Investor's Rights Agreement

Execution Copy
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INVESTOR'S RIGHTS AGREEMENT


This Investor's Rights Agreement (this "Agreement") is made and entered into as of December 10, 1998 by and among Accom, Inc., a Delaware corporation (the "Company"), and Michael Luckwell (the "Investor").


RECITALS


A. The Investor has agreed to acquire from the Company, and the Company has agreed to issue to the Investor, 2,500,000 shares of the Company's Common Stock (the "New Shares") on the terms and conditions set forth in the Stock Purchase Agreement dated as the date hereof by and between the Company and the Investor (the "Stock Purchase Agreement").


B. As a condition to the issuance of the New Shares the Investor, the Company has agreed to certain restrictions related to the ownership of stock of the Company.


AGREEMENT


NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, the parties hereto agree as follows:


1. Acquisition of Additional Shares, Voting, Transfer and Other Restrictions.


1.1 Certain Definitions. All capitalized terms used but not defined in this Agreement shall have the meaning as defined for such term in the Stock Purchase Agreement. In addition, as used in this Agreement, the following terms shall have the following respective meanings:


"Affiliate" of any Person, means (i) any other Person controlling, controlled by or under common control with such Person, (ii) any director or executive officer of such Person or of any Affiliate of such Person and (iii) any immediate family member of any director or executive officer of such Person or any director or executive officer of any Affiliate of such Person.


"Stock Purchase Closing" means the Closing as defined in the Stock Purchase Agreement.


"Beneficially Own" or "Beneficial Ownership" with respect to any securities shall have the meaning set forth in Rule 13d-3 under the Exchange Act.


"Common Stock" means the Company's common stock, $0.001 par value.


"Company Securities" mean any option, warrant, other right to acquire Voting Securities or other capital stock of the Company.


"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time.


"Investor Shares" means the New Shares plus all shares of Common Stock of the Company owned by the Investor on the date hereof.


"Person" means any natural person, corporation, partnership, limited liability company, firm, association, trust, "group" within the meaning of Section 13(d)(3) of the Exchange Act, government, governmental agency, or other legal entity, whether acting in an individual, fiduciary or other capacity.


"Permitted Transferee" means, with respect to each Person bound by the terms of this Agreement, (i) in respect of the Investor, any descendant, Affiliate or associate (as such term is defined in Rule 405 of the Securities Act) of the Investor or any other Permitted Transferee of such Affiliate; (ii) the Company; (iii) in the event of the dissolution, liquidation or winding up of any such Person that is a corporation or a partnership, the partners of a partnership that is such Person, the stockholder of a corporation that is such Person or a successor partnership all of the partners of which or a successor corporation all of the stockholder of which are the Persons who were the partners of such partnership or the stockholder of such corporation immediately prior to the dissolution, liquidation or winding up of such Person; (iv) a transferee by testamentary or intestate disposition; (v) a transferee by inter vivos transfer to the transferring Person's spouse, children and/or other lineal descendants; (vi) a trust transferee by inter vivos transfer, the beneficiaries of which are the transferring Person, spouse, children and/or other lineal descendants; (vii) a successor nominee or trustee for the beneficial owner of the shares for which such Person acts as nominee or trustee, as the case may be, or (viii) a Person who acquires all or substantially all of the stock or assets of such Person; provided, however, that any such Permitted Transferee shall have agreed in writing in form and substance satisfactory to the Company to be bound by, and hold the Registrable Securities acquired by it subject to, the terms of this Agreement.


"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder, as the same shall be in effect at the time.


"Total Voting Power" at any time means the total combined voting power in the general election of directors of all the Voting Securities then outstanding.


"Transfer" means any sale, transfer, pledge, encumbrance or other disposition.


"Voting Securities" means any shares of any class of capital stock of the Company which are then entitled to vote generally in the election of directors.


1.2 Acquisition of Additional Shares.


(a) The Investor covenants and agrees with the Company that, for so long as Junaid Sheikh is the Chief Executive Officer of the Company, the Investor will not, and will not permit any of its Affiliates, in either case without the prior written consent of the Company, to acquire Beneficial Ownership of any Company Securities other than the Investor Shares.


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(b) If at any time, as the result of any transaction or circumstances, the Investor and its Affiliates shall acquire Beneficial Ownership of any Company Securities other than the Investor Shares, inadvertently or otherwise, in violation of this Agreement, then the Investor shall promptly take such action as may be necessary or appropriate to divest such Beneficial Ownership of Company Securities.


