INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT
(this “IR Agreement”)
is made and entered into as of the _____ day of August, 2010, by and between XXX
XXXXXXXXXXX, a Maryland corporation (“Investor”), and
DOCUMENT CAPTURE TECHNOLOGIES, INC., a Delaware corporation (“Company”).
WITNESSETH:
WHEREAS, Company and Investor
are parties to that certain Share Purchase Agreement, of even date herewith (the
“Purchase Agreement”),
which provides for, among other things, the issuance and sale by Company to
Investor of 3,861,004 shares of Company’s common stock, par value $0.001 per
share (the “Shares”) for an
aggregate purchase price of $4,000,000; and
WHEREAS, in order to induce
Company to enter into the Purchase Agreement and to induce Investor to invest
funds in Company pursuant to the Purchase Agreement, Company has agreed to
provide Investor with, among other things, certain rights to register the Shares
and other shares of common stock of Company issuable to Investor, to receive
certain information from Company, and to acquire up to an additional $4,000,000
of common stock of Company under certain circumstances;
NOW, THEREFORE, for and in
consideration of the mutual covenants, agreements and warranties herein
contained, the parties hereby agree as follows:
ARTICLE
1
CERTAIN
DEFINITIONS
For
purposes of this IR Agreement, the following terms shall have the meanings
specified below:
“Additional Shares of Common
Stock” means all shares of Common Stock issued by Company, or deemed
issued as provided in Section 4.5(f)
and Section 4.7(b),
whether or not subsequently reacquired or retired by Company, other
than: (a) any shares of Common Stock (or options, warrants or
rights therefor) granted or issued hereafter to employees, officers, directors,
contractors, consultants or advisers to, Company or any subsidiary pursuant to
incentive agreements, stock purchase or stock option plans, stock bonuses or
awards, warrants, contracts or other arrangements that are approved by the
Company board of directors; (b) any shares of Common Stock (or options,
warrants or rights therefor) issued or issuable to parties that are providing
Company with equipment leases, real property leases, loans, credit lines or
similar transactions, under arrangements, in each case, approved by the Company
board of directors; (c) shares of Common Stock issued pursuant to the
acquisition of another corporation or entity by Company pursuant to a
consolidation, merger, purchase of all or substantially all of the assets, or
other reorganization in which Company acquires, in a single transaction or
series of related transactions, all or substantially all of the assets of such
other corporation or entity or more than 50% of the voting power of such other
corporation or entity or more than 50% of the equity ownership of such other
entity; provided that such
transaction or series of transactions has been approved by the Company board of
directors; and provided, further, that such
other corporation or entity is not an Affiliate of Company or “controlled” (as
such term is used in the definition of “Affiliate” herein) directly or
indirectly by one or more officers, directors or employees of Company;
(d) shares of Common Stock issuable upon exercise of any options, warrants
or rights to purchase any securities of Company outstanding as of the date
hereof; or (e) shares of Common Stock (or options, warrants or rights
therefor) issued by reason of a dividend, stock split, split-up or other
distribution on shares of Common Stock that is covered by subsections (a)
through (d) of Section 4.5.
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“Affiliate” means, as
to any Person, (a) any subsidiary of such Person, and (b) any other
Person which, directly or indirectly, controls, is controlled by, or is under
common control with, such Person and includes, in the case of a Person other
than an individual, each officer, director, general partner or member of such
Person, and each Person who is the beneficial owner of 5% or more of such
Person’s outstanding stock having ordinary voting power of such
Person. For the purposes of this definition, “control” means the
possession of the power to direct or cause the direction of management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
“Aggregate Consideration
Received” by Company for any issue or sale (or deemed issue or sale) of
securities shall: (a) to the extent it consists of cash, be
computed at the gross amount of cash received by Company before deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by Company in connection with such issue or sale and without deduction of any
expenses payable by Company; (b) to the extent it consists of property
other than cash, be computed at the fair value of that property as determined in
good faith by the Company board of directors; and (c) if Additional Shares
of Common Stock, Convertible Securities (as defined herein) or Rights or Options
(as defined herein) to purchase either Additional Shares of Common Stock or
Convertible Securities are issued or sold together with other stock or
securities or other assets of Company for a consideration which covers both, be
computed as the portion of the consideration so received that may be reasonably
determined in good faith by the Company board of directors to be allocable to
such Additional Shares of Common Stock, Convertible Securities or Rights or
Options.
