================================================================================
NOTE PURCHASE AGREEMENT
Among
ACCOM, INC.
AMERICAN BANKERS INSURANCE GROUP, INC.
and
THE SEVERAL OTHER PURCHASERS NAMED
IN ANNEX I HERETO
Dated as of March 12, 1999
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I THE NOTES.........................................................1
SECTION 1.01 Purchase and Sale of the Notes.......................1
SECTION 1.02 Closing Date.........................................2
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................2
SECTION 2.01 Organization, Qualifications and Corporate Power....2
SECTION 2.02 Authorization of Agreements; Etc. ...................2
SECTION 2.03 Validity.............................................3
SECTION 2.04 Authorized Capital Stock; Options, Etc. .............3
SECTION 2.05 SEC Documents; Financial Statements.................4
SECTION 2.06 Events Subsequent to December 31, 1998...............4
SECTION 2.07 Actions Pending, Etc. ...............................5
SECTION 2.08 Property and Assets..................................5
SECTION 2.09 Taxes................................................6
SECTION 2.10 Material Contracts and Commitments...................6
SECTION 2.11 Software.............................................7
SECTION 2.12 Intangible Rights....................................7
SECTION 2.13 Governmental Approvals...............................8
SECTION 2.14 Condition of Assets..................................8
SECTION 2.15 Offering of Notes....................................8
SECTION 2.16 Certain Transactions. ...............................8
SECTION 2.17 Compliance With Laws, Etc. ..........................8
SECTION 2.18 Employee Benefit Plans...............................9
SECTION 2.19 Insurance...........................................10
SECTION 2.20 Absence of Certain Business Practices...............10
SECTION 2.21 Disclosure..........................................11
SECTION 2.22 Brokers' or Finders' Fees...........................11
SECTION 2.23 Environmental Matters...............................11
SECTION 2.24 Regulations G and X.................................12
Page
----
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS..............12
SECTION 3.01 Experience..........................................12
SECTION 3.02 Economic Risk.......................................12
SECTION 3.03 Investment..........................................13
SECTION 3.04 Accredited Investor; Residency .....................13
SECTION 3.05 Reliance on Exemptions..............................13
SECTION 3.06 Governmental Review.................................13
SECTION 3.07 Execution, Delivery and Performance.................13
SECTION 3.08 Rule 144............................................14
SECTION 3.09 Information. .......................................14
SECTION 3.10 Brokers' or Finders' Fees...........................14
ARTICLE IV. CONDITIONS TO THE OBLIGATIONS OF THE PARTIES...................15
SECTION 4.01 Conditions to the Obligations of the Purchasers with
respect to the Closing..............................15
SECTION 4.02 Conditions to the Obligations of the Company with
respect to the Closing..............................17
ARTICLE V. COVENANTS.......................................................18
SECTION 5.01 Certain Covenants of the Company....................18
SECTION 5.02 Financial Statements, Reports, Etc. ................18
SECTION 5.03 Board Representation; Rights to Attend Meetings.....20
ARTICLE VI MISCELLANEOUS............................................21
SECTION 6.01 Expenses............................................21
SECTION 6.02 Survival of Agreements, Etc. .......................21
SECTION 6.03 Brokerage...........................................21
SECTION 6.04 Parties in Interest.................................21
SECTION 6.05 Notices.............................................21
SECTION 6.06 Knowledge...........................................22
SECTION 6.07 Assignability.......................................22
SECTION 6.08 Law Governing.......................................22
SECTION 6.09 Mediation...........................................22
SECTION 6.10 Wavier of Jury Trial................................22
SECTION 6.11 Entire Agreement; Amendments; Waivers...............23
SECTION 6.12 Counterparts........................................23
iii
TESTIMONIUM................................................................24
INDEX TO EXHIBITS
Exhibit Description
------- -----------
EXHIBIT A Form of Senior Subordinated Convertible Note
EXHIBIT B Form of Registration Rights Agreement
EXHIBIT C Form of Subordination and Intercreditor Agreement
INDEX TO ANNEXES
Annex Description
----- -----------
I The Purchasers, the Notes and the Conversion Shares
INDEX TO SCHEDULES
Schedule Description
-------- -----------
2.01(b) Joint Ventures, Etc.
2.05 SEC Documents
2.06(a) Events Subsequent to December 31, 1998
2.10 Material Contracts and Commitments
2.11 Software
2.14 Condition of Assets
2.16 Certain Transactions
2.19 Insurance
2.22 Brokers (Company)
3.10 Brokers (Purchasers)
iv
NOTE PURCHASE AGREEMENT, dated as of March 12, 1999 among ACCOM, INC.,
a Delaware corporation (the "Company"), American Banking Insurance Group, Inc.
("American Bankers") and the several other purchasers named in Annex I hereto
(American Bankers and such other purchasers being sometimes referred to herein
individually as a "Purchaser" and collectively as the "Purchasers").
WHEREAS, the Company is engaged in designing, manufacturing, selling
and supporting systems and workstations used for digital video editing, image
manipulation, effects creation and image storage; and
WHEREAS, the Company wishes to sell to the Purchasers, on the Closing
Date (as hereinafter defined), an aggregate $3,500,000 principal amount of 6%
Senior Subordinated Convertible Notes Due 2004 of the Company, convertible into
shares of the Common Stock, $.001 par value (the "Common Stock") of the Company,
on the terms and conditions contained herein; and
WHEREAS, the Purchasers, severally, wish to purchase said notes, on the
terms and subject to the conditions hereinafter set forth;
WHEREAS as a material inducement to the Purchasers to enter into this
Agreement and to consummate the transactions contemplated hereby, the Company
and the other parties thereto desire to execute and deliver the Investor Rights
Agreement, dated as of the Closing Date, among the Company and the Purchasers,
substantially in the form annexed as Exhibit B hereto (the "Registration Rights
Agreement"), in order to include the Common Stock issuable to the Purchasers
upon conversion of the Notes as "Registrable Securities" thereunder;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereby agree as follows:
I.
THE NOTES
SECTION 1.01 Purchase and Sale of the Notes. (a) Subject to the terms
and conditions set forth herein, the Company shall execute, sell and deliver to
each Purchaser, and each Purchaser, severally and not jointly, shall purchase
from the Company on the Closing Date (as hereinafter defined), a 6% Subordinated
Note Due 2004 of the Company, dated the Closing Date, substantially in the form
of Exhibit A hereto (such Notes, and any note or notes issued in exchange or
substitution therefor, being hereinafter called the "Notes") in the principal
amount set forth opposite the name of such Purchaser on Annex I hereto under the
heading "Principal Amount".
(b) As payment in full for the Notes being purchased by it hereunder,
and against delivery thereof as aforesaid, on the Closing Date, each Purchaser
shall pay to the Company, by wire transfer of immediately available funds to an
account designated by the Company 100% of the principal amount of such Note.
SECTION 1.02 Closing Date. The closing of the sale and purchase of the
Notes to the Purchasers shall take place at the offices of Reboul, MacMurray,
Xxxxxx, Xxxxxxx & Kristol, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10
a.m., New York time, on March 12, 1999, or at such other date and time as may be
mutually agreed upon between the Purchasers and the Company (such date and time
of closing being herein called the "Closing Date").
II.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to each Purchaser as follows:
SECTION 2.01 Organization, Qualifications and Corporate Power. (a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and is duly licensed or qualified to do
business as a foreign corporation and is in good standing in each other
jurisdiction in which it owns or leases any real property or in which the nature
of business transacted by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not have a
Material Adverse Effect. The Company has the power and authority (i) to own and
hold its properties and to carry on its business as currently conducted, (ii) to
execute, deliver and perform this Agreement, (iii) to execute, deliver and
perform the Registration Rights Agreement, (iii) to issue, sell and deliver the
Notes and (iv) to issue and deliver the shares (the "Conversion Shares") of
Common Stock issuable upon conversion of the Notes.
(b) Except as set forth on Schedule 2.01(b), the Company (i) does not
own of record or beneficially, directly or indirectly, any outstanding capital
stock or securities convertible into capital stock or other equity securities of
any other corporation or limited liability company and (ii) is not a partner or
joint venturer in any partnership, joint venture or similar non-corporate
business enterprise.
SECTION 2.02 Authorization of Agreements; Etc. (a) Each of (i) the
execution and delivery by the Company of this Agreement, the Registration Rights
Agreement and the Notes, (ii) the performance by the Company of its obligations
hereunder and thereunder and (iii) the issuance and delivery by the Company of
the Conversion Shares issuable upon conversion of the Notes have been duly
authorized by all requisite action and will not violate any
2
provision of law, any order of any court or other agency of government, the
Certificate of Incorporation or Bylaws of the Company, or any provision of any
material indenture, agreement or other instrument to which the Company is a
party or by which it or its properties or assets is bound or affected, or
conflict with, result in a material breach of or constitute (with due notice or
lapse of time or both) a material default under any such indenture, agreement or
other instrument, or result in the creation or imposition of any material lien,
charge or encumbrance of any nature whatsoever upon any of the properties or
assets of the Company.
(b) The Conversion Shares have been duly reserved for issuance upon
conversion of the Notes, and will be validly issued and outstanding, fully paid
and nonassessable shares of Common Stock. Neither the issuance, sale and
delivery of the Notes nor the issuance and delivery of the Conversion Shares
upon conversion of the Notes is subject to any preemptive rights of stockholders
of the Company or to any right of first refusal or other similar right in favor
of any person.
SECTION 2.03 Validity. This Agreement has been duly executed and
delivered by the Company and constitutes, and each of the Notes and the
Registration Rights Agreement, when executed and delivered as contemplated by
this Agreement, will constitute, legal, valid and binding obligations of the
Company, enforceable in accordance with their respective terms.
SECTION 2.04 Authorized Capital Stock; Options, Etc. (a) The Company is
authorized to issue 2,000,000 shares of Preferred Stock, none of which are
outstanding and 20,233,497 shares of Common Stock of which 10,125,164 shares of
Common Stock are issued and outstanding, 1,000,000 shares of Common Stock are
reserved for issuance upon exercise of the Warrants issued on December 10, 1998
(the "Warrants") and 1,000,000 shares of Common Stock are reserved for issuance
upon the exercise of options (the "Options") currently outstanding or to be
awarded at the discretion of the Company's Board of Directors pursuant to the
Company's stock incentive plans. The shares of capital stock of the Company are
not subject to, nor were they issued in violation of, any preemptive rights of
the stockholders of the Company or to any right of first refusal or other
similar right in favor of any person.
(b) Except for the Warrants and the Options, and as contemplated hereby
(i) no subscription, warrant, option, convertible security or other right
(contingent or other) to purchase or acquire any equity securities of the
Company is authorized or outstanding, (ii) there is not any commitment of the
Company to issue any warrant, option, convertible security or other such rights
or to distribute to holders of any class of its equity securities in respect
thereof, any evidences of indebtedness or assets, and (iii) the Company has no
obligation (contingent or other) to purchase, redeem or otherwise acquire any of
its equity securities or any interest therein, to declare, make or pay any
dividend or make any other distribution in respect thereof.
3
SECTION 2.05 SEC Documents; Financial Statements. (a) Except as set
forth in Schedule 2.05(a) hereto, the Company has timely filed all forms,
reports, statements and documents, including amendments thereto, required to be
filed by it with the Securities and Exchange Commission (the "Commission")
through the date of this Agreement (collectively, the "SEC Documents"). Each SEC
Document (i) as of its filing date, complied with the requirements of the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, as the case may be, and the rules and regulations of the Commission
thereunder, and (ii) did not at the time it was filed contain any untrue
statement of a material fact or omit to state a material fact required to be
state therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
(b) The Company has furnished to the Purchasers (i) the audited balance
sheet of the Company as of September 30, 1998, the related audited statement of
income, stockholders' equity and cash flow for the fiscal year then ended,
audited and certified without qualification by the independent certified public
accountants of the Company, (ii) the draft balance sheet of the Company as of
December 31, 1998, the related draft statement of income, stockholders' equity
and cash flow for the three-month period year then ended, and (ii) the unaudited
balance sheet of the Company as of January 31, 1999 and the related unaudited
statement of income and cash flow for the month then ended, certified by the
principal financial officer of the Company. Such financial statements have been
prepared from and are in accordance with the books and records of the Company,
have been prepared in accordance with generally accepted accounting principles
consistently applied, and fairly present the financial position of the Company
as of such respective dates and the results of its operations, and (in the case
of such audited and draft financial statements) stockholders equity and cash
flows for the respective periods then ended in accordance with generally
accepted accounting principles except for the absence of notes and, in the case
of the January 31, 1999 financial statements, subject to year-end adjustments
which consist only of normal year-end accruals and the absence of notes. Except
as reflected in such balance sheets, the Company had no material (individually
or in the aggregate) obligations or liabilities of the type required to be
disclosed on a balance sheet (including, without limitation, the footnotes
thereto) prepared in accordance with generally accepted accounting principles,
whether absolute, accrued or contingent, as of the respective dates of such
balance sheets. There has been no material adverse change in the business,
assets, properties, operations, condition (financial or other) or prospects of
the Company since December 31, 1998.
SECTION 2.06 Events Subsequent to December 31, 1998. Since December 31,
1998, except as set forth on Schedule 2.06(a) hereto or as contemplated hereby,
the Company has not (i) changed or amended its Certificate of Incorporation or
By-laws, (ii) issued any equity securities, bonds or other corporate securities,
(iii) borrowed any amount or incurred any liabilities (absolute or contingent)
that would be required to be disclosed on a balance sheet as of the date hereof
prepared in accordance with generally accepted accounting principles, except
current liabilities incurred, and liabilities under contracts entered into, in
the ordinary course of business, (iv) discharged or satisfied any lien or paid
any obligation or liability (absolute or contingent) other than current
liabilities shown on its balance sheet as of December 31,
4
1998 referred to in Section 2.05 hereof and current liabilities incurred since
that date in the ordinary course of business, (v) declared or made any dividend,
payment or distribution to stockholders or purchased or redeemed any equity or
other securities, (vi) mortgaged, pledged or subjected to lien any of its
assets, tangible or intangible, other than liens of current real property taxes
not yet due and payable (other than with respect to acquisitions of personal
property in the ordinary course of business), (vii) sold, assigned or
transferred any of its material tangible assets, (viii) acquired any material
tangible assets or properties, (ix) canceled or compromised any debts or claims,
except in the ordinary course of business, (x) sold, assigned or transferred any
Intangible Rights (as defined in Section 2.12 below) or permitted any license,
permit, or other form of authorization relating to an Intangible Right to lapse,
(xi) suffered any material losses, or waived any rights of material value,
whether or not in the ordinary course of business, (xii) received notification
of cancellation, or canceled or waived any rights which, individually or in the
aggregate, are material with respect to any currently existing agreement,
contract, right or understanding, (xiii) made any changes in officer
compensation or (xiv) entered into any transaction except in the ordinary course
of business.
SECTION 2.07 Actions Pending, Etc. (a) Except as set forth in the SEC
Documents, there is no action, suit or proceeding pending or, to the knowledge
of the Company, threatened against or affecting the Company, or any of its
properties or rights, before any court or by or before any governmental body or
arbitration board or tribunal, nor is there any judgment, decree, injunction or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator against the Company, nor to the knowledge of the Company, does
there exist any basis for any action, suit, investigation or proceeding against
the Company which, if adversely determined, could reasonably be expected to have
a material adverse effect on the business, assets, properties, operating
condition (financial or otherwise) of the Company (a "Material Adverse Effect").
The foregoing includes, without limiting its generality, actions pending against
the Company or, to the knowledge of the Company, against any employee or
prospective employee (or any reasonable basis for any of the foregoing known to
the Company) involving his or her prior employment or use, in connection with
the Company's business, of any information or techniques which might be alleged
to be proprietary to his or her former employer(s). To the knowledge of the
Company, no labor organizational efforts are currently being made with respect
to any of its employees.
(b) There are no actions, suits, proceedings or claims pending before
or by any court, arbitrator, regulatory authority or government agency against
or affecting the Company that might enjoin the transactions contemplated by this
Agreement.
SECTION 2.08 Property and Assets. The Company owns or has the right to
use pursuant to a valid lease or other agreement, all real and personal
properties and assets currently used by the Company or necessary to conduct its
business as heretofore conducted. Each such lease or agreement to which the
Company is a party and under which it is a lessee of any property, is a valid
and subsisting agreement without any material default of the Company thereunder
and, to the knowledge of the Company, without any material default thereunder of
any
5
other party thereto. The possession by the Company of such property has not been
disturbed nor has any claim been asserted in writing against the Company adverse
to its rights in such leasehold interests.
SECTION 2.09 Taxes. The Company has duly filed or caused to be filed
(or obtained valid, currently effective extensions for filing) all Federal,
state, local and foreign income, franchise, excise, payroll, sales and use,
property and withholding tax returns, reports, estimates and information and
other statements or returns (collectively "Tax Returns") required to be filed by
or on behalf of it pursuant to any applicable federal, state, local or foreign
tax laws for all years and periods for which such Tax Returns have become due.
All such Tax Returns were true, correct and complete in all material respects as
filed and correctly reflect the Federal, state, local and foreign income,
franchise, excise, payroll, sales and use, property, withholding and other
taxes, duties, imposts and governmental charges (and charges in lieu of any
thereof), together with interest and penalties thereon (collectively "Taxes"),
required to be paid or collected by (or allocable to) the Company. The Company
(i) has paid or caused to be paid to the appropriate taxing authorities all
Taxes owed by it for all years and periods through the date hereof and (ii) has
properly and fully accrued on its unaudited financial statements referred to in
Section 2.05 above all Taxes with respect to the Company that are not yet due
for all periods up to and including January 31, 1999 except, in each case, any
taxes the payment of which is being contested in good faith by appropriate
proceedings by the Company and in respect of which adequate reserves are
reflected on the financial statements of the Company. There is no pending or
threatened audit, dispute or claim concerning any Tax Return or Tax liability of
the Company as to which the Company either (i) has been notified by any tax
authority or (ii) otherwise has reason to know of.
