UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
Amendment No. 1
Form 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended September 30, 1998, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition period from _____ to_________.
Commission file number: 0-26620
ACCOM, INC.
(Exact name of Registrant as specified in its charter)
Delaware 94-3055907
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
1490 O'Brien Drive
Menlo Park, CA 94025
(Address of principal executive offices)
Registrant's telephone number, including area code: (650) 328-3818
----------------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value per share
----------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period than the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES _X_ NO __
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant was approximately $1,870,320 as of December 31, 1998, based
upon the average bid and asked prices on the Over-the-Counter (OTC) Bulletin
Board reported for such date. Shares of Common Stock held by each officer and
director and by each person who owns 5% of more of the outstanding Common Stock
have been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
There were 10,121,164 shares of Registrant's Common Stock issued and
outstanding as of December 31, 1998.
<PAGE>
AMENDMENT NO. 1
FORM 10-K/A
This Amendment No. 1 to Form 10-K/A is being filed by Accom, Inc.
("Accom" or the "Company") to add the Items comprising Part III information not
later than 120 days after the end of the fiscal year covered by the Form 10-K,
as provided in General Instruction G(3) to Form 10-K.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information as to the Company's executive officers appears at the end
of Part I of the Company's Form 10-K.
DIRECTORS
Set forth below is information regarding the directors of the Company,
including information furnished by them as to their principal occupation at
present and for the last five years, certain other directorships held by them,
the year in which each became a director of the Company and their ages as of
December 31, 1998:
Nominees Position(s) with the Company Age
---------------------- --------------------------------- ---
Junaid Sheikh Chairman of the Board, President, 45
and Chief Executive Officer
Lionel M. Allan Director 55
Thomas E. Fanella Director 51
David A. Lahar Director 41
Business Experience of Directors
Junaid Sheikh has served as the Chairman of the Company's Board of
Directors since June 1988 and as the Company's President and Chief Executive
Officer since November 1991. Mr. Sheikh was also the President and Chairman of
the Board of Directors of Axial Systems Corporation, a maker of on-line editing
systems, from May 1990 to October 1991.
Lionel M. Allan has served on the Company's Board of Directors since
April 1995. For more than the past five years, Mr. Allan has been President of
Allan Advisors, Inc., a board and legal consulting firm. Mr. Allan also is a
director and past Chairman of the Board of KTEH Public Television Channel 54 in
San Jose, California, a director of Global Motorsport Group, Inc., a motorcycle
products company, and a director of Catalyst Semiconductor, Inc., a
semiconductor company.
Thomas E. Fanella has served on the Company's Board of Directors since
March 1997. Since August 1988, Mr. Fanella has been President and Chief
Executive Officer of KTEH Public
<PAGE>
Television Channel 54 in San Jose, California. Mr. Fanella is also a director of
the Catholic Television Network, the Pacific Mountain Network and the Silicon
Valley Forum.
David A. Lahar has served on the Company's Board of Directors since
February 1998. Since September 1992, Mr. Lahar has been a Managing Director of
EOS Capital, Inc., an investment, venture capital and consulting firm. From 1992
to June 1996, Mr. Lahar was the President of Aurora Electronics, Inc.
("Aurora"), a company which he co-founded and which is a provider of spare parts
distribution services and electronics recycling and recovery services to
computer manufacturers and field service providers. Mr. Lahar remains a director
of Aurora. From 1986 to 1992, Mr. Lahar was a Managing Director in the
Investment Banking Division of PaineWebber Incorporated.
The Company currently has authorized four directors. Each director is
elected for a period of one year at the Company's annual meeting of stockholders
and serves until the next annual meeting or until his successor is duly elected
and qualified. There are no family relationships among any of the directors or
executive officers of the Company. Except for grants of stock options, directors
are not compensated for their services as directors.
Board Meetings and Committees
The Board of Directors held a total of seven meetings during the year
ended September 30, 1998. Each incumbent director attended at least 75% of the
aggregate number of meetings of the Board of Directors and of the Committees on
which such directors served and that were held during the period that such
individual was a member of the Board of Directors. The Company's Audit Committee
is comprised of Messrs. Fanella and Lahar. The Audit Committee met once during
the fiscal year ended September 30, 1998. The Company does not have a
Compensation or Nominating committee and did not during the fiscal year ended
September 30, 1998.
Item 11. Executive Compensation
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Report of the Board of Directors
The Board of Directors has general responsibility for establishing the
compensation payable to the Company's executive officers and other key
executives and has the sole and exclusive authority to administer the Company's
1995 Stock Option/Stock Issuance Plan (the "Stock Option Plan") under which
grants may be made to such individuals. Until September 15, 1996, such functions
were performed by the Compensation Committee of the Board and are now performed
by the full Board of Directors.
General Compensation Policy. Under the supervision of the Board of
Directors, the Company's compensation policy is designed to attract and retain
qualified key executives critical to the Company's growth and long-term success.
It is the objective of the Board of Directors to have a portion of each
executive's compensation contingent upon the Company's performance as well as
upon the individual's personal performance. Accordingly, each executive
officer's compensation package is comprised of three elements: (i) base salary
which reflects individual
3
<PAGE>
performance and expertise, (ii) variable bonus awards payable in cash and tied
to the achievement of certain performance goals for the Company or the executive
and (iii) long-term, stock-based incentive awards that are designed to
strengthen the mutuality of interests between the executive officers and the
Company's stockholders. The summary below describes in more detail the factors
which the Board of Directors considers in establishing each of the three primary
components of the compensation package provided to the executive officers.
Base Salary. The level of base salary is established primarily on the
basis of the individual's qualifications and relevant experience, the strategic
goals for which he has responsibility, the compensation levels at companies that
compete with the Company for business and executive talent, and the incentives
necessary to attract and retain qualified management. Base salary is reevaluated
each year to take into account the individual's performance and to maintain a
competitive salary structure. Company performance does not play a significant
role in the determination of base salary.
Cash-Based Incentive Compensation. Cash bonuses are awarded on a
discretionary basis to executive officers on the basis of their success in
achieving designated individual goals and the Company's success in achieving
specific company-wide goals, such as customer satisfaction, revenue growth and
earnings growth.
Long-Term Incentive Compensation. The Company has utilized the Stock
Option Plan to provide executives and other key employees with incentives to
maximize long-term stockholder values. Awards under this plan by the Board of
Directors take the form of stock options designed to give the recipient a
significant equity stake in the Company and thereby closely align his interests
with those of the Company's stockholders. Factors considered in making such
awards include the individual's position in the Company, his performance and
responsibilities, and internal comparability considerations. In addition, the
Board of Directors takes into account each individual's position with the
Company and his existing holdings of unvested options. Each option grant allows
the executive officer to acquire shares of Common Stock at a fixed price per
share (the fair market value on the date of grant) over a specified period of
time (up to 10 years). The options typically vest in periodic installments over
a four-year period, contingent upon the executive officer's continued employment
with the Company. Accordingly, the option will provide a return to the executive
officer only if he remains in the Company's service, and then only if the market
price of the Common Stock appreciates over the option term.
CEO Compensation. In setting the compensation payable during fiscal
1998 to the Company's Chief Executive Officer, Junaid Sheikh, the Board of
Directors used the same factors as described above for the executive officers.
The Board established a combination compensation package for Mr. Sheikh,
including a base salary and stock option grants in line with those received by
other executives of comparably-sized companies in similar industries.
Report on Repriced Stock Options. In May 1998, the Board of Directors
determined that it was in the best interest of the Company to offer to reprice
the then-existing stock options of the Company with exercise prices in excess of
the then-current fair market value of the Company's Common Stock. The Company
also changed the vesting on such options from a five-year period to a four-year
period, with 25% of the shares vesting at the end of the first year and the rest
4
<PAGE>
vesting equally over the following three years. Included in the repricing
actions were options held by the Company's executive officers and certain
directors, but not any of the options that had been automatically granted to the
non-employee directors pursuant to the Stock Option Plan. The objectives of the
Stock Option Plan are to promote the interests of the Company by providing
employees, certain directors, and certain consultants or independent contractors
an incentive to acquire a proprietary interest in the Company and to continue to
render services to the Company. It was the view of the Board of Directors that
stock options with exercise prices substantially above the current market price
of the Company's Common Stock were viewed negatively by most optionees of the
Company, and provided little, if any, equity incentive to the optionees. The
Board thus concluded that such option grants seriously undermined the specific
objectives of the Stock Option Plan and should properly be repriced. In making
this decision, the Board also considered the fairness of such a determination in
relation to other stockholders. In the opinion of the Board, the stockholders'
long-term best interests were clearly served by the retention and motivation of
optionees.
In this context, the Board decided that effective May 15, 1998 (the
"Grant Date") all optionees holding stock options with exercise prices in excess
of the fair market value of the Company's Common Stock should receive a
one-for-one repricing of their then-existing unexercised stock options with a
new exercise price set at $1.03125 per share, the fair market value of the
Company's Common Stock on the Grant Date. The Company completed this repricing
through a one-for-one stock option exchange of "underwater" stock options for
all optionees. The vesting schedule of the new options, as well as all other
options, was changed from a vesting schedule over a five-year period to a
vesting schedule over a four-year period (with 25% vesting after one year and
the balance vesting on a equal monthly basis thereafter). The exchange was
completed in May 1998. It is the opinion of the Board of Directors that this
program helped build optionee morale and provided new incentives for the
Company's employees and management.
The Board of Directors
Junaid Sheikh
Lionel M. Allan
Thomas E. Fanella
David A. Lahar
Compensation Committee Interlocks and Insider Participation
No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Company's Board of Directors. Mr.
Sheikh, Chairman of the Board of Directors, is also President and Chief
Executive Officer of the Company. Mr. Sheikh participated in deliberations of
the Company's Board of Directors concerning executive officer compensation.
Stock Performance Graph
The following graph shows a comparison of cumulative total stockholder
returns for the Company, the Nasdaq Total Return Index, and the Hambrecht &
Quist Technology Index for the period commencing September 26, 1995, the date of
the initial public offering of the Company's Common Stock, to the last day of
the Company's fiscal year ended September 30, 1998.
5
<PAGE>
<TABLE>
[The following descriptive data is supplied in accordance with Rule 304(d) of Regulation S-T.]
<CAPTION>
9/26/95 9/30/95 9/30/96 9/30/97 9/30/98
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Accom, Inc. $100 $ 97.22 $ 22.22 $ 29.17 $ 4.17
NASDAQ Total Return Index $100 $100.55 $119.31 $163.79 $164.19
Hambrecht & Quist Technology Index $100 $101.14 $111.02 $165.53 $153.80
</TABLE>
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, which might incorporate future
filings made by the Company under those statutes, the preceding Report of the
Board of Directors on Executive Compensation and Stock Performance Graph are not
to be incorporated by reference into any of those previous filings; nor is such
report or graph to be incorporated by reference into any future filings which
the Company may make under those statutes.
Summary of Cash and Certain Other Compensation
<TABLE>
The following Summary Compensation Table sets forth the compensation
earned by the Company's Chief Executive Officer and the three other highest-paid
executive officers whose salary and bonus for the fiscal year ended September
30, 1998 was in excess of $100,000 (collectively, the "Named Officers") for
services rendered in all capacities to the Company for that fiscal year.
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------- ------------
Fiscal Year Securities
Ended Underlying All Other
Name and Present Principal Position Sept. 30 Salary ($) Bonus ($)(1) Options (#)* Compensation ($)
- -------------------------------------- ----------- ---------- ----------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Junaid Sheikh ........................ 1998 $170,528 $0 147,286 (2) $2,722 (5)
President, Chief Executive Officer 1997 $149,220 $0 87,286 (3) $866 (5)
and Chairman of the Board 1996 $159,644 $0 137,286 (4) $2,266 (5)
Ian Craven ........................... 1998 $141,250 $2,000 88,125 (6) $1,449 (5)
Senior Vice President , Engineering 1997 $130,000 $5,000 58,125 (7) $351 (5)
1996 $129,000 $0 33,125 (8) $1,203 (5)
W. Harris Rogers .................... 1998 $118,199 $1,000 65,499(9) $492 (12)
Vice President, Marketing 1997 $101,439 $4,716 54,166(10) $351 (12)
1996 $84,251 $1,439 34,166(11) $369 (12)
Donald W. Petersen .................. 1998 $124,345 $0 105,833 (13) $549 (12)
Vice President, Manufacturing 1997 $111,416 $5,000 75,833 (14) $330 (12)
1996 $105,502 $0 50,833 (15) $347 (12)
- ------------------------------------
<FN>
(*) Includes options repriced in the fiscal years ending September 30, 1996 and 1997.
(1) Represents bonus compensation earned in such fiscal year.
(2) Includes options to purchase 87,286 shares of the Company's Common Stock that were canceled on May 15, 1998 and
repriced to $1.03125 per share. See "Option Grants in Last Fiscal Year" below.
6
<PAGE>
(3) Represents options to purchase 87,286 shares of the Company's Common Stock that were canceled on February 18,
1997 and repriced to $1.3125 per share.
(4) Includes options to purchase 54,166 shares of the Company's Common Stock that were canceled on April 23, 1996
and repriced to $3.25 per share.
(5) Represents standard life insurance and key man insurance premiums paid by the Company for the benefit of the
named Officer.
(6) Includes options to purchase 58,125 shares of the Company's Common Stock that were canceled on May 15, 1998
and repriced to $1.03125 per share. See "Option Grants in Last Fiscal Year" below.
(7) Includes options to purchase 18,125 shares of the Company's Common Stock that were canceled on February 18,
1997 and repriced to $1.3125 per share.
(8) Includes options to purchase 18,125 shares of the Company's Common Stock that were canceled on April 23, 1996
and repriced to $3.25 per share.
(9) Includes options to purchase 45,499 shares of the Company's Common Stock that were canceled on May 15, 1998
and repriced to $1.03125 per share. See "Option Grants in Last Fiscal Year" below.
(10) Represents options to purchase 34,166 shares of the Company's Common Stock that were canceled on February 18,
1997 and repriced to $1.3125 per share.
(11) Includes options to purchase 14,166 of the Company's Common Stock that were canceled on April 23, 1996 and
repriced to $3.25 per share.
(12) Represents standard life insurance premiums paid by the Company for the benefit of the Named Officer.
(13) Includes options to purchase 75,833 shares of the Company's Common Stock that were canceled on May 15, 1998
and repriced to $1.03125 per share. See "Option Grants in Last Fiscal Year" below.
(14) Includes options to purchase 35,833 shares of the Company's Common Stock that were canceled on February 18,
1997 and repriced to $1.3125 per share.
(15) Includes options to purchase 35,833 shares of the Company's Common Stock that were canceled on April 23, 1996
and repriced to $3.25 per share.
