AIRPORT SYSTEMS INTERNATIONAL, INC.
INVESTOR'S RIGHTS AGREEMENT
THIS INVESTOR'S RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of the 7th day of February, 2000, by and among AIRPORT SYSTEMS
INTERNATIONAL, INC., a Kansas corporation (the "Company"), and KCEP VENTURES II,
L.P., a Kansas limited partnership (the "Investor").
RECITALS
A. The Company proposes to sell and issue 198,413 shares of its common
stock (the "Initial Shares"), a convertible subordinated debenture in the amount
of $500,000 (the "Convertible Debenture"), and a warrant to purchase 45,635
shares of its common stock (the "Warrant") (the Initial Shares, the Convertible
Debenture and the Warrant are collectively referred to herein as the
"Securities") pursuant to that certain Investment Agreement of even date
herewith (the "Investment Agreement").
B. As a condition of entering into the Investment Agreement, the Investor
has requested that the Company grant to it certain rights (including, without
limitation, registration rights) as set forth below.
SECTION 1
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Board of Directors" shall mean the Company's board of
directors, as it may exist from time to time.
(b) "Closing" shall mean the date as set forth in the Investment
Agreement.
(c) "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
(d) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to
time.
(e) "DCI Stockholders" shall mean Xxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxx
and Xxxxxxx X. Xxxx who, by virtue of agreements with the Company, are
entitled to include their securities in certain registrations hereunder.
(f) "Registrable Securities" shall mean (i) any Initial Shares, (ii)
shares of common stock issued or issuable pursuant to the conversion of
the Convertible Debenture (the "Debenture Shares"), (iii) shares of common
stock issued or issuable pursuant to the exercise of the Warrant, and (iv)
any common stock issued as a dividend or other distribution with respect
to or in exchange for or in replacement of the shares of common stock of
the Company referenced in (i)-(iii) above; provided, however, that
Registrable Securities shall not include any shares of common stock that
have previously been registered or which have been sold to the public.
(g) The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the
effectiveness of such registration statement.
(h) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company,
blue sky fees and expenses, and expenses of any regular or special audits
incident to or required by any such registration (including all pre- and
post-effective amendments to the registration statements), and expenses
associated with the listing for quotation on the American Stock Exchange
of the Registrable Securities, but shall not include Selling Expenses and
fees and disbursements of counsel for the Investor, except for fees and
disbursements of counsel for the Investor or the Stockholders as provided
in Section 1.4 hereof, and shall not include the compensation of regular
employees of the Investor or the Stockholders, which shall be paid in any
event by the Investor or the Stockholders.
(i) "Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time,
or any similar successor rule that may be promulgated by the Commission.
(j) "Rule 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time,
or any similar successor rule that may be promulgated by the Commission.
(k) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to
time.
(l) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to a sale of Registrable Securities, fees
and disbursements of counsel for the Investor or the Stockholders, any
fees and expenses incurred in order to amend or supplement the
registration statement or prospectus to reflect transferees, donees, or
pledgees, or any costs or
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expenses related to any road shows or similar sales efforts on behalf of
the Investors or Stockholders.
(m) "Stockholders" shall mean the Investor and any persons or
entities to whom the registration rights conferred by this Agreement have
been transferred in compliance with Section 1.10 hereof.
1.2 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. If the Company shall receive at any
time a written request from the Investor that the Company effect any
registration with respect to at least thirty percent (30%) of the
Registrable Securities, the Company will:
(i) promptly give written notice of the proposed registration
to all Stockholders and the DCI Stockholders; and
(ii) as soon as practicable, use commercially reasonable
efforts to effect such registration (including, without limitation,
filing post-effective amendments, obtaining appropriate
qualifications under applicable blue sky or other state securities
laws, and ensuring appropriate compliance with the Securities Act)
as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such
request by the Investor, together with all or such portion of the
Registrable Securities of any Stockholder joining in such request as
are specified in a written request received by the Company within
thirty (30) days after the written notice from the Company referred
to in subclause (i) above is mailed or delivered.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 1.2:
(A) (i) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process
in effecting such registration, qualification, or compliance, unless
the Company is already subject to service in such jurisdiction and
except as may be required by the Securities Act, or (ii) in any
particular jurisdiction in which the Company is not qualified to do
business or would be required to do business as a foreign
corporation and where it would not otherwise be required to so
qualify, or (iii) subject itself to taxation in any such
jurisdiction;
(B) After the Company has initiated two such registrations
pursuant to this Section 1.2(a) (counting for these purposes only
registrations which have been declared or ordered effective and
registrations which have been withdrawn by the Investor or the
Stockholders and as to which the Investor or any other Stockholder
has not elected to bear the Registration Expenses pursuant to
Section 1.4); or
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(C) If the Company is unable to obtain the commitment of an
underwriter to firmly underwrite the offering.