SECTION 2.10 Material Contracts and Commitments. Except as disclosed in
Schedule 2.10, all material provisions of all material contracts and commitments
(including, without limitation, mortgages, indentures, loan agreements, customer
contracts and supplier contracts) to which the Company is a party, are, to the
knowledge of the Company, valid and enforceable obligations of the Company. The
Company (i) is not in default in any material respect in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in such contract or commitment and (ii) has not been notified in
writing of any claim that any such contract is not valid and enforceable in
accordance with its terms for the periods stated therein or that there is under
any such contract any existing default or event of default or event which with
notice or lapse of time or both would constitute such a default. For the
purposes of this Section 2.10, a contract or commitment of the Company shall not
be deemed material unless it is either (i) an SEC Document or (ii) any other
contract or commitment of the Company that (A) is a contract or group of related
contracts which exceeds $100,000 in amount on an annual basis, (B) contains
warranties by the Company materially in excess of those customary in its
business or (C) cannot be performed in the normal course within one year after
the Closing Date or cannot be canceled within such period by the Company or its
assignee, without breach or greater than nominal penalty. Set forth on Schedule
2.10 is a list of each material contract or commitment of the Company that is
not an SEC Document. True and complete
6
copies or descriptions of each contract or commitment listed on said Schedule
2.10 have been made available to the Purchasers and their counsel.
SECTION 2.11 Software. (a) Except as set forth on Schedule 2.11, the
Company (i) holds valid licenses (the "Software Licenses") to all copies of
material operating and applications computer software programs and databases
used by the Company in the conduct of the Company's business (collectively, the
"Software"), other than any portion thereof (collectively, the "Proprietary
Software") that was developed by or under contract with the Company and (ii)
either owns outright, or has a perpetual, royalty-free license to, the
Proprietary Software. The Company has not sold, licensed, leased or otherwise
transferred or granted any interest or rights to any Proprietary Software other
than in connection with the sale of the Company's product and services. The
Company has not received any written notice that the use of its Proprietary
Software infringes upon or violates any patent, copyright, trade secret or other
proprietary right of any other person. The Company has taken all steps
reasonably necessary to protect its right, title and interest in and to the
Software.
(b) Upon consummation of the transactions contemplated by this
Agreement, the Company will continue to own all the Software owned by it, free
and clear of all claims, liens, encumbrances, obligations and liabilities, other
than any such liabilities disclosed in the SEC Documents, and, with respect to
all agreements for the lease or license of Software which require consents or
other actions as a result of the consummation of the transactions contemplated
by this Agreement in order for the Company to continue to use and operate such
Software after the Closing Date, the Company will have obtained such consents or
taken such other actions so required.
(c) Any programs, modifications, enhancements or other inventions,
improvements, discoveries, methods or works of authorship included in the
Software that were created by employees of the Company were made in the regular
course of such employees' employment with the Company using the Company's
facilities and resources and, as such, constitute "works made for hire".
SECTION 2.12 Intangible Rights. The Company owns or has the right to
use pursuant to a valid license or other agreement all patents, trademarks,
trade names, service marks, processes, copyrights, technology, knowhow and other
proprietary rights (other than Software) owned by the Company (collectively,
with all unexpired registrations and pending applications for the registration
or renewal thereof and all licenses (other than Software Licenses) and other
agreements to which the Company is a party which relate to such intangible
rights of third parties which the Company is authorized to use, "Intangible
Rights") used by it or necessary to provide, sell and produce the products and
services provided and sold by it, and to conduct its business as heretofore
conducted. The Company is in compliance in all material respects with its
7
contractual obligations relating to the protection of such of the Intangible
Rights used by it pursuant to licenses or other contracts and the consummation
of the transactions contemplated hereby will not alter or impair any such
Intangible Rights. To the knowledge of the Company, all such Intangible Rights
are valid and enforceable and the Company has not received notice that any
claims are currently being asserted with respect to the use by the Company of
any of the Intangible Rights for patent, copyright or trademark infringement. To
the knowledge of the Company, no person is infringing on or violating the
Intangible Rights used by the Company.
SECTION 2.13 Governmental Approvals. Other than filings required in
connection with federal and state securities laws all of which, to the extent
required to be made on or prior to the Closing Date, have been made, subject to
the accuracy of the representations and warranties of the Purchasers set forth
in Article III hereof, no registration or filing with, or consent or approval
of, or other action by, any Federal, state or other governmental agency or
instrumentality is or will be necessary for (i) the valid execution, delivery
and performance of this Agreement, the Registration Rights Agreement or the
Notes by the Company, (ii) the issuance, sale and delivery by the Company of the
Notes hereunder, or (iii) the conduct of the business of the Company after the
Closing Date in substantially the manner as currently conducted and as proposed
to be conducted after the Closing Date.
SECTION 2.14 Condition of Assets. Except as set forth on Schedule 2.14,
all material tangible personal property, fixtures and equipment comprising the
assets of the Company are in good state of repair (ordinary wear and tear
excepted) and operating condition and are sufficient and adequate to conduct the
business of the Company on the date hereof and as proposed to be conducted after
the Closing Date.
SECTION 2.15 Offering of Notes. Neither the Company nor, to the
knowledge of the Company, any person authorized by the Company, as agent,
broker, dealer or otherwise in connection with the offering or sale of the Notes
has taken or will take any action (including without limitation any offer,
issuance or sale of any security under circumstances which would require the
integration of such security with the Notes under the Securities Act of 1933, as
amended (the "Securities Act") or the rules and regulations of the Commission
thereunder) which would subject the offering, issuance or sale of the Notes to
the registration provisions of the Securities Act, assuming the accuracy of the
representations and warranties of the Purchasers contained in Article III
hereof.
SECTION 2.16 Certain Transactions. Except as set forth on Schedule 2.16
and in the SEC Documents, there are no existing material arrangements or
proposed material transactions between the Company and (i) any officer, director
or stockholder of the Company or any member of the immediate family of any of
the foregoing persons (such officers, directors, stockholders and family members
being hereinafter individually referred to as a "Related Party"), or (ii) any
business (corporate or otherwise) which a Related Party owns, directly or
indirectly, or in which a Related Party has an ownership interest.
8
SECTION 2.17 Compliance With Laws, Etc. (a) The business and activities
of the Company have been and are being conducted in compliance with all
provisions of all applicable Federal, state and local statutes, ordinances,
rules and regulations, except where noncompliance would not have a material
adverse effect on the business, assets, properties, operating condition
(financial or otherwise) or prospects of the Company (a "Material Adverse
Effect"). The Company is not in violation of or in default under (i) any order,
judgment or decree of any court, arbitration panel or other tribunal or (ii) any
administrative order, rulemaking, procedure, policy or other published
declaration of any Federal, state or local governmental agency or other
authority, except where such violation or default would not have a Material
Adverse Effect.
(b) The Company holds all governmental licenses, permits, franchises
and other governmental authorizations necessary to the ownership of its
properties or the conduct of its business as currently conducted, except where
the failure to hold such licenses, permits, franchises or other authorizations
would not have a Material Adverse Effect, and all such licenses, permits,
franchises and other governmental authorizations will remain in full force and
effect immediately following the Closing Date, and will not in any way be
affected by, or terminate or lapse by reason of, the consummation of the
transactions contemplated hereby.
SECTION 2.18 Employee Benefit Plans. (a) The Company has complied and
currently is in compliance in all material respects, both as to form and
operation, with the applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the Internal Revenue Code of
1986, as amended (the "Code"), with respect to each "employee benefit plan" as
defined under Section 3(3) of ERISA (a "Plan") which the Company (i) has ever
adopted, maintained, established or to which any of the same has been required
to contribute to or has ever contributed or (ii) currently maintains or to which
any of the same currently contributes or is required to contribute or (iii)
currently participates in or is required to participate in.
(b) The Company has never maintained, adopted or established,
contributed or been required to contribute to, or otherwise participated in or
been required to participate in, a "multiemployer plan" (as defined in Section
3(37) of ERISA). No amount is due or owing from the Company on account of a
"multiemployer plan" (as defined in Section 3(37) of ERISA) or on account of any
withdrawal therefrom.
(c) Notwithstanding anything else set forth herein, other than routine
contributions to Plans and routine claims for benefits and liability for
premiums due to the Pension Benefit Guaranty Corporation, the Company has not
incurred any liability with respect to a Plan that is currently due and owing
and has not yet been satisfied, including without limitation under ERISA
(including without limitation Title I or Title IV thereof), the Code or other
applicable law, and, to the knowledge of the Company, no event has occurred,
and, there exists no condition or set of circumstances (other than the
contributions to, and accrual of benefits under,
9
the normal terms of the Plans), which could result in the imposition of any
liability of the Company with respect to a Plan.
(d) Except (i) as required by applicable law, (ii) as provided in any
insurance policy referred to in Section 2.19 hereof or (iii) as contemplated by
this Agreement, the Company has not committed itself, orally or in writing, (x)
to provide or cause to be provided to any person any payments or provision of
any "welfare" or "pension" benefits (as defined in Sections 3(1) and 3(2) of
ERISA) in addition to, or in lieu of, those payments or benefits set forth under
any Plan, (y) to continue the payment of, or accelerate the payment of, benefits
under any Plan, except as expressly set forth thereunder, or (z) to provide or
cause to be provided any severance or other post-employment benefit, salary
continuation, termination, disability, death, retirement, health or medical
benefit to any person (including without limitation any former or current
employee) except as set forth under any Plan.
(e) Notwithstanding any other provisions to the contrary set forth
herein, the Purchasers shall not assume any liability that the Company may have
incurred or may incur which arises out of, is a result of, or is in any way
related to, any Plan.
SECTION 2.19 Insurance. All policies of fire, liability, workers'
compensation, and other forms of insurance providing insurance coverage to or
for the Company for events or occurrences arising or taking place in the case of
occurrence type insurance, and for claims made and/or suits commenced in the
case of claims-made type insurance are in full force and effect and provide
insurance, including without limitation liability insurance, in such amounts and
against such risks as is customary for companies engaged in similar businesses
to the Company to protect the employees, properties, assets, businesses and
operations of the Company. Except as set forth in Schedule 2.19, all premiums
with respect to such policies covering all periods up to and including the date
as of which this representation is being made have been paid, and no notice of
cancellation or termination has been received with respect to any such policy.
All such policies will remain in full force and effect immediately following the
Closing Date, and will not in any way be affected by, or terminate or lapse by
reason of, the consummation of the transactions contemplated hereby.
SECTION 2.20 Absence of Certain Business Practices. Neither the Company
nor, to the knowledge of the Company, any officer, director, employee or agent
thereof, nor any other person or entity acting on behalf of the Company, acting
alone or together, has (i) received, directly or indirectly, any rebates,
payments, commissions, promotional allowances or any other economic benefits,
regardless of their nature or type, from any customer, supplier, governmental
employee or other person or entity with whom the Company has done business
directly or indirectly, or (ii) directly or indirectly, given or agreed to give
any gift or similar benefit to any customer, supplier, governmental employee or
other person or entity who is or may be in a position to help or hinder the
business (or assist the Company in connection with any actual or proposed
transaction) which in the case of either clause (i) or clause (ii) above, (a)
would reasonably be expected to subject the Company to any damage or penalty in
any civil,
10
criminal or governmental litigation or proceeding, (b) if not given in the past,
would reasonably be expected to have had Material Adverse Effect or (c) if not
continued in the future, would reasonably be expected to have a Material Adverse
Effect.
SECTION 2.21 Disclosure. The Company has furnished to the Purchasers a
copy of the Company's confidential Financing Memorandum dated February, 1999
(the "Memorandum"). Neither this Agreement nor the Memorandum, when taken as a
whole, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the information contained herein or therein not
misleading. The projections of financial results contained in the Memorandum
were prepared accurately by the Company based upon the assumptions described
therein that the Company in good faith believed to have been reasonable at the
time they were made. The Company specifically does not make any representation
and does not give any assurances that such projected financial results will be
achieved by the Company.
SECTION 2.22 Brokers' or Finders' Fees. Except as set forth on Schedule
2.22 hereof, all negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by the Company directly with the
Purchasers, without the intervention of any person on behalf of the Company in
such a manner as to give rise to any claim by any person against the Purchasers
for a finder's fee, brokerage commission or similar payment.
SECTION 2.23 Environmental Matters. (a) For the purposes of this
Section 2.23, the following terms shall have the following meanings:
"Environmental Law" means any applicable federal, state or
local statute, law, ordinance, rule or regulation of the United States
and any other jurisdiction within the United States now effective and
any order, to which the Company is a party or is otherwise directly
bound, of the United States or other jurisdiction within the United
States now effective relating to: (i) pollution or protection of the
environment, including natural resources; (ii) manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of Hazardous Substances; or (iii) exposure of persons, including
employees, to Hazardous Substances;
"Hazardous Substances" means any substance, whether liquid,
solid or gas (i) listed, identified or designated as hazardous or toxic
under any Environmental Law, (ii) which, applying criteria specified in
any Environmental Law, is hazardous or toxic, or (iii) the use or
disposal of which is regulated under Environmental Law.
(b) The Company has obtained and been in compliance with all of the
terms and conditions of all permits, licenses and other authorizations which are
required under, and has complied, in all material respects with all other
limitations, restrictions, conditions, standards,
11
prohibitions, requirements, obligations, schedules and timetables which are
contained in, any Environmental Law.
(c) To the knowledge of the Company, the Company has not discharged,
released or emitted into the air, water, surface water, ground water, land
surface or subsurface strata or transported to or from the property of the
Company any Hazardous Substance except in compliance in all material respects
with Environmental Law and except for incidental release of Hazardous Substances
in amounts or concentrations which would not reasonably be expected to give rise
to any claims or liabilities against the Company under any Environmental Law.
(d) The Company has not received any written notification from a
governmental agency that there is any violation of any Environmental Law with
respect to the business and properties of the Company, nor has the Company
received any written notification from a governmental agency pursuant to Section
104, 106 or 107 of the Comprehensive Environmental Response Compensation and
Liability Act, as amended.
SECTION 2.24 Regulations G and X. The Company is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (as defined, from time to time, in Regulation G promulgated by the Board
of Governors of the Federal Reserve System), and no part of the proceeds from
the Note will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock in
violation of Regulations G and X.
III.
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS
Each Purchaser represents and warrants, severally and not jointly and
with respect to itself only, to the Company as follows:
SECTION 3.01 Experience. Such Purchaser has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and the risks of its investment in the Company and has the capacity to protect
its own interests.
SECTION 3.02 Economic Risk. Such Purchaser understands that the
purchase of the Notes hereunder is a speculative investment which involves a
high degree of risk of loss of such Purchaser's investment therein. Such
Purchaser is able to bear the economic risk of its investment in the Notes and
the Conversion Shares for an indefinite period of time, including the risk of a
complete loss of such Purchaser's investment in such securities. Such Purchaser
12
acknowledges that none of the Notes or the Conversion Shares have been
registered under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption from such
registration is available and that there are substantial restrictions on the
transferability of such securities under the Registration Rights Agreement.
SECTION 3.03 Investment. Such Purchaser is acquiring the Notes, and,
upon conversion thereof, will acquire the Conversion Shares, for investment for
its own account, not as a nominee or agent, and not with the view to, or for
resale in connection with, any distribution thereof. Such Purchaser understands
that the Notes to be purchased have not been, and will not be, registered under
the Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
such Purchaser's representations as expressed herein.
SECTION 3.04 Accredited Investor; Residency. Such Purchaser is an
"accredited investor" as defined in Rule 501 of Regulation D adopted by the
Commission under the Securities Act. Such Purchaser is a bona fide resident and
domiciliary (not a temporary or transient resident) of the State set forth under
such Purchaser's name set forth in Annex I hereto.
SECTION 3.05 Reliance on Exemptions. Each Purchaser understands that
the Notes are being offered and sold to the Purchasers in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and each Purchaser's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of each Purchaser set forth
herein in order to determine the availability of such exemptions and the
eligibility of each Purchaser to acquire the Securities.
SECTION 3.06 Governmental Review. Each Purchaser understands that no
United States federal or state agency or any other government or governmental
agency has passed or made any recommendation or endorsement of the Notes.
SECTION 3.07 Execution, Delivery and Performance. Such Purchaser has
full right, power and authority to execute and deliver this Agreement and the
Registration Rights Agreement and to perform such Purchaser's obligations
hereunder and thereunder. At or before the Closing Date, such Purchaser will
execute and deliver to the Company the Registration Rights Agreement, and such
Purchaser acknowledges and agrees that the Notes purchased hereunder will be
subject to the terms and provisions of the Registration Rights Agreement. This
Agreement and the Registration Rights Agreement, when so executed and delivered
by such Purchaser, will constitute valid and binding obligations of such
Purchaser, enforceable in accordance with their respective terms. No consent,
approval, authorization, order, filing, registration or qualification of or with
any court, governmental authority or third person is required to be obtained by
such Purchaser in connection with the execution and delivery of this Agreement
or
13
the Registration Rights Agreement or the performance of such Purchaser's
obligations hereunder or thereunder.
SECTION 3.08 Rule 144. Such Purchaser acknowledges that the Notes, and,
upon the conversion thereof, the Conversion Shares must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from such registration is available. Such Purchaser is aware of the provisions
of Rule 144 under the Securities Act ("Rule 144") which permit limited resale of
securities purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things, the existence of a public
market for the securities, the availability of certain current public
information about the Company, the resale occurring not less than one year after
a party has purchased and paid for the security to be sold, the sale being
effected through a "broker's transaction" or in transactions directly with a
"market maker" and the number of securities being sold during any three month
period not exceeding specified limitations.
SECTION 3.09 Information. Each Purchaser and its counsel have been
furnished all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Notes which have
been specifically requested by such Purchaser or its counsel. Each Purchaser
and its counsel have been afforded the opportunity to ask questions of the
Company and have received what such Purchasers believes to be satisfactory
answers to any such inquiries. In making the decision to purchase the Notes in
accordance with this Agreement, each Purchaser has relied solely upon
independent investigations made by it and not upon any representations made by
the Company other than those made or specifically referred to in this Agreement.
Each Purchaser represents and warrants that it has received all of the
information it considers necessary or appropriate for deciding whether to
purchase the Notes. Each Purchaser has conducted its own investigation of and
into: (i) the Company and its officers, financial condition, business and
prospects; (ii) the terms of the purchase of the Notes; and (iii) all other
matters that such Purchaser has deemed necessary or appropriate to make its
decision to purchase the Notes. Each Purchaser's decision to purchase the Notes
is based upon the public documents it has received from the Company and on the
Purchaser's own evaluation of the risks and merits of the purchase of the Notes.
The foregoing, however, does not limit or modify the representations and
warranties of the Company made or specifically referred to in this Agreement or
the right of each Purchaser to rely thereon.