</FN>
</TABLE>
7
<PAGE>
Option Grants
<TABLE>
The following table provides information with respect to the stock
option grants made during the year ended September 30, 1998 under the Company's
1995 Stock Option/Stock Issuance Plan to the Named Officers. No stock
appreciation rights were granted to these individuals during such fiscal year.
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed Annual
Rate of Stock
Price Appreciation
Individual Grants for Option Term
--------------------------------------------------------------- ----------------------------
% of Total
Options
Granted to Exercise
Options Employees in Price (2) Expiration
Name Granted Fiscal Year ($/share) Date 5% ($)(3) 10% ($)(3)
- ---- ------- ----------- --------- ---- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Junaid Sheikh 60,000(1) 18.7% $0.8750 2/05/08 33,017 83,671
4,166(4) N/A $1.0313 1/19/05 1,656 3,826
50,000(4) N/A $1.0313 1/15/06 23,407 55,557
33,120(4) N/A $1.0313 9/03/06 17,062 41,212
Ian Craven 30,000(1) 9.4% $0.8750 2/05/08 16,508 41,836
40,000(4) N/A $1.0313 3/14/07 22,214 54,453
3,125(4) N/A $1.0313 1/15/05 1,240 2,864
15,000(4) N/A $1.0313 1/15/06 7,022 16,667
W. Harris Rogers 20,000(1) 6.2% $0.8750 2/05/08 11,005 27,890
20,000(4) N/A $1.0313 3/14/07 11,007 27,227
15,000(4) N/A $1.0313 7/10/06 7,557 18,178
2,499(4) N/A $1.0313 7/01/05 1,072 2,507
8,000(4) N/A $1.0313 1/15/06 3,745 8,889
Donald W. Petersen 30,000(1) 9.4% $0.8750 2/05/08 16,508 41,836
40,000(4) N/A $1.0313 3/14/07 22,214 54,453
20,833(4) N/A $1.0313 10/10/04 7,882 18,076
15,000(4) N/A $1.0313 1/15/06 7,022 16,667
<FN>
- ------------------
(1) These options 25% vest on February 5, 1999, and thereafter one 1/36th of the remaining unvested options
vest each month. The Board of Directors also has the authority to provide for the automatic vesting of
shares subject to the outstanding option upon the occurrence of certain hostile takeovers. Each option has
a maximum term of 10 years, subject to earlier termination in the event of the optionee's cessation of
employment with the Company.
(2) The exercise price may be paid in cash, in shares of Common Stock valued at fair market value on the
exercise date or through a cashless exercise procedure involving a same-day sale of the purchased shares.
The Company may also finance the option exercise by loaning the optionee sufficient funds to pay the
exercise price for the purchased shares and the federal and state income tax liability incurred by the
optionee in connection with such exercise.
<PAGE>
(3) Disclosure of the 5% and 10% assumed annual rates of compounded stock price appreciation is mandated by
the Securities and Exchange Commission. There is no assurance provided to any executive officer or any
other holder of the Company's securities that the actual stock price appreciation over the 10-year option
term will be at the assumed 5% and 10% levels or at any other defined level. Unless the market price of
the Company's Common Stock appreciates over the option term, no value will be realized from the option
grants made to the executive officers.
(4) Represents option granted on May 15, 1998 in connection with the cancellation of an existing outstanding
option with an exercise price in excess of $1.0313 per share. Concommitant with the repricing on May 15,
1998, the vesting schedule for these options changed. Under the previous method, options vested in five
equal annual installments with 20% of the option shares vesting on a cliff basis after each year of
service. Under the new method, options will vest and be exercisable with respect to 25% of the option
shares after one year of service, and 1/36th per month for each month of service thereafter. See "Ten-Year
Option/SAR Repricings" below.
</FN>
</TABLE>
Option Exercises and Holdings
<TABLE>
The table below sets forth information concerning the exercise of
options during the fiscal year ended September 30, 1998 and unexercised options
held as of the end of such year by the Named Officers. No stock appreciation
rights were exercised during such fiscal year or outstanding as of the end of
that fiscal year.
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of
Securities Underlying Value of Unexercised
Shares Aggregate Unexercised Options at In-the-Money Options at
Acquired On Value Realized Fiscal Year End Fiscal Year End (1)
Name Exercise ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ----------------- ------------------ ------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Junaid Sheikh 0 $0 70,271 / 77,015 $0 / $0
Ian Craven 0 $0 27,864 / 60,261 $0 / $0
W. Harris Rogers 8,667 $3,813 21,922 / 43,577 $0 / $0
Donald W. Petersen 0 0 47,482 / 60,434 $0 / $0
- --------------
<FN>
(1) Market price at fiscal year end ($0.375) less exercise price. For purposes of this calculation, the fiscal
year end market price of the shares is deemed to be the closing sale price of the Company's Common Stock
as reported on the Over-the-Counter Bulletin Board on September 30, 1998.
</FN>
</TABLE>
Ten-Year Option/SAR Repricings
<TABLE>
The following table sets forth certain information as of September 30,
1998 with respect to the repricing of certain stock options held by the
Company's executive officers.
9
<PAGE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Market
Price Of Exercise Length Of
Number Of Stock At Price At Original
Securities Time Of Time Of Option Term
Underlying Repricing Repricing Remaining
Options Or Or New At Date Of
Repriced Or Amendment Amendment Exercise Repricing
Name Date Amended (#) ($) ($) Price ($) Or Amendment
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Junaid Sheikh (1)................ 5/15/98 4,166 $1.03125 $1.3125 $1.03125 6.7 years
5/15/98 50,000 $1.03125 $1.3125 $1.03125 7.7 years
President, Chief Executive 5/15/98 33,120 $1.03125 $1.3125 $1.03125 8.3 years
Officer and Chairman of the Board 2/18/97 4,166 $1.3125 $3.25 $1.3125 7.9 years
2/18/97 50,000 $1.3125 $3.25 $1.3125 8.9 years
2/18/97 33,120 $1.3125 $1.88 $1.3125 9.5 years
4/23/96 4,166 $3.25 $4.80 $3.25 8.7 years
4/23/96 50,000 $3.25 $5.75 $3.25 9.7 years
- ----------------------------------------------------------------------------------------------------------------------
Ian Craven (1)................... 5/15/98 3,125 $1.03125 $1.3125 $1.03125 6.7 years
5/15/98 15,000 $1.03125 $1.3125 $1.03125 7.7 years
Senior Vice President , 5/15/98 40,000 $1.03125 $1.3125 $1.03125 8.8 years
Engineering 2/18/97 3,125 $1.3125 $3.25 $1.3125 7.9 years
2/18/97 15,000 $1.3125 $3.25 $1.3125 8.9 years
4/23/96 3,125 $3.25 $4.80 $3.25 8.7 years
4/23/96 15,000 $3.25 $5.75 $3.25 9.7 years
- ----------------------------------------------------------------------------------------------------------------------
W. Harris Rogers (1)............. 5/15/98 15,000 $1.03125 $1.3125 $1.03125 8.2 years
5/15/98 2,499 $1.03125 $1.3125 $1.03125 7.1 years
Vice President, Marketing 5/15/98 8,000 $1.03125 $1.3125 $1.03125 7.7 years
5/15/98 20,000 $1.03125 $1.25 $1.03125 8.8 years
2/18/97 15,000 $1.3125 $3.25 $1.3125 9.4 years
2/18/97 4,166 $1.3125 $3.25 $1.3125 8.4 years
2/18/97 10,000 $1.3125 $3.25 $1.3125 8.9 years
2/18/97 5,000 $1.3125 $3.25 $1.3125 9.4 years
4/23/96 4,166 $3.25 $6.00 $3.25 9.2 years
4/23/96 10,000 $3.25 $5.75 $3.25 9.7 years
- ----------------------------------------------------------------------------------------------------------------------
Donald W. Petersen (1)........... 5/15/98 20,833 $1.03125 $1.31 $1.03125 6.4 years
5/15/98 15,000 $1.03125 $1.31 $1.03125 7.7 years
Vice President, Manufacturing 5/15/98 40,000 $1.03125 $1.31 $1.03125 8.8 years
2/18/97 20,833 $1.3125 $3.25 $1.3125 7.9 years
2/18/97 15,000 $1.3125 $3.25 $1.3125 8.9 years
4/23/96 20,833 $3.25 $4.80 $3.25 8.7 years
4/23/96 15,000 $3.25 $5.75 $3.25 9.7 years
- ----------------------------------------------------------------------------------------------------------------------
<FN>
- ------------------------------------------
(1) The Company repriced certain options in April 1996, February 1997 and May 1998. In each instance, in order
to reincentivize certain of its employees, the Compensation Committee of the Board of Directors or the
Board of Directors itself approved an option exchange for all employees holding options with an exercise
price in excess of the then current fair market value (which is the price set forth in the column entitled
"Market Price Of Stock At Time of Repricing Or Amendment" above); such repricings entitled each such
employee to cancel their outstanding options in exchange for new options with an exercise price equal to
the then current fair market value of the Company's Common Stock on the date of the approval by the Board
of Directors or Compensation Committee. In the April 1996 and February 1997 repricings, the new options
were subject to the same vesting schedule as the canceled options, including the same original vesting
commencement date. In the May 1998 repricing, the new options were amended to vest as follows: 25% of each
grant vests on the original vesting commencement date, and thereafter, one 1/36th of the remaining
unvested options of each grant vest each month for the next three years.
</FN>
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The members of the Board of Directors, the executive officers of the
Company and persons who hold more than ten percent (10%) of the Company's
outstanding Common Stock are subject to the reporting
10
<PAGE>
requirements of Section 16(a) of the Securities Exchange Act of 1934, which
requires such individuals to file reports with respect to their ownership of and
transactions in the Company's securities. Officers, directors and greater than
ten percent (10%) stockholders are required to furnish the Company with copies
of all such reports they file. Based solely on its review of the copies of such
forms received by it, or written representations from certain reporting persons
that no Forms 5 were required for those persons, the Company believes that,
during the fiscal year ended September 30, 1998 all filing requirements
applicable to its officers, directors, and greater than ten-percent beneficial
owners were complied with except that each of Messrs. Junaid Sheikh, Ian Craven,
W. Harris Rogers, Donald Petersen, Paul Hansil and Lionel Allan failed to timely
file a year-end report on Form 5 to reflect the repricing of outstanding options
in May 1998, but have subsequently reported such repricing transactions on a
Form 5.
Item 12. Security Ownership of Certain Beneficial Owners and Management
COMMON STOCK OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's Common Stock as of
December 31, 1998 by (i) all persons who are beneficial owners of five percent
or more of the Company's Common Stock, (ii) each director and nominee, (iii)
each executive officer of the Company, and (iv) all current directors and
executive officers as a group.
<CAPTION>
Name and Address,
if Required, of Shares Percent of Shares
Beneficial Owner Beneficially Owned (1)(2) Beneficially Owned (1)(2)
---------------- ------------------------- -------------------------
<S> <C> <C>
Michael Luckwell ......................................... 3,418,750 33.8%
26 Catherine Place
London SW1E 6HF
El Dorado Ventures and affiliated entities (3)............ 988,782 9.8%
20300 Stevens Creek Boulevard
Suite 395
Cupertino, CA 95014
Scitex Digital Video, Inc (4)............................. 1,000,000 9.0%
c/o Scitex Corporation Ltd.
P.O. Box 330
Herzilya B 46103 Israel
AWM Investment Company and affiliates (5) ................ 742,100 7.3%
153 East 53rd Street, 51st Floor
New York, NY 10022
Junaid Sheikh (6)......................................... 1,003,501 9.8%
Phillip Bennett (7)....................................... 750,000 7.4%
Ian Craven (8)............................................ 117,009 1.2%
Donald W. Petersen (9).................................... 61,144 *
William Harris Rogers (10)................................ 32,129 *
William Ludwig (11)....................................... 0 *
11
<PAGE>
Donald McCauley (11)...................................... 0 *
Lionel M. Allan (12)...................................... 167,023 1.6%
Thomas E. Fanella (13).................................... 12,500 *
David A. Lahar (14)....................................... 110,000 1.1%
All executive officers and directors as a group
(10 persons) (15)..................................... 2,253,306 21.5%
<FN>
- ----------
* Less than one percent (1%).
(1) Except as indicated in the footnotes to this table and pursuant to applicable community property laws, the
Company believes that persons named in the table have sole voting and investment power with respect to all
shares of Common Stock held by such person.
(2) The number of shares of Common Stock beneficially owned includes the shares issuable pursuant to stock
options which may be exercised within 60 days after December 30, 1998. Shares issuable pursuant to such
options are deemed outstanding for computing the percentage of the person holding such options but are not
outstanding for computing the percentage of any other person.
(3) Reflects share ownership as of December 31, 1998, based on the Company's records. Includes 10,334 shares
of Common Stock owned by El Dorado C&L Fund, L.P.; 5,765 shares of Common Stock owned by El Dorado
Technology IV, L.P.; 452,326 shares of Common Stock owned by El Dorado Ventures; and 520,357 shares of
Common Stock owned by El Dorado Ventures III, L.P. Such information is based upon the Company's knowledge
after investigation, but without independent confirmation from such entities.
(4) Includes a currently exercisable warrant to purchase 250,000 shares of the Company's Common Stock at $1.00
per share and a currently exercisable warrant to purchase 750,000 shares of the Company's Common Stock at
$3.00 per share. Both warrants terminate upon the earlier to occur of (a) December 10, 2008 or (b) an
acquisition or change in control of the Company.
(5) Reflects share ownership as of December 31, 1998, based on the Company's records. Such shares are
beneficially owned by (i) Special Situations Fund III, L.P., a Delaware limited partnership (the "Fund"),
(ii) MGP Advisers Limited Partnership, a Delaware Limited Partnership ("MGP"), (iii) AWM Investment
Company, Inc., a Delaware corporation ("AWM") and (iv) Austin W. Marxe. MGP is a general partner of and
investment adviser to the Fund. MGP is registered as an investment adviser under the Investment Advisers
Act of 1940, as amended. AWM, a Delaware corporation primarily owned by Austin Marxe, serves as the sole
general partner of MGP. AWM is a registered investment adviser under the Investment Advisers Act of 1940.
Austin W. Marxe is also the principal limited partner of MGP and is the President and Chief Executive
Officer of AWM. Mr. Marxe is principally responsible for the selection, acquisition and disposition of the
portfolio securities by AWM on behalf of MGP and the Fund. Such information is based upon the Company's
knowledge after investigation, but without independent confirmation from such entities.
(6) Includes 90,827 shares issuable upon currently exercisable options held by Mr. Sheikh. Also includes
912,674 shares owned indirectly by Mr. Sheikh and Mr. Sheikh's wife as Trustees of the Sheikh Revocable
Trust.