(b) FILING OF REGISTRATION STATEMENT. Subject to the foregoing
clauses (A) through (C), the Company shall file a registration statement
covering the Registrable Securities so requested to be registered as soon
as practicable after receipt of the request or requests of the Investor;
PROVIDED, HOWEVER, the Company: (i) at its sole discretion, may offer a
right to participate in such registration statement at such time to the
DCI Stockholders, (ii) shall be entitled to postpone for a reasonable
period of time, but not in excess of ninety (90) days, the filing of any
registration statement otherwise required to be prepared pursuant to this
Section 1.2 if Company is, at such time, conducting or about to conduct an
underwritten public offering of equity securities (or securities
convertible into equity securities) and is advised in writing by its
managing underwriter that such offering would in its opinion be adversely
affected by the registration so requested, and (iii) shall be entitled to
postpone such required registration for up to ninety (90) days if the
Company determines reasonably and in good faith, in view of the
advisability of deferring public disclosure of material corporate
developments or other information that such registration and the
disclosure required to be made pursuant thereto would not be in the best
interest of the Company at such time.
The registration statement filed pursuant to the request of the Investor
may, subject to the provisions of Sections 1.2(b) and 1.12 hereof, include other
securities of the Company, with respect to which registration rights have been
granted, and may include securities of the Company being sold for the account of
the Company.
(c) PROCEDURES. If Stockholders or the DCI Stockholders shall
request inclusion in any registration pursuant to this Section 1.2, the
Company shall offer to include such securities in the underwriting and may
condition such offer on its acceptance of the further applicable
provisions of this Section 1 (including Section 1.12 hereof). The Company
shall (together with all Stockholders) enter into an underwriting
agreement in customary form with the representative of the underwriter or
underwriters selected by the Company for such underwriting.
Notwithstanding any other provision of this Section 1.2, if the
representative of the underwriters advises the Investor in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the number of shares to be included in the underwriting or
registration shall be allocated as set forth in Section 1.12 hereof. If a
person who has requested inclusion in such registration as provided above
does not agree to the terms of any such underwriting, such person shall be
excluded therefrom by written notice from the Company or the underwriter.
Any Registrable Securities or other securities excluded shall also be
withdrawn from such registration. If shares are so withdrawn from the
registration and if the number of shares to be included in such
registration was previously reduced as a result of marketing factors
pursuant to this Section 1.2(c), then the Company shall offer to all
Stockholders who have retained rights to include securities in the
registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares so
withdrawn, with such shares to be allocated among such Stockholders
requesting additional inclusion in accordance with Section 1.12 hereof.
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1.3 COMPANY REGISTRATIONS.
(a) If the Company shall determine to register any of its securities
either for its own account or the account of a security holder exercising
demand registration rights (other than pursuant to Section 1.2 hereof),
other than a registration relating solely to employee benefit plans, a
registration relating solely to a Rule 145 transaction, or a registration
on any registration form that does not permit secondary sales, the Company
will:
(i) promptly give to all Stockholders written notice thereof;
and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), except as
set forth in Section 1.3(b) and Section 1.12 hereof, and in any
underwriting involved therein, all the Registrable Securities
specified in a written request or requests, made by any Stockholder
and received by the Company within thirty (30) days after the
written notice from the Company described in clause (i) above is
mailed or delivered by the Company. Such written request may specify
all or a part of a Stockholder's Registrable Securities.
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Stockholders as a part of the written notice
given pursuant to Section 1.3(a)(i) hereof. In such event, the right of
any Stockholder to registration pursuant to this Section 1.3 shall be
conditioned upon such Stockholder's participation in such underwriting and
the inclusion of such Stockholder's Registrable Securities in the
underwriting to the extent provided herein. All Stockholders proposing to
distribute their securities through such underwriting shall (together with
the Company) enter into an underwriting agreement in customary form with
the representative of the underwriter or underwriters selected by the
Company.
