each subsequent holder of at least $100,000
principal amount of the Notes and (iii) each holder of at least 25% of the
issued and outstanding Conversion Shares, treating as outstanding for the
purpose of such calculation the Conversion Shares issued and issuable upon
conversion of all outstanding Notes:
(i) within 90 days after the end of each fiscal year of the Company, a
consolidated balance sheet of the Company and its subsidiaries as of
the end of such fiscal year and the related consolidated statements of
income, changes in stockholders' equity and cash flow of the Company
and its subsidiaries for the fiscal year then ended, together with
supporting notes thereto, prepared in accordance with generally
accepted accounting principles, setting forth in each case in
comparative form the figures for the previous fiscal year and
accompanied by a report, without a "going concern" or like
qualification or exception, or qualification as to scope of audit, by
a firm of independent public accountants of recognized standing
selected by the Company and reasonably acceptable to the Purchasers;
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(ii) commencing with the month ending March 31, 1999, within 20 days
after the end of each month in each fiscal year, a consolidated
balance sheet of the Company and its subsidiaries and the related
consolidated statement of income, unaudited but certified by the
principal financial officer of the Company, such balance sheets to be
as of the end of such month and such statements of income to be for
such month and for the period from the beginning of the fiscal year to
the end of such month, in each case subject to normal year-end
adjustments and setting forth in each case in comparative form the
figures for the previous year;
(iii) together with the financial statements delivered pursuant to
Sections 5.02(i) and 5.02(ii) above, a statement signed by the chief
financial officer of the Company setting forth in reasonable detail
(A) with respect to the audited financial statements of the Company,
the computations of compliance with the provisions of Sections 11(k)
and 11(l) of the Notes as at the end of and for, in each case, the
fiscal year to which such financial statements relates; and (B) with
respect to the unaudited monthly financial statements of the Company
to be delivered with respect to the third, sixth, ninth and last month
of each fiscal year, computations of the ratios set forth in each such
Section as at the end of and for, in each case, the month to which
such financial statements relates and the portion of the fiscal year
through the end of such month;
(iv) together with the financial statements delivered with respect to
the third, sixth, ninth and last month of each fiscal year of the
Company pursuant to Section 5.02(ii) above, a comparison with the
corresponding quarterly figures contained in the budget for the
current fiscal year;
(v) within 20 days prior to the beginning of each fiscal year of the
Company (and with respect to any revision thereof, promptly after such
revision has been prepared), an operating budget for the Company and
its subsidiaries approved by the Board of Directors of the Company,
including projected quarterly income statements, cash flow statements
during such fiscal year and a projected consolidated balance sheet as
of the end of such fiscal year, setting forth in each case in
comparative form the figures for the previous year, and each quarterly
financial statement furnished pursuant to (ii) above shall reflect
variances from such operating budget, as the same may from time to
time be revised;
(vi) promptly upon filing, copies of all registration statements,
prospectuses, periodic reports and other documents filed by the
Company or any of its subsidiaries with the Commission;
(vii) prompt notice of (x) any event of default by the Company under
any agreement with respect to material indebtedness for borrowed money
or a material purchase money obligation, and any event which, upon
notice or lapse of time or both, would constitute such an event of
default which would permit the holder of such indebtedness or
obligation to accelerate the maturity thereof, and (y) any action,
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suit or proceeding at law or in equity or by or before any
governmental instrumentality or agency which, if adversely determined,
would materially impair the right of the Company to carry on its
business substantially as now or then conducted, or materially affect
the business, operations, properties, assets or financial condition or
prospects of the Company; and
(viii) promptly, from time to time, such other information regarding
the operations, business, affairs and financial condition or prospects
of the Company or any subsidiary as the Purchasers or such other
holder may reasonably request.
As used in the foregoing provisions of this Section 5.02, the term "subsidiary"
shall mean any corporation or other business entity a majority of whose
outstanding voting securities entitled to vote for the election of directors is
at the time owned by the Company and/or one or more other subsidiaries.
Any and all information provided pursuant to this Section 5.02 to the
extent not publicly available shall be deemed confidential information and shall
be held by any recipient hereunder in confidence and trust and shall not be
disclosed to third parties; and the recipient shall be subject to the fiduciary
obligations applicable to a person in possession of non-public information.
SECTION 5.03 Board Representation; Rights to Attend Meetings. (a) The
Company agrees that, so long as American Bankers shall hold at least 50% of the
issued and outstanding Conversion Shares, treating as outstanding for the
purpose of such calculation the Conversion Shares issuable upon conversion of
all outstanding Notes, at the request of American Bankers, the Company shall
nominate as a member of the slate of directors of the Company's management for
election to the Board of Directors of the Company (the "Board") one individual
designated by American Bankers (the "ABIG Designee"). Promptly after the Company
shall have received the prior written consent of the ABIG Designee to serve on
the Board, the Company shall take all action within its reasonable control
(subject to applicable law) to ensure the election of the ABIG Designee as a
director. The ABIG Designee initially will be Eugene Matalene, and any successor
representative of American Bankers shall be reasonably acceptable to the
Company. Each Purchaser that holds Conversion Shares entitled to vote thereon
agrees to appear in person or by proxy at any annual or special meeting of the
stockholders of the Company for the purpose of voting all shares of Common Stock
held by such Purchaser in favor of the ABIG Designee to the Board. The ABIG
Designee shall be entitled to receive the same cash and other incentive
compensation as the Company grants to its other outside directors, and the
Company shall reimburse the ABIG Designee for all of his or her reasonable
travel and other out-of-pocket expenses in attending meetings of the Board.
(b) So long as American Bankers shall hold at least 50% of the issued
and outstanding Conversion Shares, treating as outstanding for the purpose of
such calculation the Conversion Shares issued and issuable upon conversion of
all outstanding Notes the ABIG Designee (for so long as he or she is not a
member of the Board) and, at his or her own expense, one other representative of
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American Bankers will have the right to attend meetings of the Board, it being
understood that the ABIG Designee and such representative shall each act as an
observer without a vote or other rights as a member of the Board (except the
right to receive sufficient notice to enable such attendance and the right to
receive all other communications, information and materials furnished, from time
to time, to members of the Board). Any and all information provided to a Board
observer to the extent not publicly available shall be deemed confidential
information and shall be held by any recipient thereof in confidence and trust
and shall not be disclosed to third parties, and the recipient shall be subject
to the fiduciary obligations applicable to a director of the Company.
Notwithstanding the foregoing, the Company reserves the right to exclude the
observers from any meeting or portion thereof, and deny the observers access to
any material, if (i) the Company believes upon advice of counsel reasonably
acceptable to American Bankers that such exclusion or denial of access is
reasonably necessary to preserve the attorney-client privilege, (ii) the
presence of an observer is reasonably likely to result in a conflict of interest
in the good faith determination of the Board, or (iii) the Board determines in
good faith that such exclusion or denial of access is reasonably necessary to
protect trade secrets, intellectual property or highly sensitive subject matter.
VI.
MISCELLANEOUS
SECTION 6.01 Expenses. (a) The Company shall pay the reasonable,
documented fees and expenses (including, without limitation, legal and due
diligence fees and expenses) incurred by the Purchasers; provided, however,
that, without the prior written approval of the Company, the aggregate maximum
amount payable to the Purchasers under this Section 6.01 shall be $25,000 for
legal fees and expenses and $10,000 for other fees and expenses.
SECTION 6.02 Survival of Agreements, Etc. All representations,
warranties, covenants and agreements made in this Agreement shall survive the
execution and delivery of this Agreement and the issuance, sale and delivery of
Notes pursuant hereto.
SECTION 6.03 Brokerage. The Company, on the one hand, and the
Purchasers, on the other hand, shall indemnify and hold harmless the other
against and in respect of any claim for brokerage or other commissions relative
to this Agreement or to the transactions contemplated hereby, based in any way
on agreements, arrangements or understandings made or claimed to have been made
by such party with any third party.
SECTION 6.04 Parties in Interest. All covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not.
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SECTION 6.05 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be mailed by first-class
registered or certified mail, postage prepaid, or sent by recognized courier
service or by facsimile addressed as follows:
(a) if to the Company, to it at:
1490 O'Brien Drive
Menlo Park, CA 94025
Attention: President
Facsimile No.: (415) 292-6208
with a copy to:
Gibson, Dunn & Crutcher LLP
1530 Page Mill Road
Palo Alto, CA 94304-1125
Attention: Gregory T. Davidson
Facsimile No.: (650) 849-5333
(b) if to any Purchaser, to it at its address or facsimile
number set forth in Annex I hereto;
with a copy to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Attention: John C. MacMurray, Esq.
Facsimile No.: (212) 841-5725
(c) if to any subsequent holder of Notes or Conversion
Shares, to such holder at its address appearing on the
records of the Company;
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION 6.06 Knowledge. For the purposes of this Agreement, the term
"knowledge" shall mean, with respect to the Company, the knowledge of an officer
or director.
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SECTION 6.07 Assignability. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable by any party hereto without the
prior written consent of the other parties hereto.
SECTION 6.08 Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
SECTION 6.09 Mediation. If a dispute between one or more Purchasers,
on the one hand, and the Company, on the other hand, arises out of or relates to
this Agreement, the Notes or in connection with the transactions contemplated
hereby or thereby, or the breach hereof or thereof, and if the dispute cannot be
settled through negotiation, the parties agree first to try in good faith to
settle the dispute by mediation administered by the American Arbitration
Association under its Commercial Mediation Rules before resorting to litigation.
Any such dispute shall be submitted to one mediator selected in accordance with
said rules, and such mediation shall be held in San Francisco, California. The
parties further agree that the costs of such mediation shall be shared equally
between the Purchaser or Purchasers involved, on the one hand, and the Company,
on the other hand.
SECTION 6.10 WAIVER OF JURY TRIAL. EACH OF THE PURCHASERS AND THE
COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT HE, SHE
OR IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE NOTES OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. FURTHER, THE COMPANY HEREBY CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF THE PURCHASERS OR COUNSEL TO THE PURCHASERS HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE PURCHASERS WOULD NOT, IN THE EVENT
OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION. THE COMPANY ACKNOWLEDGES THAT THE PURCHASERS HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, INTER ALIA, THE PROVISIONS OF THIS SECTION 6.10.
SECTION 6.11 Entire Agreement; Amendments; Waivers. This Agreement,
the Notes and the Registration Rights Agreement constitute the entire Agreement
of the parties with respect to the subject matter hereof and may not be modified
or amended, nor may compliance by the Company with any of the provisions of
this Agreement be waived, except by written instrument signed by the Company and
the Purchasers.
SECTION 6.12 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Note Purchase Agreement as of the day and year first above written.
ACCOM, INC.
By: /s/ JUNAID SHEIKH
Name: Junaid Sheikh
Title: President
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IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Note Purchase Agreement as of the day and year first above written.
PURCHASER:
AMERICAN BANKERS INSURANCE GROUP, INC.
By: /s/ SUSAN EGLI
Name: Susan Egli
Title: Director of Investments
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IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Note Purchase Agreement as of the day and year first above written.
PURCHASER:
/s/ ALAN LIEBMAN
Alan Liebman
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IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Note Purchase Agreement as of the day and year first above written.
PURCHASER:
/s/ PAUL HIGBEE
Paul Higbee
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IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Note Purchase Agreement as of the day and year first above written.