SECTION 3.10 Brokers' or Finders' Fees. Except as set forth on Schedule
3.10 hereto, all negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by such Purchaser directly with the
Company, without the intervention of any person on behalf of such Purchaser in
such a manner as to give rise to any
14
claim by any person against the Company for a finder's fee, brokerage commission
or similar payment.
IV.
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
SECTION 4.01 Conditions to the Obligations of the Purchasers with
respect to the Closing. The obligation of each Purchaser to purchase and pay for
the Notes being purchased by it hereunder on the Closing Date is, at such
Purchaser's option, subject to the satisfaction, on or prior to such date, of
the following conditions:
(a) Representations and Warranties to Be True and Correct. The
representations and warranties of the Company contained in Article II
hereof shall be true and correct on and as of the Closing Date with the
same effect as though such representations and warranties had been made
on and as of such date, and, if the date of this Agreement is not the
Closing Date, the Company shall have certified to such effect to the
Purchasers in writing.
(b) Performance. The Company shall have performed and complied
with all agreements and conditions contained herein required to be
performed or complied with by it prior to or at the Closing Date, and,
if the date of this Agreement is not the Closing Date, the Company
shall have certified to such effect to the Purchasers in writing.
(c) Opinion of Counsel. The Purchasers shall have received
from Xxxxxx, Xxxx & Xxxxxxxx LLP, counsel for the Company, an opinion
dated the Closing Date, satisfactory in form and substance to the
Purchasers and their counsel.
(d) All Proceedings to Be Satisfactory. All other proceedings
to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be
satisfactory in form and substance to the Purchasers and their counsel,
and the Purchasers and their counsel shall have received all such
counterpart originals or certified or other copies of such documents as
they may reasonably request.
(e) Subordination and Intercreditor Agreement. A Subordination
and Intercreditor Agreement, among LaSalle Business Credit, Inc., the
Purchasers, Scitex Digital Video, Inc. and the Company, substantially
in the form annexed hereto as Exhibit C, shall have been executed and
delivered by the Company and the other parties thereto and shall be in
full force and effect as of the Closing Date.
15
(f) Registration Rights Agreement. The Registration Rights
Agreement shall have been executed and delivered by the Company and the
other parties thereto named in the Annexes thereto, and shall be in
full force and effect as of the Closing Date.
(g) Supporting Documents. On or prior to the Closing Date, the
Purchasers and their counsel shall have received copies of the
following supporting documents:
(i) (1) a copy of the Certificate of Incorporation of
the Company, certified as of a recent date by the Secretary of
State of the State of Delaware, and (2) a certificate of said
Secretary dated as of a recent date as to the due
incorporation and good standing of the Company and listing all
documents on file with said official;
(ii) a certificate of the Secretary or an Assistant
Secretary of the Company, dated the Closing Date and
certifying (1) that attached thereto is a true and complete
copy of the Bylaws as in effect on the date of such
certification; (2) that attached thereto is a true and
complete copy of resolutions adopted by the board of directors
of the Company authorizing the execution, delivery and
performance of this Agreement and the Registration Rights
Agreement, the issuance, sale and delivery of the Notes and,
upon conversion thereof, the issuance and delivery of the
Conversion Shares and the reservation of the Conversion Shares
for issuance upon conversion of the Notes, and that all such
resolutions are still in full force and effect and are all the
resolutions adopted in connection with the transactions
contemplated by each of this Agreement, the Notes, and the
Registration Rights Agreement; (3) that the Certificate of
Incorporation of the Company has not been amended since the
date of the last amendment referred to in the certificate
delivered pursuant to clause (i)(2) above; and (4) as to the
incumbency and specimen signature of each officer of the
Company executing this Agreement, the Notes, the Registration
Rights Agreement, and any certificate or instrument furnished
pursuant hereto or thereto, a certification by another officer
of the Company as to the incumbency and signature of the
officer signing the certificate referred to in this paragraph
(ii); and
(iii) such additional supporting documents and other
information with respect to the operations and affairs of the
Company as the Purchasers or their counsel may reasonably
request.
All such documents shall be satisfactory in form and substance to the Purchasers
and their counsel.
(h) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted or threatened seeking to
restrain, prohibit, invalidate or otherwise affect
16
the consummation of the transactions contemplated hereby or which
would, if adversely decided, have a Material Adverse Effect.
(i) Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of
exemptions therefrom, required by any state for the offer and sale of
the Notes.
(j) Material Adverse Change. There shall have been no material
adverse change in the business, assets, properties, operations,
condition (financial or other) or prospects of the Company since
December 31, 1998.
(k) Consents. The Company shall have obtained all necessary
consents required to be in order to consummate the transactions
contemplated by this Agreement, the Notes and the Registration Rights
Agreement, including, without limitation, the consent of LaSalle
Business Credit, Inc.
SECTION 4.02 Conditions to the Obligations of the Company with respect
to the Closing. The obligation of the Company to issue and sell the Notes to the
Purchasers hereunder on the Closing Date is, at the Company's option, subject to
the satisfaction, on or before such date of the following conditions:
(a) Representations and Warranties to Be True and Correct. The
representations and warranties contained in Article III hereof shall be
true and correct on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of
such date.
(b) Performance. Each Purchaser shall have performed and
complied with all agreements and conditions contained herein required
to be performed or complied with by it prior to or at the Closing Date.
(c) All Proceedings to Be Satisfactory. All proceedings to be
taken by the Purchasers in connection with the transactions
contemplated hereby and all documents incident thereto shall be
satisfactory in form and substance to the Company and its counsel, and
the Company and said counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may
reasonably request.
(d) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted or threatened seeking to
restrain, prohibit, invalidate or otherwise affect the consummation of
the transactions contemplated hereby or which would, if adversely
decided, have a Material Adverse Effect.
17
(e) Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of
exemptions therefrom, required by any state for the offer and sale of
the Notes.
V.
COVENANTS
SECTION 5.01 Certain Covenants of the Company. (a) During the period
from the date of this Agreement to the Closing Date, the Company will conduct
its business and operations according to its ordinary course of business
consistent with past practice and use its best efforts (A) to preserve its
relationships with business partners, suppliers, employees and customers and (B)
to maintain the contracts, agreements, commitments or understandings with
customers that are material to its business in full force and effect in
accordance with their terms up to and following the Closing Date. Without
limiting the generality of the foregoing, except as otherwise contemplated by
this Agreement or required by law, prior to the Closing Date, without the prior
written consent of the Purchasers and to the extent such acts are within the
control of the Company, the Company will not do any of the things listed in
clauses (i) through (xiv) of Section 2.06 above.
(b) Between the date of this Agreement and the Closing Date, the
Company will afford the representatives of the Purchasers reasonable access
during normal business hours to the offices, facilities, books and records of
the Company and the opportunity to discuss the affairs of the Company with
officers and employees of the Company familiar therewith. Such activities shall
be performed, so far as is reasonably possible, in such a manner as to avoid
disruption of normal operations.
SECTION 5.02 Financial Statements, Reports, Etc. The Company shall
furnish to (i) each Purchaser, for so long as such Purchaser (or Permitted
Transferee (as such term is defined in the Registration Rights Agreement) shall
hold any outstanding Note, (ii) each subsequent holder of at least $100,000
principal amount of the Notes and (iii) each holder of at least 25% of the
issued and outstanding Conversion Shares, treating as outstanding for the
purpose of such calculation the Conversion Shares issued and issuable upon
conversion of all outstanding Notes:
(i) within 90 days after the end of each fiscal year of the Company, a
consolidated balance sheet of the Company and its subsidiaries as of the
end of such fiscal year and the related consolidated statements of income,
changes in stockholders' equity and cash flow of the Company and its
subsidiaries for the fiscal year then ended, together with supporting notes
thereto, prepared in accordance with generally accepted accounting
principles, setting forth in each case in comparative form the figures for
the previous fiscal year and accompanied by a report, without a "going
concern" or like qualification or
18
exception, or qualification as to scope of audit, by a firm of independent
public accountants of recognized standing selected by the Company and
reasonably acceptable to the Purchasers;
(ii) commencing with the month ending March 31, 1999, within 20 days after
the end of each month in each fiscal year, a consolidated balance sheet of
the Company and its subsidiaries and the related consolidated statement of
income, unaudited but certified by the principal financial officer of the
Company, such balance sheets to be as of the end of such month and such
statements of income to be for such month and for the period from the
beginning of the fiscal year to the end of such month, in each case subject
to normal year-end adjustments and setting forth in each case in
comparative form the figures for the previous year;
(iii) together with the financial statements delivered pursuant to Sections
5.02(i) and 5.02(ii) above, a statement signed by the chief financial
officer of the Company setting forth in reasonable detail (A) with respect
to the audited financial statements of the Company, the computations of
compliance with the provisions of Sections 11(k) and 11(l) of the Notes as
at the end of and for, in each case, the fiscal year to which such
financial statements relates; and (B) with respect to the unaudited monthly
financial statements of the Company to be delivered with respect to the
third, sixth, ninth and last month of each fiscal year, computations of the
ratios set forth in each such Section as at the end of and for, in each
case, the month to which such financial statements relates and the portion
of the fiscal year through the end of such month;
(iv) together with the financial statements delivered with respect to the
third, sixth, ninth and last month of each fiscal year of the Company
pursuant to Section 5.02(ii) above, a comparison with the corresponding
quarterly figures contained in the budget for the current fiscal year;
(v) within 20 days prior to the beginning of each fiscal year of the
Company (and with respect to any revision thereof, promptly after such
revision has been prepared), an operating budget for the Company and its
subsidiaries approved by the Board of Directors of the Company, including
projected quarterly income statements, cash flow statements during such
fiscal year and a projected consolidated balance sheet as of the end of
such fiscal year, setting forth in each case in comparative form the
figures for the previous year, and each quarterly financial statement
furnished pursuant to (ii) above shall reflect variances from such
operating budget, as the same may from time to time be revised;
(vi) promptly upon filing, copies of all registration statements,
prospectuses, periodic reports and other documents filed by the Company or
any of its subsidiaries with the Commission;
19
(vii) prompt notice of (x) any event of default by the Company under any
agreement with respect to material indebtedness for borrowed money or a
material purchase money obligation, and any event which, upon notice or
lapse of time or both, would constitute such an event of default which
would permit the holder of such indebtedness or obligation to accelerate
the maturity thereof, and (y) any action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or agency which, if
adversely determined, would materially impair the right of the Company to
carry on its business substantially as now or then conducted, or materially
affect the business, operations, properties, assets or financial condition
or prospects of the Company; and
(viii) promptly, from time to time, such other information regarding the
operations, business, affairs and financial condition or prospects of the
Company or any subsidiary as the Purchasers or such other holder may
reasonably request.
As used in the foregoing provisions of this Section 5.02, the term "subsidiary"
shall mean any corporation or other business entity a majority of whose
outstanding voting securities entitled to vote for the election of directors is
at the time owned by the Company and/or one or more other subsidiaries.
Any and all information provided pursuant to this Section 5.02 to the extent not
publicly available shall be deemed confidential information and shall be held by
any recipient hereunder in confidence and trust and shall not be disclosed to
third parties; and the recipient shall be subject to the fiduciary obligations
applicable to a person in possession of non-public information.
SECTION 5.03 Board Representation; Rights to Attend Meetings. (a) The
Company agrees that, so long as American Bankers shall hold at least 50% of the
issued and outstanding Conversion Shares, treating as outstanding for the
purpose of such calculation the Conversion Shares issuable upon conversion of
all outstanding Notes, at the request of American Bankers, the Company shall
nominate as a member of the slate of directors of the Company's management for
election to the Board of Directors of the Company (the "Board") one individual
designated by American Bankers (the "ABIG Designee"). Promptly after the Company
shall have received the prior written consent of the ABIG Designee to serve on
the Board, the Company shall take all action within its reasonable control
(subject to applicable law) to ensure the election of the ABIG Designee as a
director. The ABIG Designee initially will be Xxxxxx Xxxxxxxx, and any successor
representative of American Bankers shall be reasonably acceptable to the
Company. Each Purchaser that holds Conversion Shares entitled to vote thereon
agrees to appear in person or by proxy at any annual or special meeting of the
stockholders of the Company for the purpose of voting all shares of Common Stock
held by such Purchaser in favor of the ABIG Designee to the Board. The ABIG
Designee shall be entitled to receive the same cash and other incentive
compensation as the Company grants to its other outside directors, and the
Company shall reimburse the ABIG Designee for all of his or her reasonable
travel and other out-of-pocket expenses in attending meetings of the Board.
20
(b) So long as American Bankers shall hold at least 50% of the issued
and outstanding Conversion Shares, treating as outstanding for the purpose of
such calculation the Conversion Shares issued and issuable upon conversion of
all outstanding Notes the ABIG Designee (for so long as he or she is not a
member of the Board) and, at his or her own expense, one other representative of
American Bankers will have the right to attend meetings of the Board, it being
understood that the ABIG Designee and such representative shall each act as an
observer without a vote or other rights as a member of the Board (except the
right to receive sufficient notice to enable such attendance and the right to
receive all other communications, information and materials furnished, from time
to time, to members of the Board). Any and all information provided to a Board
observer to the extent not publicly available shall be deemed confidential
information and shall be held by any recipient thereof in confidence and trust
and shall not be disclosed to third parties, and the recipient shall be subject
to the fiduciary obligations applicable to a director of the Company.
Notwithstanding the foregoing, the Company reserves the right to exclude the
observers from any meeting or portion thereof, and deny the observers access to
any material, if (i) the Company believes upon advice of counsel reasonably
acceptable to American Bankers that such exclusion or denial of access is
reasonably necessary to preserve the attorney-client privilege, (ii) the
presence of an observer is reasonably likely to result in a conflict of interest
in the good faith determination of the Board, or (iii) the Board determines in
good faith that such exclusion or denial of access is reasonably necessary to
protect trade secrets, intellectual property or highly sensitive subject matter.
VI.
MISCELLANEOUS
SECTION 6.01 Expenses. (a) The Company shall pay the reasonable,
documented fees and expenses (including, without limitation, legal and due
diligence fees and expenses) incurred by the Purchasers; provided, however,
that, without the prior written approval of the Company, the aggregate maximum
amount payable to the Purchasers under this Section 6.01 shall be $25,000 for
legal fees and expenses and $10,000 for other fees and expenses.
SECTION 6.02 Survival of Agreements, Etc. All representations,
warranties, covenants and agreements made in this Agreement shall survive the
execution and delivery of this Agreement and the issuance, sale and delivery of
Notes pursuant hereto.
SECTION 6.03 Brokerage. The Company, on the one hand, and the
Purchasers, on the other hand, shall indemnify and hold harmless the other
against and in respect of any claim for brokerage or other commissions relative
to this Agreement or to the transactions contemplated hereby, based in any way
on agreements, arrangements or understandings made or claimed to have been made
by such party with any third party.
21
SECTION 6.04 Parties in Interest. All covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not.
SECTION 6.05 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be mailed by first-class
registered or certified mail, postage prepaid, or sent by recognized courier
service or by facsimile addressed as follows:
(a) if to the Company, to it at:
0000 X'Xxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Attention: President
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
(b) if to any Purchaser, to it at its address or facsimile number set
forth in Annex I hereto;
with a copy to:
Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. XxxXxxxxx, Esq.
Facsimile No.: (000) 000-0000
(c) if to any subsequent holder of Notes or Conversion Shares, to such
holder at its address appearing on the records of the Company;
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
22
SECTION 6.06 Knowledge. For the purposes of this Agreement, the term
"knowledge" shall mean, with respect to the Company, the knowledge of an officer
or director.
SECTION 6.07 Assignability. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable by any party hereto without the
prior written consent of the other parties hereto.
SECTION 6.08 Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
SECTION 6.09 Mediation. If a dispute between one or more Purchasers, on
the one hand, and the Company, on the other hand, arises out of or relates to
this Agreement, the Notes or in connection with the transactions contemplated
hereby or thereby, or the breach hereof or thereof, and if the dispute cannot be
settled through negotiation, the parties agree first to try in good faith to
settle the dispute by mediation administered by the American Arbitration
Association under its Commercial Mediation Rules before resorting to litigation.
Any such dispute shall be submitted to one mediator selected in accordance with
said rules, and such mediation shall be held in San Francisco, California. The
parties further agree that the costs of such mediation shall be shared equally
between the Purchaser or Purchasers involved, on the one hand, and the Company,
on the other hand.
SECTION 6.10 WAIVER OF JURY TRIAL. EACH OF THE PURCHASERS AND THE
COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT HE, SHE
OR IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE NOTES OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. FURTHER, THE COMPANY HEREBY CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF THE PURCHASERS OR COUNSEL TO THE PURCHASERS HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE PURCHASERS WOULD NOT, IN THE EVENT
OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION. THE COMPANY ACKNOWLEDGES THAT THE PURCHASERS HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, INTER ALIA, THE PROVISIONS OF THIS SECTION 6.10.
SECTION 6.11 Entire Agreement; Amendments; Waivers. This Agreement, the
Notes and the Registration Rights Agreement constitute the entire Agreement of
the parties with respect to the subject matter hereof and may not be modified or
amended, nor may compliance by the Company with any of the provisions of this
Agreement be waived, except by written instrument signed by the Company and the
Purchasers.
23
SECTION 6.12 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
24
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Note Purchase Agreement as of the day and year first above written.
ACCOM, INC.
By: /s/ XXXXXX XXXXXX
-----------------------------------------
Name: Xxxxxx Xxxxxx
Title: President
25
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Note Purchase Agreement as of the day and year first above written.
PURCHASER:
AMERICAN BANKERS INSURANCE GROUP, INC.
By: /s/ XXXXX XXXX
-----------------------------------------
Name: Xxxxx Xxxx
Title: Director of Investments
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Note Purchase Agreement as of the day and year first above written.
PURCHASER:
/s/ XXXX XXXXXXX
-----------------------------------------
Xxxx Xxxxxxx
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Note Purchase Agreement as of the day and year first above written.
PURCHASER:
/S/ XXXX XXXXXX
-----------------------------------------
Xxxx Xxxxxx
28
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Note Purchase Agreement as of the day and year first above written.
PURCHASER:
/s/ XXXXX XXXXXX
-----------------------------------------
Xxxxx Xxxxxx
29
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Note Purchase Agreement as of the day and year first above written.
PURCHASER:
/s/ XXXXXX XXXXXXXX
-----------------------------------------
Xxxxxx Xxxxxxxx
30
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Note Purchase Agreement as of the day and year first above written.