Notwithstanding any other provision of this Section 1.3, if the
representative of the underwriters advises the Company in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may exclude all Registrable Securities from, or limit the number
of Registrable Securities to be included in, the registration and underwriting.
The Company shall so advise all Stockholders of securities holders requesting
registration, and the number of shares that are entitled to be included in the
registration and underwriting (other than on behalf of the Company) as set forth
in Section 1.12 hereof. If any person does not agree to the terms of any such
underwriting, he shall be excluded therefrom by written notice from the Company
or the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration and if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an
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aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion in accordance
with Section 1.12 hereof.
1.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 1.3 hereof, and the two registrations pursuant to Section 1.2 hereof
shall be borne by the Company; provided, however, that if the Investor or any
other Stockholder pays all the Registration Expenses for any registration
proceeding begun pursuant to Section 1.2 hereof which is subsequently withdrawn
by the Investor, such registration proceeding shall not be counted as a
requested registration pursuant to Section 1.2 hereof. Notwithstanding the
foregoing, in the event that a withdrawal is based upon material adverse
information relating to the Company that is different from the information known
or available (upon request from the Company or otherwise) to the Investor at the
time of its request for registration under Section 1.2 hereof, the Company will
bear the Registration Expenses, and such registration shall not be treated as a
counted registration for purposes of Section 1.2 hereof, even though the
Investor does not bear the Registration Expenses for such registration. All
Selling Expenses relating to securities so registered shall be borne by the
holders of such securities pro rata on the basis of the amount of securities so
registered on their behalf. The Company shall not, under any circumstances, be
required in connection with a registration hereunder, to (x) conduct any road
shows or similar sales efforts for the Investor, (y) pay any expenses to the
Investor for any road shows or similar sales efforts, or (z) pay any fees and
disbursements of counsel for the Investor.
1.5 REGISTRATION PROCEDURES. In the case of each registration effected by
the Company pursuant to Section 1, the Company will keep each Stockholder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
eighty (180) days or until the Stockholders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs; provided, however, that such one hundred eighty
(180) day period shall be extended for a period of time equal to the
period the Stockholder refrains from selling any securities included in
such registration at the request of an underwriter of common stock (or
other securities) of the Company.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as a
Stockholder or Underwriter from time to time may reasonably request in
order to facilitate the public offering of such securities;
(d) Notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the
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Securities Act of the happening of any event as a result of which 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 required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the 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 a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such shares, 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 or incomplete in the light
of the circumstances then existing; and
(e) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 1.2 hereof, the Company
will enter into an underwriting agreement reasonably necessary to effect
the offer and sale of common stock, provided such underwriting agreement
contains customary indemnification provisions and provided further that if
the underwriter so requests the underwriting agreement will contain
customary contribution provisions.
1.6 INDEMNIFICATION.
(a) The Company will indemnify the Investor, each of its officers,
directors and partners, legal counsel, and accountants and each person
controlling the Investor within the meaning of section 15 of the
Securities Act, to the extent any registration, qualification, or
compliance is effected on its behalf, pursuant to this Section 1, and each
underwriter, if any, and each person who controls within the meaning of
section 15 of the Securities Act any underwriter, against all expenses,
claims, losses, damages, and liabilities (or actions, proceedings, or
settlements in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like) incident to any
such registration, qualification, or compliance, or based on any omission
(or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of the Securities Act, the Exchange Act,
any state securities laws or any rule or regulation thereunder applicable
to the Company and relating to action or inaction required of the Company
in connection with any such registration, qualification, or compliance,
and will reimburse the Investor, each of its officers, directors,
partners, legal counsel, and accountants and each person controlling the
Investor, each such underwriter, and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such claim,
loss, damage, liability, or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability, or expense arises out of or is based on any untrue statement or
omission to the Company by the Investor, any Stockholder or any
underwriter and stated to be specifically for use therein. It is agreed
that the indemnity agreement contained in this Section 1.6(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of
the Company (which consent shall not be unreasonably withheld).