PURCHASER:
/s/ SCOTT HOWARD
Scott Howard
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IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Note Purchase Agreement as of the day and year first above written.
PURCHASER:
/s/ EUGENE MATALENE
Eugene Matalene
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IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Note Purchase Agreement as of the day and year first above written.
PURCHASER:
/s/ ROBERT PANGIA
Robert Pangia
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ANNEX I
The Purchasers
The Notes and Conversion Shares
Principal Number of Purchase
Amount Conversion Price of
Name, Address and Domicile of Notes ($) Shares[FN2] Notes ($)
- -------------------------- ------------ ------ ---------
American Bankers
Insurance Group, Inc.
11222 Quail Roost Drive
Miami, FL 33157
Florida 3,000,000 2,307,692 3,000,000
Paul Higbee
175 Elmsley Court
Ridgewood, NJ 07450
New Jersey 100,000 76,923 100,000
Scott Howard
c/o Concorde Holdings
50 East 42nd Street, Suite 2106
New York, NY 10017
New York 100,000 76,923 100,000
Alan Liebman
300 West End Avenue
New York, NY 10023
New York 100,000 76,923 100,000
Eugene Matalene
19 North Drive
Plandome, NY 11030
New York 100,000 76,923 100,000
Robert Pangia
31 Hyde Circle
Watchung, NJ 07060
New Jersey 100,000 76,923 100,000
---------- ---------- -----------
Total $3,500,000 2,692,307 $3,500,000
- --------
[FN2] Rounded to eliminate fractional shares and subject to adjustment as set
forth in the Notes
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EXHIBIT A TO PURCHASE AGREEMENT
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER THIS
NOTE, NOR ANY INTEREST HEREIN, MAY BE OFFERED, SOLD,
TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF UNLESS
EITHER (I) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND LAWS RELATING THERETO OR (II) THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY, STATING
THAT SUCH REGISTRATION IS NOT REQUIRED.
ACCOM, INC.
Senior Subordinated Convertible Note
Due March 12, 2004
Registered R-001 New York, New York
$3,000,000 March 12, 1999
ACCOM, INC., a Delaware corporation (hereinafter called the
"Company"), for value received, hereby promises to pay to American Bankers
Insurance Group, Inc. ("American Bankers"), or registered assigns, the principal
sum of THREE MILLION DOLLARS ($3,000,000), on March 12, 2004 (the "Maturity
Date"), and to pay interest (computed on the basis of a 360-day year consisting
of twelve 30-day months) on the unpaid principal amount hereof from the date
hereof through the Maturity Date at the rate of 6% per annum, payable (i)
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quarterly in arrears on the last day of March, June, September and December in
each year (each said day being an "Interest Payment Date"), commencing on June
30, 1999 (ii) at maturity and (iii) upon conversion of all or any portion of
this Note until the principal amount hereof shall have become due and payable,
whether at maturity or by acceleration or otherwise. If all or a portion of (i)
the unpaid principal amount hereof, (ii) any interest payable thereon or (iii)
any other amount payable hereunder or under the Purchase Agreement (as
hereinafter defined) shall not be paid when due (whether at the stated maturity,
by acceleration or otherwise), for so long as such Event of Default (as
hereinafter defined) shall continue, the unpaid principal amount hereof, any
such overdue amount and, to the extent permitted by applicable law, any overdue
interest shall bear interest at a rate per annum equal to 12%, payable on
demand.
All payments of principal and interest on this Note shall be in such
coin or currency of the United States of America as at the time of payment shall
be legal tender for payment of public and private debts, and shall be made at
the offices of the person deemed the holder hereof in accordance with Section 4
below.
For purposes of this Note, "Business Day" shall mean any day other
than a Saturday, Sunday or a legal holiday under the laws of the State of New
York and the State of California.
1. Notes. This Note, together with any Note or Notes issued upon
exchange or transfer thereof pursuant to Section 2 hereof, is one of a duly
authorized issue of Notes (herein called the "Notes") made or to be made by the
Company in the aggregate principal amount of $3,500,000, maturing on March 12,
2004 and bearing interest payable at the same rate and on the same dates as the
interest on the principal amount of this Note. This Note is issued pursuant to
and is subject to the terms and provisions of the Note Purchase Agreement dated
as of March 12, 1999 (the "Purchase Agreement"), among the Company, American
Bankers and the other Purchasers named in Annex I thereto (collectively with
American Bankers, the "Purchasers"), and the terms of this Note include those
stated in the Purchase Agreement, including, without limitation, the final
paragraph of Section 5.02 thereof, which shall be binding upon each registered
transferee of this Note as provided in Section 3.
2. Loss, Theft, Destruction or Mutilation of Note. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note, and, in the case of any such loss, theft or
destruction, upon receipt of an affidavit of loss and indemnity from the holder
hereof reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of this Note, the Company will make
and deliver, in lieu of this Note, a new Note of like tenor and unpaid principal
amount and dated as of the date to which interest has been paid on this Note.
3. Transfer, Etc. of Notes. The Company shall keep at its office or
agency maintained as provided in paragraph (a) of Section 11 a register in which
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<PAGE>
the Company shall provide for the registration of Notes and for the registration
of transfer and exchange of Notes. The holder of this Note may, at its option,
and either in person or by duly authorized attorney, surrender the same for
registration of transfer or exchange at the office or agency of the Company
maintained as provided in said paragraph (a), and, without expense to such
holder (except for taxes or governmental charges imposed in connection
therewith), receive in exchange therefor a Note or Notes each in such
denomination or denominations as such holder may request, dated as of the date
to which interest has been paid on the Note or Notes so surrendered for transfer
or exchange, for the same aggregate principal amount as the then unpaid
principal amount of the Note or Notes so surrendered for transfer or exchange,
and registered in the name of such person or persons as may be designated by
such holder. Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed, or shall be accompanied by a written instrument
of transfer, satisfactory in form to the Company, duly executed by the holder of
such Note or his attorney duly authorized in writing. Every Note so made and
delivered in exchange for this Note shall in all other respects be in the same
form and have the same terms as this Note. No transfer or exchange of any Note
shall be valid unless made in the foregoing manner at such office or agency.
Upon any registration of transfer as provided herein, the transferee shall with
respect to the Note or any portion thereof so transferred to it become subject
to all of the terms and provisions of, and obligations of a holder under, such
Note (or portion) and the transferor shall have no further rights, obligations
or liabilities with respect thereto other than any which arose prior to the date
of transfer. Notwithstanding the foregoing, the minimum principal amount of
Notes that may be transferred to any third party is $100,000.
4. Persons Deemed Owners; Holders. The Company may deem and treat the
person in whose name any Note is registered as the owner and holder of such Note
for the purpose of receiving payment of principal of and interest on such Note
and for all other purposes whatsoever, whether or not such Note shall be
overdue. With respect to any Note at any time outstanding, the term "holder", as
used herein, shall be deemed to mean the person in whose name such Note is
registered as aforesaid at such time.
5. Optional Prepayments. Subject to any restrictions then applicable
to the Company under (x) the Loan and Security Agreement, dated as of December
10, 1998, as amended up to and including the date hereof (the "Loan Agreement")
among the Company, LaSalle Business Credit, Inc., as agent for the benefit of
the lenders party thereto ("LaSalle") and such lenders and (y) the Subordination
Agreement, dated as of March 12, 1999 (the "Subordination Agreement") among the
Company, LaSalle and the Purchasers:
(a) On and at any time after the first anniversary of the Closing
Date, upon notice given as provided in Section 6, the Company may, at its
option, prepay all or any portion of the Notes at 100% of the principal
amount thereof so to be prepaid if each of the following conditions shall
have been satisfied:
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(i) The Common Stock, $.001 par value ("Common Stock"), of the
Company shall, at the time such notice is given, have been quoted on
NASDAQ or listed on the New York Stock Exchange during the twenty
trading days immediately preceding the date of such prepayment, and
the price per share during such period shall not at any time have been
less than $5.00; and
(ii) American Bankers and its accountants shall have delivered a
certificate (the "Prepayment Certificate"), to the effect that
conversion of the Notes held by American Bankers into Common Stock on
or prior to the proposed date of such prepayment would not result in
American Bankers or any of its affiliates being required under
generally accepted accounting principles to account for its holdings
of the Common Stock of the Company pursuant to the "equity method" of
accounting; and
(iii) either:
(1) the trading volume for the Common Stock for each of the
four weeks (each such week consisting of five trading days)
immediately preceding the date set for such prepayment shall have
been at least 200,000 shares; or
(2) prior to the proposed date of such prepayment, the
holders of the Notes shall have realized aggregate net proceeds
(exclusive of premium or interest on the Notes), from their
original investment in the Notes of at least $3,500,000.
(b) On and at any time after the first anniversary of the Closing
Date, upon notice given as provided in Section 6, the Company may, at its
option, prepay all or any portion of the Notes at 130% of the principal
amount thereof so to be prepaid if the conditions set forth in clauses (i)
and (ii) of paragraph (a) above have been satisfied.
Any prepayments of the principal of the Notes made pursuant to this
Section 5 shall be made (i) in an amount equal to at least $875,000 or, if less,
the entire outstanding principal amount of the Notes, allocated in proportion to
the aggregate principal amount of all Notes so to be prepaid and (ii) together
with interest accrued thereon to the date fixed for such prepayment.
6. Notice of Prepayment, Other Notices; Satisfaction of Conditions.
(a) The Company shall give written notice of any prepayment of this
Note or any portion hereof pursuant to Section 5 not less than 30 nor more
than 45 days prior to the proposed date of such prepayment. Such notice of
prepayment shall specify (i) the proposed date of such prepayment, (ii) the
principal amount of the Notes called for such prepayment, (iii) to the
extent applicable, those conditions described in Section 5 that are
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<PAGE>
required to have been satisfied as of such proposed date of prepayment,
together with a reasonably detailed explanation as to the proposed way in
which the conditions (other than the condition described in clause (ii) of
Section 5(a)) will be satisfied and (iv) the percentage of the principal
amount at which this Note or portion hereof is to be prepaid. Such notice
of prepayment and all other notices to be given to any holder of this Note
shall be given by registered or certified mail to the person in whose name
this Note is registered at its address designated on the register
maintained by the Company on the date of mailing such notice of prepayment
or other notice.
(b) Upon notice of prepayment being given as aforesaid, American
Bankers will promptly consult with its accountants in order to make a good
faith determination as to the matter described in subparagraph (ii) of
Section 5(a). If such determination is to the effect that the condition
contained in said subparagraph has been satisfied, American Bankers shall
deliver a Prepayment Certificate, no less than five days prior to the
proposed date of such prepayment. If such determination is to the effect
that the condition cannot be satisfied as of the proposed date of such
prepayment, American Bankers shall deliver a certificate to that effect,
together with such evidence supporting such conclusion as American Bankers,
in its reasonable discretion, deems necessary.