(7) Includes 650,000 shares subject to a repurchase right of the Company, at the issuance price, which lapses
in equal monthly increments over a period of three years, beginning December 1998.
(8) Includes 41,353 shares issuable upon currently exercisable options held by Mr. Craven.
(9) Represents 61,144 shares issuable upon currently exercisable options held by Mr. Petersen.
(10) Includes 32,129 shares issuable upon currently exercisable options held by Mr. Rogers.
(11) Messrs. McCauley and Ludwig joined the Company in December 1998.
12
<PAGE>
(12) Includes 54,151 shares issuable upon currently exercisable options held by Mr. Allan. Also includes 12,456
shares owned indirectly by Mr. Allan as the beneficiary of the Allan Advisors, Inc. Profit Sharing Plan
FBO Lionel M. Allan. Also includes 100,000 shares which are subject to a repurchase right of the Company,
at the issuance price, which lapses with respect to one-third of the shares after one year and then with
respect to the remaining shares in equal monthly increments over the two years thereafter, beginning in
December 1998.
(13) Represents shares issuable upon currently exercisable options held by Mr. Fanella, 5,000 of which shares
are currently subject to a repurchase right of the Company.
(14) Includes 10,000 shares issuable upon currently exercisable options held by Mr. Lahar, 7,500 of which
shares are currently subject to a repurchase right of the Company. Also includes 100,000 shares which are
subject to a repurchase right of the Company, at the issuance price, which lapses with respect to
one-third of the shares after one year and then with respect to the remaining shares in equal monthly
increments over the two years thereafter, beginning in December 1998.
(15) Includes 287,084 shares issuable upon currently exercisable options. See Footnotes above.
</FN>
</TABLE>
Item 13. Certain Relationships and Related Transactions
On December 4, 1998, the Company entered into an agreement with Phillip
Bennett, as an inducement to Mr. Bennett to join the Company as Executive Vice
President, Technology and Engineering, which provided for the sale by the
Company to Mr. Bennett of 750,000 shares of Common Stock. Of such shares,
100,000 shares were sold at $0.50 per share for cash, 300,000 shares were sold
at $0.50 per share in consideration of the delivery by Mr. Bennett of a
non-recourse promissory note, and 350,000 shares were sold at $1.00 per share in
consideration of the delivery by Mr. Bennett of a non-recourse promissory note.
The 650,000 shares issued in consideration of the delivery of the promissory
note are subject to a repurchase right of the Company, at the issuance price,
which lapses in equal monthly increments over a period of three years.
On December 7, 1998, the Company entered into agreements with each of
Messrs. Allan and Lahar, directors of the Company, pursuant to which the Company
issued 100,000 shares of Common Stock to each of them. The shares were issued at
a price of $0.65 per shares and were issued in consideration of the delivery by
each of Messrs. Allan and Lahar of a non-recourse promissory note in the amount
of $65,000. The shares issued are subject to a repurchase right of the Company,
at the issuance price, which lapses with respect to one-third of the shares
after one year and then with respect to the remaining shares in equal monthly
increments over the two years thereafter. The Company approved the sale of such
shares to Messrs. Allan and Lahar primarily in recognition of their significant
efforts related to the acquisition by the Company of substantially all of the
assets of Scitex Digital Video, Inc. ("Scitex") which was consummated on
December 10, 1998.
On December 10, 1999, the Company sold and issued 2,500,000 shares of
unregistered Common Stock, at a price of $0.60 per share, to Michael Luckwell, a
major stockholder of the Company, in a private placement. The purpose of the
sale of shares to Mr. Luckwell was to provide the Company with additional
capital in connection with the purchase by the Company of substantially all of
the assets of Scitex. The Company purchased the assets of Scitex concurrently
with the sale of the shares to Mr. Luckwell. In connection with such
transaction, the Company granted Mr. Luckwell the right to be nominated to the
Board of Directors of the Company so long as he holds more than 15% of the
outstanding shares of Common Stock of the Company, and the Company agreed to use
its best efforts to take all required steps to effect the nomination, including
any required amendment of the Company's charter documents. The Company also
granted to Mr. Luckwell certain demand and piggyback registration rights with
respect to all of the shares of Common Stock held by Mr. Luckwell. In addition,
Mr. Luckwell agreed that, for so long as Junaid Sheikh is
13
<PAGE>
the Chief Executive Officer of the Company, he would not, directly or
indirectly, acquire beneficial ownership of any additional stock of the Company.
Mr. Luckwell also agreed that he would not initiate, commence or propose any
proxy contest or other solicitation to vote or seek to influence any other
person with respect to the voting of any stock of the Company with respect to
the election or removal of the Board of Directors, nor become a member of a
"group" within the meaning of Section 13 of the Securities Exchange Act of 1934,
as amended. The Company and Mr. Luckwell additionally agreed upon certain
restrictions on transfers of the Company's stock held by Mr. Luckwell. Prior to
the sale of shares to Mr. Luckwell, the Company amended its Preferred Shares
Rights Agreement, dated as of September 13, 1996, to permit Mr. Luckwell to
acquire up to 3,425,000 shares of Common Stock (as adjusted for any stock
splits, stock dividends, recapitalizations or the like).
In connection with the acquisition of substantially all of the assets
of Scitex, the Company retained EOS Capital, Inc. to provide investment banking,
capital raising and financial consulting services, including seeking necessary
debt financing, obtaining a commitment from a lender and negotiating the
financial and other terms of the financing, as well as financial analysis
concerning the acquisition. Mr. Lahar, a director of the Company, is a managing
director and the sole equity owner of EOS Capital. Upon consummation of the
acquisition of the assets of Scitex, EOS Capital earned a $300,000 payment from
the Company for its services. Such amount was negotiated on an arm's length
basis and the Company believes that such amount and the terms of the agreement
with EOS Capital are at least as favorable as the Company could have obtained
from third parties.
Each of El Dorado Ventures and Michael Luckwell are entitled to certain
registration rights with respect to the Company's Common Stock owned by such
stockholder. See "Common Stock Ownership of Certain Beneficial Owners and
Management." The Company's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by the Delaware General Corporation
Law. The Company's Bylaws also provide that the Company shall indemnify its
directors, officers, employees and agents in such circumstances. In addition,
the Company has entered into indemnification agreements with its officers and
directors.
The Company has retained Lionel Allan, a director of the Company, as a
consultant for legal and other business related matters. These services are in
addition to his services as a director of the Company. The Company pays Mr.
Allan $4,000 per month for such consulting services.
Item 14. Exhibits
(a)(3) The following exhibit shall be added to the list of Exhibits
previously filed with the Company's Form 10-K (numbered in accordance with Item
601 of Regulation S-K).
Number Description
------ -----------
10.6 Restricted Stock Purchase Agreement and Non-Recourse Promissory
Note, each dated December 4, 1998, between Phillip Bennett and the
Company.
10.7 Restricted Stock Purchase Agreement and Non-Recourse Promissory
Note, each dated December 7, 1998, between Lionel M. Allan and the
Company.
10.8 Restricted Stock Purchase Agreement dated December 7, 1998, among
David A. Lahar, EOS Capital Profit Sharing Plan and the Company;
Non-Recourse Promissory Note dated December 7, 1998 of David A.
Lahar in favor of the Company.
14
<PAGE>
10.9 Stock Purchase Agreement, dated December 10, 1998, between Michael
Luckwell and the Company.
10.10 Investor's Rights Agreement, dated December 10, 1998, between
Michael Luckwell and the Company.
ADDITIONAL INFORMATION AVAILABLE
THE COMPANY WILL PROVIDE WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS, SCHEDULES
AND A LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO THE ATTENTION OF DONALD K.
MCCAULEY, SENIOR VICE PRESIDENT, FINANCE, AND CHIEF FINANCIAL OFFICER AT ACCOM,
INC., 1490 O'BRIEN DRIVE, MENLO PARK, CALIFORNIA 94025, OR TELEPHONED TO (650)
328-3818.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Amendment No. 1 to the
Report on Form 10-K to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Menlo Park, California on this 28th day of
January, 1999.
ACCOM, INC.
By: /s/ JUNAID SHEIKH
-------------------------------------
Junaid Sheikh
Chairman of the Board of Directors,
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Junaid Sheikh and Donald K. McCauley,
jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Report on Form 10-K, and to file the same, with exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes may do or cause to be done by virtue hereof.
<TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Amendment No. 1 to Report on Form 10-K/A has been signed below by the
following persons in the capacities and on the dates indicated.
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ JUNAID SHEIKH Chairman of the Board of Directors, January 28, 1999
----------------- President and Chief Executive Officer
(Junaid Sheikh) (Principal Executive Officer)
/s/ DONALD K. MCCAULEY Senior Vice President, Finance and Chief January 28, 1999
-------------------- Financial Officer (Principal Financial
(Donald K. McCauley) Officer)
/s/ JAMES CUNNIFFE Controller (Principal Accounting Officer) January 28, 1999
------------------
(James Cunniffe)
/s/ LIONEL M. ALLAN Director January 28, 1999
------------------
(Lionel M. Allan)
/s/ THOMAS E. FANELLA Director January 28, 1999
------------------
(Thomas E. Fanella)
/s/ DAVID A. LAHAR Director January 28, 1999
------------------
(David A. Lahar)
</TABLE>
16
Execution Copy
--------------
RESTRICTED STOCK PURCHASE AGREEMENT
THIS RESTRICTED STOCK PURCHASE AGREEMENT (this "Agreement")
has been executed and delivered effective as of December 4, 1998, by and between
Accom, Inc., a Delaware corporation (the "Company"), and Phillip Bennett, an
individual residing in California (the "Purchaser"), for the purpose of sale by
the Company to the Purchaser of 750,000 shares (the "Shares") of the Company's
Common Stock (the "Common Stock") on the terms and conditions in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements of the
Company and the Purchaser, and intending to be legally bound, the Company and
the Purchaser agree as follows:
1. Purchase and Sale of the Shares
1.1 Cash Purchase. Concurrently with execution of this Agreement, the
Purchaser will purchase, by delivery of cash or a personal check and the Company
will sell, by delivery of an appropriate stock certificate to the Purchaser,
100,000 shares of Common Stock at a purchase price of $0.50 per share (the "Cash
Shares") for the aggregate consideration of fifty thousand dollars ($50,000).
1.2 Note Purchase. Concurrently with execution of this Agreement, the
Purchaser will purchase, by delivery of a promissory note issued by the
Purchaser in favor of the Company and dated as of even date herewith in the form
attached hereto as Exhibit A (the "Promissory Note"), and the Company will sell,
by delivery of an appropriate stock certificate to the Purchaser, 300,000 shares
of Common Stock at a purchase price of $0.50 per share (the "First Note Shares")
and 350,000 shares of Common Stock at a purchase price of $1.00 per share (the
"Second Note Shares", and collectively the "Note Shares") for the aggregate
consideration of five hundred thousand dollars ($500,000).
1.3 Closing. The closing of the purchase of the Cash Shares and the
Note Shares shall take place at the offices of Gibson, Dunn & Crutcher LLP at
1530 Page Mill Road, Palo Alto, CA 94304, or at such other place as may be
agreed upon by the parties.
2. Right of Repurchase - Cessation of Association
2.1 The Repurchase Option. In the event that the Purchaser voluntarily
or involuntarily ceases to be an officer or director of the Company, the Company
shall have the option under this Section 2 (the "Repurchase Option"), but not
the obligation, to repurchase all, but not a portion of, the Note Shares then
subject to the Repurchase Option purchased by the Purchaser pursuant to this
Agreement from the Purchaser, or from the Purchaser's estate or personal
representative, and from each transferee to whom the Purchaser has transferred
any of the Shares (the "Transferees"), as the case may be.
<PAGE>
2.2 Exercise of the Repurchase Option. The Company shall exercise the
Repurchase Option by giving to the Purchaser, or to the Purchaser's estate or
personal representative, and to any Transferees of whom the Company has
previously received written notice, written notice of the Company's intention to
exercise the Repurchase Option (the "Notice of Repurchase") before the
Repurchase Option lapses in accordance with Section 2.5 of this Agreement, and
in such Notice agreeing to tender to the Purchaser, or to the Purchaser's estate
or personal representative, and to any Transferees, as the case may be, the
amount specified in Section 2.3, against delivery of the certificates
representing the Shares to be repurchased, duly endorsed, free and clear of any
and all liens, charges or encumbrances. In exercising the Repurchase Option, the
Company may also designate one or more nominees to purchase some or all of the
Note Shares instead of purchasing all of them itself, provided that the Shares
to be purchased by the Company and by such nominees shall in any event
constitute all of the Shares that could then be purchased from the Purchaser, or
the Purchaser's estate or personal representative, and from any Transferees, as
the case may be.
2.3 Repurchase Option Price. The purchase price for the First Note
Shares upon exercise of the Repurchase Option shall be $0.50 for each First Note
Share repurchased pursuant to this Section 2. The purchase price for the Second
Note Shares upon exercise of the Repurchase Option shall be $1.00 for each
Second Note Share repurchased pursuant to this Section 2 (the aggregate purchase
for the First Note Shares and the Second Note Shares, the "Purchase Price").
2.4 Option Exercise; Closing. The closing with respect to exercise of
the Repurchase Option shall occur not more than 30 days after the date on which
the Notice of Repurchase is given, on such date and time and at such location as
shall be specified by the Company, and in the absence of the specification of
another site, at the Company's principal offices. At such closing, (a) the
Company shall deliver to the Purchaser, or to the Purchaser's estate or personal
representative, and to any Transferees, as the case may be, a check in the
amount of the Purchase Price, or the Company may, in its sole discretion, cancel
or forgive indebtedness of such party in the amount of the Purchase Price; and
(b) the Purchaser, or the Purchaser's estate or personal representative, and any
Transferees, as the case may be, shall deliver to the Company the certificates
representing the Note Shares, duly endorsed, free and clear of any and all
liens, charges or encumbrances.
2.5 Lapse of Repurchase Option. Notwithstanding any other provision of
this Section 2, certain of the Note Shares shall cease to be subject to the
Repurchase Option as follows:
(a) On the first day of each month following the date of this
Agreement, 8,333 First Note Shares shall cease to be subject to the Repurchase
Option (except that on the first day of the thirty-sixth month following the
date of this Agreement, 8,345 First Note Shares shall cease to be subject to the
Repurchase Option); such that after the first day of the thirty-sixth month
following the date of this Agreement, all of the First Note Shares shall be free
of the Repurchase Option provided in this Section 2, except those First Note
Shares as to which the Repurchase Option has been exercised by the Company prior
to such date. Those First Note Shares which cease to be subject to the
Repurchase Option are referred to herein as the "First Note Vested Shares."