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(b) The Investor will, to the extent Registrable Securities, are
included in the securities as to which such registration, qualification,
or compliance is being effected, indemnify the Company, each of its
directors, officers, stockholders, legal counsel, and accountants and each
underwriter, if any, of the Company's securities covered by a registration
statement, each person who controls the Company or such underwriter within
the meaning of section 15 of the Securities Act, and each of their
officers, directors, and partners, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering
circular, or other document, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and will reimburse the
Company, its directors, officers, partners, legal counsel, and
accountants, persons, underwriters, or control persons for any legal and
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability, or action, in each case
to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in
such registration statement, prospectus, offering circular, or other
document in reliance upon and in conformity with information provided to
the Company by the Investor and stated to be specifically for use therein;
PROVIDED, however, that the obligations of the Investor hereunder shall
not apply to amounts paid in settlement of any such claims, losses,
damages, or liabilities (or actions in respect thereof) if such settlement
is effected without the consent of the Investor (which consent shall not
be unreasonably withheld).
(c) Each party entitled to indemnification under this Section 1.6
(the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the
defense of such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such
claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld), and
the Indemnified Party may participate in such defense at such party's
expense, and provided further that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 1, to the extent such failure is not
prejudicial. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.6 is held
by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense
referred to herein, then the Indemnifying Party, in lieu of indemnifying
such Indemnified Party hereunder, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party on the one hand
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and of the Indemnified Party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party and of the Indemnified Party
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Indemnifying
Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent
such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering
are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
1.7 INFORMATION BY STOCKHOLDER. Each Stockholder of Registrable Securities
shall furnish to the Company such information regarding such Stockholder and the
distribution proposed by such Stockholder as the Company may reasonably request
and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in this Section 1.
1.8 LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES. Without the
consent of the Investor and except for the rights granted to the DCI
Stockholders, the Company shall not grant any registration rights which are
senior to the rights of the Investor hereunder.
1.9 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission that may permit the sale of the
Registrable Securities to the public without registration, the Company agrees to
use its best efforts to:
(a) Make and keep public information regarding the Company
available, as those terms are understood and defined in Rule 144 under the
Securities Act, at all times;
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act at any time;
(c) So long as the Investor owns any Registrable Securities, furnish
to the Investor forthwith upon written request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144,
and of the Securities Act and the Exchange, a copy of the most recent
annual or quarterly report of the Company, and such other reports and
documents so filed as the Investor may reasonably request in availing
itself of any rule or regulation of the Commission allowing the Investor
to sell any such securities without registration.
1.10 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register securities granted to the Investor by the Company under
this Section 1 may be transferred or assigned by the Investor only to a
transferee or assignee of not less than fifty-one percent (51%) of the
Registrable Securities (as presently constituted and subject to subsequent
adjustments for stock splits, stock dividends, reverse stock splits, and the
like), provided that the
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Company is given written notice at the time of or within a reasonable time after
such transfer or assignment, stating the name and address of the transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, and, provided further, that the
transferee or assignee of such rights assumes the obligations of the Investor
under this Agreement in a writing delivered to the Company. Upon consummation of
such transfer or assignment, the Investor shall no longer be able to exercise
the rights and shall not incur further obligations attributed to the "Investor"
hereunder.
1.11 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an
underwriter of common stock (or other securities) of the Company, the
Stockholders shall not sell or otherwise transfer or dispose of any common stock
(or other securities) of the Company held by such holder (other than those
included in the registration) during the one hundred eighty (180) day period
following the effective date of a registration statement of the Company filed
under the Securities Act; provided, that all officers and directors of the
Company and all other persons holding five percent (5%) or more of the Company's
outstanding stock enter into similar agreements and provided further, that the
Stockholders shall not be so prohibited from selling or otherwise transferring
or disposing of any common stock (or other securities) of the Company if a
Stockholder seeks inclusion in such registration but is unable to participate as
a result of the limitations provided in Section 1.3(b) and Section 1.12 of this
Agreement.
The obligations described in this Section 1.11 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares (or securities) subject to
the foregoing restriction until the end of such one hundred eighty (180) day
period.
1.12 ALLOCATION OF REGISTRATION OPPORTUNITIES. In any circumstance in
which all of the Registrable Securities and securities of the Company held by
others who have been granted registration rights, including the DCI
Stockholders, (the "Other Shares") are the subject of a request to be included
in a registration and cannot be so included as a result of limitations on the
aggregate number of shares of Registrable Securities and Other Shares that may
be so included, the number of shares of Registrable Securities and Other Shares
that may be so included shall be allocated among those requesting inclusion of
shares as follows:
(a) Upon a request for registration by the Investor pursuant to
Section 1.2, the Other Shares to be included in such registration shall be
reduced pro rata among the holders of such shares to the extent necessary
to accommodate the sale of ALL of the Registrable Securities by the
Investor and Stockholders, even if such reduction may eliminate the
opportunity for the sale of Other Shares. If, after the Other Shares are
eliminated from such registration, limitations remain on the Registrable
Securities to be included in such registration, the Registrable Securities
to be included shall be reduced on a pro rata basis among the Investor and
the Stockholders.