(c) Upon notice of prepayment being given as aforesaid, subject to
satisfaction of the conditions specified in such notice, the Company
covenants and agrees that it will prepay, on the date specified therein for
such prepayment, this Note or the portion hereof, as the case may be, so
called for prepayment, at the percentage of the principal amount thereof so
called for prepayment specified in the notice, together with interest
accrued thereon to the date of such prepayment. If on the proposed date of
any prepayment pursuant to Section 5 any condition to such prepayment shall
not have been satisfied as required thereunder (i) the Company shall
neither be permitted nor any longer be obligated to make such prepayment,
and (ii) the holder of this Note shall thereupon have the right to withdraw
any notice of conversion given at any time during the period (the
"Prepayment Period") commencing upon the delivery of the related notice of
prepayment pursuant to this Section 6 and ending on the proposed date of
prepayment specified in such notice.
7. Allocation of Prepayment. In the event of any prepayment, purchase,
redemption or retirement of less than all of the Notes which the Company is
obligated to prepay, purchase, redeem or retire on any date, the Company will
allocate the principal amount so to be prepaid, purchased, redeemed or retired
on such date to each Note so to be prepaid, purchased, redeemed or retired in
proportion, as nearly as may be, to the aggregate principal amount of all Notes
then due to be prepaid, purchased, redeemed or retired.
8. Interest After Date Fixed for Prepayment. If this Note or a portion
hereof is called for prepayment as herein provided, this Note or such portion
shall cease to bear interest on and after the date fixed for such prepayment
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<PAGE>
unless, upon presentation for the purpose, the Company shall fail to pay this
Note or such portion, as the case may be, in which event this Note or such
portion, as the case may be, and, so far as may be lawful, any overdue
installment of interest, shall bear interest on and after the date fixed for
such prepayment and until paid at the rate per annum provided herein for overdue
principal.
9. Surrender of Note; Notation Thereon. Upon any prepayment of a
portion of the principal amount of this Note, the holder hereof, at its option,
may require the Company to execute and deliver at the expense of the Company
(except for taxes or governmental charges imposed in connection therewith),
upon surrender of this Note, a new Note registered in the name of such person or
persons as may be designated by such holder for the principal amount of this
Note then remaining unpaid, dated as of the date to which interest has been paid
on the principal amount of this Note then remaining unpaid, or may present this
Note to the Company for notation hereon of the payment of the portion of the
principal amount of this Note so prepaid.
10. Conversion.
(a) Right to Convert. Subject to the terms and conditions of this
Section 10, the holder of this Note shall have the right, at such holder's
option at any time to convert the principal amount of this Note, in whole
or, subject as set forth below, in part, into a number of fully paid and
nonassessable whole shares of Common Stock determined by dividing the
outstanding principal amount hereof, or a portion thereof, by the
conversion price of $1.30 per share, or by the conversion price as last
adjusted and in effect at the date that this Note is surrendered for
conversion (such price, or such price as last adjusted, being referred to
herein as the "Conversion Price"). Notwithstanding the foregoing, at any
time after the holders of the Notes shall have realized aggregate net
proceeds (exclusive of premium or interest on the Notes) from their
original investment in the Notes of at least $3,500,000, the right of the
holder of this Note to convert less than the entire remaining principal
amount of this Note shall cease, and any notice of conversion delivered by
the holder of this Note in the manner described below after such time shall
be deemed to be a request to convert all, but not less than all, of the
remaining principal amount outstanding hereunder. The rights of conversion
contained in this subparagraph (a) shall be exercised by the holder of this
Note by giving written notice that such holder elects to convert this Note
pursuant to this subparagraph (a) into Common Stock and by surrender of
this Note to the Company at its principal office (or such other office or
agency of the Company as the Company may designate by notice in writing to
the holder of this Note) at any time during its usual business hours on the
date set forth in such notice, together with a statement of the name or
names (with address) in which the certificate or certificates for shares of
Common Stock shall be issued.
(b) Issuance of Certificates; Time Conversion Effected. Promptly after
the receipt of the written notice referred to in subparagraph (a) above and
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surrender of this Note for the conversion of this Note or portion thereof,
or, in the case of a notice of conversion delivered during a Prepayment
Period, on the proposed date of prepayment as provided in Section 6
(provided such notice of conversion shall not have been withdrawn by the
holder hereof pursuant to Section 6(c)), the Company shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in
such name or names as such holder may direct, a certificate or certificates
for the number of whole shares of Common Stock issuable upon the conversion
of this Note of the portion thereof being converted. To the extent
permitted by law, such conversion shall be deemed to have been effected,
and the Conversion Price shall be determined, as of the close of business
on the date on which such written notice shall have been received by the
Company and this Note shall have been surrendered as aforesaid, and at such
time the rights of the holder of this Note shall cease with respect thereto
or to the portion thereof being converted, and the person or persons in
whose name or names any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become
the holder or holders of record of the shares represented thereby. Upon
notice of conversion being given as aforesaid, the Company will pay on the
date of such conversion interest accrued on this Note or the portion hereof
being converted to the date of such conversion. If this Note or a portion
hereof is converted as herein provided, this Note or such portion shall
cease to bear interest on and after the date of conversion unless, upon
surrender of the Note for the purpose, the Company shall fail to convert
this Note or such portion, as the case may be, in which event, this Note or
such portion, as the case may be, and, so far as may be lawful, any overdue
interest, shall bear interest on and after the date of such conversion and
until paid (or in the case of principal, converted) at the rate per annum
provided herein for overdue principal.
(c) Fractional Shares; Dividends; Partial Conversion. No fractional
shares shall be issued upon conversion of this note or any portion thereof
into Common Stock and no payment or adjustment shall be made upon any
conversion on account of any cash dividends on the Common Stock issued
upon such conversion. In case of the conversion of less than the entire
principal amount outstanding of this Note, the Corporation shall, upon such
conversion, execute and deliver to the holder thereof, at the expense of
the Corporation, a new Note or Notes for the principal amount of this Note
which is not to be converted. If any fractional interest in a share of
Common Stock would, except for the provisions of the first sentence of this
subparagraph (c), be deliverable upon any such conversion, the Corporation,
in lieu of delivering the fractional share thereof shall (i) in the case of
a partial conversion, add to the principal amount of such new Note, an
amount equal to the fractional interest not converted, multiplied by the
Conversion Price then in effect and (ii) in the case of the conversion of
the entire principal amount of this Note, shall pay to the holder
surrendering this Note for conversion an amount in cash equal to the
current fair market value of such fractional interest as determined in good
faith by the Board of Directors of the Corporation.
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(d) Subdivision or Combination of Stock. In case the Company shall at
any time subdivide its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Conversion Price in effect immediately prior
to such combination shall be proportionately increased.
(e) Stock Dividends. In case the Company shall declare a dividend or
make any other distribution upon any stock of the Company payable in Common
Stock, or in rights to subscribe for or to purchase, or in options for the
purchase of Common Stock or for any stock or securities convertible into or
exchangeable for Common Stock ("Common Stock Equivalents"), any Common
Stock or Common Stock Equivalents as the case may be, issuable in payment
of such dividend or distribution shall be deemed to have been issued or
sold without consideration, and the Conversion Price shall be reduced as if
the Company had subdivided its outstanding shares of Common Stock into a
greater number of shares, as provided in subparagraph (d) hereof.
(f) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution payable in Common Stock or Common Stock
Equivalents, then such record date shall be deemed to be the date of the
issue of the shares of Common Stock or the Common Stock Equivalents deemed
to have been issued upon the declaration of such dividend or the making of
such other distribution, provided that such shares of Common Stock or
Common Stock Equivalents shall in fact have been issued.
(g) Reorganization, Reclassification, Consolidation, Merger or Sale.
If any capital reorganization or reclassification of the capital stock of
the Company or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected in such a way (including, without
limitation, by way of consolidation or merger) that holders of Common
Stock shall be entitled to receive stock, securities or assets with respect
to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions (in form reasonably satisfactory to the holder of this
Note) shall be made whereby the holder of this Note shall thereafter have
the right to receive, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately
theretofore receivable upon the conversion of this Note, such shares of
stock, securities or assets as may be issued or payable with respect to or
in exchange for a number of outstanding shares of Common Stock equal to the
number of shares of such stock immediately theretofore so receivable had
such reorganization, reclassification, consolidation, merger or sale not
taken place, and in any such case appropriate provision shall be made with
respect to the rights and interests of such holder to the end that the
provisions hereof (including, without limitation, provisions for adjustment
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<PAGE>
of the Conversion Price) shall thereafter be applicable, as nearly
practicable, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of such conversion rights
(including, if necessary to effect the adjustments contemplated herein, an
immediate adjustment, by reason of such reorganization, reclassification,
consolidation, merger or sale, of the Conversion Price to the value for the
Common Stock reflected by the terms of such reorganization,
reclassification, consolidation, merger or sale if the value so reflected
is less than the Conversion Price in effect immediately prior to such
reorganization, reclassification, consolidation, merger or sale). In the
event of a merger or consolidation of the Company as a result of which a
greater or lesser number of shares of common stock of the surviving
corporation is issuable to holders of Common Stock of the Company
outstanding immediately prior to such merger or consolidation, the
Conversion Price in effect immediately prior to such merger or
consolidation shall be adjusted in the same manner as though there were a
subdivision or combination of the outstanding shares of Common Stock of the
Company. The Company will not effect any such consolidation or merger, or
any sale of all or substantially all of its assets and properties, unless
prior to the consummation thereof the successor corporation (if other than
the Company) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume by written instrument (in form
reasonably satisfactory to the holder of this Note), executed and mailed or
delivered to the holder of this Note at the last address of such holder
appearing on the books of the Company, the obligation to deliver to such
holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to receive.
(h) Notices. Upon any adjustment of the Conversion Price, then and in
each such case the Company shall give written notice thereof as provided in
Section 5, which notice shall state the Conversion Price resulting from
such adjustment, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(i) Stock to be Reserved. The Company will at all times reserve and
keep available out of its authorized Common Stock or its treasury shares,
solely for the purpose of issue upon the conversion of this Note as herein
provided, such number of shares of Common Stock as shall then be issuable
upon the conversion of this Note. The Company covenants that all shares of
Common Stock which shall be so issued shall be duly and validly issued and
fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issue thereof and, without limiting the generality of
the foregoing, the Company covenants that it will from time to time take
all such action as may be requisite to assure that the par value per share
of the Common Stock is at all times equal to or less than the effective
Conversion Price. The Company will take all such action as may be necessary
to assure that all such shares of Common Stock may be so issued without
violation of any applicable law or regulation, or of any requirements of
any national securities exchange upon which the Common Stock of the Company
may be listed.
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(j) Issue Tax. The issuance of certificates for shares of Common Stock
upon conversion of this Note shall be made without charge to the holders
thereof for any issuance tax in respect thereof, provided that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of this Note.
(k) Closing of Books. The Company will at no time close its transfer
books against the transfer of any shares of Common Stock issued or issuable
upon the conversion of this Note in any manner which interferes with the
timely conversion of this Note.
11. Covenants. The Company covenants and agrees that, so long as any
Note shall be outstanding:
(a) Maintenance of Office. The Company will maintain an office or
agency in such place in the United States of America as the Company may
designate in writing to the registered holder hereof where the Notes may be
presented for registration of transfer and exchange as herein provided,
where notices and demands to or upon the Company in respect of the Notes
may be served and where the Notes shall be presented for payment. Until the
Company otherwise notifies the holders of Notes, said office shall be the
office of the Company at 1490 O'Brien Drive, Menlo Park, California 94025.