2
<PAGE>
(b) In addition, on the first day of each month following the date of
this Agreement, 9,722 Second Note Shares shall cease to be subject to the
Repurchase Option (except that on the first day of the thirty-sixth month
following the date of this Agreement, 9,730 Second Note Shares shall cease to be
subject to the Repurchase Option); such that after the first day of the
thirty-sixth month following the date of this Agreement, all of the Second Note
Shares shall be free of the Repurchase Option provided in this Section 2, except
those Second Note Shares as to which the Repurchase Option has been exercised by
the Company prior to such date. Those Second Note Shares which cease to be
subject to the Repurchase Option are referred to herein as the "Second Note
Vested Shares." the First Note Vested Shares and the Second Note Vested Shares
are together referred to herein as the "Vested Shares."
2.6 Termination of Repurchase Option. In the event that there is a
Change in Control (as defined below) of the Company, all of the Shares held
subject to a Repurchase Option shall immediately upon such Change in Control
become Vested Shares and shall cease to be subject to the Repurchase Option. For
this Agreement, a "Change of Control" includes the sale or other disposition of
substantially all of the assets of the Company, any reorganization,
consolidation, or merger of the Company where the Company is not the surviving
corporation and where the Company's securities outstanding immediately before
the transaction represent less than 50% of the beneficial ownership of the new
entity immediately after the transaction, or a change in a majority of the
members of the Board of Directors of the Company (the "Board") which is not
voted upon by the current members of the Board.
2.7 Section 83 Stock. The Purchaser acknowledges that such Purchaser
has been advised that the Repurchase Option contained in this Section 2 will
cause the purchase of the Shares to fall within the provisions of Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code"), which provides for
the recognition of ordinary income (as distinguished from capital gain) by the
purchaser of Shares based on the difference between the purchase price of the
Shares and their fair market value at the time restrictions with respect to the
Shares (for example, the "Repurchase Option") "lapse", regardless whether the
Shares are then (or could be then) sold. However, Section 83 of the Code permits
the filing of an election within 30 days after the Purchaser's purchase of the
Shares pursuant to this Agreement, whereby the Purchaser may elect to be taxed
on the difference, if any, between the purchase price of the Shares and their
fair market value at the time of purchase, with the result that if such election
is validly made, future gain, if any, realized upon disposition of the Shares
would in general be treated as capital gain. Purchaser acknowledges receipt from
the Company of a copy of Sections 83(a) and (b) of the Code and a portion of the
IRS Regulations thereunder, to which the foregoing discussion is subject. The
Purchaser should consult with his tax adviser concerning whether to make such
election and its consequences. In the event of any IRS audit or investigation of
the Purchaser or the transactions contemplated by this Agreement, the Purchaser
shall not seek reimbursement or indemnification from the Company for any
assessment or penalty resulting from an IRS determination that the purchase
price of the Shares is lower than the fair market value thereof as of the date
of issuance.
3
<PAGE>
3. Effect of Tender of Purchase Price
Notwithstanding the failure of the holder of any Certificates
evidencing all or any portion of the Shares subject to repurchase under Section
2 to deliver the same to the Company, upon tender by the Company of the purchase
price for any such Shares in accordance with the terms of this Agreement, such
Shares and the Certificates representing same shall forthwith and without
further action be deemed to have been transferred to the Company and no longer
to be outstanding for any purpose, except receipt of the price payable by the
Company, without interest, upon proper tender of the Certificates to the Company
in accordance with this Agreement.
4. Restrictions on Transfer
Except as otherwise may be permitted by this Agreement, the Purchaser
shall not dispose of or otherwise alienate any of, or any interest in, the
Shares that at any time would be subject to repurchase by the Company under
Section 2 of this Agreement, and any attempt to effect any such transaction
shall be null and void ab initio and of no force and effect.
5. Investment Representations of the Purchaser
The Purchaser represents to the Company and agrees with the Company as
follows:
5.1 The Purchaser is acquiring the Shares for private personal
investment for his own account and not for the account of any other person, and
has no present intention of reselling the Securities to others. None of the
Shares or any interest therein will be sold, transferred or otherwise disposed
of (except for sale to the Company) unless registered under the Securities Act
of 1933, or similar successor law ("the Act"), and applicable securities or
"blue sky laws" of any state ("State Securities Laws") or unless subject to
exemptions from the Act and State Securities Laws.
5.2 Accordingly, to implement the Purchaser's representations and
agreements, the Purchaser agrees to authorize the Company to place substantially
the following legends, and any legend required by applicable State Securities
Laws, on each Certificate issued to the Purchaser to evidence the Shares, and to
place a stop order against further transfer of the Shares except in compliance
with the Act and applicable State Securities Laws.
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED AND
TRANSFERRED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR DISPOSED OF
UNLESS SO REGISTERED OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE."
"RESTRICTIONS ON THE OWNERSHIP RIGHTS OF THE STOCK REPRESENTED BY THIS
CERTIFICATE HAVE BEEN IMPOSED PURSUANT TO A RESTRICTED STOCK PURCHASE AGREEMENT
[DATED DECEMBER 4, 1998]. A COPY OF THE RESTRICTED STOCK PURCHASE AGREEMENT IS
ON FILE AT THE PRINCIPAL
4
<PAGE>
OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF THIS
CERTIFICATE UPON RECEIPT BY THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS OR
REGISTER OFFICE OF A WRITTEN REQUEST FROM THE HOLDER REQUESTING SUCH COPY."
6. General Provisions
6.1 Construction. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware.
6.2 Entire Agreement. This Agreement contains the entire understanding
of the parties and supersedes all prior agreements and understandings relating
to the subject matter hereof.
6.3 Modification. This Agreement may be modified, amended or waived
only by a writing executed by the Company and the Purchaser.
6.4 Waivers. Any party to this Agreement may waive any right, provided
that such waiver will not be effective against the waiving party unless it is in
writing and signed by the waiving party. No waiver will be deemed to be a waiver
of any same, similar, or dissimilar matter.
6.5 Notice. 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 Buyer: 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 Purchaser: Phillip Bennett
c/o Accom, Inc.
1490 O'Brien Drive
Menlo Park, CA 94025
Fax: (650) 327-2511
5
<PAGE>
6.6 Successors. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, and upon any transferee of Shares, and upon
their respective successors, assigns, executors, administrators and legal
representatives. This Agreement may not be assigned by any Purchaser without the
express written consent of the Company.
6.7 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.
6.8 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 both counterparts shall together constitute but one and the same
instrument.
6.9 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.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
ACCOM, INC.
By: /s/ JUNAID SHEIKH
------------------------------------------
Name: Junaid Sheikh
---------------------------------------
Title: Chief Executive Officer
--------------------------------------
PHILLIP BENNETT
/s/ PHILLIP BENNETT
---------------------------------------------
7
<PAGE>
Execution Copy
--------------
NON-RECOURSE PROMISSORY NOTE
$500,000 December 4, 1998
FOR VALUE RECEIVED, Phillip Bennett ("Maker"), promises to pay to
Accom, Inc., a Delaware corporation ("Payee"), in lawful money of the United
States of America, the principal sum of Five Hundred Thousand ($500,000)
together with interest in arrears on the unpaid principal balance at a variable
annual rate equal to the prime rate of Comerica Bank which rate shall be
established and adjusted as necessary at the beginning of each calendar quarter
during the term of this Note. Interest shall be calculated on the basis of a
year of 365 or 366 days, as applicable, and charged for the actual number of
days elapsed.
1. PAYMENTS.
1.1 Principal and Interest. Subject to Section 1.3, the
principal amount of this Note then outstanding shall be due and payable three
years from the date of execution of this Note. Accrued, unpaid interest on the
unpaid principal balance of this Note shall be due and payable together with the
payment of principal as described above.
1.2 Manner of Payment. All payments of principal and interest
on this Note shall be made by wire transfer to such accounts as specified by
Payee, promptly upon request of Maker, or by check at 1490 O'Brien Drive, Menlo
Park, CA 94025, or at such other place in the United States of America as Payee
shall designate to Maker in writing. If any payment of principal or interest on
this Note is due on a day which is not a Business Day, such payment shall be due
on the next succeeding Business Day, and such extension of time shall be taken
into account in calculating the amount of interest payable under this Note.
"Business Day" means any day other than a Saturday, Sunday or legal holiday in
the State of California.
1.3 Optional Prepayment. Maker may, without premium or
penalty, at any time and from time to time, prepay all or any portion of the
outstanding principal balance due under this Note, provided that each such
prepayment is accompanied by accrued interest on the amount of principal prepaid
calculated to the date of such prepayment. Any partial prepayments shall be
applied to installments of principal in inverse order of their maturity.
2. DEFAULTS.
2.1 Events of Default. The occurrence of any one or more of
the following events with respect to Maker shall constitute an event of default
hereunder ("Event of Default"):
(a) If Maker shall fail to pay when due any payment of
principal or interest on this Note and such failure continues for five (5)
Business Days after Payee notifies Maker thereof writing.
<PAGE>
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief against it
in an involuntary case; (iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; or (iv) make an assignment for the
benefit of its creditors.
(c) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (i) is for relief against Maker in an
involuntary case; (ii) appoints a trustee, receiver, assignee, liquidator or
similar official for Maker or substantially all of Maker's properties; or (iii)
orders the liquidation of Maker, and in each case the order or decree is not
dismissed within 120 days.
(d) Upon the death of the Maker.
2.2 Remedies. Subject to Section 2.3, upon the occurrence of
an Event of Default hereunder (unless all Events of Default have been cured or
waived by Payee), Payee may, at its option, (i) by written notice to Maker,
declare the entire unpaid principal balance of this Note, together with all
accrued interest thereon, immediately due and payable regardless of any prior
forbearance, and (ii) exercise any and all rights and remedies available to it
under applicable law, including, without limitation, the right to collect from
Maker all sums due under this Note. Maker shall pay all reasonable attorneys'
fees incurred by or on behalf of Payee in connection with Payee's exercise of
any or all of its rights and remedies under this Note.
2.3 Non-Recourse Limitation on Remedies. Notwithstanding
anything to the contrary contained in this Note, Payee's recovery against Maker
under this Note upon an Event of Default shall be limited solely to the shares
of common stock of Payee purchased by Maker in the Restricted Stock Purchase
Agreement dated as of even date herewith between Maker and Payee. Maker shall
not be liable or have any personal liability in any other respect for the
payment of any amount due under this Note.
3. MISCELLANEOUS.
3.1 Waiver. The rights and remedies of Payee under this Note
shall be cumulative and not alternative. No waiver by Payee of any right or
remedy under this Note shall be effective unless in a writing signed by Payee.
Neither the failure nor any delay in exercising any right, power or privilege
under this Note will operate as a waiver of such right, power or privilege and
no single or partial exercise of any such right, power or privilege by Payee
will preclude any other or further exercise of such right, power or privilege or
the exercise of any other right, power or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right of Payee arising out of this
Note can be discharged by Payee, in whole or in part, by a waiver or
renunciation of the claim or right unless in a writing, signed by Payee; (b) no
waiver that may be given by Payee will be applicable except in the specific
instance for which it is given; and (c) no notice to or demand on Maker will be
deemed to be a waiver of any obligation of Maker or of the right of Payee to
take further action without notice or demand as provided in this Note.
2
<PAGE>
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 pursuant to the terms of Section 6.5 of the Restricted Stock Purchase
Agreement.
3.3 Severability. Any provision of this Note 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 Note invalid,
illegal or unenforceable in any other jurisdiction.
3.4 Governing Law. This Note shall be construed and enforced
in accordance with and governed by the laws of the State of Delaware.
3.5 Parties In Interest. This Note shall bind Maker and its
successors and assigns. This Note shall not be assigned or transferred by Maker
or Payee without the express prior written consent of Maker, except by operation
of law or in connection with the sale of all or substantially all of the stock
or assets of Maker or Payee (as applicable).
3.6 Section Headings, Construction. The headings of each
Section, subsection or other subdivision of this Note are for reference only and
shall not limit or control the meaning thereof. All references to "Section" or
"Sections" refer to the corresponding Section or Sections of this Note unless
otherwise specified. All words used in this Note will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the words "hereof" and "hereunder" and similar references refer to
this Note in its entirety and not to any specific section or subsection hereof.
3.7 No Usury. It is the intent of the parties that the rate of
interest and other charges to the Maker shall be lawful. If for any reason the
interest or other charges payable hereunder are found by a court of competent
jurisdiction, in a final determination, to exceed the limit which the Payee may
lawfully charge the Maker, then the obligation to pay interest or other charges
shall automatically be reduced to such limit and, if any amount in excess of
such limit shall have been paid, then such amount shall be refunded to the
Maker.
[The remainder of this page is intentionally left blank.]
3
<PAGE>
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
/s/ PHILLIP BENNETT
-------------------------------
Phillip Bennett
4
Execution Copy
--------------
RESTRICTED STOCK PURCHASE AGREEMENT
THIS RESTRICTED STOCK PURCHASE AGREEMENT (this "Agreement") has been
executed and delivered effective as of December 7, 1998, by and between Accom,
Inc., a Delaware corporation (the "Company"), and Lionel M. Allan, an individual
residing in California (the "Purchaser"), for the purpose of sale by the Company
to the Purchaser of 100,000 shares (the "Shares") of the Company's Common Stock
(the "Common Stock") on the terms and conditions in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements of the
Company and the Purchaser, and intending to be legally bound, the Company and
the Purchaser agree as follows:
1. Purchase and Sale of the Shares
Concurrently with execution of this Agreement, the Purchaser will
purchase, by delivery of a promissory note issued by the Purchaser in favor of
the Company and dated as of even date herewith in the form attached hereto as
Exhibit A (the "Promissory Note"), and the Company will sell, by delivery of an
appropriate stock certificate to the Purchaser, the Shares at a purchase price
of $0.65 per Share for the aggregate consideration of sixty five thousand
dollars ($65,000). The closing of the purchase of the Shares shall take place at
the offices of Gibson, Dunn & Crutcher, LLP at 1530 Page Mill Road, Palo Alto,
CA 94304, or at such other place as may be agreed upon by the parties.
2. Right of Repurchase - Cessation of Association
2.1 The Repurchase Option. In the event that the Purchaser voluntarily
or involuntarily ceases to be a director of and also ceases to be a consultant
to the Company, the Company shall have the option under this Section 2 (the
"Repurchase Option"), but not the obligation, to repurchase all, but not a
portion of, the Shares then subject to the Repurchase Option purchased by the
Purchaser pursuant to this Agreement from the Purchaser, or from the Purchaser's
estate or personal representative, and from each transferee to whom the
Purchaser has transferred any of the Shares (the "Transferees"), as the case may
be.