(b) Upon a registration proposed by another holder of Company
securities pursuant to Section 1.3, the Registrable Securities to be
included in such registration shall be
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reduced pro rata among the Investor and the Stockholders to the extent
necessary to accommodate the sale of ALL of the Other Shares by such other
holder, even if such reduction may eliminate the opportunity for the sale
of the Registrable Securities.
(c) Upon a registration proposed by the Company pursuant to Section
1.3, the number of Registrable Securities and Other Shares to be included
in such registration shall, AFTER the inclusion of all shares proposed for
sale by the Company, be allocated pro rata on the basis of the number of
shares of Registrable Securities and Other Shares that would be held by
the Investor, the holders, and stockholders of Other Shares, assuming
conversion; provided, however, so that such allocation shall not operate
to reduce the aggregate number of Registrable Securities to be included in
such registration below twenty-five percent (25%) of the total amount of
securities included in such offering. If the Investor, the Stockholder, or
other security holders do not request inclusion of the maximum number of
shares of Registrable Securities and Other Shares allocated to him
pursuant to the above-described procedure, the remaining portion of his
allocation shall be reallocated among those requesting Stockholders whose
allocations did not satisfy their requests pro rata on the basis of the
number of shares of Registrable Securities and Other Shares which would be
held by such Stockholders, assuming conversion, and this procedure shall
be repeated until all of the shares of Registrable Securities and Other
Shares which may be included in the registration on behalf of the
Stockholders have been so allocated.
(d) The Company shall not limit the number of Registrable Securities
to be included in a registration pursuant to this Agreement in order to
include shares held by stockholders with no registration rights. To
facilitate the allocation of Securities in accordance with the above
provisions, the Company or the Underwriters may round the number of
Securities allocated to any Stockholder to the nearest 100 Securities.
1.13 DELAY OF REGISTRATION. The Investor shall not have any right to take
any action to restrain, enjoin, or otherwise delay any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.14 TERMINATION OF REGISTRATION RIGHTS. The right of the Investor to
request registration or inclusion in any registration pursuant to Section 1.2 or
1.3 hereof shall terminate on the closing of an acquisition of the Registrable
Securities in exchange for publicly traded stock of another entity.
SECTION 2
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees, so long as the Investor owns
Securities or Registrable Securities representing not less than fifty percent
(50%) of the total potential amount of Registrable Securities, as follows:
2.1 BASIC FINANCIAL INFORMATION. The Company will furnish to the Investor
the following upon request:
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(a) Within 90 days after the end of each fiscal year of the Company,
a balance sheet of the Company as of the end of such fiscal year and
statements of income and of changes in financial condition of the Company
for such year (A) prepared in accordance with generally accepted
accounting principles, (B) audited by an independent accounting firm
reasonably acceptable to Investor, and (C) including such other
information as is necessary to verify the financial conditions of the
Company.
(b) Within 30 days after the end of each calendar month (other than
a calendar month during which any fiscal quarter or fiscal year of the
Company ends), an unaudited balance sheet of the Company as of the end of
such month and unaudited statements of income and of changes in financial
condition of the Company for such month and for the current fiscal year to
the end of such month;
(c) As soon as available, but in any event within 30 days after
commencement of each new fiscal year, a business plan that shall contain
projected quarterly and annual financial statements and quarterly and
annual operating and capital budgets for such fiscal year, which such plan
shall be submitted to Company's Board of Directors for approval within
such time; and
(d) With reasonable promptness, such other information and financial
data concerning the Company as Investor may reasonably request, including,
without limitation, quarterly and annual budgets and summaries of
financial plans.
2.2 FUTURE INVESTMENTS. In the event Company shall commence a private
equity financing within five years subsequent to the date of this Agreement,
Investor shall have the right to purchase the number of shares necessary to
maintain its percentage interest in the common stock of the Company.