1.3. Further Restrictions on Conduct. The Investor covenants and agrees with the Company that, for so long as Junaid Sheikh is the Chief Executive Officer of the Company, neither it nor any of its Affiliates shall:


(a) initiate, commence or propose, directly or indirectly, any "solicitation" of "proxies" to vote, or seek to influence any Person with respect to the voting of, any Company Securities, in connection with a "solicitation" or "election contest" (as such terms are defined or used in Regulation 14A under the Exchange Act) with respect to the election or removal of the members of the Board. Notwithstanding the foregoing, or any other provision of this Agreement, nothing in this Agreement shall prevent the Investor from voting the Investor Shares in connection with any matter (including the election or removal of members of the Board) however the Investor decides to vote such Investor Shares;


(b) other than a transaction permitted by Section 1.4(b)(iii) hereof, solicit, offer, seek or propose to acquire shares of Company Securities in excess of the number of shares permitted by this Agreement, whether directly or indirectly through a tender offer, proxy or consent solicitation, exchange offer, merger proposal or otherwise; or


(c) become a member of a "group" within the meaning of Section 13(d)(3) of the Exchange Act with any person other than the Investor and its Affiliates.


1.4 Restrictions on Transfer. The Investor covenants and agrees with the Company that:


(a) until the first anniversary of the date of this Agreement, the Investor will not Transfer any of the Investor Shares to any Person other than a Permitted Transferee except through:


(i) a Transfer through a bona fide underwritten public offering registered under the Securities Act effected in accordance with the provisions of Section 2.5 hereof, with an underwriter or underwriters and pursuant to procedures reasonably acceptable to the Company, intended to achieve a broad public distribution of the Investor Shares covered thereby; or


(ii) Transfers in normal and customary open-market transactions on a national securities exchange, the Nasdaq National Market or an over-the counter market, provided that the total number of Investor Shares so transferred by the Investor in any one-week period shall not exceed the greater of (a) one percent (1%) of the outstanding shares of the Common Stock or (b) the average weekly trading volume for Common Stock for the four weeks immediately preceding the week in which the relevant Transfer occurs.


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(b) after the first anniversary of the date of this Agreement, the Investor will not Transfer any Investor Shares except through:


(i) a Transfer through a bona fide underwritten public offering registered under the Securities Act effected in accordance with the provisions of Section 2 hereof, with an underwriter or underwriters and pursuant to procedures reasonably acceptable to the Company, intended to achieve a broad public distribution of the Investor Shares covered thereby;


(ii) Transfers in normal and customary open-market transactions on a national securities exchange, the Nasdaq National Market or an over-the counter market, provided that the total number of Investor Shares so transferred by the Investor in any one-week period shall not exceed the greater of (a) one percent (1%) of the outstanding shares of the Common Stock or (b) the average weekly trading volume for Common Stock for the four weeks immediately preceding the week in which the relevant Transfer occurs;


(iii) a Transfer of all or substantially all of the Investor Shares in a transaction involving the opportunity for all holders of Company Securities (including the Investor) to dispose of all or a proportionate part of such Company Securities for the same consideration as, and on terms and conditions not materially less favorable than those available to the Investor; or


(iv) a Transfer by the Investor to a Permitted Transferee.


2. Registration Rights.


2.1 Definitions. For purposes of this Section 2:


(a) Registration. The terms "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and the declaration or ordering of effectiveness of such registration statement


(b) Registrable Securities. The term "Registrable Securities" means (i) the Investor Shares and (ii) any Common Stock or other shares of capital stock of the Company issued by way of stock dividend or stock split or other distribution, recapitalization or reclassification with respect to, or in exchange for, or in replacement of, any other Registrable Securities. Notwithstanding the foregoing, "Registrable Securities" shall exclude any Registrable Securities sold by a person in a transaction in which rights under this Section 2 are not assigned in accordance with this Agreement or any Registrable Securities sold in a public offering, whether sold pursuant to Rule 144 promulgated under the Securities Act, or in a registered offering, or otherwise.


(c) Registrable Securities Then Outstanding. The number of shares of "Registrable Securities then outstanding" shall mean the number of shares of Common Stock of the Company that are Registrable Securities and are then issued and outstanding.


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(d) Holder. For purposes of this Section 2, the term "Holder" means any person owning of record Registrable Securities that have not been sold to the public or pursuant to Rule 144 promulgated under the Securities Act or any permitted assignee of record of such Registrable Securities to whom rights under this Section 2 have been duly assigned in accordance with this Agreement.