PURCHASER:
/s/ XXXXXX XXXXXX
-----------------------------------------
Xxxxxx Xxxxxx
31
ANNEX I
The Purchasers
The Notes and Conversion Shares
Principal Number of Purchase
Amount Conversion Price of
Name, Address and Domicile of Notes ($) Shares(2) Notes ($)
-------------------------- ------------ ------- ---------
American Bankers
Insurance Group, Inc.
00000 Xxxxx Xxxxx Xxxxx
Xxxxx, XX 00000
Florida 3,000,000 2,307,692 3,000,000
Xxxx Xxxxxx
000 Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
New Jersey 100,000 76,923 100,000
Xxxxx Xxxxxx
c/o Concorde Holdings
00 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
New York 100,000 76,923 100,000
Xxxx Xxxxxxx
000 Xxxx Xxx Xxxxxx
Xxx Xxxx, XX 00000
New York 100,000 76,923 100,000
Xxxxxx Xxxxxxxx
00 Xxxxx Xxxxx
Xxxxxxxx, XX 00000
Xxx Xxxx 100,000 76,923 100,000
Xxxxxx Xxxxxx
00 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
New Jersey 100,000 76,923 100,000
---------- --------- ----------
Total $3,500,000 2,692,307 $3,500,000
------------------
(2)Rounded to eliminate fractional shares and subject to adjustment as set forth
in the Notes
32
EXHIBIT A TO NOTE
PURCHASE AGREEMENT
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER THIS
NOTE, NOR ANY INTEREST HEREIN, MAY BE OFFERED, SOLD,
TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF UNLESS
EITHER (I) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND LAWS RELATING THERETO OR (II) THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY, STATING
THAT SUCH REGISTRATION IS NOT REQUIRED.
ACCOM, INC.
Senior Subordinated Convertible Note
Due March 12, 2004
Registered X-000 Xxx Xxxx, Xxx Xxxx
$3,000,000 March 12, 1999
ACCOM, INC., a Delaware corporation (hereinafter called the "Company"),
for value received, hereby promises to pay to American Bankers Insurance Group,
Inc. ("American Bankers"), or registered assigns, the principal sum of THREE
MILLION DOLLARS ($3,000,000), on March 12, 2004 (the "Maturity Date"), and to
pay interest (computed on the basis of a 360-day year consisting of twelve
30-day months) on the unpaid principal amount hereof from the date hereof
through the Maturity Date at the rate of 6% per annum, payable (i) quarterly in
arrears on the last day of March, June, September and December in each year
(each said day being an "Interest Payment Date"), commencing on June 30, 1999
(ii) at maturity and (iii) upon conversion of all or any portion of this Note
until the principal amount hereof shall have become due and payable, whether at
maturity or by acceleration or otherwise. If all or a
portion of (i) the unpaid principal amount hereof, (ii) any interest payable
thereon or (iii) any other amount payable hereunder or under the Purchase
Agreement (as hereinafter defined) shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), for so long as such Event of
Default (as hereinafter defined) shall continue, the unpaid principal amount
hereof, any such overdue amount and, to the extent permitted by applicable law,
any overdue interest shall bear interest at a rate per annum equal to 12%,
payable on demand.
All payments of principal and interest on this Note shall be in such
coin or currency of the United States of America as at the time of payment shall
be legal tender for payment of public and private debts, and shall be made at
the offices of the person deemed the holder hereof in accordance with Section 4
below.
For purposes of this Note, "Business Day" shall mean any day other than
a Saturday, Sunday or a legal holiday under the laws of the State of New York
and the State of California.
1. Notes. This Note, together with any Note or Notes issued upon
exchange or transfer thereof pursuant to Section 2 hereof, is one of a duly
authorized issue of Notes (herein called the "Notes") made or to be made by the
Company in the aggregate principal amount of $3,500,000, maturing on March 12,
2004 and bearing interest payable at the same rate and on the same dates as the
interest on the principal amount of this Note. This Note is issued pursuant to
and is subject to the terms and provisions of the Note Purchase Agreement dated
as of March 12, 1999 (the "Purchase Agreement"), among the Company, American
Bankers and the other Purchasers named in Annex I thereto (collectively with
American Bankers, the "Purchasers"), and the terms of this Note include those
stated in the Purchase Agreement, including, without limitation, the final
paragraph of Section 5.02 thereof, which shall be binding upon each registered
transferee of this Note as provided in Section 3.
2. Loss, Theft, Destruction or Mutilation of Note. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note, and, in the case of any such loss, theft or
destruction, upon receipt of an affidavit of loss and indemnity from the holder
hereof reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of this Note, the Company will make
and deliver, in lieu of this Note, a new Note of like tenor and unpaid principal
amount and dated as of the date to which interest has been paid on this Note.
3. Transfer, Etc. of Notes. The Company shall keep at its office or
agency maintained as provided in paragraph (a) of Section 11 a register in which
the Company shall provide for the registration of Notes and for the registration
of transfer and exchange of Notes. The holder of this Note may, at its option,
and either in person or by duly authorized attorney, surrender the same for
registration of transfer or exchange at the office or agency of the Company
maintained as provided in said paragraph (a), and, without expense to such
holder (except for
2
taxes or governmental charges imposed in connection therewith), receive in
exchange therefor a Note or Notes each in such denomination or denominations as
such holder may request, dated as of the date to which interest has been paid on
the Note or Notes so surrendered for transfer or exchange, for the same
aggregate principal amount as the then unpaid principal amount of the Note or
Notes so surrendered for transfer or exchange, and registered in the name of
such person or persons as may be designated by such holder. Every Note presented
or surrendered for registration of transfer or exchange shall be duly endorsed,
or shall be accompanied by a written instrument of transfer, satisfactory in
form to the Company, duly executed by the holder of such Note or his attorney
duly authorized in writing. Every Note so made and delivered in exchange for
this Note shall in all other respects be in the same form and have the same
terms as this Note. No transfer or exchange of any Note shall be valid unless
made in the foregoing manner at such office or agency. Upon any registration of
transfer as provided herein, the transferee shall with respect to the Note or
any portion thereof so transferred to it become subject to all of the terms and
provisions of, and obligations of a holder under, such Note (or portion) and the
transferor shall have no further rights, obligations or liabilities with respect
thereto other than any which arose prior to the date of transfer.
Notwithstanding the foregoing, the minimum principal amount of Notes that may be
transferred to any third party is $100,000.
4. Persons Deemed Owners; Holders. The Company may deem and treat the
person in whose name any Note is registered as the owner and holder of such Note
for the purpose of receiving payment of principal of and interest on such Note
and for all other purposes whatsoever, whether or not such Note shall be
overdue. With respect to any Note at any time outstanding, the term "holder", as
used herein, shall be deemed to mean the person in whose name such Note is
registered as aforesaid at such time.
5. Optional Prepayments. Subject to any restrictions then applicable to
the Company under (x) the Loan and Security Agreement, dated as of December 10,
1998, as amended up to and including the date hereof (the "Loan Agreement")
among the Company, LaSalle Business Credit, Inc., as agent for the benefit of
the lenders party thereto ("LaSalle") and such lenders and (y) the Subordination
Agreement, dated as of March 12, 1999 (the "Subordination Agreement") among the
Company, LaSalle and the Purchasers:
(a) On and at any time after the first anniversary of the
Closing Date, upon notice given as provided in Section 6, the Company
may, at its option, prepay all or any portion of the Notes at 100% of
the principal amount thereof so to be prepaid if each of the following
conditions shall have been satisfied:
(i) The Common Stock, $.001 par value ("Common
Stock"), of the Company shall, at the time such notice is
given, have been quoted on NASDAQ or listed on the New York
Stock Exchange during the twenty trading days immediately
preceding the date of such prepayment, and the price per share
during such period shall not at any time have been less than
$5.00; and
3
(ii) American Bankers and its accountants shall have
delivered a certificate (the "Prepayment Certificate"), to the
effect that conversion of the Notes held by American Bankers
into Common Stock on or prior to the proposed date of such
prepayment would not result in American Bankers or any of its
affiliates being required under generally accepted accounting
principles to account for its holdings of the Common Stock of
the Company pursuant to the Aequity method@ of accounting; and
(iii) either:
(1) the trading volume for the Common Stock
for each of the four weeks (each such week consisting of five
trading days) immediately preceding the date set for such
prepayment shall have been at least 200,000 shares; or
(2) prior to the proposed date of such
prepayment, the holders of the Notes shall have realized
aggregate net proceeds (exclusive of premium or interest on
the Notes), from their original investment in the Notes of at
least $3,500,000.
(b) On and at any time after the first anniversary of the
Closing Date, upon notice given as provided in Section 6, the Company
may, at its option, prepay all or any portion of the Notes at 130% of
the principal amount thereof so to be prepaid if the conditions set
forth in clauses (i) and (ii) of paragraph (a) above have been
satisfied.
Any prepayments of the principal of the Notes made pursuant to this Section 5
shall be made (i) in an amount equal to at least $875,000 or, if less, the
entire outstanding principal amount of the Notes, allocated in proportion to the
aggregate principal amount of all Notes so to be prepaid and (ii) together with
interest accrued thereon to the date fixed for such prepayment.
6. Notice of Prepayment, Other Notices; Satisfaction of Conditions.
(a) The Company shall give written notice of any prepayment of
this Note or any portion hereof pursuant to Section 5 not less than 30
nor more than 45 days prior to the proposed date of such prepayment.
Such notice of prepayment shall specify (i) the proposed date of such
prepayment, (ii) the principal amount of the Notes called for such
prepayment, (iii) to the extent applicable, those conditions described
in Section 5 that are required to have been satisfied as of such
proposed date of prepayment, together with a reasonably detailed
explanation as to the proposed way in which the conditions (other than
the condition described in clause (ii) of Section 5(a)) will be
satisfied and (iv) the percentage of the principal amount at which this
Note or portion hereof is to be prepaid. Such notice of prepayment and
all other notices to be given to any holder of this Note shall be given
by registered or certified mail to the person in whose name this Note
is
4
registered at its address designated on the register maintained by the
Company on the date of mailing such notice of prepayment or other
notice.
(b) Upon notice of prepayment being given as aforesaid,
American Bankers will promptly consult with its accountants in order to
make a good faith determination as to the matter described in
subparagraph (ii) of Section 5(a). If such determination is to the
effect that the condition contained in said subparagraph has been
satisfied, American Bankers shall deliver a Prepayment Certificate, no
less than five days prior to the proposed date of such prepayment. If
such determination is to the effect that the condition cannot be
satisfied as of the proposed date of such prepayment, American Bankers
shall deliver a certificate to that effect, together with such evidence
supporting such conclusion as American Bankers, in its reasonable
discretion, deems necessary.
(c) Upon notice of prepayment being given as aforesaid,
subject to satisfaction of the conditions specified in such notice, the
Company covenants and agrees that it will prepay, on the date specified
therein for such prepayment, this Note or the portion hereof, as the
case may be, so called for prepayment, at the percentage of the
principal amount thereof so called for prepayment specified in the
notice, together with interest accrued thereon to the date of such
prepayment. If on the proposed date of any prepayment pursuant to
Section 5 any condition to such prepayment shall not have been
satisfied as required thereunder (i) the Company shall neither be
permitted nor any longer be obligated to make such prepayment, and (ii)
the holder of this Note shall thereupon have the right to withdraw any
notice of conversion given at any time during the period (the
"Prepayment Period") commencing upon the delivery of the related notice
of prepayment pursuant to this Section 6 and ending on the proposed
date of prepayment specified in such notice.
7. Allocation of Prepayment. In the event of any prepayment, purchase,
redemption or retirement of less than all of the Notes which the Company is
obligated to prepay, purchase, redeem or retire on any date, the Company will
allocate the principal amount so to be prepaid, purchased, redeemed or retired
on such date to each Note so to be prepaid, purchased, redeemed or retired in
proportion, as nearly as may be, to the aggregate principal amount of all Notes
then due to be prepaid, purchased, redeemed or retired.
8. Interest After Date Fixed for Prepayment. If this Note or a portion
hereof is called for prepayment as herein provided, this Note or such portion
shall cease to bear interest on and after the date fixed for such prepayment
unless, upon presentation for the purpose, the Company shall fail to pay this
Note or such portion, as the case may be, in which event this Note or such
portion, as the case may be, and, so far as may be lawful, any overdue
installment of interest, shall bear interest on and after the date fixed for
such prepayment and until paid at the rate per annum provided herein for overdue
principal.
5
9. Surrender of Note; Notation Thereon. Upon any prepayment of a
portion of the principal amount of this Note, the holder hereof, at its option,
may require the Company to execute and deliver at the expense of the Company
(except for taxes or governmental charges imposed in connection therewith), upon
surrender of this Note, a new Note registered in the name of such person or
persons as may be designated by such holder for the principal amount of this
Note then remaining unpaid, dated as of the date to which interest has been paid
on the principal amount of this Note then remaining unpaid, or may present this
Note to the Company for notation hereon of the payment of the portion of the
principal amount of this Note so prepaid.
10. Conversion.
(a) Right to Convert. Subject to the terms and conditions of
this Section 10, the holder of this Note shall have the right, at such
holder's option at any time to convert the principal amount of this
Note, in whole or, subject as set forth below, in part, into a number
of fully paid and nonassessable whole shares of Common Stock determined
by dividing the outstanding principal amount hereof, or a portion
thereof, by the conversion price of $1.30 per share, or by the
conversion price as last adjusted and in effect at the date that this
Note is surrendered for conversion (such price, or such price as last
adjusted, being referred to herein as the "Conversion Price").
Notwithstanding the foregoing, at any time after the holders of the
Notes shall have realized aggregate net proceeds (exclusive of premium
or interest on the Notes) from their original investment in the Notes
of at least $3,500,000, the right of the holder of this Note to convert
less than the entire remaining principal amount of this Note shall
cease, and any notice of conversion delivered by the holder of this
Note in the manner described below after such time shall be deemed to
be a request to convert all, but not less than all, of the remaining
principal amount outstanding hereunder. The rights of conversion
contained in this subparagraph (a) shall be exercised by the holder of
this Note by giving written notice that such holder elects to convert
this Note pursuant to this subparagraph (a) into Common Stock and by
surrender of this Note to the Company at its principal office (or such
other office or agency of the Company as the Company may designate by
notice in writing to the holder of this Note) at any time during its
usual business hours on the date set forth in such notice, together
with a statement of the name or names (with address) in which the
certificate or certificates for shares of Common Stock shall be issued.
(b) Issuance of Certificates; Time Conversion Effected.
Promptly after the receipt of the written notice referred to in
subparagraph (a) above and surrender of this Note for the conversion of
this Note or portion thereof, or, in the case of a notice of conversion
delivered during a Prepayment Period, on the proposed date of
prepayment as provided in Section 6 (provided such notice of conversion
shall not have been withdrawn by the holder hereof pursuant to Section
6(c)), the Company shall issue and deliver, or cause to be issued and
delivered, to the holder, registered in such name or names as such
6
holder may direct, a certificate or certificates for the number of
whole shares of Common Stock issuable upon the conversion of this Note
of the portion thereof being converted. To the extent permitted by law,
such conversion shall be deemed to have been effected, and the
Conversion Price shall be determined, as of the close of business on
the date on which such written notice shall have been received by the
Company and this Note shall have been surrendered as aforesaid, and at
such time the rights of the holder of this Note shall cease with
respect thereto or to the portion thereof being converted, and the
person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder or holders of
record of the shares represented thereby. Upon notice of conversion
being given as aforesaid, the Company will pay on the date of such
conversion interest accrued on this Note or the portion hereof being
converted to the date of such conversion. If this Note or a portion
hereof is converted as herein provided, this Note or such portion shall
cease to bear interest on and after the date of conversion unless, upon
surrender of the Note for the purpose, the Company shall fail to
convert this Note or such portion, as the case may be, in which event,
this Note or such portion, as the case may be, and, so far as may be
lawful, any overdue interest, shall bear interest on and after the date
of such conversion and until paid (or in the case of principal,
converted) at the rate per annum provided herein for overdue principal.
(c) Fractional Shares; Dividends; Partial Conversion. No
fractional shares shall be issued upon conversion of this note or any
portion thereof into Common Stock and no payment or adjustment shall be
made upon any conversion on account of any cash dividends on the Common
Stock issued upon such conversion. In case of the conversion of less
than the entire principal amount outstanding of this Note, the
Corporation shall, upon such conversion, execute and deliver to the
holder thereof, at the expense of the Corporation, a new Note or Notes
for the principal amount of this Note which is not to be converted. If
any fractional interest in a share of Common Stock would, except for
the provisions of the first sentence of this subparagraph (c), be
deliverable upon any such conversion, the Corporation, in lieu of
delivering the fractional share thereof shall (i) in the case of a
partial conversion, add to the principal amount of such new Note, an
amount equal to the fractional interest not converted, multiplied by
the Conversion Price then in effect and (ii) in the case of the
conversion of the entire principal amount of this Note, shall pay to
the holder surrendering this Note for conversion an amount in cash
equal to the current fair market value of such fractional interest as
determined in good faith by the Board of Directors of the Corporation.
(d) Subdivision or Combination of Stock. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into
a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced, and
conversely, in case the outstanding shares of Common Stock of the
7
Company shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall
be proportionately increased.
(e) Stock Dividends. In case the Company shall declare a
dividend or make any other distribution upon any stock of the Company
payable in Common Stock, or in rights to subscribe for or to purchase,
or in options for the purchase of Common Stock or for any stock or
securities convertible into or exchangeable for Common Stock ("Common
Stock Equivalents"), any Common Stock or Common Stock Equivalents as
the case may be, issuable in payment of such dividend or distribution
shall be deemed to have been issued or sold without consideration, and
the Conversion Price shall be reduced as if the Company had subdivided
its outstanding shares of Common Stock into a greater number of shares,
as provided in subparagraph (d) hereof.
(f) Record Date. In case the Company shall take a record of
the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution payable in Common Stock or
Common Stock Equivalents, then such record date shall be deemed to be
the date of the issue of the shares of Common Stock or the Common Stock
Equivalents deemed to have been issued upon the declaration of such
dividend or the making of such other distribution, provided that such
shares of Common Stock or Common Stock Equivalents shall in fact have
been issued.