(b) Payment of Taxes. The Company will promptly pay and discharge or
cause to be paid and discharged, before the same shall become in default,
all lawful taxes and assessments imposed upon the Company or any subsidiary
or upon the income and profits of the Company or any subsidiary, or upon
any property, real, personal or mixed, belonging to the Company or any
subsidiary, or upon any part thereof by the United States or any State
thereof, as well as all lawful claims for labor, materials and supplies,
which, if unpaid, would become a lien or charge upon such property or any
part thereof, provided, however, that neither the Company nor any
subsidiary shall be required to pay and discharge or to cause to be paid
and discharged any such tax, assessment, charge, levy or claim so long as
(i) the Company or a subsidiary shall be contesting the validity thereof in
good faith or (ii) the Company shall, in its good faith judgment, deem the
validity thereof to be questionable and the party to whom such tax,
assessment, charge, levy or claim is allegedly owed shall not have made
written demand for the payment thereof.
(c) Legal Existence. The Company will do or cause to be done all
things necessary and lawful to preserve and keep in full force and effect
its legal existence, rights and franchises and the legal existence, rights
and franchises of each of its subsidiaries.
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(d) Maintenance of Property. The Company will at all times maintain
and keep, or cause to be maintained and kept, in good repair, working order
and condition all significant properties of the Company and its
subsidiaries used in the conduct of the business of the Company and its
subsidiaries, and will from time to time make or cause to be made all
needful and proper repairs, renewals, replacements, betterments and
improvements thereto, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this paragraph (d) shall require (i) the
making of any repair or renewal or (ii) the continuance of the operation
and maintenance of any property or (iii) the retention of any assets if
such action (or inaction) is, in the good faith business judgment of the
Company, in the best interests of the Company and is not disadvantageous in
any material respect to the holders of the Notes.
(e) Insurance. The Company will, and will cause each of its
subsidiaries, at all times, either to (i) (x) keep adequately insured, by
financially sound and reputable insurers, all property of a character
usually insured by business enterprises engaged in the same or a similar
business similarly situated against loss or damage of the kinds customarily
insured against by such enterprises and (y) carry, with financially sound
and reputable insurers, such other insurance (including, without
limitation, liability insurance) in such amounts as are available at
reasonable expense and to the extent believed necessary in the good faith
business judgment of the Board of Directors of the Company; or (ii) subject
to the approval of said Board of Directors, implement and maintain a
self-insurance program to protect the Company from such risks of loss as
would otherwise be required to be insured against under subclause (i)
above.
(f) Keeping of Books. The Company will at all times keep, and cause
each of its subsidiaries to keep, proper books of record and account in
which proper entries will be made of its transactions in accordance with
generally accepted accounting principles.
(g) Transactions with Affiliates. Except as contemplated by the
Purchase Agreement, the Company shall not enter into, or permit any
subsidiary to enter into, any transaction with any of its or any
subsidiary's officers, directors, employees or any person related by blood
or marriage to any such person or any entity in which any such person owns
any beneficial interest, except for (i) normal employment arrangements,
benefit programs and employee incentive option programs on reasonable
terms, (ii) any transaction approved by the independent and disinterested
members of the board of directors of the Company or otherwise permitted
under applicable law, and (iii) customer transactions in the ordinary
course of business and (iv) the transactions contemplated by the Purchase
Agreement.
(h) Notice of Default. If any one or more events which constitute, or
which with notice or lapse of time or both would constitute, an Event of
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<PAGE>
Default under Section 13 of this Note shall occur, or if the holder of any
Note shall demand payment or take any other action permitted upon the
occurrence of any such Event of Default, the Company shall, immediately
after it becomes aware that any such event has occurred or that such demand
has been made or that any such action has been taken, give notice to all
holders of the Notes, specifying the nature of such event or of such demand
or action, as the case may be.
(i) Payment of Principal and Interest on the Notes. The Company will
use its best efforts, subject to the provisions of applicable credit
arrangements and contractual obligations of the Company and/or its
subsidiaries and any applicable law restricting the same, to provide funds
from its subsidiaries to the Company, by dividend, advance or otherwise,
sufficient to permit payment by the Company of the principal of and
interest on the Notes in accordance with their terms.
(j) Limitations on Fundamental Changes; Sale of Assets, Etc. The
Company shall not, nor shall it permit any subsidiary to (i) enter into any
merger, consolidation or amalgamation, or liquidate, wind up or dissolve
itself, or suffer any liquidation or dissolution (except that any
wholly-owned subsidiary may merge with or into the Company or any other
subsidiary) or (ii) convey, sell, lease, assign, transfer or otherwise
dispose of any of its property, business or assets (including, without
limitation, receivables and leasehold interests), whether now owned or
hereafter acquired, except, in each case, for (x) the sale or other
disposition of inventory or other property in the ordinary course of
business, (y) the sale or other disposition of assets not used in or
necessary to the business the proceeds of which shall not exceed $50,000
in the aggregate and (z) as otherwise permitted under the Loan Agreement.
(k) Interest Coverage Ratio. The Company and its subsidiaries, on a
consolidated basis, shall not have, for any period of four consecutive
fiscal quarters (or, prior to the fiscal quarter ending June 30, 2000, such
smaller number of consecutive fiscal quarters commencing with the fiscal
quarter ending on June 30, 1999) (each such period being a "Test Period"
and the last day of each Test Period being a "Test Date") ending at any
time after the date hereof, a ratio of (x) EBITDA to (y) total interest
expense, in each case for such Test Period, less than 1.5 to 1.
(l) Leverage Ratio. The Company and its subsidiaries, on a
consolidated basis, shall not have a ratio of (x) Total Funded Debt, as of
any Test Date to (y) EBITDA, for the Test Period then ended greater than 3
to 1; provided, however, that in order to calculate such ratio as of any
Test Date occurring prior to March 31, 2000, EBITDA for the Test Period
then ended shall be deemed to be EBITDA for the number of whole consecutive
fiscal quarters elapsed between the date of this Note and such Test Date
multiplied (i) in the case of the June 30, 1999 Test Date, by 4, (ii) in
the case of the September 30, 1999 Test Date, by 2 and (iii) in the case of
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<PAGE>
the December 31, 1999 Test Date, by 4/3, and provided, further however,
that if the Company or any subsidiary shall have made any acquisition
during any period for which the ratio of Total Debt to EBITDA is to be
calculated, EBITDA shall be calculated as if such acquisition had been made
on the first day of such period.
(m) Limitations on Certain Indebtedness. The Company shall not, nor
shall it permit any subsidiary to, create, incur, assume or suffer to exist
any Indebtedness for borrowed money that (i) ranks pari passu with the
Indebtedness evidenced by the Notes or (ii) is subordinated to the Notes,
unless the terms and conditions of such subordination is reasonably
satisfactory to the holders of at least 50% in principal amount of the
Notes then outstanding.
(n) Limitations on Liens. The Company shall not, nor shall it permit
any subsidiary to, create, incur, assume or suffer to exist any Lien upon
any of its property, assets or revenues, whether now owned or hereafter
acquired, except for:
(i) Liens created under the Loan Agreement and under any
refinancings, refundings, renewals or extensions thereof;
(ii) Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings diligently conducted, provided
that adequate reserves with respect thereto are maintained on the
books of the Company or such subsidiary in conforming with generally
accepted accounting principles;
(iii) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens of the Company arising in the ordinary
course of business which are not overdue for a period of more than 60
days or which are being contested in good faith by appropriate
proceedings diligently conducted;
(iv) pledges or deposits by the Company in connection with
workers' compensation, unemployment insurance and other social
security legislation and deposits securing liability to insurance
carriers under insurance or self-insurance arrangements;
(v) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business of the Company;
(vi) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business of the
Company which, in the aggregate, are not substantial in amount and
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<PAGE>
which do not in any case materially detract from the value of the property
subject thereto or materially interfere with the ordinary conduct of the
business of the Company;
(vii) Liens consisting solely of the interest of a lessor in
property subject to a capitalized lease obligation, provided that (x)
such Liens shall be created substantially simultaneously with the
acquisition or commencement of the use of the property subject thereto
by the Company and (y) such Liens shall not at any time encumber any
property other than the leased property;
(viii) Liens securing purchase money indebtedness; provided that
such Lien does not secure any other Indebtedness and does not encumber
any property other than the property acquired with the proceeds of
such purchase money indebtedness; and
(ix) Liens in existence on the date hereof listed on Schedule
11(o)(ix) securing the Indebtedness described therein, and extensions
and renewals thereof, provided that no such Lien shall extend to any
additional property (other than the proceeds of the property subject
to such Lien on the date hereof) after the Closing Date and that the
amount of Indebtedness secured thereby is not increased.
(o) Limitations on Contingent Obligations. The Company shall not, nor
shall it permit any subsidiary to, create, incur, assume or suffer to exist
any Contingent Obligation of the Company or such subsidiary guaranteeing
Indebtedness that the Company or such subsidiary would have been prohibited
from incurring directly under Section 11(m).
(p) Limitation on Amendments. The Company shall not, nor shall it
permit any subsidiary to amend, modify or waive any term or material
provision of (i) its Certificate or Articles of Incorporation; (ii) its
by-laws; (iii) the Loan Agreement, (iv) the Seller Notes or (v) any other
document evidencing Indebtedness; provided, however, that no such
prohibition shall be required with respect to any such change, modification
or waiver if giving effect thereto shall not result in a Default or Event
of Default, hereunder or under the Loan Agreement, as defined therein, or
be reasonably expected to have a material adverse effect on the business,
assets, properties, operating condition (financial or otherwise) or
prospects of the Company (a "Material Adverse Effect"). The Company shall
deliver to American Bankers a copy of any such change, modification or
waiver that is in writing promptly upon its execution and delivery.
(q) Line of Business. Engage in any business other than that of
designing, manufacturing, selling and supporting systems and workstations
used for digital video editing, image manipulation and effects creation and
image storage, and businesses reasonably incidental thereto.
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(r) Restricted Payments. Declare or make any dividends or
distributions, or apply any of its property to the voluntary purchase,
redemption or other retirement of, or set apart any sum for the voluntary
payment of any distribution on, or make any other distribution (including,
without limitation, any distributions for the payment of taxes) in respect
of, any securities of the Company or any rights or options in connection
therewith (each a "Restricted Payment"), except up to $250,000 in any
fiscal year of the Company for the repurchase of securities of the Company
or any rights or options in connection therewith held by employees of the
Company that are no longer employed by the Company as of the date of such
repurchase.
(s) The Company shall not at any time issue shares of Common Stock or
any Common Stock Equivalents at a price per share of Common Stock or
underlying Common Stock, as the case may be, less than the Conversion Price
then in effect.
12. Modification by Holders; Waiver. Subject to any restrictions then
applicable under the Loan Agreement or the Subordination Agreement, the Company
may, with the written consent of the holders of not less than 50% in principal
amount of the Notes then outstanding, modify the terms and provisions of the
Notes or the rights of the holders of the Notes or the obligations of the
Company thereunder, and the observance by the Company of any term or provision
of the Notes may be waived with the written consent of the holders of not less
than [50]% in principal amount of the Notes then outstanding; provided, however,
that, without the consent of all holders of the Notes, no such modification or
waiver shall:
(a) change the maturity of any Note or reduce the principal amount
thereof or reduce the rate or extend the time of payment of interest
thereon without the consent of the holder of each Note so affected; or
(b) give any Note any preference over any other Note; or
(c) reduce the percentage of Notes, the consent of the holders of
which is required for any such modification.