(e) SEC. The term "SEC" or "Commission" means the U.S. Securities and Exchange Commission.


2.2 Demand Registration.


(a) Request by Holders. If the Company shall at any time after the first anniversary of the date hereof receive a written request from any of the Holders of the Registrable Securities then outstanding that the Company file a registration statement under the Securities Act covering the registration of Registrable Securities pursuant to this Section 2.2, then the Company shall, within fifteen (15) business days of the receipt of such written request, give written notice of such request ("Request Notice") to all Holders, and effect, as soon as practicable, the registration under the Securities Act of all Registrable Securities that Holders request to be registered and included in such registration by written notice given such Holders to the Company within fifteen (15) days after receipt of the Request Notice, subject only to the limitations of this Section 2.2; provided that the Registrable Securities requested by all Holders to be registered pursuant to such request must be at least fifty percent (50%) of all Registrable Securities then outstanding; and provided further that the Company shall not be obligated to effect any such registration if the Company has, within the six (6) month period preceding the date of such request, already effected a registration under the Securities Act pursuant to this Section 2.2, or in which the Holders had an opportunity to participate pursuant to the provisions of Section 2.3 if at least 50% of the number of Registrable Securities as to which registration was requested by the Holders were registered therein.


(b) Underwriting. If the Holders initiating the registration request under this Section 2.2 ("Initiating Holders") intend to distribute the Registrable Securities covered by their request by means of an underwriting, then they shall so advise the Company as a part of their request made pursuant to this Section 2.2 and the Company shall include such information in the written notice referred to in subsection 2.2(a). In addition, the right of any Holder to include his Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting by the Company and reasonably acceptable to a majority of the Holders participating in such offering. Such underwriting agreement shall include a market stand-off agreement of up to 180 days if required by such underwriter. Notwithstanding any other provision of this Section 2.2, if the underwriter advises the Company in writing that marketing factors require a limitation of the number of securities to be underwritten then the Company shall so advise all Holders of Registrable Securities which would otherwise be registered and underwritten pursuant hereto, and the


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number of Registrable Securities that may be included in the underwriting shall be reduced as required by the underwriter and allocated among the Holders of Registrable Securities on a pro rata basis according to the number of Registrable Securities then outstanding held by each Holder requesting registration (including the initiating Holders). If any such exclusion causes less than 50% of the number of shares of Registrable Securities as to which registration was requested by the Holders to be registered, such registration may be withdrawn at the request of a majority of the Holders of Registrable Securities to be included in such offering and, if so withdrawn within ten (10) days after such Holders are notified of such exclusion, such registration shall not constitute a request for registration under Section 2.2(e). Any Registrable Securities excluded and withdrawn from such underwriting shall be withdrawn from the registration.


(c) Maximum Number of Demand Registrations. The Company shall be obligated to effect only two (2) such registrations pursuant to this Section 2.2.


(d) Deferral. Notwithstanding the foregoing, if the Company shall furnish to Holders requesting the filing of a registration statement pursuant to this Section 2.2, a certificate signed by the President or Chief Executive Officer of the Company stating that in the good faith judgment of the Board, it would be materially detrimental to the Company for such registration statement to be filed, then the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating Holders; provided, however, that the Company may not utilize this right more than once in any twelve (12) month period.


(e) Expenses. All expenses incurred in connection with any registration pursuant to this Section 2.2, including without limitation all federal and state securities and "blue sky" registration fees, filing and qualification fees, printer's and accounting fees, and fees and disbursements of counsel for the Company (but excluding underwriters' discounts and commissions relating to shares sold by the Holders and legal fees of counsel for any of the Holders), shall be borne by the Company. Each Holder participating in a registration pursuant to this Section 2.2 shall bear such Holder's proportionate share (based on the total number of shares sold in such registration other than for the account of the Company) of all discounts, commissions or other amounts payable to underwriters or brokers. In addition, each Holder shall bear such Holders' legal fees, in connection with such offering by the Holders. Notwithstanding the foregoing, the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to this Section 2.2 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered, unless the Holders of a majority of the Registrable Securities to be registered pursuant to such request agree that such registration constitutes the use by the Holders of one (1) demand registration pursuant to this Section 2.2 (in which case such registration shall also constitute the use by all Holders of Registrable Securities of one (l) such demand registration); provided, further, however, that if at the time of such withdrawal, such Holders have learned of a material adve ...