SECTION 3
BOARD REPRESENTATION
3.1 BOARD OF DIRECTORS. So long as the Convertible Debenture purchased by
Investor pursuant to the Investment Agreement remains outstanding and is not
converted into shares of common stock of the Company, and thereafter so long as
KCEP Ventures II, L.P. beneficially owns Securities or Registrable Securities
representing not less than fifty percent (50%) of the total potential amount of
Registrable Securities, the Board of Directors of the Company shall nominate and
recommend to the stockholders of the Company for election a person designated by
KCEP Ventures II, L.P. (and reasonably acceptable to the Board of Directors) to
be elected to the Board of Directors, who shall serve in accordance with the
provisions of the Articles of Incorporation and the Bylaws of the Company. KCEP
Ventures II, L.P.'s designated director may choose to serve on, and shall then
be appointed to, the Audit Committee of the Board of Directors of the Company.
KCEP Ventures II, L.P.'s designated director shall receive the same fees, and
shall be insured by the same director and officer insurance policy paid for by
the Company, as current members of the Board of Directors of the Company and
shall be allowed to participate in the option program on the same terms and
conditions as other members of the Board of Directors of the Company.
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SECTION 4
MISCELLANEOUS
4.1 GOVERNING LAW. This Agreement is delivered and shall be construed in
accordance with the laws of the State of Kansas, without regard to the conflicts
of laws provisions thereof.
4.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
4.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and
supersedes all prior agreements between the parties with respect to the subject
matter hereof and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated, except by a written instrument signed
by the Company and the Stockholders owning at least a majority of the
Registrable Securities (on an as-converted basis) not resold to the public, and
any such amendment, waiver, discharge or termination shall be binding on all the
Stockholders.
4.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally by hand or nationally
recognized courier or sent via facsimile addressed (a) if to Investor, at 000
Xxxx 00xx Xxxxxx, Xxxxxx Xxxx, Xxxxxxxx 00000, facsimile number (000) 000-0000,
Attention: Xxxxx X. Xxxxxxx, or at such other address as the Investor or
permitted assignee shall have furnished to the Company in writing with a copy
to: Xxxxxxx, Mag & Fizzell, P.C., 0000 Xxxxxx, Xxxxxx Xxxx, Xxxxxxxx, Attention:
Xxxx Xxxxxxxxx, Esq., or (b) if to the Company, at 00000 Xxxx 00xx Xxxxxx,
Xxxxxxxx Xxxx, Xxxxxx, 00000, facsimile number (000) 000-0000, Attention: Xxxxx
Xxxxx, or at such other address as the Company shall have furnished to the
Investor in writing with a copy to Xxxxxxxxx Xxxxxxx Xxxxx Xxxxxx LLP, 0000 Xxxx
Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxxxxxxx 00000, Attention: Xxxxxx X. Xxxxxx,
Esq. All such notices and other written communications shall be effective (i) if
mailed, five (5) days after mailing, (ii) if delivered, upon delivery and (iii)
if sent via facsimile, upon confirmation of receipt.
4.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right, power
or remedy accruing to the Investor, upon any breach or default of the Company
under this Agreement shall impair any such right, power or remedy of the
Investor nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default therefore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of the
Investor of any breach or default under this Agreement or any waiver on the part
of the Investor of any provisions or conditions of this Agreement must be made
in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement or by law or otherwise
afforded to the Investor, shall be cumulative and not alternative.
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4.6 SEPARABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
4.7 INFORMATION CONFIDENTIAL. The Investor acknowledges that the
information received by it pursuant hereto may be confidential and for its use
only, and it will not use such confidential information in violation of the
Exchange Act or reproduce, disclose or disseminate such information to any other
person (other than its employees or agents having a need to know the contents of
such information, and its attorneys), except in connection with the exercise of
rights under this Agreement, unless the Company has made such information
available to the public generally or the Investor is required to disclose such
information by a governmental body.
4.8 TITLES AND SUBTITLES. The titles of the paragraphs and sub-paragraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Investors Rights
Agreement effective as of the day and year first above written.
AIRPORT SYSTEMS INTERNATIONAL, INC.
By:_________________________________
Xxxxx X. Xxxxx
President
KCEP VENTURES II, L.P.
By: KCEP II, L.C., its General Partner
By:_________________________________
Name:____________________________
Title:___________________________