2.2 Exercise of the Repurchase Option. The Company shall exercise the
Repurchase Option by giving to the Purchaser, or to the Purchaser's estate or
personal representative, and to any Transferees of whom the Company has
previously received written notice, written notice of the Company's intention to
exercise the Repurchase Option (the "Notice of Repurchase") before the
Repurchase Option lapses in accordance with Section 2.5 of this Agreement, and
in such Notice agreeing to tender to the Purchaser, or to the Purchaser's estate
or personal representative, and to any Transferees, as the case may be, the
amount specified in Section 2.3, against delivery of the certificates
representing the Shares to be repurchased, duly endorsed, free and clear of any
<PAGE>
and all liens, charges or encumbrances. In exercising the Repurchase Option, the
Company may also designate one or more nominees to purchase some or all of the
Shares instead of purchasing all of them itself, provided that the Shares to be
purchased by the Company and by such nominees shall in any event constitute all
of the Shares that could then be purchased from the Purchaser, or the
Purchaser's estate or personal representative, and from any Transferees, as the
case may be.
2.3 Repurchase Option Price. The purchase price for the Shares upon
exercise of the Repurchase Option shall be $0.65 for each Share repurchased
pursuant to this Section 2 (in the aggregate referred to in this Section 2 as
the "Purchase Price").
2.4 Option Exercise; Closing. The closing with respect to exercise of
the Repurchase Option shall occur not more than 30 days after the date on which
the Notice of Repurchase is given, on such date and time and at such location as
shall be specified by the Company, and in the absence of the specification of
another site, at the Company's principal offices. At such closing, (a) the
Company shall deliver to the Purchaser, or to the Purchaser's estate or personal
representative, and to any Transferees, as the case may be, a check in the
amount of the Purchase Price, or the Company may, in its sole discretion, cancel
or forgive indebtedness of such party in the amount of the Purchase Price; and
(b) the Purchaser, or the Purchaser's estate or personal representative, and any
Transferees, as the case may be, shall deliver to the Company the certificates
representing the Shares, duly endorsed, free and clear of any and all liens,
charges or encumbrances.
2.5 Lapse of Repurchase Option. Notwithstanding any other provision of
this Section 2, certain of the Shares shall cease to be subject to the
Repurchase Option as follows:
(a) On the first anniversary of this Agreement, one-third (1/3) of the
Shares, or 33,333 shares, shall cease to be subject to the Repurchase Option;
and
(b) On the first day of each month following the first anniversary, one
thirty-sixth (1/36) of the original number of Shares, or 2,778 shares, shall
cease to be subject to the Repurchase Option (except that on the day of the
third anniversary 2,773 shares shall cease to be subject to the Repurchase
Option); such that on the third anniversary of this Agreement, all of the Shares
shall be free of the Repurchase Option provided in this Section 2, except those
Shares as to which the Repurchase Option has been exercised by the Company prior
to such third anniversary. Those shares which cease to be subject to the
Repurchase Option are referred to herein as the "Vested Shares."
2.6 Termination of Repurchase Option. In the event that there is a
Change in Control (as defined below) of the Company, all of the Shares held
subject to a Repurchase Option shall immediately upon such Change in Control
become Vested Shares and shall cease to be subject to the Repurchase Option. For
this Agreement, a "Change of Control" includes the sale or other disposition of
substantially all of the assets of the Company, any reorganization,
consolidation, or merger of the Company where the Company is not the surviving
corporation and where the Company's securities outstanding immediately before
the transaction represent less than 50% of the beneficial ownership of the new
entity immediately after the transaction, or a change in a
2
<PAGE>
majority of the members of the Board of Directors of the Company (the "Board")
which is not voted upon by the current members of the Board.
2.7 Section 83 Stock. The Purchaser acknowledges that such Purchaser
has been advised that the Repurchase Option contained in this Section 2 will
cause the purchase of the Shares to fall within the provisions of Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code"), which provides for
the recognition of ordinary income (as distinguished from capital gain) by the
purchaser of Shares based on the difference between the purchase price of the
Shares and their fair market value at the time restrictions with respect to the
Shares (for example, the "Repurchase Option") "lapse", regardless whether the
Shares are then (or could be then) sold. However, Section 83 of the Code permits
the filing of an election within 30 days after the Purchaser's purchase of the
Shares pursuant to this Agreement, whereby the Purchaser may elect to be taxed
on the difference, if any, between the purchase price of the Shares and their
fair market value at the time of purchase, with the result that if such election
is validly made, future gain, if any, realized upon disposition of the Shares
would in general be treated as capital gain. Purchaser acknowledges receipt from
the Company of a copy of Sections 83(a) and (b) of the Code and a portion of the
IRS Regulations thereunder, to which the foregoing discussion is subject. The
Purchaser should consult with his tax adviser concerning whether to make such
election and its consequences. In the event of any IRS audit or investigation of
the Purchaser or the transactions contemplated by this Agreement, the Purchaser
shall not seek reimbursement or indemnification from the Company for any
assessment or penalty resulting from an IRS determination that the purchase
price of the Shares is lower than the fair market value thereof as of the date
of issuance.
3. Effect of Tender of Purchase Price
Notwithstanding the failure of the holder of any Certificates
evidencing all or any portion of the Shares subject to repurchase under Section
2 to deliver the same to the Company, upon tender by the Company of the purchase
price for any such Shares in accordance with the terms of this Agreement, such
Shares and the Certificates representing same shall forthwith and without
further action be deemed to have been transferred to the Company and no longer
to be outstanding for any purpose, except receipt of the price payable by the
Company, without interest, upon proper tender of the Certificates to the Company
in accordance with this Agreement.
4. Restrictions on Transfer
Except as otherwise may be permitted by this Agreement, the Purchaser
shall not dispose of or otherwise alienate any of, or any interest in, the
Shares that at any time would be subject to repurchase by the Company under
Section 2 of this Agreement, and any attempt to effect any such transaction
shall be null and void ab initio and of no force and effect.
5. Investment Representations of the Purchaser
The Purchaser represents to the Company and agrees with the Company as
follows:
3
<PAGE>
5.1 The Purchaser is acquiring the Shares for private personal
investment for his own account and not for the account of any other person, and
has no present intention of reselling the Shares to others. None of the Shares
or any interest therein will be sold, transferred or otherwise disposed of
(except for sale to the Company) unless registered under the Securities Act of
1933, or similar successor law ("the Act"), and applicable securities or "blue
sky laws" of any state ("State Securities Laws") or unless subject to exemptions
from the Act and State Securities Laws.
5.2 Accordingly, to implement the Purchaser's representations and
agreements, the Purchaser agrees to authorize the Company to place substantially
the following legends, and any legend required by applicable State Securities
Laws, on each Certificate issued to the Purchaser to evidence the Shares, and to
place a stop order against further transfer of the Shares except in compliance
with the Act and applicable State Securities Laws.
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED AND
TRANSFERRED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR DISPOSED OF
UNLESS SO REGISTERED OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE."
"RESTRICTIONS ON THE OWNERSHIP RIGHTS OF THE STOCK REPRESENTED BY THIS
CERTIFICATE HAVE BEEN IMPOSED PURSUANT TO A RESTRICTED STOCK PURCHASE AGREEMENT
DATED DECEMBER 7, 1998. A COPY OF THE RESTRICTED STOCK PURCHASE AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE
TO THE HOLDER OF THIS CERTIFICATE UPON RECEIPT BY THE COMPANY AT ITS PRINCIPAL
PLACE OF BUSINESS OR REGISTER OFFICE OF A WRITTEN REQUEST FROM THE HOLDER
REQUESTING SUCH COPY."
6. General Provisions
6.1 Construction. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware.
6.2 Entire Agreement. This Agreement contains the entire understanding
of the parties and supersedes all prior agreements and understandings relating
to the subject matter hereof.
6.3 Modification. This Agreement may be modified, amended or waived
only by a writing executed by the Company and the Purchaser.
6.4 Waivers. Any party to this Agreement may waive any right, provided
that such waiver will not be effective against the waiving party unless it is in
writing and signed by the waiving party. No waiver will be deemed to be a waiver
of any same, similar, or dissimilar matter.
4
<PAGE>
6.5 Notice. 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 Buyer: 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 Purchaser: Lionel M. Allan
18222 Sebree Lane
Monte Sereno, CA 95030
Fax: (408) 395-1492
6.6 Successors. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, and upon any transferee of Shares, and upon
their respective successors, assigns, executors, administrators and legal
representatives. This Agreement may not be assigned by any Purchaser without the
express written consent of the Company.
6.7 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.
6.8 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 both counterparts shall together constitute but one and the same
instrument.
6.9 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.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
ACCOM, INC.
By: /S/ JUNAID SHEIKH
----------------------------------
Name: Junaid Sheikh
--------------------------------
Title: Chief Executive Officer
-------------------------------
LIONEL M. ALLAN
/S/ LIONEL M. ALLAN
-------------------------------------
6
<PAGE>
Execution Copy
--------------
NON-RECOURSE PROMISSORY NOTE
$65,000 December 7, 1998
FOR VALUE RECEIVED, Lionel M. Allan ("Maker"), promises to pay to
Accom, Inc., a Delaware corporation ("Payee"), in lawful money of the United
States of America, the principal sum of Sixty-Five Thousand ($65,000) together
with interest in arrears on the unpaid principal balance at a variable annual
rate equal to the prime rate of Comerica Bank which rate shall be established
and adjusted as necessary at the beginning of each calendar quarter during the
term of this Note. Interest shall be calculated on the basis of a year of 365 or
366 days, as applicable, and charged for the actual number of days elapsed.
1. PAYMENTS.
1.1 Principal and Interest. Subject to Section 1.3, the principal
amount of this Note then outstanding shall be due and payable three years from
the date of execution of this Note. Accrued, unpaid interest on the unpaid
principal balance of this Note shall be due and payable together with the
payment of principal as described above.
1.2 Manner of Payment. All payments of principal and interest on this
Note shall be made by wire transfer to such accounts as specified by Payee,
promptly upon request of Maker, or by check at 1490 O'Brien Drive, Menlo Park,
CA 94025, or at such other place in the United States of America as Payee shall
designate to Maker in writing. If any payment of principal or interest on this
Note is due on a day which is not a Business Day, such payment shall be due on
the next succeeding Business Day, and such extension of time shall be taken into
account in calculating the amount of interest payable under this Note. "Business
Day" means any day other than a Saturday, Sunday or legal holiday in the State
of California.
1.3 Optional Prepayment. Maker may, without premium or penalty, at any
time and from time to time, prepay all or any portion of the outstanding
principal balance due under this Note, provided that each such prepayment is
accompanied by accrued interest on the amount of principal prepaid calculated to
the date of such prepayment. Any partial prepayments shall be applied to
installments of principal in inverse order of their maturity.
2. DEFAULTS.
2.1 Events of Default. The occurrence of any one or more of the
following events with respect to Maker shall constitute an event of default
hereunder ("Event of Default"):
(a) If Maker shall fail to pay when due any payment of principal or
interest on this Note and such failure continues for five (5) Business Days
after Payee notifies Maker thereof writing.
<PAGE>
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief against it
in an involuntary case; (iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; or (iv) make an assignment for the
benefit of its creditors.
(c) If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against Maker in an involuntary
case; (ii) appoints a trustee, receiver, assignee, liquidator or similar
official for Maker or substantially all of Maker's properties; or (iii) orders
the liquidation of Maker, and in each case the order or decree is not dismissed
within 120 days.
(d) Upon the death of the Maker.
2.2 Remedies. Subject to Section 2.3, upon the occurrence of an Event
of Default hereunder (unless all Events of Default have been cured or waived by
Payee), Payee may, at its option, (i) by written notice to Maker, declare the
entire unpaid principal balance of this Note, together with all accrued interest
thereon, immediately due and payable regardless of any prior forbearance, and
(ii) exercise any and all rights and remedies available to it under applicable
law, including, without limitation, the right to collect from Maker all sums due
under this Note. Maker shall pay all reasonable attorneys' fees incurred by or
on behalf of Payee in connection with Payee's exercise of any or all of its
rights and remedies under this Note.
2.3 Non-Recourse Limitation on Remedies. Notwithstanding anything to
the contrary contained in this Note, Payee's recovery against Maker under this
Note upon an Event of Default shall be limited solely to the shares of common
stock of Payee purchased by Maker in the Restricted Stock Purchase Agreement
dated as of even date herewith between Maker and Payee (the "Restricted Stock
Purchase Agreement"). Maker shall not be liable or have any personal liability
in any other respect for the payment of any amount due under this Note.
3. MISCELLANEOUS.
3.1 Waiver. The rights and remedies of Payee under this Note shall be
cumulative and not alternative. No waiver by Payee of any right or remedy under
this Note shall be effective unless in a writing signed by Payee. Neither the
failure nor any delay in exercising any right, power or privilege under this
Note will operate as a waiver of such right, power or privilege and no single or
partial exercise of any such right, power or privilege by Payee will preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right of Payee arising out of this Note can be
discharged by Payee, in whole or in part, by a waiver or renunciation of the
claim or right unless in a writing, signed by Payee; (b) no waiver that may be
given by Payee will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on Maker will be deemed to be a waiver
of any obligation of Maker or of the right of Payee to take further action
without notice or demand as provided in this Note.
2
<PAGE>
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
pursuant to the terms of Section 6.5 of the Restricted Stock Purchase Agreement.
3.3 Severability. Any provision of this Note 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 Note invalid,
illegal or unenforceable in any other jurisdiction.
3.4 Governing Law. This Note shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware.
3.5 Parties In Interest. This Note shall bind Maker and its successors
and assigns. This Note shall not be assigned or transferred by Maker or Payee
without the express prior written consent of Maker, except by operation of law
or in connection with the sale of all or substantially all of the stock or
assets of Maker or Payee (as applicable).
3.6 Section Headings, Construction. The headings of each Section,
subsection or other subdivision of this Note are for reference only and shall
not limit or control the meaning thereof. All references to "Section" or
"Sections" refer to the corresponding Section or Sections of this Note unless
otherwise specified. All words used in this Note will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the words "hereof" and "hereunder" and similar references refer to
this Note in its entirety and not to any specific section or subsection hereof.
3.7 No Usury. It is the intent of the parties that the rate of interest
and other charges to the Maker shall be lawful. If for any reason the interest
or other charges payable hereunder are found by a court of competent
jurisdiction, in a final determination, to exceed the limit which the Payee may
lawfully charge the Maker, then the obligation to pay interest or other charges
shall automatically be reduced to such limit and, if any amount in excess of
such limit shall have been paid, then such amount shall be refunded to the
Maker.