(g) Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization or reclassification of the capital
stock of the Company or any consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its
assets to another corporation shall be effected in such a way
(including, without limitation, by way of consolidation or merger) that
holders of Common Stock shall be entitled to receive stock, securities
or assets with respect to or in exchange for Common Stock, then, as a
condition of such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provisions (in form reasonably
satisfactory to the holder of this Note) shall be made whereby the
holder of this Note shall thereafter have the right to receive, upon
the basis and upon the terms and conditions specified herein and in
lieu of the shares of Common Stock immediately theretofore receivable
upon the conversion of this Note, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for a
number of outstanding shares of Common Stock equal to the number of
shares of such stock immediately theretofore so receivable had such
reorganization, reclassification, consolidation, merger or sale not
taken place, and in any such case appropriate provision shall be made
with respect to the rights and interests of such holder to the end that
the provisions hereof (including, without limitation, provisions for
adjustment of the Conversion Price) shall thereafter be applicable, as
nearly practicable, in relation to any shares of stock, securities or
assets thereafter deliverable upon the exercise of such conversion
rights (including, if necessary to effect the adjustments contemplated
herein, an immediate adjustment, by
8
reason of such reorganization, reclassification, consolidation, merger
or sale, of the Conversion Price to the value for the Common Stock
reflected by the terms of such reorganization, reclassification,
consolidation, merger or sale if the value so reflected is less than
the Conversion Price in effect immediately prior to such
reorganization, reclassification, consolidation, merger or sale). In
the event of a merger or consolidation of the Company as a result of
which a greater or lesser number of shares of common stock of the
surviving corporation is issuable to holders of Common Stock of the
Company outstanding immediately prior to such merger or consolidation,
the Conversion Price in effect immediately prior to such merger or
consolidation shall be adjusted in the same manner as though there were
a subdivision or combination of the outstanding shares of Common Stock
of the Company. The Company will not effect any such consolidation or
merger, or any sale of all or substantially all of its assets and
properties, unless prior to the consummation thereof the successor
corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall
assume by written instrument (in form reasonably satisfactory to the
holder of this Note), executed and mailed or delivered to the holder of
this Note at the last address of such holder appearing on the books of
the Company, the obligation to deliver to such holder such shares of
stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to receive.
(h) Notices. Upon any adjustment of the Conversion Price, then
and in each such case the Company shall give written notice thereof as
provided in Section 5, which notice shall state the Conversion Price
resulting from such adjustment, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is
based.
(i) Stock to be Reserved. The Company will at all times
reserve and keep available out of its authorized Common Stock or its
treasury shares, solely for the purpose of issue upon the conversion of
this Note as herein provided, such number of shares of Common Stock as
shall then be issuable upon the conversion of this Note. The Company
covenants that all shares of Common Stock which shall be so issued
shall be duly and validly issued and fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue
thereof and, without limiting the generality of the foregoing, the
Company covenants that it will from time to time take all such action
as may be requisite to assure that the par value per share of the
Common Stock is at all times equal to or less than the effective
Conversion Price. The Company will take all such action as may be
necessary to assure that all such shares of Common Stock may be so
issued without violation of any applicable law or regulation, or of any
requirements of any national securities exchange upon which the Common
Stock of the Company may be listed.
(j) Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of this Note shall be made without charge
to the holders thereof for any
9
issuance tax in respect thereof, provided that the Company shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name
other than that of the holder of this Note.
(k) Closing of Books. The Company will at no time close its
transfer books against the transfer of any shares of Common Stock
issued or issuable upon the conversion of this Note in any manner which
interferes with the timely conversion of this Note.
11. Covenants. The Company covenants and agrees that, so long as any
Note shall be outstanding:
(a) Maintenance of Office. The Company will maintain an office
or agency in such place in the United States of America as the Company
may designate in writing to the registered holder hereof where the
Notes may be presented for registration of transfer and exchange as
herein provided, where notices and demands to or upon the Company in
respect of the Notes may be served and where the Notes shall be
presented for payment. Until the Company otherwise notifies the holders
of Notes, said office shall be the office of the Company at 0000
X'Xxxxx Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000.
(b) Payment of Taxes. The Company will promptly pay and
discharge or cause to be paid and discharged, before the same shall
become in default, all lawful taxes and assessments imposed upon the
Company or any subsidiary or upon the income and profits of the Company
or any subsidiary, or upon any property, real, personal or mixed,
belonging to the Company or any subsidiary, or upon any part thereof by
the United States or any State thereof, as well as all lawful claims
for labor, materials and supplies, which, if unpaid, would become a
lien or charge upon such property or any part thereof, provided,
however, that neither the Company nor any subsidiary shall be required
to pay and discharge or to cause to be paid and discharged any such
tax, assessment, charge, levy or claim so long as (i) the Company or a
subsidiary shall be contesting the validity thereof in good faith or
(ii) the Company shall, in its good faith judgment, deem the validity
thereof to be questionable and the party to whom such tax, assessment,
charge, levy or claim is allegedly owed shall not have made written
demand for the payment thereof.
(c) Legal Existence. The Company will do or cause to be done
all things necessary and lawful to preserve and keep in full force and
effect its legal existence, rights and franchises and the legal
existence, rights and franchises of each of its subsidiaries.
(d) Maintenance of Property. The Company will at all times
maintain and keep, or cause to be maintained and kept, in good repair,
working order and condition all significant properties of the Company
and its subsidiaries used in the conduct of the business of the Company
and its subsidiaries, and will from time to time make or cause to
10
be made all needful and proper repairs, renewals, replacements,
betterments and improvements thereto, so that the business carried on
in connection therewith may be properly and advantageously conducted at
all times; provided, however, that nothing in this paragraph (d) shall
require (i) the making of any repair or renewal or (ii) the continuance
of the operation and maintenance of any property or (iii) the retention
of any assets if such action (or inaction) is, in the good faith
business judgment of the Company, in the best interests of the Company
and is not disadvantageous in any material respect to the holders of
the Notes.
(e) Insurance. The Company will, and will cause each of its
subsidiaries, at all times, either to (i) (x) keep adequately insured,
by financially sound and reputable insurers, all property of a
character usually insured by business enterprises engaged in the same
or a similar business similarly situated against loss or damage of the
kinds customarily insured against by such enterprises and (y) carry,
with financially sound and reputable insurers, such other insurance
(including, without limitation, liability insurance) in such amounts as
are available at reasonable expense and to the extent believed
necessary in the good faith business judgment of the Board of Directors
of the Company; or (ii) subject to the approval of said Board of
Directors, implement and maintain a self-insurance program to protect
the Company from such risks of loss as would otherwise be required to
be insured against under subclause (i) above.
(f) Keeping of Books. The Company will at all times keep, and
cause each of its subsidiaries to keep, proper books of record and
account in which proper entries will be made of its transactions in
accordance with generally accepted accounting principles.
(g) Transactions with Affiliates. Except as contemplated by
the Purchase Agreement, the Company shall not enter into, or permit any
subsidiary to enter into, any transaction with any of its or any
subsidiary's officers, directors, employees or any person related by
blood or marriage to any such person or any entity in which any such
person owns any beneficial interest, except for (i) normal employment
arrangements, benefit programs and employee incentive option programs
on reasonable terms, (ii) any transaction approved by the independent
and disinterested members of the board of directors of the Company or
otherwise permitted under applicable law, and (iii) customer
transactions in the ordinary course of business and (iv) the
transactions contemplated by the Purchase Agreement.
(h) Notice of Default. If any one or more events which
constitute, or which with notice or lapse of time or both would
constitute, an Event of Default under Section 13 of this Note shall
occur, or if the holder of any Note shall demand payment or take any
other action permitted upon the occurrence of any such Event of
Default, the Company shall, immediately after it becomes aware that any
such event has occurred or that such demand has been made or that any
such action has been taken, give notice to all
11
holders of the Notes, specifying the nature of such event or of such
demand or action, as the case may be.
(i) Payment of Principal and Interest on the Notes. The
Company will use its best efforts, subject to the provisions of
applicable credit arrangements and contractual obligations of the
Company and/or its subsidiaries and any applicable law restricting the
same, to provide funds from its subsidiaries to the Company, by
dividend, advance or otherwise, sufficient to permit payment by the
Company of the principal of and interest on the Notes in accordance
with their terms.
(j) Limitations on Fundamental Changes; Sale of Assets, Etc.
The Company shall not, nor shall it permit any subsidiary to (i)enter
into any merger, consolidation or amalgamation, or liquidate, wind up
or dissolve itself, or suffer any liquidation or dissolution (except
that any wholly-owned subsidiary may merge with or into the Company or
any other subsidiary) or (ii) convey, sell, lease, assign, transfer or
otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests),
whether now owned or hereafter acquired, except, in each case, for (x)
the sale or other disposition of inventory or other property in the
ordinary course of business, (y) the sale or other disposition of
assets not used in or necessary to the business the proceeds of which
shall not exceed $50,000 in the aggregate and (z) as otherwise
permitted under the Loan Agreement.
(k) Interest Coverage Ratio. The Company and its subsidiaries,
on a consolidated basis, shall not have, for any period of four
consecutive fiscal quarters (or, prior to the fiscal quarter ending
June 30, 2000, such smaller number of consecutive fiscal quarters
commencing with the fiscal quarter ending on June 30, 1999) (each such
period being a "Test Period" and the last day of each Test Period being
a "Test Date") ending at any time after the date hereof, a ratio of (x)
EBITDA to (y) total interest expense, in each case for such Test
Period, less than 1.5 to 1.
(l) Leverage Ratio. The Company and its subsidiaries, on a
consolidated basis, shall not have a ratio of (x) Total Funded Debt, as
of any Test Date to (y) EBITDA, for the Test Period then ended greater
than 3 to 1; provided, however, that in order to calculate such ratio
as of any Test Date occurring prior to Xxxxx 00, 0000, XXXXXX for the
Test Period then ended shall be deemed to be EBITDA for the number of
whole consecutive fiscal quarters elapsed between the date of this Note
and such Test Date multiplied (i) in the case of the June 30, 1999 Test
Date, by 4, (ii) in the cast of the September 30, 1999 Test Date, by 2
and (iii) in the case of the December 31, 1999 Test Date, by 4/3, and
provided, further however, that if the Company or any subsidiary shall
have made any acquisition during any period for which the ratio of
Total Debt to EBITDA is to be calculated, EBITDA shall be calculated as
if such acquisition had been made on the first day of such period.
12
(m) Limitations on Certain Indebtedness. The Company shall
not, nor shall it permit any subsidiary to, create, incur, assume or
suffer to exist any Indebtedness for borrowed money that (i) ranks pari
passu with the Indebtedness evidenced by the Notes or (ii) is
subordinated to the Notes, unless the terms and conditions of such
subordination is reasonably satisfactory to the holders of at least 50%
in principal amount of the Notes then outstanding.
(n) Limitations on Liens. The Company shall not, nor shall it
permit any subsidiary to, create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(i) Liens created under the Loan Agreement and under
any refinancings, refundings, renewals or extensions thereof;
(ii) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings diligently
conducted, provided that adequate reserves with respect
thereto are maintained on the books of the Company or such
subsidiary in conforming with generally accepted accounting
principles;
(iii) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens of the Company
arising in the ordinary course of business which are not
overdue for a period of more than 60 days or which are being
contested in good faith by appropriate proceedings diligently
conducted;
(iv) pledges or deposits by the Company in connection
with workers' compensation, unemployment insurance and other
social security legislation and deposits securing liability to
insurance carriers under insurance or self-insurance
arrangements;
(v) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary
course of business of the Company;
(vi) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of
business of the Company which, in the aggregate, are not
substantial in amount and which do not in any case materially
detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business
of the Company;
(vii) Liens consisting solely of the interest of a
lessor in property subject to a capitalized lease obligation,
provided that (x) such Liens shall be created
13
substantially simultaneously with the acquisition or
commencement of the use of the property subject thereto by the
Company and (y) such Liens shall not at any time encumber any
property other than the leased property;
(viii) Liens securing purchase money indebtedness;
provided that such Lien does not secure any other Indebtedness
and does not encumber any property other than the property
acquired with the proceeds of such purchase money
indebtedness; and
(ix) Liens in existence on the date hereof listed on
Schedule 11(o)(ix) securing the Indebtedness described
therein, and extensions and renewals thereof, provided that no
such Lien shall extend to any additional property (other than
the proceeds of the property subject to such Lien on the date
hereof) after the Closing Date and that the amount of
Indebtedness secured thereby is not increased.
(o) Limitations on Contingent Obligations. The Company shall
not, nor shall it permit any subsidiary to, create, incur, assume or
suffer to exist any Contingent Obligation of the Company or such
subsidiary guaranteeing Indebtedness that the Company or such
subsidiary would have been prohibited from incurring directly under
Section 11(m).
(p) Limitation on Amendments. The Company shall not, nor shall
it permit any subsidiary to amend, modify or waive any term or material
provision of (i) its Certificate or Articles of Incorporation; (ii) its
by-laws; (iii) the Loan Agreement, (iv) the Seller Notes or (v) any
other document evidencing Indebtedness; provided, however, that no such
prohibition shall be required with respect to any such change,
modification or waiver if giving effect thereto shall not result in a
Default or Event of Default, hereunder or under the Loan Agreement, as
defined therein, or be reasonably expected to have a material adverse
effect on the business, assets, properties, operating condition
(financial or otherwise) or prospects of the Company (a "Material
Adverse Effect"). The Company shall deliver to American Bankers a copy
of any such change, modification or waiver that is in writing promptly
upon its execution and delivery.
(q) Line of Business. Engage in any business other than that
of designing, manufacturing, selling and supporting systems and
workstations used for digital video editing, image manipulation and
effects creation and image storage, and businesses reasonably
incidental thereto.
(r) Restricted Payments. Declare or make any dividends or
distributions, or apply any of its property to the voluntary purchase,
redemption or other retirement of, or set apart any sum for the
voluntary payment of any distribution on, or make any other
distribution (including, without limitation, any distributions for the
payment of taxes) in respect of, any securities of the Company or any
rights or options in connection therewith
14
(each a "Restricted Payment"), except up to $250,000 in any fiscal year
of the Company for the repurchase of securities of the Company or any
rights or options in connection therewith held by employees of the
Company that are no longer employed by the Company as of the date of
such repurchase.
(s) The Company shall not at any time issue shares of Common
Stock or any Common Stock Equivalents at a price per share of Common
Stock or underlying Common Stock, as the case may be, less than the
Conversion Price then in effect.
12. Modification by Holders; Waiver. Subject to any restrictions then
applicable under the Loan Agreement or the Subordination Agreement, the Company
may, with the written consent of the holders of not less than 50% in principal
amount of the Notes then outstanding, modify the terms and provisions of the
Notes or the rights of the holders of the Notes or the obligations of the
Company thereunder, and the observance by the Company of any term or provision
of the Notes may be waived with the written consent of the holders of not less
than [50]% in principal amount of the Notes then outstanding; provided, however,
that, without the consent of all holders of the Notes, no such modification or
waiver shall:
(a) change the maturity of any Note or reduce the principal
amount thereof or reduce the rate or extend the time of payment of
interest thereon without the consent of the holder of each Note so
affected; or
(b) give any Note any preference over any other Note; or
(c) reduce the percentage of Notes, the consent of the holders
of which is required for any such modification.
Any such modification or waiver shall apply equally to all the holders
of the Notes and shall be binding upon them, upon each future holder of any Note
and upon the Company, whether or not such Note shall have been marked to
indicate such modification or waiver, but any Note issued thereafter shall bear
a notation referring to any such modification or waiver. Promptly after
obtaining the written consent of the holders as herein provided, the Company
shall transmit a copy of such modification or waiver to all the holders of the
Notes at the time outstanding.
13. Events of Default. If any one or more of the following events,
herein called "Events of Default", shall occur, for any reason whatsoever, and
whether such occurrence shall, on the part of the Company or any subsidiary, be
voluntary or involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgment, decree or order of a court of
competent jurisdiction or any order, rule or regulation of any administrative or
other governmental authority, and such Event of Default shall be continuing:
15
(a) default shall be made in the payment of the principal of
any Note when and as the same shall become due and payable, whether at
maturity or at a date fixed for prepayment or by acceleration or
otherwise; or
(b) default shall be made in the payment of any installment of
interest on any Note according to its terms when and as the same shall
become due and payable and such default shall continue for a period of
five (5) Business Days; or
(c) default shall be made in the due observance or performance
of any covenant, condition or agreement on the part of the Company to
be observed or performed pursuant to Sections 11(k), 11(l) and 11(s)
and, in the case of Sections 11(k) and 11(l), any such default shall
continue for 30 days; or
(d) default shall be made in the due observance or performance
of any other covenant, condition or agreement on the part of the
Company to be observed or performed pursuant to the terms hereof or of
the Purchase Agreement and any such default shall continue for 30 days
after written notice thereof, specifying such default and requesting
that the same be remedied, shall have been given to the Company by the
holder or holders of at least 25% of the principal amount of the Notes
then outstanding (the Company to give forthwith to all other holders of
Notes at the time outstanding written notice of the receipt of such
notice specifying the default referred to therein); or
(e) any representation or warranty made by the Company herein
or in the Purchase Agreement (taken singly or together with other
representations and warranties made by the Company herein or therein)
shall prove to have been false or incorrect in any material respect on
the date on or as of which made; or
(f) the entry of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Company or any
subsidiary of the Company in an involuntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar
laws, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Company or any such
subsidiary or for any substantial part of any of their property, or
ordering the winding-up or liquidation of any of their affairs and the
continuance of any such decree or order unstayed and in effect for a
period of 90 consecutive days; or
(g) the commencement by the Company or any subsidiary of the
Company of a voluntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or any other applicable federal or
state bankruptcy, insolvency or other similar laws, or the consent by
any of them to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of
16
the Company or any such subsidiary for any substantial part of their
property, or the making by any of them of any assignment for the
benefit of creditors, or the failure of the Company or any such
subsidiary generally to pay its debts as such debts become due, or the
taking of corporate action by the Company or any such subsidiary in
furtherance of or which might reasonably be expected to result in any
of the foregoing; or
(h) default as defined in any instrument evidencing or under
which the Company or any subsidiary has outstanding at the time any
Indebtedness for money borrowed in excess of $100,000 in aggregate
principal amount shall occur and as a result thereof the maturity of
any such indebtedness shall have been accelerated so that the same
shall have become due and payable prior to the date on which the same
would otherwise have become due and payable and such acceleration shall
not have been rescinded or annulled within 30 days; or
(i) final judgment for the payment of money in excess of an
amount equal to the sum of $100,000 and the proceeds of insurance or
other third party indemnification payments actually collected by the
Company shall be rendered against the Company or a subsidiary of the
Company and the same shall remain undischarged for a period of 30 days
during which execution shall not be effectively stayed;
then, subject to any restrictions then applicable under the Loan Agreement or
the Subordination Agreement, the holder or holders of a least 50% in aggregate
principal amount of the Notes at the time outstanding may, at its or their
option, by notice to the Company, declare all the Notes to be, and all the Notes
shall thereupon be and become, forthwith due and payable together with interest
accrued thereon without presentment, demand, protest or further notice of any
kind, all of which are expressly waived to the extent permitted by law.