Any such modification or waiver shall apply equally to all the holders
of the Notes and shall be binding upon them, upon each future holder of any Note
and upon the Company, whether or not such Note shall have been marked to
indicate such modification or waiver, but any Note issued thereafter shall bear
a notation referring to any such modification or waiver. Promptly after
obtaining the written consent of the holders as herein provided, the Company
shall transmit a copy of such modification or waiver to all the holders of the
Notes at the time out standing.
13. Events of Default. If any one or more of the following events,
herein called "Events of Default", shall occur, for any reason whatsoever, and
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<PAGE>
whether such occurrence shall, on the part of the Company or any subsidiary, be
voluntary or involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgment, decree or order of a court of
competent jurisdiction or any order, rule or regulation of any administrative or
other governmental authority, and such Event of Default shall be continuing:
(a) default shall be made in the payment of the principal of any Note
when and as the same shall become due and payable, whether at maturity or
at a date fixed for prepayment or by acceleration or otherwise; or
(b) default shall be made in the payment of any installment of
interest on any Note according to its terms when and as the same shall
become due and payable and such default shall continue for a period of five
(5) Business Days; or
(c) default shall be made in the due observance or performance of any
covenant, condition or agreement on the part of the Company to be observed
or performed pursuant to Sections 11(k), 11(l) and 11(s) and, in the case
of Sections 11(k) and 11(l), any such default shall continue for 30 days;
or
(d) default shall be made in the due observance or performance of any
other covenant, condition or agreement on the part of the Company to be
observed or performed pursuant to the terms hereof or of the Purchase
Agreement and any such default shall continue for 30 days after written
notice thereof, specifying such default and requesting that the same be
remedied, shall have been given to the Company by the holder or holders of
at least 25% of the principal amount of the Notes then outstanding (the
Company to give forthwith to all other holders of Notes at the time
outstanding written notice of the receipt of such notice specifying the
default referred to therein); or
(e) any representation or warranty made by the Company herein or in
the Purchase Agreement (taken singly or together with other representations
and warranties made by the Company herein or therein) shall prove to have
been false or incorrect in any material respect on the date on or as of
which made; or
(f) the entry of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Company or any subsidiary of
the Company in an involuntary case under the federal bankruptcy laws, as
now constituted or hereafter amended, or any other applicable federal or
state bankruptcy, insolvency or other similar laws, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of the Company or any such subsidiary or for any
substantial part of any of their property, or ordering the winding-up or
liquidation of any of their affairs and the continuance of any such decree
or order unstayed and in effect for a period of 90 consecutive days; or
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(g) the commencement by the Company or any subsidiary of the Company
of a voluntary case under the federal bankruptcy laws, as now constituted
or hereafter amended, or any other applicable federal or state bankruptcy,
insolvency or other similar laws, or the consent by any of them to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of the Company
or any such subsidiary for any substantial part of their property, or the
making by any of them of any assignment for the benefit of creditors, or
the failure of the Company or any such subsidiary generally to pay its
debts as such debts become due, or the taking of corporate action by the
Company or any such subsidiary in furtherance of or which might reasonably
be expected to result in any of the foregoing; or
(h) default as defined in any instrument evidencing or under which the
Company or any subsidiary has outstanding at the time any Indebtedness for
money borrowed in excess of $100,000 in aggregate principal amount shall
occur and as a result thereof the maturity of any such indebtedness shall
have been accelerated so that the same shall have become due and payable
prior to the date on which the same would otherwise have become due and
payable and such acceleration shall not have been rescinded or annulled
within 30 days; or
(i) final judgment for the payment of money in excess of an amount
equal to the sum of $100,000 and the proceeds of insurance or other third
party indemnification payments actually collected by the Company shall be
rendered against the Company or a subsidiary of the Company and the same
shall remain undischarged for a period of 30 days during which execution
shall not be effectively stayed;
then, subject to any restrictions then applicable under the Loan Agreement or
the Subordination Agreement, the holder or holders of a least 50% in aggregate
principal amount of the Notes at the time outstanding may, at its or their
option, by notice to the Company, declare all the Notes to be, and all the Notes
shall thereupon be and become, forthwith due and payable together with interest
accrued thereon without presentment, demand, protest or further notice of any
kind, all of which are expressly waived to the extent permitted by law.
At any time after any declaration of acceleration as to all of the
Notes has been made as provided in this Section 13, the holders of at least 50%
in principal amount of the Notes then outstanding may, by notice to the Company,
rescind such declaration and its consequences, if (i) the Company has paid all
overdue installments of interest on the Notes and all principal that has become
due otherwise than by such declaration of acceleration and (ii) all other
defaults and Events of Default (other than nonpayments of principal and interest
that have become due solely by reason of acceleration) shall have been remedied
or cured or shall have been waived pursuant to this paragraph; provided,
however, that no such rescission shall extend to or affect any subsequent
default or Event of Default or impair any right consequent thereon.
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14. Suits for Enforcement. In case any one or more of the Events of
Default specified in Section 13 of this Note shall occur and be continuing, the
holder of this Note may proceed to protect and enforce its rights by suit in
equity, action at law and/or by other appropriate proceeding, whether for the
specific performance of any covenant or agreement contained in this Note or in
aid of the exercise of any power granted in this Note, or may proceed to enforce
the payment of this Note or to enforce any other legal or equitable right of the
holder of this Note.
In case of any default under any Note, the Company will pay to the
holder thereof such amounts as shall be sufficient to cover the reasonable costs
and expenses of such holder due to said default, including, without limitation,
collection costs and reasonable attorneys' fees, to the extent actually
incurred.
15. Remedies Cumulative. No remedy herein conferred upon the holder of
this Note is intended to be exclusive of any other remedy and each and every
such remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or otherwise.
16. Remedies Not Waived. No course of dealing between the Company and
the holder of this Note or any delay on the part of the holder hereof in
exercising any rights hereunder shall operate as a waiver of any right of any
holder of this Note.
17. Subordination. Anything in this Note to the contrary
notwithstanding, the obligation of the Company to pay the principal of and
interest on this Note and to discharge all of its other obligations hereunder,
shall be subordinate and junior in right of payment to the prior payment in full
of the obligations of the Company under the Loan Agreement, to the extent set
forth in the Subordination Agreement.
18. Certain Definitions. As used herein, the following words shall
have the following meanings:
"Contingent Obligation": as to any person, any obligation, contingent
or otherwise, of such person directly or indirectly guaranteeing any
Indebtedness or other obligation of any other person and, without limiting
the generality of the foregoing, any obligation (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness
or other obligation; or (ii) arising under any performance or surety bond,
or other obligation assuring in any manner the obligee of such Indebtedness
or other obligation of the payment or performance thereof or to protect
such other person against loss in respect thereof (in whole or in part).
The amount of any Contingent Obligation of any person shall be deemed to be
the maximum amount for which such person may be liable pursuant to the
terms of the instrument embodying such Contingent Obligation, unless the
maximum amount for which such guaranteeing person may be liable is not
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stated or determinable, in which case the amount of such Contingent
Obligation shall be such person's maximum reasonably anticipated liability
in respect thereof.
"EBITDA": for any fiscal period of the Company and its subsidiaries,
the consolidated net income (or loss) after taxes (to the extent deducted)
of the Company and its consolidated subsidiaries, for continuing operations
for such fiscal period (excluding any after-tax extraordinary gains or
losses (to the extent added or deducted)) (a) plus, to the extent deducted
in arriving at such net income (or loss) (i) total interest expense, (ii)
income tax expense and (iii) depreciation and amortization and (b) plus or
minus any other non-cash charges or gains which have been deducted or added
in calculating such net income after taxes, in each case with respect to
the Company and its consolidated subsidiaries for such fiscal period,
calculated in accordance with generally accepted accounting principles
consistently applied.
"Total Funded Debt": at any date of determination (a) all outstanding
obligations of the Company and its subsidiaries under (i) the Loan
Agreement, (ii) the Seller Notes and (iii) the Purchase Agreement and the
Notes, plus (b) any other Indebtedness for borrowed money of the Company
and its subsidiaries.
"Lien": any mortgage, pledge, hypothecation, assignment, encumbrance,
lien, security agreement or security interest of any kind or nature
whatsoever, or any other arrangement having substantially the same economic
effect as any of the foregoing.
"Indebtedness": as to any person at any date, (a) all indebtedness of
such person for borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities incurred in the
ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such person which is evidenced by
a note, bond, debenture or similar instrument, (c) all obligations of such
person under capitalized lease obligations, (d) all obligations of such
person in respect of acceptances issued or created for the account of such
person or in respect of unreimbursed drawings under letters of credit
issued for the account of such person, (e) all liabilities secured by any
Lien on any property owned by such person even though such person has not
assumed or otherwise become liable for the payment thereof and (e) all
Contingent Obligations of such person.
19. Covenants Bind Successors and Assigns. All the covenants,
stipulations, promises and agreements in this Note contained by or on behalf of
the Company shall bind its successors and assigns, whether so expressed or not.
20. Governing Law. This Note shall be governed and construed in
accordance with the laws of the State of Delaware.
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21. Headings. The headings of the Sections and paragraphs of this Note
are inserted for convenience only and do not constitute a part of this Note.
IN WITNESS WHEREOF, ACCOM INC. has caused this Note to be signed in
its corporate name by one of its officers thereunto duly authorized and to be
dated as of the day and year first above written.
ACCOM, INC.
By
Name:
Title:
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EXHIBIT B TO PURCHASE AGREEMENT
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "Agreement") is made and entered
into as of March ___, 1999 by and among Accom, Inc., a Delaware corporation (the
"Company"), and those investors listed on Schedule I hereto (each, an "Investor"
and collectively, the "Investors").
RECITALS
A. The Investors have agreed to acquire from the Company, and the
Company has agreed to issue to the Investors, an aggregate $3,500,000 principal
amount of 6% Senior Subordinated Convertible Notes (the "Notes") on the terms
and conditions set forth in the Note Purchase Agreement dated as the date hereof
by and between the Company and the Investors (the "Note Purchase Agreement").
B. The Notes may be converted into shares (the "Conversion Shares") of
the Company's Common Stock pursuant to the terms and conditions of the Note,
which Conversion Shares, as of the date hereof, are listed on Schedule I hereto.
C. As a condition to the issuance of the Notes, the Investors have
agreed to certain restrictions related to the ownership of stock of the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
1. Acquisition of Additional Shares, Voting, Transfer and Other Restrictions.
1.1 Certain Definitions. All capitalized terms used but not defined in
this Agreement shall have the meaning as defined for such term in the Note
Purchase Agreement. In addition, as used in this Agreement, the following terms
shall have the following respective meanings:
"Affiliate" of any Person, means (i) any other Person controlling,
controlled by or under common control with such Person, (ii) any director or
executive officer of such Person or of any Affiliate of such Person and (iii)
any immediate family member of any director or executive officer of such Person
or any director or executive officer of any Affiliate of such Person.
"Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall have the meaning set forth in Rule 13d-3 under the Exchange
Act.
"Common Stock" means the Company's common stock, $0.001 par value.