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3
<PAGE>
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
/S/ LIONEL M. ALLAN
-------------------------------------
Lionel M. Allan
4
Execution Copy
--------------
RESTRICTED STOCK PURCHASE AGREEMENT
THIS RESTRICTED STOCK PURCHASE AGREEMENT (this "Agreement") has been
executed and delivered effective as of December 7, 1998, by and among Accom,
Inc., a Delaware corporation (the "Company"), David A. Lahar, an individual
residing in California (the "Purchaser"), and EOS Capital Profit Sharing Plan
(the "Plan," and together with the Purchaser, the "Holders," and each a
"Holder"), for the purpose of sale by the Company to the Purchaser of 100,000
shares (the "Shares") of the Company's Common Stock (the "Common Stock") on the
terms and conditions in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements of the
Company and the Purchaser, and intending to be legally bound, the Company and
the Purchaser agree as follows:
1. Purchase and Sale of the Shares
Concurrently with execution of this Agreement, the Purchaser will
purchase, by delivery of a promissory note issued by the Purchaser in favor of
the Company and dated as of even date herewith in the form attached hereto as
Exhibit A (the "Promissory Note"), and the Company will sell, by delivery of an
appropriate stock certificate to the Purchaser, the Shares at a purchase price
of $0.65 per Share for the aggregate consideration of sixty five thousand
dollars ($65,000). The closing of the purchase of the Shares shall take place at
the offices of Gibson, Dunn & Crutcher LLP at 1530 Page Mill Road, Palo Alto, CA
94304, or at such other place as may be agreed upon by the parties.
2. Right of Repurchase - Cessation of Association
2.1 The Repurchase Option. In the event that the Purchaser voluntarily
or involuntarily ceases to be a director of the Company, the Company shall have
the option under this Section 2 (the "Repurchase Option"), but not the
obligation, to repurchase all, but not a portion of, the Shares then subject to
the Repurchase Option purchased by the Purchaser pursuant to this Agreement from
the Purchaser, or from the Purchaser's estate or personal representative, and
from each transferee to whom the Purchaser has transferred any of the Shares
(the "Transferees"), as the case may be.
2.2 Exercise of the Repurchase Option. The Company shall exercise the
Repurchase Option by giving to the Purchaser, or to the Purchaser's estate or
personal representative, and to any Transferees of whom the Company has
previously received written notice, written notice of the Company's intention to
exercise the Repurchase Option (the "Notice of Repurchase") before the
Repurchase Option lapses in accordance with Section 2.5 of this Agreement, and
in such Notice agreeing to tender to the Purchaser, or to the Purchaser's estate
or personal representative, and to any Transferees, as the case may be, the
amount specified in Section 2.3, against delivery
<PAGE>
of the certificates representing the Shares to be repurchased, duly endorsed,
free and clear of any and all liens, charges or encumbrances. In exercising the
Repurchase Option, the Company may also designate one or more nominees to
purchase some or all of the Shares instead of purchasing all of them itself,
provided that the Shares to be purchased by the Company and by such nominees
shall in any event constitute all of the Shares that could then be purchased
from the Purchaser, or the Purchaser's estate or personal representative, and
from any Transferees, as the case may be.
2.3 Repurchase Option Price. The purchase price for the Shares upon
exercise of the Repurchase Option shall be $0.65 for each Share repurchased
pursuant to this Section 2 (in the aggregate referred to in this Section 2 as
the "Purchase Price").
2.4 Option Exercise; Closing. The closing with respect to exercise of
the Repurchase Option shall occur not more than 30 days after the date on which
the Notice of Repurchase is given, on such date and time and at such location as
shall be specified by the Company, and in the absence of the specification of
another site, at the Company's principal offices. At such closing, (a) the
Company shall deliver to the Purchaser, or to the Purchaser's estate or personal
representative, and to any Transferees, as the case may be, a check in the
amount of the Purchase Price, or the Company may, in its sole discretion, cancel
or forgive indebtedness of such party in the amount of the Purchase Price; and
(b) the Purchaser, or the Purchaser's estate or personal representative, and any
Transferees, as the case may be, shall deliver to the Company the certificates
representing the Shares, duly endorsed, free and clear of any and all liens,
charges or encumbrances.
2.5 Lapse of Repurchase Option. Notwithstanding any other provision of
this Section 2, certain of the Shares shall cease to be subject to the
Repurchase Option as follows:
(a) On the first anniversary of this Agreement, one-third (1/3) of the
Shares, or 33,333 shares, shall cease to be subject to the Repurchase Option;
and
(b) On the first day of each month following the first anniversary, one
thirty-sixth (1/36) of the original number of Shares, or 2,778 shares, shall
cease to be subject to the Repurchase Option (except that on the day of the
third anniversary 2,773 shares shall cease to be subject to the Repurchase
Option); such that on the third anniversary of this Agreement, all of the Shares
shall be free of the Repurchase Option provided in this Section 2, except those
Shares as to which the Repurchase Option has been exercised by the Company prior
to such third anniversary. Those shares which cease to be subject to the
Repurchase Option are referred to herein as the "Vested Shares."
2.6 Termination of Repurchase Option. In the event that there is a
Change in Control (as defined below) of the Company, all of the Shares held
subject to a Repurchase Option shall immediately upon such Change in Control
become Vested Shares and shall cease to be subject to the Repurchase Option. For
this Agreement, a "Change of Control" includes the sale or other disposition of
substantially all of the assets of the Company, any reorganization,
consolidation, or merger of the Company where the Company is not the surviving
corporation and where the Company's securities outstanding immediately before
the transaction represent less than 50% of
2
<PAGE>
the beneficial ownership of the new entity immediately after the transaction, or
a change in a majority of the members of the Board of Directors of the Company
(the "Board") which is not voted upon by the current members of the Board.
2.7 Section 83 Stock. The Purchaser acknowledges that such Purchaser
has been advised that the Repurchase Option contained in this Section 2 will
cause the purchase of the Shares to fall within the provisions of Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code"), which provides for
the recognition of ordinary income (as distinguished from capital gain) by the
purchaser of Shares based on the difference between the purchase price of the
Shares and their fair market value at the time restrictions with respect to the
Shares (for example, the "Repurchase Option") "lapse", regardless whether the
Shares are then (or could be then) sold. However, Section 83 of the Code permits
the filing of an election within 30 days after the Purchaser's purchase of the
Shares pursuant to this Agreement, whereby the Purchaser may elect to be taxed
on the difference, if any, between the purchase price of the Shares and their
fair market value at the time of purchase, with the result that if such election
is validly made, future gain, if any, realized upon disposition of the Shares
would in general be treated as capital gain. Purchaser acknowledges receipt from
the Company of a copy of Sections 83(a) and (b) of the Code and a portion of the
IRS Regulations thereunder, to which the foregoing discussion is subject. The
Purchaser should consult with his tax adviser concerning whether to make such
election and its consequences. In the event of any IRS audit or investigation of
the Purchaser or the transactions contemplated by this Agreement, the Purchaser
shall not seek reimbursement or indemnification from the Company for any
assessment or penalty resulting from an IRS determination that the purchase
price of the Shares is lower than the fair market value thereof as of the date
of issuance.
3. Effect of Tender of Purchase Price
Notwithstanding the failure of the holder of any Certificates
evidencing all or any portion of the Shares subject to repurchase under Section
2 to deliver the same to the Company, upon tender by the Company of the purchase
price for any such Shares in accordance with the terms of this Agreement, such
Shares and the Certificates representing same shall forthwith and without
further action be deemed to have been transferred to the Company and no longer
to be outstanding for any purpose, except receipt of the price payable by the
Company, without interest, upon proper tender of the Certificates to the Company
in accordance with this Agreement.
4. Restrictions on Transfer
Except as otherwise may be permitted by this Agreement, no Holder shall
dispose of or otherwise alienate any of, or any interest in, the Shares that at
any time would be subject to repurchase by the Company under Section 2 of this
Agreement, and any attempt to effect any such transaction shall be null and void
ab initio and of no force and effect.
5. Investment Representations of the Purchaser
The Purchaser represents to the Company and agrees with the Company as
follows:
3
<PAGE>
5.1 The Purchaser is acquiring the Shares for private personal
investment for his own account and not for the account of any other person, and
has no present intention of reselling the Shares to others. None of the Shares
or any interest therein will be sold, transferred or otherwise disposed of
(except for the original issuance in the name of the Plan in accordance with
Section 6 of this Agreement and except for sale to the Company) unless
registered under the Securities Act of 1933, or similar successor law ("the
Act"), and applicable securities or "blue sky laws" of any state ("State
Securities Laws") or unless subject to exemptions from the Act and State
Securities Laws.
5.2 Accordingly, to implement the Purchaser's representations and
agreements, the Purchaser agrees to authorize the Company to place substantially
the following legends, and any legend required by applicable State Securities
Laws, on each Certificate issued to the Purchaser to evidence the Shares, and to
place a stop order against further transfer of the Shares except in compliance
with the Act and applicable State Securities Laws.
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED AND
TRANSFERRED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR DISPOSED OF
UNLESS SO REGISTERED OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE."
"RESTRICTIONS ON THE OWNERSHIP RIGHTS OF THE STOCK REPRESENTED BY THIS
CERTIFICATE HAVE BEEN IMPOSED PURSUANT TO A RESTRICTED STOCK PURCHASE AGREEMENT
DATED DECEMBER 7, 1998. A COPY OF THE RESTRICTED STOCK PURCHASE AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE
TO THE HOLDER OF THIS CERTIFICATE UPON RECEIPT BY THE COMPANY AT ITS PRINCIPAL
PLACE OF BUSINESS OR REGISTER OFFICE OF A WRITTEN REQUEST FROM THE HOLDER
REQUESTING SUCH COPY."
6. Share Issuance.
The Shares shall be issued in the name of the Plan. The Plan agrees
that the Shares shall remain subject to repurchase by the Company under Section
2 of this Agreement.
7. General Provisions
7.1 Construction. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware.
7.2 Entire Agreement. This Agreement contains the entire understanding
of the parties and supersedes all prior agreements and understandings relating
to the subject matter hereof.
4
<PAGE>
7.3 Modification. This Agreement may be modified, amended or waived
only by a writing executed by the Company and the Purchaser.
7.4 Waivers. Any party to this Agreement may waive any right, provided
that such waiver will not be effective against the waiving party unless it is in
writing and signed by the waiving party. No waiver will be deemed to be a waiver
of any same, similar, or dissimilar matter.
7.5 Notice. 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 Buyer: 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 Purchaser: David A. Lahar
c/o EOS Capital, Inc.
2101 Bush Street
San Francisco, CA 94115
Fax: (415) 292-7184
If to the Plan: EOS Capital Profit Sharing Plan
2101 Bush Street
San Francisco, CA 94115
Fax: (415) 292-7184
7.6 Successors. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, and upon any transferee of Shares, and upon
their respective successors, assigns, executors, administrators and legal
representatives. This Agreement may not be assigned by any Purchaser without the
express written consent of the Company.
7.7 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.
7.8 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 both counterparts shall together constitute but one and the same
instrument.
5
<PAGE>
7.9 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.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
ACCOM, INC.
By: /S/ JUNAID SHEIKH
----------------------------------
Name: Junaid Sheikh
--------------------------------
Title: Chief Executive Officer
-------------------------------
DAVID A. LAHAR
/S/ DAVID A. LAHAR
-------------------------------------
EOS CAPITAL PROFIT SHARING PLAN
By: /S/ DAVID A. LAHAR
----------------------------------
Name: David A. Lahar
--------------------------------
Title: Trustee
-------------------------------
7
<PAGE>
Execution Copy
--------------
NON-RECOURSE PROMISSORY NOTE
$65,000 December 7, 1998
FOR VALUE RECEIVED, David A. Lahar ("Maker"), promises to pay to Accom,
Inc., a Delaware corporation ("Payee"), in lawful money of the United States of
America, the principal sum of Sixty-Five Thousand ($65,000) together with
interest in arrears on the unpaid principal balance at a variable annual rate
equal to the prime rate of Comerica Bank which rate shall be established and
adjusted as necessary at the beginning of each calendar quarter during the term
of this Note. Interest shall be calculated on the basis of a year of 365 or 366
days, as applicable, and charged for the actual number of days elapsed.
1. PAYMENTS.
1.1 Principal and Interest. Subject to Section 1.3, the principal
amount of this Note then outstanding shall be due and payable three years from
the date of execution of this Note. Accrued, unpaid interest on the unpaid
principal balance of this Note shall be due and payable together with the
payment of principal as described above.
1.2 Manner of Payment. All payments of principal and interest on this
Note shall be made by wire transfer to such accounts as specified by Payee,
promptly upon request of Maker, or by check at 1490 O'Brien Drive, Menlo Park,
CA 94025, or at such other place in the United States of America as Payee shall
designate to Maker in writing. If any payment of principal or interest on this
Note is due on a day which is not a Business Day, such payment shall be due on
the next succeeding Business Day, and such extension of time shall be taken into
account in calculating the amount of interest payable under this Note. "Business
Day" means any day other than a Saturday, Sunday or legal holiday in the State
of California.
1.3 Optional Prepayment. Maker may, without premium or penalty, at any
time and from time to time, prepay all or any portion of the outstanding
principal balance due under this Note, provided that each such prepayment is
accompanied by accrued interest on the amount of principal prepaid calculated to
the date of such prepayment. Any partial prepayments shall be applied to
installments of principal in inverse order of their maturity.
2. DEFAULTS.
2.1 Events of Default. The occurrence of any one or more of the
following events with respect to Maker shall constitute an event of default
hereunder ("Event of Default"):
(a) If Maker shall fail to pay when due any payment of principal or
interest on this Note and such failure continues for five (5) Business Days
after Payee notifies Maker thereof writing.
<PAGE>
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief against it
in an involuntary case; (iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; or (iv) make an assignment for the
benefit of its creditors.
(c) If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against Maker in an involuntary
case; (ii) appoints a trustee, receiver, assignee, liquidator or similar
official for Maker or substantially all of Maker's properties; or (iii) orders
the liquidation of Maker, and in each case the order or decree is not dismissed
within 120 days.
(d) Upon the death of the Maker.
2.2 Remedies. Subject to Section 2.3, upon the occurrence of an Event
of Default hereunder (unless all Events of Default have been cured or waived by
Payee), Payee may, at its option, (i) by written notice to Maker, declare the
entire unpaid principal balance of this Note, together with all accrued interest
thereon, immediately due and payable regardless of any prior forbearance, and
(ii) exercise any and all rights and remedies available to it under applicable
law, including, without limitation, the right to collect from Maker all sums due
under this Note. Maker shall pay all reasonable attorneys' fees incurred by or
on behalf of Payee in connection with Payee's exercise of any or all of its
rights and remedies under this Note.