At any time after any declaration of acceleration as to all of the
Notes has been made as provided in this Section 13, the holders of at least 50%
in principal amount of the Notes then outstanding may, by notice to the Company,
rescind such declaration and its consequences, if (i) the Company has paid all
overdue installments of interest on the Notes and all principal that has become
due otherwise than by such declaration of acceleration and (ii) all other
defaults and Events of Default (other than nonpayments of principal and interest
that have become due solely by reason of acceleration) shall have been remedied
or cured or shall have been waived pursuant to this paragraph; provided,
however, that no such rescission shall extend to or affect any subsequent
default or Event of Default or impair any right consequent thereon.
14. Suits for Enforcement. In case any one or more of the Events of
Default specified in Section 13 of this Note shall occur and be continuing, the
holder of this Note may proceed to protect and enforce its rights by suit in
equity, action at law and/or by other appropriate proceeding, whether for the
specific performance of any covenant or agreement contained in this Note or in
aid of the exercise of any power granted in this Note, or may proceed
17
to enforce the payment of this Note or to enforce any other legal or equitable
right of the holder of this Note.
In case of any default under any Note, the Company will pay to the
holder thereof such amounts as shall be sufficient to cover the reasonable costs
and expenses of such holder due to said default, including, without limitation,
collection costs and reasonable attorneys' fees, to the extent actually
incurred.
15. Remedies Cumulative. No remedy herein conferred upon the holder of
this Note is intended to be exclusive of any other remedy and each and every
such remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or otherwise.
16. Remedies Not Waived. No course of dealing between the Company and
the holder of this Note or any delay on the part of the holder hereof in
exercising any rights hereunder shall operate as a waiver of any right of any
holder of this Note.
17. Subordination. Anything in this Note to the contrary
notwithstanding, the obligation of the Company to pay the principal of and
interest on this Note and to discharge all of its other obligations hereunder,
shall be subordinate and junior in right of payment to the prior payment in full
of the obligations of the Company under the Loan Agreement, to the extent set
forth in the Subordination Agreement.
18. Certain Definitions. As used herein, the following words shall have
the following meanings:
"Contingent Obligation": as to any person, any obligation,
contingent or otherwise, of such person directly or indirectly
guaranteeing any Indebtedness or other obligation of any other person
and, without limiting the generality of the foregoing, any obligation
(i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation; or (ii) arising
under any performance or surety bond, or other obligation assuring in
any manner the obligee of such Indebtedness or other obligation of the
payment or performance thereof or to protect such other person against
loss in respect thereof (in whole or in part). The amount of any
Contingent Obligation of any person shall be deemed to be the maximum
amount for which such person may be liable pursuant to the terms of the
instrument embodying such Contingent Obligation, unless the maximum
amount for which such guaranteeing person may be liable is not stated
or determinable, in which case the amount of such Contingent Obligation
shall be such person's maximum reasonably anticipated liability in
respect thereof.
"EBITDA": for any fiscal period of the Company and its
subsidiaries, the consolidated net income (or loss) after taxes (to the
extent deducted) of the Company and
18
its consolidated subsidiaries, for continuing operations for such
fiscal period (excluding any after-tax extraordinary gains or losses
(to the extent added or deducted)) (a) plus, to the extent deducted in
arriving at such net income (or loss) (i) total interest expense, (ii)
income tax expense and (iii) depreciation and amortization and (b) plus
or minus any other non-cash charges or gains which have been deducted
or added in calculating such net income after taxes, in each case with
respect to the Company and its consolidated subsidiaries for such
fiscal period, calculated in accordance with generally accepted
accounting principles consistently applied.
"Total Funded Debt": at any date of determination (a) all
outstanding obligations of the Company and its subsidiaries under (i)
the Loan Agreement, (ii) the Seller Notes and (iii) the Purchase
Agreement and the Notes, plus (b) any other Indebtedness for borrowed
money of the Company and its subsidiaries.
"Lien": any mortgage, pledge, hypothecation, assignment,
encumbrance, lien, security agreement or security interest of any kind
or nature whatsoever, or any other arrangement having substantially the
same economic effect as any of the foregoing.
"Indebtedness": as to any person at any date, (a) all
indebtedness of such person for borrowed money or for the deferred
purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices), (b) any other indebtedness of
such person which is evidenced by a note, bond, debenture or similar
instrument, (c) all obligations of such person under capitalized lease
obligations, (d) all obligations of such person in respect of
acceptances issued or created for the account of such person or in
respect of unreimbursed drawings under letters of credit issued for the
account of such person, (e) all liabilities secured by any Lien on any
property owned by such person even though such person has not assumed
or otherwise become liable for the payment thereof and (e) all
Contingent Obligations of such person.
19. Covenants Bind Successors and Assigns. All the covenants,
stipulations, promises and agreements in this Note contained by or on behalf of
the Company shall bind its successors and assigns, whether so expressed or not.
20. Governing Law. This Note shall be governed and construed in
accordance with the laws of the State of Delaware.
21. Headings. The headings of the Sections and paragraphs of this Note
are inserted for convenience only and do not constitute a part of this Note.
19
IN WITNESS WHEREOF, ACCOM INC. has caused this Note to be signed in its
corporate name by one of its officers thereunto duly authorized and to be dated
as of the day and year first above written.
ACCOM, INC.
By _______________________________
Name:
Title:
20
EXHIBIT B TO NOTE
PURCHASE AGREEMENT
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "Agreement") is made and entered
into as of March ___, 1999 by and among Accom, Inc., a Delaware corporation (the
"Company"), and those investors listed on Schedule I hereto (each, an "Investor"
and collectively, the "Investors").
RECITALS
A. The Investors have agreed to acquire from the Company, and the
Company has agreed to issue to the Investors, an aggregate $3,500,000 principal
amount of 6% Senior Subordinated Convertible Notes (the "Notes") on the terms
and conditions set forth in the Note Purchase Agreement dated as the date hereof
by and between the Company and the Investors (the "Note Purchase Agreement").
B. The Notes may be converted into shares (the "Conversion Shares") of
the Company's Common Stock pursuant to the terms and conditions of the Note,
which Conversion Shares, as of the date hereof, are listed on Schedule I hereto.
C. As a condition to the issuance of the Notes, the Investors have
agreed to certain restrictions related to the ownership of stock of the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
1. Acquisition of Additional Shares, Voting, Transfer and Other Restrictions.
1.1 Certain Definitions. All capitalized terms used but not defined in
this Agreement shall have the meaning as defined for such term in the Note
Purchase Agreement. In addition, as used in this Agreement, the following terms
shall have the following respective meanings:
"Affiliate" of any Person, means (i) any other Person
controlling, controlled by or under common control with such Person, (ii) any
director or executive officer of such Person or of any Affiliate of such Person
and (iii) any immediate family member of any director or executive officer of
such Person or any director or executive officer of any Affiliate of such
Person.
"Beneficially Own" or "Beneficial Ownership" with respect to
any securities shall have the meaning set forth in Rule 13d-3 under the Exchange
Act.
"Common Stock" means the Company's common stock, $0.001 par
value.
"Company Securities" mean any convertible note, option,
warrant, other right to acquire Voting Securities or other capital stock of the
Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder, all as the same
shall be in effect at the time.
"Person" means any natural person, corporation, partnership,
limited liability company, firm, association, trust, "group" within the meaning
of Section 13(d)(3) of the Exchange Act, government, governmental agency, or
other legal entity, whether acting in an individual, fiduciary or other
capacity.
"Permitted Transferee" means, with respect to each Person
bound by the terms of this Agreement, (i) in respect of each Investor, any
descendant, Affiliate or associate (as such term is defined in Rule 405 of the
Securities Act) of such Investor or any other Permitted Transferee of such
Affiliate; (ii) the Company; (iii) in the event of the dissolution, liquidation
or winding up of any such Person that is a corporation or a partnership, the
partners of a partnership that is such Person, the stockholder of a corporation
that is such Person or a successor partnership all of the partners of which or a
successor corporation all of the stockholder of which are the Persons who were
the partners of such partnership or the stockholder of such corporation
immediately prior to the dissolution, liquidation or winding up of such Person;
(iv) a transferee by testamentary or intestate disposition; (v) a transferee by
inter vivos transfer to the transferring Person's spouse, children and/or other
lineal descendants; (vi) a trust transferee by inter vivos transfer, the
beneficiaries of which are the transferring Person, spouse, children and/or
other lineal descendants; (vii) a successor nominee or trustee for the
beneficial owner of the shares for which such Person acts as nominee or trustee,
as the case may be, or (viii) a Person who acquires all or substantially all of
the stock or assets of such Person; provided, however, that any such Permitted
Transferee shall have agreed in writing in form and substance satisfactory to
the Company to be bound by, and hold the Registrable Securities acquired by it
subject to, the terms of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder, as the same shall be in
effect at the time.
"Transfer" means any sale, transfer, pledge, encumbrance or
other disposition.
1.2 Acquisition of Additional Shares.
(a) American Bankers covenants and agrees with the Company
that, for so long as Xxxxxx Xxxxxx is the Chief Executive Officer of the
Company, such Investor will not, and will not permit any of its Affiliates, in
either case without the prior written consent of the Company, to acquire
Beneficial Ownership of any Company Securities other than the Conversion Shares;
provided, however, that any such acquisition of Beneficial Ownership of Company
Securities made on behalf of American Bankers or one of its Affiliates by a
money manager or similar person authorized to invest and reinvest assets on
behalf of American Bankers or such Affiliate on a discretionary basis shall not
be deemed to be a violation of this Section 1.2(a), provided that neither
American Bankers nor one of its Affiliates directs such money manager or similar
person to make such acquisition.
2
(b) If at any time, as the result of any transaction or
circumstances, American Bankers or any of its Affiliates shall acquire
Beneficial Ownership of any Company Securities in violation of Section 1.2(a)
above, then American Bankers shall promptly take, or cause its Affiliates to
promptly take, such action as may be necessary or appropriate to divest such
Beneficial Ownership of Company Securities.
1.3 Restrictions on Transfer. Each Investor covenants and agrees with
the Company that:
(a) until December 10, 1999, such Investor will not Transfer
any Conversion Shares to any Person other than a Permitted Transferee without
the prior written consent of the Company, which consent shall not be
unreasonably withheld (it being understood that withholding consent to such a
Transfer to a bank, an insurance company, an investment company or other
financial investor engaged primarily in the business of investing, reinvesting
or trading in securities shall, without limitation, be deemed not to have been
reasonable, and that withholding consent to such a Transfer to a competitor of
the Company that is an operating entity shall, without limitation, be deemed to
have been reasonable), except through:
(i) a Transfer through a bona fide underwritten
public offering registered under the Securities Act effected in accordance with
the provisions of Section 2 hereof, with an underwriter or underwriters and
pursuant to procedures reasonably acceptable to the Company, intended to achieve
a broad public distribution of the Conversion Shares covered thereby; or
(ii) Transfers in normal and customary open-market
transactions on a national securities exchange, the Nasdaq National Market or an
over-the counter market, provided that the total number of Conversion Shares
transferred by all Investors in any one-week period shall not exceed the greater
of (a) one percent (1%) of the outstanding shares of the Common Stock or (b) the
average weekly trading volume for Common Stock for the four weeks immediately
preceding the week in which the relevant Transfer occurs.
(b) after December 10, 1999, such Investor will not Transfer
any Conversion Shares without the prior written consent of the Company, which
consent shall not be unreasonably withheld (it being understood that withholding
consent to such a Transfer to a bank, an insurance company, an investment
company or other financial investor engaged primarily in the business of
investing, reinvesting or trading in securities shall, without limitation, be
deemed not to have been reasonable, and that withholding consent to such a
Transfer to a competitor of the Company that is an operating entity shall,
without limitation, be deemed to have been reasonable), except through:
(i) a Transfer through a bona fide underwritten
public offering registered under the Securities Act effected in accordance with
the provisions of Section 2 hereof, with an underwriter or underwriters and
pursuant to procedures reasonably acceptable to the Company, intended to achieve
a broad public distribution of the Conversion Shares covered thereby;
3
(ii) Transfers in normal and customary open-market
transactions on a national securities exchange, the Nasdaq National Market or an
over-the counter market, provided that the total number of Conversion Shares
transferred by all Investors in any one-week period shall not exceed the greater
of (a) one percent (1%) of the outstanding shares of the Common Stock or (b) the
average weekly trading volume for Common Stock for the four weeks immediately
preceding the week in which the relevant Transfer occurs;
(iii) a Transfer of all or substantially all of the
Conversion Shares held by such Investor in a transaction involving the
opportunity for all holders of Company Securities (including any Investor) to
dispose of all or a proportionate part of such Company Securities for the same
consideration as, and on terms and conditions not materially less favorable than
those available to such Investor; or
(iv) a Transfer by such Investor to a Permitted
Transferee of such Investor.
(c) in connection with any Transfer under this Section 1.3
that is not pursuant to a transaction described in subsections 1.3(a)(i),
(a)(ii), (b)(i), (b)(ii) or (b)(iii), the transferee of the Conversion Shares
shall agree to be bound by the provisions of this Section 1.3.
2. Registration Rights.
2.1 Definitions. For purposes of this Section 2:
(a) Registration. The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act and the declaration
or ordering of effectiveness of such registration statement
(b) Registrable Securities. The term "Registrable Securities"
means (i) the Conversion Shares and (ii) any Common Stock or other shares of
capital stock of the Company issued by way of stock dividend or stock split or
other distribution, recapitalization or reclassification with respect to, or in
exchange for, or in replacement of, any Registrable Securities. Notwithstanding
the foregoing, "Registrable Securities" shall exclude any Registrable Securities
sold by a person in a transaction in which rights under this Section 2 are not
assigned in accordance with this Agreement or any Registrable Securities sold in
a public offering, whether sold pursuant to Rule 144 promulgated under the
Securities Act, or in a registered offering, or otherwise.
(c) Registrable Securities Then Outstanding. The number of
shares of "Registrable Securities then outstanding" shall mean the number of
shares of Common Stock of the Company that are Registrable Securities and are
then issued and outstanding.
(d) Holder. For purposes of this Section 2, the term "Holder"
means any person owning of record Registrable Securities that have not been sold
to the public or pursuant to Rule 144 promulgated under the Securities Act or
any permitted assignee of record of such Registrable Securities to whom rights
under this Section 2 have been duly assigned in accordance
4
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
December 10, 1999 receive a written request from the Holders of at least fifty
percent (50%) of the Registrable Securities then outstanding that the Company
file a registration statement under the Securities Act covering the registration
of Registrable Securities pursuant to this Section 2.2, then the Company shall,
within fifteen (15) business days of the receipt of such written request, give
written notice of such request ("Request Notice") to all Holders, and effect, as
soon as practicable, the registration under the Securities Act of all
Registrable Securities that Holders request to be registered and included in
such registration by written notice given such Holders to the Company within
fifteen (15) days after receipt of the Request Notice, subject only to the
limitations of this Section 2.2; provided, that the Registrable Securities
requested by all Holders to be registered pursuant to such request must be at
least fifty percent (50%) of all Registrable Securities held by the requesting
Holders; and provided further that the Company shall not be obligated to effect
any such registration if the Company has, within the six (6) month period
preceding the date of such request, already effected a registration under the
Securities Act pursuant to this Section 2.2, or in which the Holders had an
opportunity to participate pursuant to the provisions of Section 2.3 if at least
fifty percent (50%) of the number of Registrable Securities as to which
registration was requested by the Holders were registered therein.
(b) Underwriting. If the Holders initiating the registration
request under this Section 2.2 ("Initiating Holders") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
then they shall so advise the Company as a part of their request made pursuant
to this Section 2.2 and the Company shall include such information in the
written notice referred to in subsection 2.2(a). In addition, the right of any
Holder to include his, her or its Registrable Securities in such registration
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the Initiating
Holders and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by the Company and reasonably
acceptable to a majority of the Holders participating in such offering. Such
underwriting agreement shall include a market stand-off agreement of up to 180
days if required by such underwriter. Notwithstanding any other provision of
this Section 2.2, if the underwriter advises the Company in writing that
marketing factors require a limitation of the number of Registrable Securities
to be underwritten then the Company shall so advise all Holders of Registrable
Securities which would otherwise be registered and underwritten pursuant hereto,
and the number of Registrable Securities that may be included in the
underwriting shall be reduced as required by the underwriter and allocated among
the Holders of Registrable Securities and the other holders of Common Stock with
registration rights who have requested
5
shares of Common Stock held by them to be included in such registration, on a
pro rata basis according to the number of Registrable Securities then
outstanding held by each Holder requesting registration (including the
initiating Holders) and by the other holders of registration rights who have
requested shares to be included in such registration. If any such exclusion
causes less than fifty percent (50%) of the number of shares of Registrable
Securities as to which registration was requested by the Holders to be
registered, such registration may be withdrawn at the request of a majority of
the Holders of Registrable Securities to be included in such offering and, if so
withdrawn within ten (10) days after such Holders are notified of such
exclusion, such registration shall not constitute a request for registration
under Section 2.2(e). Any Registrable Securities excluded and withdrawn from
such underwriting shall be withdrawn from the registration.
(c) Maximum Number of Demand Registrations. The Company shall
be obligated to effect only two (2) registrations pursuant to this Section 2.2.
Notwithstanding anything to the contrary contained herein, the obligation of the
Company under this Section 2 shall be deemed satisfied only when a registration
statement covering all Registrable Securities specified in written requests
received as aforesaid, for sale in accordance with the method of disposition
specified by the requesting Holders, shall have become effective and, if such
method of disposition is a firm commitment underwritten public offering, all
such shares shall have been sold pursuant thereto.