"Company Securities" mean any convertible note, option, warrant, other
right to acquire Voting Securities or other capital stock of the Company.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder, all as the same shall be in
effect at the time.
"Person" means any natural person, corporation, partnership, limited
liability company, firm, association, trust, "group" within the meaning of
Section 13(d)(3) of the Exchange Act, government, governmental agency, or other
legal entity, whether acting in an individual, fiduciary or other capacity.
"Permitted Transferee" means, with respect to each Person bound by the
terms of this Agreement, (i) in respect of each Investor, any descendant,
Affiliate or associate (as such term is defined in Rule 405 of the Securities
Act) of such Investor or any other Permitted Transferee of such Affiliate; (ii)
the Company; (iii) in the event of the dissolution, liquidation or winding up of
any such Person that is a corporation or a partnership, the partners of a
partnership that is such Person, the stockholder of a corporation that is such
Person or a successor partnership all of the partners of which or a successor
corporation all of the stockholder of which are the Persons who were the
partners of such partnership or the stockholder of such corporation immediately
prior to the dissolution, liquidation or winding up of such Person; (iv) a
transferee by testamentary or intestate disposition; (v) a transferee by inter
vivos transfer to the transferring Person's spouse, children and/or other lineal
descendants; (vi) a trust transferee by inter vivos transfer, the beneficiaries
of which are the transferring Person, spouse, children and/or other lineal
descendants; (vii) a successor nominee or trustee for the beneficial owner of
the shares for which such Person acts as nominee or trustee, as the case may be,
or (viii) a Person who acquires all or substantially all of the stock or assets
of such Person; provided, however, that any such Permitted Transferee shall have
agreed in writing in form and substance satisfactory to the Company to be bound
by, and hold the Registrable Securities acquired by it subject to, the terms of
this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder, as the same shall be in effect at
the time.
"Transfer" means any sale, transfer, pledge, encumbrance or other
disposition.
1.2 Acquisition of Additional Shares.
(a) American Bankers covenants and agrees with the Company that, for
so long as Junaid Sheikh is the Chief Executive Officer of the Company, such
Investor will not, and will not permit any of its Affiliates, in either case
without the prior written consent of the Company, to acquire Beneficial
Ownership of any Company Securities other than the Conversion Shares; provided,
however, that any such acquisition of Beneficial Ownership of Company Securities
made on behalf of American Bankers or one of its Affiliates by a money manager
or similar person authorized to invest and reinvest assets on behalf of American
Bankers or such Affiliate on a discretionary basis shall not be deemed to be a
violation of this Section 1.2(a), provided that neither American Bankers nor one
of its Affiliates directs such money manager or similar person to make such
acquisition.
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(b) If at any time, as the result of any transaction or circumstances,
American Bankers or any of its Affiliates shall acquire Beneficial Ownership of
any Company Securities in violation of Section 1.2(a) above, then American
Bankers shall promptly take, or cause its Affiliates to promptly take, such
action as may be necessary or appropriate to divest such Beneficial Ownership of
Company Securities.
1.3 Restrictions on Transfer. Each Investor covenants and agrees with
the Company that:
(a) until December 10, 1999, such Investor will not Transfer any
Conversion Shares to any Person other than a Permitted Transferee without the
prior written consent of the Company, which consent shall not be unreasonably
withheld (it being understood that withholding consent to such a Transfer to a
bank, an insurance company, an investment company or other financial investor
engaged primarily in the business of investing, reinvesting or trading in
securities shall, without limitation, be deemed not to have been reasonable, and
that withholding consent to such a Transfer to a competitor of the Company that
is an operating entity shall, without limitation, be deemed to have been
reasonable), except through:
(i) a Transfer through a bona fide underwritten public offering
registered under the Securities Act effected in accordance with the provisions
of Section 2 hereof, with an underwriter or underwriters and pursuant to
procedures reasonably acceptable to the Company, intended to achieve a broad
public distribution of the Conversion Shares covered thereby; or
(ii) Transfers in normal and customary open-market transactions
on a national securities exchange, the Nasdaq National Market or an over-the
counter market, provided that the total number of Conversion Shares transferred
by all Investors in any one-week period shall not exceed the greater of (a) one
percent (1%) of the outstanding shares of the Common Stock or (b) the average
weekly trading volume for Common Stock for the four weeks immediately preceding
the week in which the relevant Transfer occurs.
(b) after December 10, 1999, such Investor will not Transfer any
Conversion Shares without the prior written consent of the Company, which
consent shall not be unreasonably withheld (it being understood that withholding
consent to such a Transfer to a bank, an insurance company, an investment
company or other financial investor engaged primarily in the business of
investing, reinvesting or trading in securities shall, without limitation, be
deemed not to have been reasonable, and that withholding consent to such a
Transfer to a competitor of the Company that is an operating entity shall,
without limitation, be deemed to have been reasonable), except through:
(i) a Transfer through a bona fide underwritten public offering
registered under the Securities Act effected in accordance with the provisions
of Section 2 hereof, with an underwriter or underwriters and pursuant to
procedures reasonably acceptable to the Company, intended to achieve a broad
public distribution of the Conversion Shares covered thereby;
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(ii) Transfers in normal and customary open-market transactions
on a national securities exchange, the Nasdaq National Market or an over-the
counter market, provided that the total number of Conversion Shares transferred
by all Investors in any one-week period shall not exceed the greater of (a) one
percent (1%) of the outstanding shares of the Common Stock or (b) the average
weekly trading volume for Common Stock for the four weeks immediately preceding
the week in which the relevant Transfer occurs;
(iii) a Transfer of all or substantially all of the Conversion
Shares held by such Investor in a transaction involving the opportunity for all
holders of Company Securities (including any Investor) to dispose of all or a
proportionate part of such Company Securities for the same consideration as, and
on terms and conditions not materially less favorable than those available to
such Investor; or
(iv) a Transfer by such Investor to a Permitted Transferee of
such Investor.
(c) in connection with any Transfer under this Section 1.3 that
is not pursuant to a transaction described in subsections 1.3(a)(i), (a)(ii),
(b)(i), (b)(ii) or (b)(iii), the transferee of the Conversion Shares shall agree
to be bound by the provisions of this Section 1.3.
2. Registration Rights.
2.1 Definitions. For purposes of this Section 2:
(a) Registration. The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act and the declaration
or ordering of effectiveness of such registration statement.
(b) Registrable Securities. The term "Registrable Securities"
means (i) the Conversion Shares and (ii) any Common Stock or other shares of
capital stock of the Company issued by way of stock dividend or stock split or
other distribution, recapitalization or reclassification with respect to, or in
exchange for, or in replacement of, any Registrable Securities. Notwithstanding
the foregoing, "Registrable Securities" shall exclude any Registrable Securities
sold by a person in a transaction in which rights under this Section 2 are not
assigned in accordance with this Agreement or any Registrable Securities sold in
a public offering, whether sold pursuant to Rule 144 promulgated under the
Securities Act, or in a registered offering, or otherwise.
(c) Registrable Securities Then Outstanding. The number of shares
of "Registrable Securities then outstanding" shall mean the number of shares of
Common Stock of the Company that are Registrable Securities and are then issued
and outstanding.
(d) Holder. For purposes of this Section 2, the term "Holder"
means any person owning of record Registrable Securities that have not been sold
to the public or pursuant to Rule 144 promulgated under the Securities Act or
any permitted assignee of record of such Registrable Securities to whom rights
under this Section 2 have been duly assigned in accordance with this Agreement.
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(e) SEC. The term "SEC" or "Commission" means the U.S. Securities
and Exchange Commission.
2.2 Demand Registration.
(a) Request by Holders. If the Company shall at any time after
December 10, 1999 receive a written request from the Holders of at least fifty
percent (50%) of the Registrable Securities then outstanding that the Company
file a registration statement under the Securities Act covering the registration
of Registrable Securities pursuant to this Section 2.2, then the Company shall,
within fifteen (15) business days of the receipt of such written request, give
written notice of such request ("Request Notice") to all Holders, and effect, as
soon as practicable, the registration under the Securities Act of all
Registrable Securities that Holders request to be registered and included in
such registration by written notice given such Holders to the Company within
fifteen (15) days after receipt of the Request Notice, subject only to the
limitations of this Section 2.2; provided, that the Registrable Securities
requested by all Holders to be registered pursuant to such request must be at
least fifty percent (50%) of all Registrable Securities held by the requesting
Holders; and provided further that the Company shall not be obligated to effect
any such registration if the Company has, within the six (6) month period
preceding the date of such request, already effected a registration under the
Securities Act pursuant to this Section 2.2, or in which the Holders had an
opportunity to participate pursuant to the provisions of Section 2.3 if at least
fifty percent (50%) of the number of Registrable Securities as to which
registration was requested by the Holders were registered therein.
(b) Underwriting. If the Holders initiating the registration
request under this Section 2.2 ("Initiating Holders") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
then they shall so advise the Company as a part of their request made pursuant
to this Section 2.2 and the Company shall include such information in the
written notice referred to in subsection 2.2(a). In addition, the right of any
Holder to include his, her or its Registrable Securities in such registration
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the Initiating
Holders and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by the Company and reasonably
acceptable to a majority of the Holders participating in such offering. Such
underwriting agreement shall include a market stand-off agreement of up to 180
days if required by such underwriter. Notwithstanding any other provision of
this Section 2.2, if the underwriter advises the Company in writing that
marketing factors require a limitation of the number of Registrable Securities
to be underwritten then the Company shall so advise all Holders of Registrable
Securities which would otherwise be registered and underwritten pursuant hereto,
and the number of Registrable Securities that may be included in the
underwriting shall be reduced as required by the underwriter and allocated among
the Holders of Registrable Securities and the other holders of Common Stock with
registration rights who have requested shares of Common Stock held by them to be
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included in such registration, on a pro rata basis according to the number of
Registrable Securities then outstanding held by each Holder requesting
registration (including the initiating Holders) and by the other holders of
registration rights who have requested shares to be included in such
registration. If any such exclusion causes less than fifty percent (50%) of the
number of shares of Registrable Securities as to which registration was
requested by the Holders to be registered, such registration may be withdrawn at
the request of a majority of the Holders of Registrable Securities to be
included in such offering and, if so withdrawn within ten (10) days after such
Holders are notified of such exclusion, such registration shall not constitute a
request for registration under Section 2.2(e). Any Registrable Securities
excluded and withdrawn from such underwriting shall be withdrawn from the
registration.
(c) Maximum Number of Demand Registrations. The Company shall be
obligated to effect only two (2) registrations pursuant to this Section 2.2.
Notwithstanding anything to the contrary contained herein, the obligation of the
Company under this Section 2 shall be deemed satisfied only when a registration
statement covering all Registrable Securities specified in written requests
received as aforesaid, for sale in accordance with the method of disposition
specified by the requesting Holders, shall have become effective and, if such
method of disposition is a firm commitment underwritten public offering, all
such shares shall have been sold pursuant thereto.
(d) Deferral. Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting the filing of a registration statement pursuant to
this Section 2.2, a certificate signed by the President or Chief Executive
Officer of the Company stating that in the good faith judgment of the Board, it
would be materially detrimental to the Company for such registration statement
to be filed, then the Company shall have the right to defer such filing for a
period of not more than ninety (90) days after receipt of the request of the
Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any twelve (12) month period.