2.3 Non-Recourse Limitation on Remedies. Notwithstanding anything to
the contrary contained in this Note, Payee's recovery against Maker under this
Note upon an Event of Default shall be limited solely to the shares of common
stock of Payee purchased by Maker in the Restricted Stock Purchase Agreement
dated as of even date herewith between Maker, Payee and EOS Capital Profit
Sharing Plan. Maker shall not be liable or have any personal liability in any
other respect for the payment of any amount due under this Note.
3. MISCELLANEOUS.
3.1 Waiver. The rights and remedies of Payee under this Note shall be
cumulative and not alternative. No waiver by Payee of any right or remedy under
this Note shall be effective unless in a writing signed by Payee. Neither the
failure nor any delay in exercising any right, power or privilege under this
Note will operate as a waiver of such right, power or privilege and no single or
partial exercise of any such right, power or privilege by Payee will preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right of Payee arising out of this Note can be
discharged by Payee, in whole or in part, by a waiver or renunciation of the
claim or right unless in a writing, signed by Payee; (b) no waiver that may be
given by Payee will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on Maker will be deemed to be a waiver
of any obligation of Maker or of the right of Payee to take further action
without notice or demand as provided in this Note.
2
<PAGE>
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
pursuant to the terms of Section 7.5 of the Restricted Stock Purchase Agreement.
3.3 Severability. Any provision of this Note 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 Note invalid,
illegal or unenforceable in any other jurisdiction.
3.4 Governing Law. This Note shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware.
3.5 Parties In Interest. This Note shall bind Maker and its successors
and assigns. This Note shall not be assigned or transferred by Maker or Payee
without the express prior written consent of Maker, except by operation of law
or in connection with the sale of all or substantially all of the stock or
assets of Maker or Payee (as applicable).
3.6 Section Headings, Construction. The headings of each Section,
subsection or other subdivision of this Note are for reference only and shall
not limit or control the meaning thereof. All references to "Section" or
"Sections" refer to the corresponding Section or Sections of this Note unless
otherwise specified. All words used in this Note will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the words "hereof" and "hereunder" and similar references refer to
this Note in its entirety and not to any specific section or subsection hereof.
3.7 No Usury. It is the intent of the parties that the rate of interest
and other charges to the Maker shall be lawful. If for any reason the interest
or other charges payable hereunder are found by a court of competent
jurisdiction, in a final determination, to exceed the limit which the Payee may
lawfully charge the Maker, then the obligation to pay interest or other charges
shall automatically be reduced to such limit and, if any amount in excess of
such limit shall have been paid, then such amount shall be refunded to the
Maker.
[The remainder of this page is intentionally left blank.]
3
<PAGE>
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
/S/ DAVID A. LAHAR
-------------------------------------
David A. Lahar
4
EXECUTION COPY
--------------
ACCOM, INC.
Stock Purchase Agreement
December 10, 1998
<PAGE>
EXECUTION COPY
--------------
TABLE OF CONTENTS
Page
----
1. Purchase and Sale of Stock..........................................1
1.1 Sale and Issuance of Common Stock..........................1
1.2 Closing....................................................1
2. Representations and Warranties of the Company.......................1
2.1 Organization; Good Standing; Qualification.................2
2.2 Due Authorization..........................................2
2.3 Valid Issuance of Common Stock.............................2
2.4 Governmental Consents......................................2
2.5 Capitalization and Voting Rights...........................3
2.6 Registration Rights........................................3
2.7 Compliance With Other Instruments..........................3
2.8 Disclosure.................................................4
2.9 SEC Documents; Company Financial Statements................4
3. Representations and Warranties of the Investors.....................5
3.1 Purchase Entirely for Own Account..........................5
3.2 Reliance Upon Investors' Representations...................5
3.3 Receipt of Information.....................................5
3.4 Investment Experience......................................5
3.5 Accredited Investor........................................5
3.6 Restricted Securities......................................5
3.7 Legends....................................................6
4. Conditions of the Investor's Obligations at Closing.................6
4.1 Representations and Warranties.............................6
4.2 Performance................................................6
4.3 Compliance Certificate.....................................7
4.4 Qualifications.............................................7
4.5 Proceedings and Documents..................................7
4.6 Opinion of Company Counsel.................................7
4.7 Investor's Rights Agreement................................7
5. Conditions of the Company's Obligations at Closing..................7
5.1 Representations and Warranties.............................7
5.2 Qualifications.............................................7
6. Covenants of the Company............................................7
6.1 Grant of Stock Options.....................................7
6.2 Right to Nominate Director.................................8
6.3 Consulting Services........................................8
-i-
<PAGE>
EXECUTION COPY
--------------
7. Miscellaneous.......................................................8
7.1 Entire Agreement...........................................8
7.2 Survival of Representations, Warranties and Covenants......8
7.3 Successors and Assigns.....................................8
7.4 Governing Law..............................................8
7.5 Counterparts...............................................8
7.6 Titles and Subtitles.......................................8
7.7 Attorneys' Fees............................................9
7.8 Amendments and Waivers.....................................9
7.9 Severability...............................................9
7.10 California Corporate Securities Law........................9
Exhibit A - Asset Purchase Agreement
Exhibit B - Investor's Rights Agreement
Exhibit C - Schedule of Exceptions
Exhibit D - Opinion of Gibson Dunn & Crutcher LLP
-ii-
<PAGE>
EXECUTION COPY
--------------
ACCOM, INC.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of the 10th
day of December, 1998, by and between ACCOM, INC., a Delaware corporation (the
"Company"), and MICHAEL LUCKWELL (the "Investor").
WITNESSETH
WHEREAS, the Company intends to enter into that certain Asset Purchase
Agreement, the form of which is attached hereto as Exhibit A (the "Asset
Purchase Agreement") of even date herewith by and among the Company, Scitex
Digital Video, Inc., a Massachusetts corporation ("SDV"), Scitex Digital Video
(Europe) Limited, a private limited company incorporated in England and Wales,
Scitex Digital Video (Asia Pacific), Inc., a California corporation, Scitex
Development Corp., a Massachusetts corporation, and Scitex Corporation Ltd., an
Israel corporation (collectively, the "Sellers"); and
WHEREAS, the Company intends to finance a portion of its obligations
under the Asset Purchase Agreement with pursuant to this Agreement and
$3,500,000 (the "Borrowed Funds"), from LaSalle Business Credit, Inc. (the
"Lender") pursuant to a revolving credit line; and
WHEREAS, the execution of this Agreement and delivery of the Purchase
Price hereunder by the Investor is contingent upon the contemporaneous delivery
of the Borrowed Funds by the Lender;
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Common Stock. Subject to the terms and
conditions of this Agreement, the Investor agrees to purchase at the Closing (as
such term is defined below) and the Company agrees to sell and issue to the
Investor at the Closing 2,500,000 shares of the Company's Common Stock at a
price of $0.60 per share, for an aggregate of $1,500,000 (the "Purchase Price").
1.2 Closing. The purchase and sale of the Common Stock shall take place
at the offices of Gibson, Dunn & Crutcher LLP, 1530 Page Mill Road, Palo Alto,
California, at 10:00 a.m. on December 10, 1998, or at such other time and place
as the Company and the Investor shall mutually agree, either orally or in
writing (which time and place are designated as the "Closing"). At the Closing,
the Company shall deliver to the Investor a certificate representing the
2,500,000 shares of Common Stock that the Investor is purchasing against payment
of the Purchase Price by check, wire transfer or such other form of payment as
shall be mutually agreed upon by the Investor and the Company.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investor that, except as set forth on a Schedule
of Exceptions furnished to the
1
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EXECUTION COPY
--------------
Investor and counsel for the Investor and attached hereto as Exhibit C (the
"Schedule of Exceptions"), specifically identifying the relevant subparagraph(s)
hereof, which exceptions shall be deemed to be representations and warranties as
if made hereunder:
2.1 Organization; Good Standing; Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, has all requisite corporate power and authority to own
and operate its properties and assets and to carry on its business as now
conducted and as presently proposed to be conducted, to execute and deliver this
Agreement, the Investor's Rights Agreement, and any other agreement to which the
Company is a party, the execution and delivery of which is contemplated hereby
(the "Ancillary Agreements"), to issue and sell the Common Stock, and to carry
out the provisions of this Agreement, the Investor's Rights Agreement, and any
Ancillary Agreement. The Company is duly qualified and is authorized to transact
business and is in good standing as a foreign corporation in each jurisdiction
in which the failure so to qualify would have a material adverse effect on its
business, properties or financial condition.
2.2 Due Authorization. All corporate action on the part of the Company,
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the Investor's Rights Agreement and
any Ancillary Agreement, the performance of all obligations of the Company
hereunder and thereunder at the Closing and the authorization, issuance, sale
and delivery of the Common Stock being sold hereunder has been taken or will be
taken prior to the Closing, and this Agreement, the Investor's Rights Agreement
and any Ancillary Agreement, when executed and delivered, will constitute valid
and legally binding obligations of the Company, enforceable in accordance with
their respective terms except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally, (b) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies, and (c) to the extent the indemnification provisions
contained in the Investor's Rights Agreement may be limited by applicable laws.
2.3 Valid Issuance of Common Stock. The Common Stock that is being
purchased by the Investor hereunder, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid and nonassessable, and will
be free of restrictions on transfer other than restrictions on transfer under
this Agreement and the Investor's Rights Agreement and under applicable state
and federal securities laws.
2.4 Governmental Consents. No consent, approval, qualification, order
or authorization of, or filing with, any local, state or federal governmental
authority is required on the part of the Company in connection with the
Company's valid execution, delivery or performance of this Agreement, the offer,
sale or issuance of the Common Stock by the Company, except such filings as have
been made prior to the Closing, except that any notices of sale required to be
filed with the Securities and Exchange Commission under Regulation D of the
Securities Act of 1933, as amended (the "Securities Act"), or such post-closing
filings as may be required under applicable state securities laws, which will be
timely filed within the applicable periods therefor. Notwithstanding any
provisions of this Agreement, the Company is not making and does not make any
representations or warranties with respect to the applicability of the laws or
regulations
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of any foreign country to, or the effect of any such laws or regulations upon,
the sale of the Common Stock to Investor.
2.5 Capitalization and Voting Rights.
(a) The authorized capital of the Company consists, or will consist
prior to the Closing, of shares of Preferred Stock, par value $.001 (the
"Preferred Stock") and shares of Common Stock, par value $.001(the "Common
Stock"), in the amounts set forth on Section 2.5 of the Schedule of Exceptions
attached hereto. The number of issued and outstanding shares of Preferred Stock
and Common Stock as of the date hereof is as set forth on Section 2.5 of the
Schedule of Exceptions attached hereto.
(b) The outstanding shares of Common Stock have been issued in
accordance with the registration or qualification provisions of the Securities
Act and any relevant state securities laws or pursuant to valid exemptions
therefrom. Except for (i) currently outstanding options to purchase shares of
Common Stock granted to employees pursuant to the Company's stock option plans
(the "Plans") in the amounts set forth on Section 2.5 of the Schedule of
Exceptions attached hereto, (ii) 750,000 shares to be sold to Phil Bennett
concurrently with the Closing hereunder, (iii) 1,000,000 warrants to be issued
to Scitex Digital Video, Inc., a Massachusetts corporation ("Scitex"),
concurrently with the Closing hereunder pursuant to the terms of the Asset
Purchase Agreement, (iv) that number of options to purchase shares of Common
Stock to be granted to employees of Scitex in connection with the Asset Purchase
Agreement set forth on Section 2.5 of the Schedule of Exceptions attached
hereto, there are not outstanding any options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), or agreements for
the purchase or acquisition from the Company of any shares of its capital stock.
The aggregate number of options currently outstanding pursuant to clause (i)
above or to be granted pursuant to clause (iv), the exercise prices of such
options and the vesting schedule for such options are as set forth on Section
2.5 of the Schedule of Exceptions. Except for pursuant to the Investors' Rights
Agreement of even date herewith between the Company and Scitex (the "Scitex
Investors' Rights Agreement"), the Company is not a party or subject to any
agreement or understanding, and, to the best of the Company's knowledge, there
is no agreement or understanding between any persons that affects or relates to
the voting or giving of written consents with respect to any security or the
voting by a director of the Company.
2.6 Registration Rights. Except as provided in the Investor's Rights
Agreement and the Scitex Investors' Rights Agreement, the Company is not
obligated to register under the Securities Act any of its presently outstanding
securities or any of its securities that may subsequently be issued.
2.7 Compliance With Other Instruments. The Company is not in violation
or default in any material respect of any provision of its Certificate of
Incorporation or Bylaws or in any material respect of any provision of any
mortgage, agreement, instrument or contract to which it is a party or by which
it is bound or, to the best of its knowledge, of any federal or state judgment,
order, writ, decree, statute, rule or regulation applicable to the Company. The
execution, delivery and performance by the Company of this Agreement, the
Investor's Rights Agreement and any Ancillary Agreement, and the consummation of
the transactions
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contemplated hereby and thereby will not result in any such violation or be in
material conflict with or constitute, with or without the passage of time or
giving of notice, either a material default under any such provision or an event
that results in the creation of any material lien, charge or encumbrance upon
any assets of the Company or the suspension, revocation, impairment, forfeiture
or nonrenewal of any material permit, license, authorization or approval
applicable to the Company, its business or operations, or any of its assets or
properties.
2.8 Disclosure. The Company has provided the Investor with all the
information reasonably available to the Company without undue expense that the
Investor has requested for deciding whether to purchase the Common Stock and all
information that the Company believes is reasonably necessary to enable the
Investor to make such decision. To the best of the Company's knowledge after
reasonable investigation, neither this Agreement nor any other written
statements or certificates made or delivered at the Closing contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein, in the light of the circumstances under which
they were made, not misleading.
2.9 SEC Documents; Company Financial Statements. The Company has
furnished or made available to the Investor true and complete copies of all
reports, schedules, forms, statements or other documents filed or required to be
filed with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or the
Securities Act since January 1, 1997, all in the form (including exhibits) so
filed (collectively, the "SEC Documents"). As of their respective filing dates,
such SEC Documents filed by the Company complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the SEC thereunder, as the case may be, and none of the SEC
Documents contained as of the date filed any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent such SEC Documents have been
corrected, updated or superseded by a document subsequently filed with the SEC.