(d) Deferral. Notwithstanding the foregoing, if the Company
shall furnish to Holders requesting the filing of a registration statement
pursuant to this Section 2.2, a certificate signed by the President or Chief
Executive Officer of the Company stating that in the good faith judgment of the
Board, it would be materially detrimental to the Company for such registration
statement to be filed, then the Company shall have the right to defer such
filing for a period of not more than ninety (90) days after receipt of the
request of the Initiating Holders; provided, however, that the Company may not
utilize this right more than once in any twelve (12) month period.
(e) Expenses. All expenses incurred in connection with any
registration pursuant to this Section 2.2, including without limitation all
federal and state securities and "blue sky" registration fees, filing and
qualification fees, printer's and accounting fees, and fees and disbursements of
counsel for the Company (but excluding underwriters' discounts and commissions
relating to shares sold by the Holders and legal fees of counsel for any of the
Holders), shall be borne by the Company. Each Holder participating in a
registration pursuant to this Section 2.2 shall bear such Holder's proportionate
share (based on the total number of shares sold in such registration other than
for the account of the Company) of all discounts, commissions or other amounts
payable to underwriters or brokers. In addition, each Holder shall bear such
Holders' legal fees, in connection with such offering by the Holders.
Notwithstanding the foregoing, the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to this Section 2.2 if
the registration request is subsequently withdrawn at the request of the Holders
of a majority of the Registrable Securities to be registered, unless the Holders
of a majority of the Registrable Securities to be registered pursuant to such
request agree that such registration constitutes the use by the Holders of one
(1) demand
6
registration pursuant to this Section 2.2 (in which case such registration shall
also constitute the use by all Holders of Registrable Securities of one (l) such
demand registration); provided, further, however, that if such withdrawal
results from the reduction of the number of Registrable Securities included in
the underwriting below fifty percent (50%) of the number of shares of
Registrable Securities requested to be registered, as contemplated by Section
2.2(b), or if at the time of such withdrawal, such Holders have learned of a
material adverse change in the condition, business, or prospects of the Company
not known to the Holders at the time of their request for such registration and
have withdrawn their request for registration with reasonable promptness after
learning of such material adverse change, then, in each such case, the Holders
shall not be required to pay any of such expenses and such registration shall
not constitute the use of a demand registration pursuant to this Section 2.2.
2.3 Piggyback Registrations.
(a) The Company shall notify all Holders of Registrable
Securities in writing at least thirty (30) days prior to filing any registration
statement under the Securities Act for purposes of effecting a public offering
of securities of the Company (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company, but
excluding registration statements relating to any registration under Section 2.2
of this Agreement, to any employee benefit plan, to any corporate reorganization
or to a sale solely in connection with a Rule 145 transaction or a registration
statement which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities) and will afford each such Holder an opportunity to
include in such registration statement all or any part of the Registrable
Securities then held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by
such Holder shall within fifteen (15) days after receipt of the above-described
notice from the Company, so notify the Company in writing, and in such notice
shall inform the Company of the number of Registrable Securities such Holder
wishes to include in such registration statement. If a Holder decides not to
include all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to have
the right to include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and conditions set forth
herein.
(b) Underwriting. If a registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering,
then the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder's Registrable Securities to be included in a
registration pursuant to this Section 2.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the managing underwriter or underwriters selected by the Company for such
underwriting (including a market stand-off agreement of up to 180 days if
required by such underwriters) on terms no less favorable to such Holders than
available to the Company if the Company is participating in such underwriting.
Notwithstanding any other provision of this
7
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 partners
of such Holder, or the estates and family members of any such partners and
retired partners and any trusts for the benefit of any of the foregoing persons,
and for any Holder that is a corporation, the Holder and all corporations that
are affiliates of such Holder shall be deemed to be a single "Holder," and any
pro rata reduction with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "Holder," as defined in this sentence.
(c) Expenses. All expenses incurred in connection with any
registration pursuant to this Section 2.3, including without limitation all
federal and state securities and "blue sky" registration fees, filing and
qualification fees, printer's and accounting fees, and fees and disbursements of
counsel for the Company (but excluding underwriters' discounts and commissions
relating to shares sold by the Holders and legal fees of counsel for any of the
Holders), shall be borne by the Company. Each Holder participating in a
registration pursuant to this Section 2.3 shall bear such Holder's proportionate
share (based on the total number of shares sold in such registration other than
for the account of the Company) of all discounts, commissions or other amounts
payable to underwriters or brokers. In addition, each Holder shall bear such
Holders' legal fees, in connection with such offering by the Holders.
(d) Not Demand Registration. Registration pursuant to this
Section 2.3 shall not be deemed to be a demand registration as described in
Section 2.2 above. Except as otherwise provided herein, there shall be no limit
on the number of times the Holders may request registration of Registrable
Securities under this Section 2.3.
2.4 Form S-3 Registration. In case the Company shall receive from the
Holders of at least fifty percent (50%) of the Registrable Securities a written
request that the Company effect a registration on Form S-3 (or any comparable
successor form or forms) and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holders,
the Company shall effect, as soon as practicable, such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of Registrable
Securities of such Holders as are specified in such request, provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this Section 2.4:
8
(a) if Form S-3 is not available for such offering;
(b) if the Company has already effected two registrations
pursuant to this Section 2.4;
(c) if such Holders propose to sell Registrable Securities and
such other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $1,000,000;
(d) if the Company shall furnish to such Holders a certificate
signed by the President or Chief Executive Officer of the Company stating that
in the good faith judgment of the Board, it would be materially detrimental to
the Company for such registration statement to be filed, then the Company shall
have the right to defer such filing for a period of not more than ninety (90)
days after receipt of the request of the Holders; provided, however, that the
Company may not utilize this right more than once in any twelve (12) month
period; or
(e) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance (except
for California and New York).
Registrations effected pursuant to this Section 2.4 shall not be counted as
requests for registration effected pursuant to Section 2.2.
2.5 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities under this Agreement the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, provided, however, that the
Company shall not be required to keep any such registration statement effective
for more than one hundred twenty (120) days. Prior to filing a registration
statement or prospectus relating to the sale of Registrable Securities, or any
amendments or supplements thereto, the Company will furnish to counsel
representing the Holders of the Registrable Securities covered by such
registration statement copies of all documents proposed to be filed, which
documents will be subject to the review of such counsel within ten (10) business
days after receipt thereof.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to keep such registration
statement effective during the distribution period and comply with the
provisions of the Securities Act, the Exchange Act and the rules and regulations
of the SEC thereunder with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such number of copies of such
registration statement, and of each amendment and supplement thereto, such
prospectus, including a
9
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 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
10
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 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
11
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.
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
12
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 of its Affiliates, each of its officers who have signed the
registration statement, each person, if any, who controls or is under common
control or controlled by the Company within the meaning of the Securities Act,
any underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such Holder within the meaning of the Securities Act or the
1934 Act, against any and all losses, claims, damages or liabilities (joint or
several) to which the Company or any such director, officer, controlling person,
underwriter or other such Holder, partner or director, officer or controlling
person of such other Holder may become subject under the Securities Act, the
1934 Act or other federal or state law, insofar as such losses, claims, damages
or liabilities (or actions in respect thereto whether or not such identified
party is a party thereto) arise out of or are based upon any Violation, in each
case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder specifically stating that it is for use in connection with such
registration; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, Affiliate,
controlling person, underwriter or other Holder, partner, officer, director or
controlling person of such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action: provided, however,
that the indemnity agreement contained in this Section 2.7(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; and provided, further, that the total
amounts payable in indemnity by a Holder under this Section 2.7(b) in respect of
any Violation shall not exceed the net proceeds received by such Holder in the
registered offering out of which such Violation arises; provided further,
however, that such Holder shall not be obligated to provide such indemnity to
the extent that such losses, claims or liabilities result from the failure of
the Company to promptly amend or take action to correct or supplement any such
registration statement or prospectus on the basis of corrected or supplemental
information furnished in writing to the Company by such Holder expressly for
such purpose. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any indemnified party.
(c) Notice. Promptly after receipt by an indemnified party
under this Section 2.7 of notice of the commencement of any action (including
any governmental action),
13
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 party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.7.
(d) Defect Eliminated in Final Prospectus. The foregoing
indemnity agreements of the Company and Holders are subject to the condition
that, insofar as they relate to any Violation made in a preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or the amended
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any
person if a copy of the Final Prospectus was timely furnished to the indemnified
party and was not furnished to the person asserting the loss, liability, claim
or damage at or prior to the time such action is required by the Securities Act,
if the indemnified party in such circumstance was required by the Securities Act
to furnish the Final Prospectus to such person.
(e) Contribution. In order to provide for just and equitable
contribution to joint liability under the Securities Act in any case in which
either (i) any Holder exercising rights under this Agreement, or any controlling
person of any such Holder, makes a claim for indemnification pursuant to this
Section 2.7 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 2.7 provides
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any Holder or any such controlling person in
circumstances for which indemnification is provided under this Section 2.7;
then, and in each such case, the Company and such Holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that such Holder is
responsible for the portion represented by the percentage that the public
offering price of its Registrable Securities offered by and sold under the
registration statement bears to the public offering price of all securities
offered by and sold under such registration statement, and the Company and other
selling Holders are responsible for the remaining portion; provided, however,
that, in any such case: (A) no such Holder will be required to contribute any
amount in excess of the public offering price of all such Registrable Securities
offered and sold by such Holder pursuant to such registration statement; and (B)
no
14
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation.
2.8 Termination of the Company's Obligations. The Company shall have no
obligations pursuant to Sections 2.2 or 2.3 with respect to any Registrable
Securities proposed to be sold by a Holder in a registration pursuant to
Sections 2.2 or 2.3 if, in the opinion of counsel to the Company reasonably
satisfactory to the Holders of at least fifty percent (50%) of the Registrable
Securities proposed to be sold in the registration (it being acknowledged by the
Investors that Xxxxxx, Xxxx & Xxxxxxxx LLP is satisfactory counsel for this
purpose), all such Registrable Securities proposed to be sold by a Holder may
then be sold under Rule 144 in any three month period without exceeding the
volume limitations thereunder.
2.9 Rule 144 and Rule 144A. The Company covenants that it will file the
reports required to be filed by it under the Securities Act and the 1934 Act and
the rules and regulations adopted by the SEC thereunder (or, if the Company is
not required to file such reports, it will, upon the request of any Holder of
Registrable Securities, make publicly available such information), and it will
take such further action as any Holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell shares of Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (i) Rule 144 and Rule
144A under the Securities Act, as such rules may be amended from time to time or
(ii) any similar rule or regulation hereafter adopted by the SEC.
3. Miscellaneous Provisions
3.1 Construction. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware.
3.2 Notices.
All notices, requests, demands and other communications called for or
contemplated hereunder shall be in writing and shall be deemed to have been duly
given when delivered to the party to whom addressed or when sent by telecopy (as
indicated by a telecopy confirmation and if promptly confirmed by registered or
certified mail, return receipt requested, prepaid and addressed) to the parties,
their successors in interest, or their assignees at the following addresses, or
at such other addresses as the parties may designate by written notice in the
manner aforesaid::
If to the Company: Accom, Inc.
0000 X'Xxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Attn: President
Fax: 000-000-0000
15
With copies to: Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx
Fax: 000-000-0000
If to any Investor, to the address or fax number set forth in
Schedule I hereto;
With copies to: Reboul, MacMurray, Xxxxxx, Xxxxxxx &
Kristol
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. XxxXxxxxx, Esq.
Fax: 000-000-0000
3.3 Assignment. The rights, remedies, obligations and liabilities under
Sections 2 and 3 of this Agreement may be assigned in connection with the
Transfer of any Conversion Shares permitted hereby or pursuant hereto, provided
that the transferee shall be bound by all of the terms of Sections 2 and 3. This
Agreement also may be assigned by any party to any other party acquiring all or
substantially all of the stock or assets of such assigning party. Nothing
contained herein, express or implied, is intended to confer upon any person or
entity other than the parties hereto and their successors in interest and
permitted assignees any rights or remedies under or by reason of this Agreement
unless so stated herein to the contrary.
3.4 Amendments and Waivers. This Agreement and all exhibits may be
modified only by a written instrument duly executed by the Company and those
Investors holding a majority in interest of the Conversion Shares (assuming
conversion of all of the Notes). No condition to any party's obligations and no
breach of any covenant, agreement, warranty or representation shall be deemed
waived unless expressly waived in writing by the party whose obligations are
subject to such condition or who might assert such breach. No waiver of any
right hereunder shall operate as a waiver of any other right or of the same or a
similar right on another occasion.
3.5 Survival. The covenants, agreements, warranties and representations
entered into or made pursuant to this Agreement, irrespective of any
investigation made by or on behalf of any party, shall be continuing.
3.6 Remedies. No remedy conferred by any of the specific provisions of
this Agreement is intended to be exclusive of any other remedy. Each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder now or hereafter existing at law or in equity or by statute or
otherwise, and the election by a party of one or more remedies shall not
constitute a waiver of the party's right to pursue any other available remedies.
3.7 Attorneys' Fees. In the event that any action or proceeding,
including arbitration, is commenced by any party hereto for the purpose of
enforcing any provision of this Agreement, the parties to such action,
proceeding or arbitration may receive as part of any award, judgment, decision
or other resolution of such action, proceeding or arbitration their costs and
reasonable attorneys' fees as determined by the person or body making such
award, judgment, decision or resolution. Should any claim hereunder be settled
short of the commencement of any such action
16
or proceeding, including arbitration, the parties in such settlement shall be
entitled to include as part of the damages alleged to have been incurred
reasonable costs of attorneys or other professionals in investigation or
counseling on such claim.
3.8 Binding Nature of Agreement. The Agreement includes each of the
exhibits which are referred to herein or attached hereto, all of which are
incorporated by reference herein. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective executors, heirs, legal representatives, successors and assigns.
3.9 Entire Agreement. This Agreement contains the entire understanding
of the parties, and supersedes all prior agreements and understandings, relating
to the subject matter hereof.
3.10 Severability. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
3.11 Counterparts. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
3.12 Section Headings. The headings of each Section, subsection or
other subdivision of this Agreement are for reference only and shall not limit
or control the meaning thereof.
[The remainder of this page is intentionally left blank.]
17
IN WITNESS WHEREOF, the Company and the Investors have executed this
Investor Rights Agreement as of the day and year first above written.
ACCOM, INC.
By:___________________________________
Name:
Title:
18
IN WITNESS WHEREOF, the Company and the Investors have executed this
Investor Rights Agreement as of the day and year first above written.
AMERICAN BANKERS INSURANCE GROUP, INC.
By:___________________________________
Name:
Title:
19
IN WITNESS WHEREOF, the Company and the Investors have executed this
Investor Rights Agreement as of the day and year first above written.
INVESTOR:
______________________________________
Xxxx Xxxxxxx
20
IN WITNESS WHEREOF, the Company and the Investors have executed this
Investor Rights Agreement as of the day and year first above written.
INVESTOR:
______________________________________
Xxxx Xxxxxx
21
IN WITNESS WHEREOF, the Company and the Investors have executed this
Investor Rights Agreement as of the day and year first above written.
INVESTOR:
______________________________________
Xxxxx Xxxxxx
22
IN WITNESS WHEREOF, the Company and the Investors have executed this
Investor Rights Agreement as of the day and year first above written.
INVESTOR:
______________________________________
Xxxxxx Xxxxxxxx
23
IN WITNESS WHEREOF, the Company and the Investors have executed this
Investor Rights Agreement as of the day and year first above written.