(e) Expenses. All expenses incurred in connection with any
registration pursuant to this Section 2.2, including without limitation all
federal and state securities and "blue sky" registration fees, filing and
qualification fees, printer's and accounting fees, and fees and disbursements of
counsel for the Company (but excluding underwriters' discounts and commissions
relating to shares sold by the Holders and legal fees of counsel for any of the
Holders), shall be borne by the Company. Each Holder participating in a
registration pursuant to this Section 2.2 shall bear such Holder's proportionate
share (based on the total number of shares sold in such registration other than
for the account of the Company) of all discounts, commissions or other amounts
payable to underwriters or brokers. In addition, each Holder shall bear such
Holders' legal fees, in connection with such offering by the Holders.
Notwithstanding the foregoing, the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to this Section 2.2 if
the registration request is subsequently withdrawn at the request of the Holders
of a majority of the Registrable Securities to be registered, unless the Holders
of a majority of the Registrable Securities to be registered pursuant to such
request agree that such registration constitutes the use by the Holders of one
(1) demand registration pursuant to this Section 2.2 (in which case such
registration shall also constitute the use by all Holders of Registrable
Securities of one (l) such demand registration); provided, further, however,
that if such withdrawal results from the reduction of the number of Registrable
Securities included in the underwriting below fifty percent (50%) of the number
of shares of Registrable Securities requested to be registered, as contemplated
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by Section 2.2(b), or if at the time of such withdrawal, such Holders have
learned of a material adverse change in the condition, business, or prospects of
the Company not known to the Holders at the time of their request for such
registration and have withdrawn their request for registration with reasonable
promptness after learning of such material adverse change, then, in each such
case, the Holders shall not be required to pay any of such expenses and such
registration shall not constitute the use of a demand registration pursuant to
this Section 2.2.
2.3 Piggyback Registrations.
(a) The Company shall notify all Holders of Registrable
Securities in writing at least thirty (30) days prior to filing any registration
statement under the Securities Act for purposes of effecting a public offering
of securities of the Company (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company, but
excluding registration statements relating to any registration under Section 2.2
of this Agreement, to any employee benefit plan, to any corporate reorganization
or to a sale solely in connection with a Rule 145 transaction or a registration
statement which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities) and will afford each such Holder an opportunity to
include in such registration statement all or any part of the Registrable
Securities then held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by
such Holder shall within fifteen (15) days after receipt of the above-described
notice from the Company, so notify the Company in writing, and in such notice
shall inform the Company of the number of Registrable Securities such Holder
wishes to include in such registration statement. If a Holder decides not to
include all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to have
the right to include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and conditions set forth
herein.
(b) Underwriting. If a registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering,
then the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder's Registrable Securities to be included in a
registration pursuant to this Section 2.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the managing underwriter or underwriters selected by the Company for such
underwriting (including a market stand-off agreement of up to 180 days if
required by such underwriters) on terms no less favorable to such Holders than
available to the Company if the Company is participating in such underwriting.
Notwithstanding any other provision of this Agreement, if the managing
underwriter determines in good faith that marketing factors require a limitation
of the number of shares to be underwritten, then the managing underwriters may
exclude shares from the registration and the underwriting, and the number of
shares that may be included in the registration and the underwriting shall be
allocated, first to the Company, and second, to each of the Holders requesting
inclusion of their Registrable Securities in such registration statement and
each of the other holders of Common Stock with similar registration rights, if
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any, on a pro rata basis based on the total number of Registrable Securities
then held by each such Holder and Common Stock of any other holder participating
in such registration. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company and the underwriter, delivered at least ten (10) business days prior
to the effective date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration. For any Holder that is a partnership, the Holder and the
partners and retired partners of such Holder, or the estates and family members
of any such partners and retired partners and any trusts for the benefit of any
of the foregoing persons, and for any Holder that is a corporation, the Holder
and all corporations that are affiliates of such Holder shall be deemed to be a
single "Holder," and any pro rata reduction with respect to such "Holder" shall
be based upon the aggregate amount of shares carrying registration rights owned
by all entities and individuals included in such "Holder," as defined in this
sentence.
(c) Expenses. All expenses incurred in connection with any
registration pursuant to this Section 2.3, including without limitation all
federal and state securities and "blue sky" registration fees, filing and
qualification fees, printer's and accounting fees, and fees and disbursements of
counsel for the Company (but excluding underwriters' discounts and commissions
relating to shares sold by the Holders and legal fees of counsel for any of the
Holders), shall be borne by the Company. Each Holder participating in a
registration pursuant to this Section 2.3 shall bear such Holder's proportionate
share (based on the total number of shares sold in such registration other than
for the account of the Company) of all discounts, commissions or other amounts
payable to underwriters or brokers. In addition, each Holder shall bear such
Holders' legal fees, in connection with such offering by the Holders.
(d) Not Demand Registration. Registration pursuant to this
Section 2.3 shall not be deemed to be a demand registration as described in
Section 2.2 above. Except as otherwise provided herein, there shall be no limit
on the number of times the Holders may request registration of Registrable
Securities under this Section 2.3.
2.4 Form S-3 Registration. In case the Company shall receive from
the Holders of at least fifty percent (50%) of the Registrable Securities a
written request that the Company effect a registration on Form S-3 (or any
comparable successor form or forms) and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such
Holders, the Company shall effect, as soon as practicable, such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of
Registrable Securities of such Holders as are specified in such request,
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 2.4:
(a) if Form S-3 is not available for such offering;
(b) if the Company has already effected two registrations pursuant to
this Section 2.4;
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(c) if such Holders propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $1,000,000;
(d) if the Company shall furnish to such Holders a certificate signed
by the President or Chief Executive Officer of the Company stating that in the
good faith judgment of the Board, it would be materially detrimental to the
Company for such registration statement to be filed, then the Company shall have
the right to defer such filing for a period of not more than ninety (90) days
after receipt of the request of the Holders; provided, however, that the Company
may not utilize this right more than once in any twelve (12) month period; or
(e) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance (except for
California and New York).
Registrations effected pursuant to this Section 2.4 shall not be
counted as requests for registration effected pursuant to Section 2.2.
2.5 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities under this Agreement the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, provided, however, that the Company
shall not be required to keep any such registration statement effective for more
than one hundred twenty (120) days. Prior to filing a registration statement or
prospectus relating to the sale of Registrable Securities, or any amendments or
supplements thereto, the Company will furnish to counsel representing the
Holders of the Registrable Securities covered by such registration statement
copies of all documents proposed to be filed, which documents will be subject to
the review of such counsel within ten (10) business days after receipt thereof.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to keep such registration statement
effective during the distribution period and comply with the provisions of the
Securities Act, the Exchange Act and the rules and regulations of the SEC
thereunder with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of such registration
statement, and of each amendment and supplement thereto, such prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of the Registrable Securities owned by them that
are included in such registration.
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(d) Use its best efforts to register or qualify such Registrable
Securities covered by such registration statement under such other securities or
blue sky laws of each of the 50 states of the United States (or such
jurisdictions as each seller shall reasonably request), or obtain appropriate
exemptions therefrom, and keep such state securities/"blue sky" registrations
effective, or keep the appropriate exemption therefrom effective, during the
effective period of such registration statement, and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller in accordance with their intended method of
distribution thereof, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this case (d), it would not be
obligated to be so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction (except for California and New York). Notwithstanding the
foregoing, if the Registrable Securities are not listed for trading on the New
York Stock Exchange, Nasdaq National Market or any other equivalent United
States stock market or exchange at the time the Company is required to effect
the registration of any Registrable Securities pursuant hereto, then the
Company's obligations under this Section 2.5(d) shall be limited to the states
of California and New York.
(e) Notify promptly each seller of any such Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act within the
appropriate period mentioned in clause (b) of this Section 2.5, of the Company's
becoming aware that the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact in light of the circumstances then existing, and at the
request of any such seller, prepare and furnish to such seller a reasonable
number of copies of an amended or supplemental prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
(f) Otherwise use its reasonable efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security holders, as
soon as reasonably practicable (but not more than eighteen months) after the
effective date of the registration statement, if required, an earnings statement
which shall satisfy the provisions of Section 11(a) of the Securities Act and
the rules and regulations promulgated thereunder;
(g) (i) Use reasonable efforts to list such Registrable Securities on
any securities exchange on which the Common Stock is then listed, if any, if
such Registrable Securities are not already so listed and if such listing is
then permitted under the rules of such exchange and desired by the Company; and
(ii) use reasonable efforts to provide a transfer agent and registrar for such
Registrable Securities covered by such registration statement not later than
when such distribution so requires an agent or registrar, if any;
(h) To the extent permitted by the rules of the AICPA, if requested by
the underwriters in any underwritten offering, use reasonable efforts to obtain
for such underwriters a "cold comfort" letter or letters from the Company's
independent public accountants in customary form;
10
<PAGE>
(i) Make available for inspection by any seller of such Registrable
Securities covered by such registration statement, by any underwriter
participating in any disposition to be effected pursuant to such registration
statement and by any attorney, accountant or other agent retained by any such
seller or any such underwriter, all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and cause all of
the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(j) Notify the Holders of Registrable Securities included in such
registration statement promptly (i) when the registration statement, or any
post-effective amendment to the amendment prospectus shall have been filed, (ii)
of the receipt of any comments from the SEC and (iii) of the issuance by the SEC
of any stop order suspending the effectiveness of the registration statement or
of any order preventing or suspending the use of any preliminary prospectus, or
of the suspension of the qualification of the registration statement for
offering or sale in any jurisdiction, or of the institution or threatening of
any proceedings for any of such purposes;
(k) If requested by the managing underwriter or agent or any Holder of
Registrable Securities covered by the registration statement, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or agent or such Holder reasonably
requests to be included therein, including, without limitation, the number of
Registrable Securities being sold by such Holder to such underwriter or agent,
the purchase price being paid therefor by such underwriter or agent and any
other terms of the underwritten offering of the Registrable Securities to be
sold in such offering; and make all required filings of such prospectus
supplement or post-effective amendment as soon as practicable after being
notified of the matters incorporated in such prospectus supplement or
post-effective amendment;
(l) Cooperate with the Holders of Registrable Securities covered by
the registration statement and the managing underwriter or agent, if any, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legends) representing securities sold under the registration
statement, and enable such securities to be in such denominations and registered
in such names as the managing underwriter or agent, if any, or such Holders may
request;
(m) Obtain for delivery to the Holders of Registrable Securities being
registered and to the underwriter or agent an opinion or opinions of counsel for
the Company in customary form and in form, substance and scope reasonably
satisfactory to such Holders, underwriters or agents and their counsel; and
(n) Cooperate with each seller of Registrable Securities and each
underwriter or agent participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings required
to be made with the NASD.
11
<PAGE>
2.6 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 2.2 or 2.3
that the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to timely effect the
Registration of their Registrable Securities.