The financial statements of the Company, including the notes thereto, included
in the SEC Documents (the "Company Financial Statements") comply as to form in
all material respects with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP applied in a manner
consistent with past practice of the Company (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q
under the Exchange Act) and present fairly the financial position, assets and
liabilities of the Company at the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited financial statements, to normal year-end adjustments). There has been
no change in the Company's accounting policies except as described in the notes
to the Company Financial Statements. Except as reflected or reserved against in
the Company Financial Statements, the Company has no material Liabilities (as
defined below) or other obligations, except (i) since the date of the most
recent audited balance sheet included in the Company Financial Statements,
Liabilities and obligations incurred in the ordinary course of business
consistent with the past practices of the Company or (ii) that would not be
required to be reflected or reserved against in the balance sheet of the Company
prepared in accordance with GAAP applied in a manner consistent with past
practice of the Company. "Liabilities" means all Indebtedness (as defined
below), obligations and other liabilities (or contingencies that have not yet
become liabilities) of a person, whether absolute, accrued, contingent (or based
upon any
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contingency), known or unknown, fixed or otherwise, or whether due or to become
due as determined in accordance with GAAP. "Indebtedness" of any person means
all obligations of such person (a) for borrowed money, (b) evidenced by notes,
bonds, debentures or similar instruments, (c) for the deferred purchase price of
goods or services (other than trade payables or accruals incurred in the
ordinary course of business), (d) under capital leases and (e) in the nature of
guarantees of the obligations described in clauses (a) through (d) above of any
other person.
3. Representations and Warranties of the Investors. The Investor hereby
represents and warrants that:
3.1 Purchase Entirely for Own Account. This Agreement is made with the
Investor in reliance upon the Investor's representation to the Company, which by
the Investor's execution of this Agreement the Investor hereby confirms, that
the Common Stock to be purchased by the Investor will be acquired for investment
for the Investor's own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof, and that the Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, the Investor further
represents that the Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Common Stock.
3.2 Reliance Upon Investors' Representations. The Investor understands
that the Common Stock is not registered under the Securities Act on the ground
that the sale provided for in this Agreement and the issuance of securities
hereunder is exempt from registration under the Securities Act pursuant to
section 4(2) thereof, and that the Company's reliance on such exemption is based
on the Investor's representations set forth herein. The Investor realizes that
the basis for the exemption may not be present if, notwithstanding such
representations, the Investor has in mind merely acquiring the Common Stock for
a fixed or determinable period in the future, or for a market rise, or for sale
if the market does not rise. The Investor has no such intention.
3.3 Receipt of Information. The Investor believes he has received all
the information he considers necessary or appropriate for deciding whether to
purchase the Common Stock. The Investor further represents that he has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Common Stock and the business,
properties, prospects and financial condition of the Company and to obtain
additional information (to the extent the Company possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to such Investor or to which such Investor
had access. The foregoing, however, does not limit or modify the representations
and warranties of the Company in Section 2 of this Agreement or the right of the
Investors to rely thereon.
3.4 Investment Experience. The Investor represents that he is
experienced in evaluating and investing in securities of companies in the
development stage and acknowledges that he is able to fend for himself, can bear
the economic risk of his investment, and has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the investment in the Common Stock.
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3.5 Accredited Investor. The Investor is an "Accredited Investor" as
such term is defined in Regulation D of the Securities Act.
3.6 Restricted Securities. The Investor understands that the Common
Stock may not be sold, transferred or otherwise disposed of without registration
under the Securities Act or an exemption therefrom, and that in the absence of
an effective registration statement covering the Common Stock or an available
exemption from registration under the Securities Act, the Common Stock must be
held indefinitely. In particular, the Investor is aware that the Common Stock
may not be sold pursuant to Rule 144 promulgated under the Securities Act unless
all of the conditions of that Rule are met.
3.7 Legends. To the extent applicable, each certificate or other
document evidencing any of the Common Stock issued pursuant to this Agreement
shall be endorsed with the legends set forth below, and the Investor covenants
that, except to the extent such restrictions are waived by the Company, the
Investor shall not transfer the shares represented by any such certificate
without complying with the restrictions on transfer described in the legends
endorsed on such certificate:
(a) The following legend under the Act:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES LAWS OF ANY STATE, AND MAY BE OFFERED AND SOLD ONLY IF
REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL
AND STATE SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION
UNDER FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED."
(b) Any legend imposed or required by applicable state securities laws.
4. Conditions of the Investor's Obligations at Closing. The obligations
of the Investor under subparagraph 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions:
4.1 Representations and Warranties. The representations and warranties
of the Company contained in Section 2 shall be true on and as of the Closing.
4.2 Performance. The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with on or before the Closing, including,
but not limited to, the items set forth below:
(a) Concurrently with the Closing hereunder, the Company shall close
the transactions contemplated under the Asset Purchase Agreement.
(b) Immediately prior to the Closing hereunder, the Company shall amend
Section 1(a) of its Preferred Shares Rights Agreement, dated as of September 13,
1996, as amended effective
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July 14, 1998 (the "Rights Agreement"), to provide that Michael Luckwell shall
not be deemed to be an Acquiring Person so long as such Person, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner of
not more than 3,425,000 Common Shares (as adjusted for any stock splits, stock
dividends, recapitalizations or the like) (including all Common Shares
beneficially owned by such Person as of the date of this Agreement (any
capitalized terms used in this subsection shall have the meaning given to such
terms in the Rights Agreement).
(c) Immediately prior to or concurrently with the Closing hereunder,
Phil Bennett shall be named the Vice President of Engineering of the Company. In
connection therewith, Mr. Bennett shall purchase an aggregate of 750,000 shares
of Common Stock from the Company.
4.3 Compliance Certificate. The President of the Company shall deliver
to the Investor at the Closing a certificate certifying that the conditions
specified in Sections 4.1, 4.2, 4.4, 4.5 and 4.7 have been fulfilled.
4.4 Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Common Stock pursuant to this Agreement shall be duly obtained and effective as
of the Closing.
4.5 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Investor's counsel, which shall have received all such counterpart original and
certified or other copies of such documents as it may reasonably request.
4.6 Opinion of Company Counsel. The Investor shall have received from
Gibson, Dunn & Crutcher LLP, counsel for the Company, an opinion, dated the date
of the Closing, in form and substance satisfactory to counsel to the Investor,
in substantially the form attached hereto as Exhibit D.
4.7 Investor's Rights Agreement. The Company and the Investor shall
have entered into the Investor's Rights Agreement in the form attached hereto as
Exhibit B.
5. Conditions of the Company's Obligations at Closing. The obligations
of the Company to the Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
5.1 Representations and Warranties. The representations and warranties
of the Investor contained in Section 3 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the Closing.
5.2 Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Common Stock pursuant to this Agreement shall be duly obtained and effective as
of the Closing.
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6. Covenants of the Company.
6.1 Grant of Stock Options. Except as set forth on Section 2.5 of the
Schedule of Exceptions, the Company will not grant any stock options under the
Plans or otherwise for a period of 12 months from the date hereof, except with
the prior written consent of the Investor.
6.2 Right to Nominate Director. For so long as the Investor holds more
than 15% of the outstanding shares of Common Stock, the Investor shall have the
right, but not the obligation, to designate himself to be nominated to be a
member of the Company's Board of Directors. The Company and the Company's Board
of Directors shall use its best efforts to take all required steps to effect the
nomination of the Investor to the Company's Board of Directors, including, but
not limited to, amendment of the Company's Certificate of Incorporation and
Bylaws (if such amendments would be required by the terms thereof to effect such
nomination).
6.3 Consulting Services. In the event that the Investor performs
consulting services for the Company, the Investor and the Company shall enter
into the Company's standard form of Consulting Agreement, which Consulting
Agreement shall set forth the terms and conditions of the Investor's service as
a consultant to the Company, including, but not limited to, the Investor's
salary and the number of required hours of service per month.
6.4 Expenses.
The Company shall reimburse the Investor for the reasonable fees and
disbursements of the Investor's counsel, Pillsbury Madison & Sutro LLP, incurred
by such counsel after November 30, 1998 in connection with the transactions
contemplated hereby, within five (5) business days of receipt from the Investor
of a written request for such reimbursement.
7. Miscellaneous.
7.1 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.
7.2 Survival of Representations, Warranties and Covenants. The
warranties, representations and covenants of the Company and the Investor
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing.
7.3 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
permitted transferees, if any, of any shares of Common Stock sold hereunder).
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
7.4 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware.
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7.5 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.
7.6 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.7 Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement the prevailing party shall be
entitled to reasonable attorneys' fees, costs and disbursements in addition to
any other relief to which such party may be entitled.
7.8 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Investor.
7.9 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
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7.10 California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH
SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ACCOM, INC., a Delaware corporation
By /S/ JUNAID SHEIKH
--------------------------------
Its Chief Executive Officer
-------------------------------
INVESTOR
/S/ MICHAEL LUCKWELL
------------------------------------
Michael Luckwell
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INVESTOR'S RIGHTS AGREEMENT
This Investor's Rights Agreement (this "Agreement") is made and entered
into as of December 10, 1998 by and among Accom, Inc., a Delaware corporation
(the "Company"), and Michael Luckwell (the "Investor").
RECITALS
A. The Investor has agreed to acquire from the Company, and the Company
has agreed to issue to the Investor, 2,500,000 shares of the Company's Common
Stock (the "New Shares") on the terms and conditions set forth in the Stock
Purchase Agreement dated as the date hereof by and between the Company and the
Investor (the "Stock Purchase Agreement").
B. As a condition to the issuance of the New Shares the Investor, the
Company has 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 Stock
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.
"Stock Purchase Closing" means the Closing as defined in the
Stock Purchase Agreement.
"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 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.
"Investor Shares" means the New Shares plus all shares of
Common Stock of the Company owned by the Investor on the date hereof.
"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 the Investor, any
descendant, Affiliate or associate (as such term is defined in Rule 405 of the
Securities Act) of the 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.
"Total Voting Power" at any time means the total combined
voting power in the general election of directors of all the Voting Securities
then outstanding.
"Transfer" means any sale, transfer, pledge, encumbrance or
other disposition.
"Voting Securities" means any shares of any class of capital
stock of the Company which are then entitled to vote generally in the election
of directors.
1.2 Acquisition of Additional Shares.
(a) The Investor covenants and agrees with the Company that,
for so long as Junaid Sheikh is the Chief Executive Officer of the Company, the
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 Investor Shares.
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(b) If at any time, as the result of any transaction or
circumstances, the Investor and its Affiliates shall acquire Beneficial
Ownership of any Company Securities other than the Investor Shares,
inadvertently or otherwise, in violation of this Agreement, then the Investor
shall promptly take such action as may be necessary or appropriate to divest
such Beneficial Ownership of Company Securities.
1.3. Further Restrictions on Conduct. The Investor covenants and agrees
with the Company that, for so long as Junaid Sheikh is the Chief Executive
Officer of the Company, neither it nor any of its Affiliates shall:
(a) initiate, commence or propose, directly or indirectly, any
"solicitation" of "proxies" to vote, or seek to influence any Person with
respect to the voting of, any Company Securities, in connection with a
"solicitation" or "election contest" (as such terms are defined or used in
Regulation 14A under the Exchange Act) with respect to the election or removal
of the members of the Board. Notwithstanding the foregoing, or any other
provision of this Agreement, nothing in this Agreement shall prevent the
Investor from voting the Investor Shares in connection with any matter
(including the election or removal of members of the Board) however the Investor
decides to vote such Investor Shares;
(b) other than a transaction permitted by Section 1.4(b)(iii)
hereof, solicit, offer, seek or propose to acquire shares of Company Securities
in excess of the number of shares permitted by this Agreement, whether directly
or indirectly through a tender offer, proxy or consent solicitation, exchange
offer, merger proposal or otherwise; or
(c) become a member of a "group" within the meaning of Section
13(d)(3) of the Exchange Act with any person other than the Investor and its
Affiliates.
1.4 Restrictions on Transfer. The Investor covenants and agrees with
the Company that:
(a) until the first anniversary of the date of this Agreement,
the Investor will not Transfer any of the Investor Shares to any Person other
than a Permitted Transferee 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 2.5 hereof, with an underwriter or underwriters and
pursuant to procedures reasonably acceptable to the Company, intended to achieve
a broad public distribution of the Investor 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 Investor Shares so
transferred by the Investor 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.
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(b) after the first anniversary of the date of this Agreement,
the Investor will not Transfer any Investor Shares 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 Investor Shares covered thereby;
(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 Investor Shares so
transferred by the Investor 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
Investor Shares in a transaction involving the opportunity for all holders of
Company Securities (including the 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 the Investor;
or
(iv) a Transfer by the Investor to a Permitted
Transferee.
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 Investor 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 other 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.
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(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.
(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
the first anniversary of the date hereof receive a written request from any of
the Holders 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 then outstanding; 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 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 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 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
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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 on a pro rata basis according to the number of
Registrable Securities then outstanding held by each Holder requesting
registration (including the initiating Holders). If any such exclusion causes
less than 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) such registrations pursuant to this Section
2.2.
(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 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 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.
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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
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
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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
Investor 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
the Investor, 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 the Investor's Registrable Securities 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 by the
Holders;
(b) if the Company has already effected two registrations
pursuant to this Section 2.4;
(c) if the Investor proposes 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 the Investor 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
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ninety (90) days after receipt of the request of the Investor; 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 five (5) 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.
(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
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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;
(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
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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 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.
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.
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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
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
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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 subsection 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
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
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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.
(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 such selling 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.
(f) Survival. The obligations of the Company and Holders under
this Section 2.7 shall survive until the first anniversary of the completion of
any offering of Registrable Securities in a registration statement, regardless
of the expiration of any statutes of limitation or extensions of such statutes.
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 Section
2.2 or 2.3 if, in the opinion of counsel to the Company, 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.
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2.9 Transfer of Registration Rights. The registration rights may only
be transferred to a Holder reasonably acceptable to the Company that acquires
all of the Investor's Registrable Securities or to any party acquiring all or
substantially all of the stock or assets of a Holder.
2.10 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 Buyer: 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 Investor: Michael Luckwell
26 Catherine Place
London SW1E 6HF
Fax: 011-44-171-828-1390
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With copies to: Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, CA 94304
Attn: Katherine A. Martin
Fax: 650-233-4545
3.3 Assignment. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof nor any of the
documents executed in connection herewith may be assigned by any party without
the consent of the other parties provided, however, that any party may freely
assign this Agreement to any 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 each party. 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.
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3.9 Entire Agreement. This Agreement contains the entire understanding
of the parties, supersedes all prior agreements and understandings relating to
the subject matter hereof.
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.]
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IN WITNESS WHEREOF, the parties hereto have executed this Investor
Right Agreement on the date first above written.
ACCOM, INC.
By: /S/ JUNAID SHEIKH
----------------------------------
Name: Junaid Sheikh
--------------------------------
Title: Chief Executive Officer
-------------------------------
MICHAEL LUCKWELL
By: /s/ MICHAEL LUCKWELL
---------------------------------
Name: Michael Luckwell
--------------------------------
Title:
-------------------------------
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