INVESTOR:
______________________________________
Xxxxxx Xxxxxx
24
SCHEDULE I
TO INVESTOR RIGHTS AGREEMENT
Number of
Name and Address Conversion Shares
--------------------------------------- -----------------
American Bankers Insurance Group, Inc. 2,307,692
00000 Xxxxx Xxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
Xxxx Xxxxxx 76,923
000 Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Xxxxx Xxxxxx 76,923
c/o Concorde Holdings
00 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Xxxx Xxxxxxx 76,923
000 Xxxx Xxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxx Xxxxxxxx 76,923
00 Xxxxx Xxxxx
Xxxxxxxx, XX 00000
Xxxxxx Xxxxxx 76,923
00 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Total ---------
2,692,307
EXHIBIT C TO NOTE
PURCHASE AGREEMENT
AMENDED AND RESTATED SUBORDINATION AGREEMENT
WHEREAS, ACCOM, INC. ("Borrower"), is indebted to SCITEX DIGITAL VIDEO,
INC. ("Seller"), as evidenced by one or more notes, debentures, security
agreements and other documents evidencing the Junior Debt (as defined below)
(the "Junior Debt Instruments"), and will or may from time to time hereafter be
otherwise indebted to the Seller in various sums;
WHEREAS, pursuant to a Subordination Agreement, dated as of December
10, 1998 (the "Original Subordination Agreement"), among the Borrower, the
Seller and LaSalle Business Credit, Inc. ("LaSalle"), in order to induce LaSalle
to extend and/or continue the extension of credit to Borrower from time to time
as LaSalle in its sole discretion should determine, the Seller agreed that the
"Junior Debt" should be subordinated to the "Senior Debt" (as each such term is
defined in the Original Subordination Agreement) in the manner set forth
therein;
WHEREAS, the Seller is also desirous of having American Bankers
Insurance Group, Inc. ("ABIG") and certain other persons named as Purchasers in
a Note Purchase Agreement, dated as of the date hereof (the "Note Purchase
Agreement"), among the Borrower, ABIG and such other Purchasers (collectively,
the "ABIG Purchasers" and, together with LaSalle, the "Senior Creditors")
purchase an aggregate $3,500,000 principal amount of Senior Subordinated Notes
(the "Senior Subordinated Notes") of the Borrower, and the ABIG Purchasers have
agreed to purchase the Senior Subordinated Notes subject to the condition that
the "Junior Debt" (as defined below) is subordinated to the "Senior Subordinated
Debt" (as defined below);
WHEREAS, the extension and/or continued extension of credit, as
aforesaid, by LaSalle is necessary or desirable to the conduct and operation of
the business of Borrower, and will inure to the personal and financial benefit
of the Seller;
WHEREAS, the sale of the Senior Subordinated Notes by the Borrower to
the ABIG Purchasers is necessary or desirable to the conduct and operation of
the business of Borrower, and will inure to the personal and financial benefit
of the Seller; and
WHEREAS, in consideration of the purchase of the Senior Subordinated
Notes by the ABIG Purchasers, LaSalle has consented to the issuance of the
Senior Subordinated Notes as required by and in accordance with the Loan and
Security Agreement between Borrower and LaSalle dated as of December 10, 1998
(as it may be amended, restated, renewed and/or replaced, the "Loan Agreement"),
and LaSalle, the ABIG Purchasers and the Borrower have
entered into an Intercreditor Agreement, dated as of the date hereof, governing
the relative rights of LaSalle and the ABIG Purchasers; and
WHEREAS, the Seller, LaSalle and the Borrower desire to amend and
restate in its entirety the Original Subordination Agreement in order to add the
ABIG Purchasers as parties thereto, to confirm the subordination of the Junior
Debt to the "Senior LaSalle Debt" (as defined below), to subordinate the Junior
Debt to the Senior Subordinated Debt and to make such other changes to the
Original Subordination Agreement as the parties hereto shall determine is
necessary and desirable, all in the manner hereinafter set forth;
NOW, THEREFORE, in consideration of (i) the extension and/or continued
extension of credit by LaSalle to Borrower, as LaSalle may, in its sole
discretion, determine, (ii) the purchase of the Senior Subordinated Notes by the
ABIG Purchasers, and for other good and valuable consideration to the Seller,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto
mutually agree as follows:
a. Seller hereby subordinates the indebtedness evidenced by the
Junior Debt Instruments, as well as any and all other
indebtedness now or at any time or times hereafter owing by
Borrower, or any successor or assign of Borrower, including
without limitation, a receiver, trustee or
debtor-in-possession (the term "Borrower" as used hereinafter
shall include any such successor or assign) to the Seller,
whether such indebtedness is absolute or contingent, direct or
indirect and howsoever evidenced, including without limitation
all interest thereon (collectively, the "Junior Debt") to the
prior payment in full of:
(i) any and all indebtedness now or at any time or times hereafter
owing by Borrower to LaSalle (whether absolute or contingent,
direct or indirect and howsoever evidenced including, without
limitation, all interest thereon) and all other demands,
claims, liabilities or causes of action for which Borrower may
now or at any time or times hereafter in any way be liable to
LaSalle, whether under any agreement, instrument or document
executed and delivered or made by Borrower to LaSalle or
otherwise (collectively, the "Senior LaSalle Debt"); and
(ii) any and all principal, interest, fees, expenses and other
indebtedness now or at any time or times hereafter owing by
Borrower to each of the ABIG Purchasers (whether absolute or
contingent, direct or indirect and howsoever evidenced
including, without limitation, all interest thereon, including
allowable post-petition interest thereon in any federal or
state law for the relief of debtors) and all other demands,
claims, liabilities or causes of action for which Borrower may
now or at any time or times hereafter in any way be liable to
such ABIG Purchaser, whether under any agreement, instrument
or document executed and delivered or made by Borrower to such
ABIG Purchaser or otherwise (collectively, the "Senior
2
Subordinated Debt" and, together with the Senior LaSalle Debt,
the "Senior Debt");
b. Seller shall not ask for or receive from Borrower or any other
person or entity any security for the Junior Debt not
specifically granted by the Junior Debt Instruments, agrees to
and does hereby subordinate all security interests, liens,
encumbrances and claims, whether now existing or hereafter
arising, which in any way secure the payment of the Junior
Debt (the "Seller's Collateral") to all security interests,
liens, encumbrances and claims, whether now existing or
hereafter arising, which in any way secure the payment of (i)
the Senior LaSalle Debt (the "LaSalle Collateral") and (ii)
the Senior Subordinated Debt (collectively with the LaSalle
Collateral, the "Senior Debt Collateral"); shall not take any
action to enforce any of its liens on the Seller's Collateral;
and agrees that except for the payment of money permitted in
subsection (C) below, it shall have no right to possession of
any assets included in the Seller's Collateral or the Senior
Debt Collateral, whether by judicial action or otherwise,
unless and until each of the following has occurred: (x) all
of the Senior Debt has been paid in full and such payment is
not subject to disgorgement under Xxxxxxx 000 xx xxx Xxxxxx
Xxxxxx Bankruptcy Code (any such payment in full being
referred to herein as "Fully Paid"); (y) each of the Loan
Agreement and the Note Purchase Agreement has been terminated;
and (z) all of the Senior Creditors have released their
respective security interests in all of the Senior Debt
Collateral;
c. Seller agrees to instruct Borrower not to pay, and agrees not
to accept payment of, or assert, demand, xxx for or seek to
enforce against Borrower or any other person or entity, by
setoff or otherwise, all or any portion of the Junior Debt
unless and until each of the following has occurred: (x) all
of the Senior Debt has been Fully Paid; (y) each of the Loan
Agreement and the Note Purchase Agreement has been terminated;
and (z) all of the Senior Creditors have released their
respective security interests in all of the Senior Debt
Collateral; provided however, that (i) so long as Borrower is
in compliance with all covenants included in the Loan
Agreement and all other agreements relating to the Senior
LaSalle Debt and no Event of Default, as such term is defined
in the Senior Subordinated Notes (any such failure to comply
or Event of Default being referred to as a "Senior Event of
Default") shall have occurred and be continuing, and such
payments would not result in the occurrence of a Senior Event
of Default, Borrower may make regularly scheduled payments of
principal and interest when due on the Junior Debt (including
the payments described in Sections 2.2(f), 2.4, 2.7, 2.8, 6.1,
9.1.2, 11.6 and 11.8 of the Asset Purchase Agreement between
Seller and Borrower, dated December 10, 1998 (the "Contract
Debt")), and (ii) so long as no Senior Event of Default shall
have occurred and be continuing, and such payments would not
result in the occurrence of a Senior Event of Default, and
Borrower has at least $1,500,000 Excess Availability (as
defined in the Loan
3
Agreement), will have at least $1,500,000 of Excess
Availability after such payments are made, and would have had
average Excess Availability of at least $1,500,000 on a pro
forma basis for the 30 days immediately preceding the date of
payment, such pro forma Excess Availability to be calculated
as if such payments had been made on the 31st day prior to the
proposed date of payment, after May 31, 1999, Borrower may
pay, and Seller may accept prepayments on the Junior Debt
other than the Contract Debt. Borrower's inability to pay the
Junior Debt and Seller's inability to receive payment of the
Junior Debt due to the operation of this subsection (C) will
be referred to as a "Blockage."
d. the Seller shall not be entitled at any time to accelerate the
Junior Debt or commence, prosecute or participate in any suit
or proceeding in connection therewith against the Borrower
during the pendency of any Blockage; provided that in no event
shall Seller be bound not to accelerate or commence, prosecute
or participate in any suit or proceeding after the date on
which any Senior Debt has been accelerated.
e. the Seller hereby subrogates LaSalle to the Junior Debt and
the Seller's Collateral; irrevocably authorizes LaSalle (i) to
collect, receive, enforce and accept any and all sums or
distributions of any kind that may become due, payable or
distributable on or in respect of the Junior Debt or the
Seller's Collateral, whether paid directly by Borrower or paid
or distributed in any liquidation, bankruptcy, arrangement,
receivership, assignment, reorganization or dissolution
proceedings or otherwise, and (ii) in LaSalle's sole
discretion, to make and present claims therefor in, and take
such other actions as LaSalle deems necessary or advisable in
connection with any such proceedings, either in LaSalle's name
or in the name of the Seller; and agrees that upon the written
request of LaSalle, it will promptly assign, endorse and
deliver to and deposit with LaSalle all agreements,
instruments and documents evidencing the Junior Debt
including, without limitation, the Junior Debt Instruments;
f. Seller agrees to receive and hold in trust for and promptly
turn over to LaSalle, in the form received (except for the
endorsement or assignment by the Seller where necessary), any
sums at any time paid to, or received by, the Seller in
violation of the terms of this Agreement and to reimburse
LaSalle for all reasonable costs, including reasonable
attorney's fees, incurred by LaSalle in the course of
collecting said sums should the Seller fail to voluntarily
turn the same over to LaSalle as herein required. If the
Seller fails to endorse or assign to LaSalle any items of
payment received by the Seller on account of the Junior Debt,
the Seller hereby irrevocably makes, constitutes and appoints
LaSalle (and all persons designated by LaSalle for that
purpose) as the Seller's true and lawful attorney and
agent-in-fact, to make such endorsement or assignment in the
Seller's name; and
4
g. each of LaSalle and the Seller hereby agrees that when (i) all
of the Senior LaSalle Debt has been Fully Paid; (ii) the Loan
Agreement has been terminated; and (iii) LaSalle has released
its security interests in all of the LaSalle Collateral (A)
LaSalle will hold in trust for and promptly turn over to ABIG,
acting on behalf of the ABIG Purchasers, any sums (or the
proceeds thereof) at any time paid to, or received by it
pursuant to paragraph F above, to the extent remaining and not
previously applied to the LaSalle Senior Debt and (B) the
rights granted to LaSalle in paragraphs E and F above shall
thereupon automatically be deemed to have been granted by the
Seller hereunder to ABIG, acting on behalf of the ABIG
Purchasers;
h. Seller agrees that it shall not modify or amend any agreement,
instrument or document evidencing or securing the Junior Debt,
including without limitation the Junior Debt Instruments,
without the prior written consent of LaSalle and ABIG, acting
on behalf of the ABIG Purchasers.
The Seller represents and warrants to LaSalle and the ABIG Purchasers
that the Seller has not assigned or otherwise transferred the Junior Debt or the
Seller's Collateral, or any interest therein to any person or entity, that
except as expressly permitted below, the Seller will make no such assignment or
other transfer thereof, and that all agreements, instruments and documents
evidencing the Junior Debt and the Seller's Collateral will be endorsed with
proper notice of this Agreement. Seller may assign the Junior Debt and the
Seller's interest in the Seller's Collateral to any of its affiliates or to any
successor in interest that acquires all or substantially all of the assets or
stock of Seller, provided any such assignee agrees to be bound by the terms of
this Agreement by signing and delivering to the other parties hereto a signed
counterpart of this Agreement. The Seller will promptly deliver to the Senior
Creditors a certified copy of the Junior Debt Instruments, as well as certified
copies of all other agreements, instruments and documents hereafter evidencing
any Junior Debt, in each case showing such endorsement. The Seller represents
and warrants to LaSalle and the ABIG Purchasers that the outstanding principal
amount of Junior Debt evidenced by the Junior Debt Instruments as of the date of
this Agreement is no more than $2,365,000].
The Seller expressly waives all notice of the acceptance by each of the
Senior Creditors of the subordination and other provisions of this Agreement and
all notices not specifically required pursuant to the term of this Agreement,
and the Seller expressly waives reliance by each of the Senior Creditors upon
the subordination and other provisions of this Agreement as herein provided. The
Seller consents and agrees that all Senior Debt shall be deemed to have been
made, incurred and/or continued at the request of the Seller and in reliance
upon this Agreement. The Seller agrees that none of the Senior Creditors has
made any warranties or representations with respect to the due execution,
legality, validity, completeness or enforceability of the documents, instruments
and agreements evidencing the Senior Debt, that each of the Senior Creditors
shall be entitled to manage and supervise its financial arrangements with
Borrower in accordance with its usual practices, without impairing or affecting
this
5
Agreement, and that none of the Senior Creditors shall have any liability to the
Seller, and the Seller hereby waives any claim which it may now or hereafter
have against either of the Senior Creditors arising out of (i) any and all
actions which any of the Senior Creditors takes or omits to take (including
without limitation actions with respect to the creation, perfection or
continuation of liens or security interests in any existing or future Senior
Debt Collateral, actions with respect to the occurrence of an event of default
under any documents, instruments or agreements evidencing the Senior Debt,
actions with respect to the foreclosure upon, sale, release or depreciation of,
or failure to realize upon any of the Senior Debt Collateral and actions with
respect to the collection of any claim for all or any part of the Senior Debt
from any account debtor, guarantor or other person or entity) with respect to
the documents, instruments and agreements evidencing the Senior Debt or to the
collection of the Senior Debt or the valuation, use, protection or release of
the Senior Debt Collateral, and/or (ii) any election by a Senior Creditor in any
proceeding instituted under Chapter 11 of Title 11 of United States Code (11
U.S.C. ss. 101 et. seq.) (the "Bankruptcy Code"), of the application of Section
1111(b)(2) of the Bankruptcy Code. Without limiting the generality of the
foregoing, the Seller waives the right to assert the doctrine of marshalling
with respect to any of the Senior Debt Collateral, and consents and agrees that
the holders of the Senior Debt Collateral may proceed against any or all of the
Senior Debt Collateral in such order as such holders shall determine in their
sole discretion.
The Seller agrees that each of the Senior Creditors, at any time and
from time to time hereafter, may enter into such agreements with Borrower as
such Senior Creditor may deem proper extending the time of payment of or
renewing or otherwise altering the terms of all or any of the Senior Debt or
affecting any of the Senior Debt Collateral, and may sell or surrender or
otherwise deal with any of the Senior Debt Collateral, and may release any
balance of funds of Borrower with such Senior Creditor, without notice to the
Seller and without in any way impairing or affecting this Agreement.
This Agreement shall be irrevocable and shall constitute a continuing
agreement of subordination and shall be binding on the Seller and its successors
and assigns, and shall inure to the benefit of (a) LaSalle and its successors
and assigns, until LaSalle has, in writing, notified the Seller that each of the
following has occurred: (i) all of the Senior LaSalle Debt has been Fully Paid;
(ii) the Loan Agreement has been terminated; and (iii) LaSalle has released its
security interest in all of LaSaIle's Collateral and (b) the ABIG Purchasers,
and their respective successors and assigns, until ABIG has, on behalf of the
ABIG Purchasers, in writing, notified the Seller that each of the following has
occurred: (iv) all of the Senior Subordinated Debt has been Fully Paid; (v) the
Note Purchase Agreement and all other agreements evidencing the Senior
Subordinated Debt have been terminated and (vi) the ABIG Purchasers have
released their security interests, if any, in the Senior Debt Collateral. Each
of the Senior Creditors may continue, without notice to the Seller, to lend
monies, extend credit and make other accommodations to or for the account of
Borrower in reliance on this Agreement. The Seller hereby agrees that all
payments received by any Senior Creditor may be applied, reversed, and
reapplied, in whole or in part, to any of the Senior Debt, without impairing or
affecting this Agreement.
6
The Seller hereby assumes responsibility for keeping itself informed of
the financial condition of Borrower, any and all endorsers and any and all
guarantors of the Senior Debt and the Junior Debt and of all other circumstances
bearing upon the risk of nonpayment of the Senior Debt and the Junior Debt that
diligent inquiry would reveal, and the Seller hereby agrees that no Senior
Creditor shall have any duty to advise the Seller of information known to such
Senior Creditor regarding such condition or any such circumstances or to
undertake any investigation not a part of its regular business routine. If any
Senior Creditor, in its sole discretion, undertakes at any time or from time to
time to provide any information of the type described herein to the Seller, such
Senior Creditor shall be under no obligation to subsequently update any such
information or to provide any such information to the Seller on any subsequent
occasion.
Each of the ABIG Purchasers authorizes ABIG to act on its behalf in all
matters relating to or arising out of this Agreement and agrees that ABIG shall
be entitled to receive notices hereunder on its behalf and that each of the
Seller, LaSalle and the Borrower is entitled to rely on any notice given or
action taken by ABIG on behalf of the ABIG Purchasers as if such notice had been
given or action been taken individually by each ABIG Purchaser.
No waiver shall be deemed to be made by either party of any of its
rights hereunder unless the same shall be in writing signed on behalf of that
party and each such waiver, if any, shall be a waiver only with respect to the
specific matter or matters to which the waiver relates and shall in no way
impair the rights of that party or the obligations of other party in any other
respect at any other time.
THIS AGREEMENT SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF
THE STATE OF OREGON.
To induce the Senior Creditors to accept this Agreement the Seller
irrevocably agrees that, subject to LaSalle's sole and absolute election, ALL
ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR
RELATED TO THIS AGREEMENT SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN
CLACKAMAS COUNTY OR MULTNOMAH COUNTY, STATE OF OREGON. THE SELLER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS
LOCATED WITHIN SAID COUNTIES AND STATE. THE SELLER HEREBY WAIVES ANY RIGHT IT
MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST THE
SELLER BY LASALLE IN ACCORDANCE WITH THIS PARAGRAPH. The Seller waives personal
service of any and all process, and consents that all such service of process
may be made by certified mail, return receipt requested, directed to the Seller
at the address indicated in the records of each of LaSalle and ABIG; and service
so made shall be complete five (5) days after the same has been deposited in the
U.S. mails as aforesaid.
7
EACH OF THE SELLER AND THE SENIOR CREDITORS HEREBY WAIVES ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY
TO THIS AGREEMENT.
8
IN WITNESS WHEREOF, this Amended and Restated Subordination Agreement
has been executed as of this ______ day of March, 1999.
SCITEX DIGITAL VIDEO, INC.
By:_____________________________________
Xxxx Xxxxxx
Title: Vice-Prcsident
Address: 000 Xxxxxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
BORROWER'S CONSENT
Borrower hereby consents to the foregoing Agreement (and the terms
thereof) and agrees to abide thereby and to keep, observe and perform the
several matters and things therein intended to be kept, observed and performed
by it, and specifically agrees not to make any payments to the terms of said
Agreement.
A breach of any of the terms and conditions of this consent shall
constitute an "Event of Default" under (i) the Loan and Security Agreement dated
December 10, 1998 between Borrower and LaSalle and (ii) the Senior Subordinated
Notes issued on February , 1999 by the Borrower to American Bankers Insurance
Group, Inc. and the other Purchasers party to the Purchase Agreement, as defined
therein.
BORROWER:
ACCOM, INC.
By__________________________________
Xxxxxx Xxxxxx
Chief Executive Officer
Accepted and acknowledged this __th day of March 1999.
LASALLE BUSINESS CREDIT, INC.
By:____________________________________
Xxxxxx X. Xxxxxxxxx
Vice President
Accepted and acknowledged this __th day of March 1999.
AMERICAN BANKERS INSURANCE GROUP, INC.
By:____________________________________
Name:
Title:
Accepted and acknowledged this __th day of March 1999.
_________________________________
Xxxx Xxxxxx
Accepted and acknowledged this __th day of March 1999.
_________________________________
Xxxxx Xxxxxx
Accepted and acknowledged this __th day of March 1999.
_________________________________
Xxxx Xxxxxxx
Accepted and acknowledged this __th day of March 1999.
_________________________________
Xxxxxx Xxxxxxxx
Accepted and acknowledged this __th day of March 1999.
_________________________________
Xxxxxx Xxxxxx