2.7 Indemnification. In the event any Registrable Securities are
included in a registration statement under Sections 2.2 or 2.3:
(a) By the Company. To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, officers, directors and
Affiliates of each Holder, any underwriter (as determined in the Securities Act)
for such Holder and each person, if any, who controls, is under common control
or is controlled by such Holder or underwriter within the meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended, (the "1934
Act"), against any and all losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the 1934 Act
or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof whether or not such identified party
is a party thereto) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto;
(ii) the omission or alleged omission to state therein a material
fact required to be stated therein, or necessary to make the
statements therein (in the case of a prospectus, in light of the
circumstances under which they were made) not misleading, or
(iii) any violation or alleged violation by the Company of the
Securities Act, the 1934 Act, any federal or state securities law or
any rule or regulation promulgated under the Securities Act, the 1934
Act or any federal or state securities law in connection with the
offering covered by such registration statement;
and the Company will reimburse each such Holder, partner, officer, director or
Affiliate thereof, underwriter or controlling person for any legal or other
expenses reasonably incurred by them, as incurred, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
2.7(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration through an instrument or
document provided by such Holder, partner, officer, director, underwriter or
12
<PAGE>
controlling person of such Holder specifically stating that it is for use in
preparation thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any
indemnified party and shall survive the transfer of such securities by such
seller.
(b) By Selling Holders. To the extent permitted by law, each
selling Holder will indemnify and hold harmless the Company, each of its
directors, each of its Affiliates, each of its officers who have signed the
registration statement, each person, if any, who controls or is under common
control or controlled by the Company within the meaning of the Securities Act,
any underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such Holder within the meaning of the Securities Act or the
1934 Act, against any and all losses, claims, damages or liabilities (joint or
several) to which the Company or any such director, officer, controlling person,
underwriter or other such Holder, partner or director, officer or controlling
person of such other Holder may become subject under the Securities Act, the
1934 Act or other federal or state law, insofar as such losses, claims, damages
or liabilities (or actions in respect thereto whether or not such identified
party is a party thereto) arise out of or are based upon any Violation, in each
case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder specifically stating that it is for use in connection with such
registration; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, Affiliate,
controlling person, underwriter or other Holder, partner, officer, director or
controlling person of such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action: provided, however,
that the indemnity agreement contained in this Section 2.7(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; and provided, further, that the total
amounts payable in indemnity by a Holder under this Section 2.7(b) in respect of
any Violation shall not exceed the net proceeds received by such Holder in the
registered offering out of which such Violation arises; provided further,
however, that such Holder shall not be obligated to provide such indemnity to
the extent that such losses, claims or liabilities result from the failure of
the Company to promptly amend or take action to correct or supplement any such
registration statement or prospectus on the basis of corrected or supplemental
information furnished in writing to the Company by such Holder expressly for
such purpose. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any indemnified party.
(c) Notice. Promptly after receipt by an indemnified party under this
Section 2.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.7, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
13
<PAGE>
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of
liability to the indemnified party under this Section 2.7 to the extent the
indemnifying party is prejudiced as a result thereof, but the omission so to
deliver written notice to the indemnified party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 2.7.
(d) Defect Eliminated in Final Prospectus. The foregoing indemnity
agreements of the Company and Holders are subject to the condition that, insofar
as they relate to any Violation made in a preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the SEC at the time the
registration statement in question becomes effective or the amended prospectus
filed with the SEC pursuant to SEC Rule 424(b) (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of any person if a copy of
the Final Prospectus was timely furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act, if the
indemnified party in such circumstance was required by the Securities Act to
furnish the Final Prospectus to such person.
(e) Contribution. In order to provide for just and equitable
contribution to joint liability under the Securities Act in any case in which
either (i) any Holder exercising rights under this Agreement, or any controlling
person of any such Holder, makes a claim for indemnification pursuant to this
Section 2.7 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 2.7 provides
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any Holder or any such controlling person in
circumstances for which indemnification is provided under this Section 2.7;
then, and in each such case, the Company and such Holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that such Holder is
responsible for the portion represented by the percentage that the public
offering price of its Registrable Securities offered by and sold under the
registration statement bears to the public offering price of all securities
offered by and sold under such registration statement, and the Company and other
selling Holders are responsible for the remaining portion; provided, however,
that, in any such case: (A) no such Holder will be required to contribute any
amount in excess of the public offering price of all such Registrable Securities
offered and sold by such Holder pursuant to such registration statement; and (B)
no person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution from
any person or entity who was not guilty of such fraudulent misrepresentation.
2.8 Termination of the Company's Obligations. The Company shall have no
obligations pursuant to Sections 2.2 or 2.3 with respect to any Registrable
Securities proposed to be sold by a Holder in a registration pursuant to
Sections 2.2 or 2.3 if, in the opinion of counsel to the Company reasonably
satisfactory to the Holders of at least fifty percent (50%) of the Registrable
Securities proposed to be sold in the registration (it being acknowledged by the
Investors that Gibson, Dunn & Crutcher LLP is satisfactory counsel for this
purpose), all such Registrable Securities proposed to be sold by a Holder may
then be sold under Rule 144 in any three month period without exceeding the
volume limitations thereunder.
2.9 Rule 144 and Rule 144A. The Company covenants that it will file the
reports required to be filed by it under the Securities Act and the 1934 Act and
the rules and regulations adopted by the SEC thereunder (or, if the Company is
not required to file such reports, it will, upon the request of any Holder of
Registrable Securities, make publicly available such information), and it will
take such further action as any Holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell shares of Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (i) Rule 144 and Rule
144A under the Securities Act, as such rules may be amended from time to time or
(ii) any similar rule or regulation hereafter adopted by the SEC.
3. Miscellaneous Provisions
3.1 Construction. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware.
3.2 Notices.
All notices, requests, demands and other communications called for or
contemplated hereunder shall be in writing and shall be deemed to have been duly
given when delivered to the party to whom addressed or when sent by telecopy (as
indicated by a telecopy confirmation and if promptly confirmed by registered or
certified mail, return receipt requested, prepaid and addressed) to the parties,
their successors in interest, or their assignees at the following addresses, or
at such other addresses as the parties may designate by written notice in the
manner aforesaid:
If to the Company: Accom, Inc.
1490 O'Brien Drive
Menlo Park, CA 94025
Attn: President
Fax: 650-327-2511
With copies to: Gibson, Dunn & Crutcher LLP
1530 Page Mill Road
Palo Alto, CA 94304
Attn: Gregory T. Davidson
Fax: 650-849-5333
If to any Investor, to the address or fax number set forth in
Schedule I hereto;
With copies to: Reboul, MacMurray, Hewitt,
Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Attn: John C. MacMurray, Esq.
Fax: 212-841-5725
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<PAGE>
3.3 Assignment. The rights, remedies, obligations and liabilities under
Sections 2 and 3 of this Agreement may be assigned in connection with the
Transfer of any Conversion Shares permitted hereby or pursuant hereto, provided
that the transferee shall be bound by all of the terms of Sections 2 and 3. This
Agreement also may be assigned by any party to any other party acquiring all or
substantially all of the stock or assets of such assigning party. Nothing
contained herein, express or implied, is intended to confer upon any person or
entity other than the parties hereto and their successors in interest and
permitted assignees any rights or remedies under or by reason of this Agreement
unless so stated herein to the contrary.
3.4 Amendments and Waivers. This Agreement and all exhibits may be modified
only by a written instrument duly executed by the Company and those Investors
holding a majority in interest of the Conversion Shares (assuming conversion of
all of the Notes). No condition to any party's obligations and no breach of any
covenant, agreement, warranty or representation shall be deemed waived unless
expressly waived in writing by the party whose obligations are subject to such
condition or who might assert such breach. No waiver of any right hereunder
shall operate as a waiver of any other right or of the same or a similar right
on another occasion.
3.5 Survival. The covenants, agreements, warranties and representations
entered into or made pursuant to this Agreement, irrespective of any
investigation made by or on behalf of any party, shall be continuing.
3.6 Remedies. No remedy conferred by any of the specific provisions of this
Agreement is intended to be exclusive of any other remedy. Each and every remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder now or hereafter existing at law or in equity or by statute or
otherwise, and the election by a party of one or more remedies shall not
constitute a waiver of the party's right to pursue any other available remedies.
3.7 Attorneys' Fees. In the event that any action or proceeding, including
arbitration, is commenced by any party hereto for the purpose of enforcing any
provision of this Agreement, the parties to such action, proceeding or
arbitration may receive as part of any award, judgment, decision or other
resolution of such action, proceeding or arbitration their costs and reasonable
attorneys' fees as determined by the person or body making such award, judgment,
decision or resolution. Should any claim hereunder be settled short of the
commencement of any such action or proceeding, including arbitration, the
parties in such settlement shall be entitled to include as part of the damages
alleged to have been incurred reasonable costs of attorneys or other
professionals in investigation or counseling on such claim.
3.8 Binding Nature of Agreement. The Agreement includes each of the
exhibits which are referred to herein or attached hereto, all of which are
incorporated by reference herein. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective executors, heirs, legal representatives, successors and assigns.
3.9 Entire Agreement. This Agreement contains the entire understanding of
the parties, and supersedes all prior agreements and understandings, relating to
the subject matter hereof.
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<PAGE>
3.10 Severability. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
3.11 Counterparts. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
3.12 Section Headings. The headings of each Section, subsection or other
subdivision of this Agreement are for reference only and shall not limit or
control the meaning thereof.
[The remainder of this page is intentionally left blank.]
17
<PAGE>
IN WITNESS WHEREOF, the Company and the Investors have executed this
Investor Rights Agreement as of the day and year first above written.
ACCOM, INC.
By:_______________________________________
Name:
Title:
18
<PAGE>
IN WITNESS WHEREOF, the Company and the Investors have executed this
Investor Rights Agreement as of the day and year first above written.
AMERICAN BANKERS INSURANCE GROUP, INC.
By:_______________________________________
Name:
Title:
19
<PAGE>
IN WITNESS WHEREOF, the Company and the Investors have executed this
Investor Rights Agreement as of the day and year first above written.
INVESTOR:
------------------------------------------
Alan Liebman
20
<PAGE>
IN WITNESS WHEREOF, the Company and the Investors have executed this
Investor Rights Agreement as of the day and year first above written.
INVESTOR:
------------------------------------------
Paul Higbee
21
<PAGE>
IN WITNESS WHEREOF, the Company and the Investors have executed this
Investor Rights Agreement as of the day and year first above written.
INVESTOR:
------------------------------------------
Scott Howard
22
<PAGE>
IN WITNESS WHEREOF, the Company and the Investors have executed this
Investor Rights Agreement as of the day and year first above written.
INVESTOR:
------------------------------------------
Eugene Matalene
23
<PAGE>
IN WITNESS WHEREOF, the Company and the Investors have executed this
Investor Rights Agreement as of the day and year first above written.
INVESTOR:
------------------------------------------
Robert Pangia
24
<PAGE>
SCHEDULE I
TO INVESTOR RIGHTS AGREEMENT
Number of
Name and Address Conversion Shares
---------------- -----------------
American Bankers Insurance Group, Inc. 2,307,692
11222 Quail Roost Drive
Miami, Florida 33157
Paul Higbee 76,923
175 Elmsley Court
Ridgewood, NJ 07450
Scott Howard 76,923
c/o Concorde Holdings
50 East 42nd Street, Suite 2106
New York, NY 10017
Alan Liebman 76,923
300 West End Avenue
New York, NY 10023
Eugene Matalene 76,923
19 North Drive
Plandome, NY 11030
Robert Pangia 76,923
31 Hyde Circle
Watchung, NJ 07060
Total ---------
2,692,307