“Business Day” means
any day other than a weekend day or any other day on which commercial banks in
the State of New York are authorized or required to close.
“Change in Control”
means: (a) the acquisition (other than from Company) by any
Person of beneficial ownership of 50% or more of the combined voting power of
Company’s then-outstanding securities; (b) a merger or consolidation
involving Company if the stockholders of Company, immediately before such merger
or consolidation do not, as a result of such merger or consolidation, own,
directly or indirectly, more than 50% of the combined voting power of the
then-outstanding voting securities of the corporation resulting from such merger
or consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of Company outstanding
immediately before such merger or consolidation; or (c) a complete
liquidation or dissolution of Company or the sale or other disposition of all or
substantially all of the assets of Company.
“Common Stock” means
the common stock, par value $0.001 per share, of Company.
“Convertible Securities”
shall mean stock, instruments of indebtedness, or other securities convertible
into or exchangeable for shares of Common Stock.
“Damages” means any
loss, damage, or liability (joint or several) to which a party hereto may become
subject under the Securities Act, the Exchange Act, or other federal or state
law, insofar as such loss, damage, or liability (or any action in respect
thereof) arises out of or is based upon: (a) any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement of Company, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, other
than a statement that arises out of or is based upon written information
furnished by or on behalf of Investor; (b) an 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 (c) any violation or alleged
violation by the indemnifying party (or any of its agents or Affiliates) of the
Securities Act, the Exchange Act, any state securities law, or any rule or
regulation promulgated under the Securities Act, the Exchange Act, or any state
securities law.
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“Effective Price”
of Additional Shares of Common Stock shall mean the quotient determined by
dividing the total number of Additional Shares of Common Stock issued or sold,
or deemed to have been issued or sold, by Company in connection with such
issuance, into the Aggregate Consideration Received, or deemed to have been
received, by Company as provided herein, for the issue of such Additional Shares
of Common Stock.
“Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“Excluded
Registration” means a registration relating to: (a) the
sale of securities to employees of Company or a subsidiary of Company pursuant
to a stock option, stock purchase, or similar plan; or (b) an SEC Rule 145
transaction.
“Form S-1” means such
form under the Securities Act as in effect on the date hereof or any successor
registration form under the Securities Act subsequently adopted by the
SEC.
“Form S-3” means such
form under the Securities Act as in effect on the date hereof or any
registration form under the Securities Act subsequently adopted by the SEC that
permits incorporation of substantial information by reference to other documents
filed by the Company with the SEC.
“Investor Designee”
means the member of Company’s board of directors designated by Investor pursuant
to the terms of the Voting Agreement.
“Person” means any
individual, corporation, partnership, joint venture, association, limited
liability company, joint stock company, trust, or unincorporated association, or
any governmental authority, officer, department, commission, board, bureau or
instrumentality thereof.
“Registrable
Securities” means (a) the Shares and (b) the Common Stock
issuable or issued upon exercise of the Option; excluding in all cases, however,
any Registrable Securities sold by a Person in a transaction in which the
applicable rights under this IR Agreement are not assigned pursuant to
Section 6.1, and
excluding for purposes of Article 2 any
shares for which registration rights have terminated pursuant to Section 2.8 of
this IR Agreement.
“Rights or Options”
means warrants, options or other rights to purchase or acquire shares of Common
Stock or Convertible Securities, other than: (a) warrants, options or
other rights granted or issued hereafter to employees, officers, directors,
contractors, consultants or advisers to, Company or any Company subsidiary
pursuant to incentive agreements, stock purchase or stock option plans,
contracts or other arrangements that are approved by the Company board of
directors; or (b) warrants, options or other rights issued or issuable to
parties that are providing Company with equipment leases, real property leases,
loans, credit lines or similar transactions, under arrangements, in each case,
approved by the Company board of directors.
“SEC” means the United
States Securities and Exchange Commission.
“SEC Rule 144” means
Rule 144 promulgated by the SEC under the Securities Act.
“SEC Rule 145” means
Rule 145 promulgated by the SEC under the Securities Act.
“Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
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“Selling Expenses”
means all underwriting discounts, selling commissions, and stock transfer taxes
applicable to the sale of Registrable Securities, and fees and disbursements of
counsel for Investor.
“Trading Day” means
any day on which the Common Sock is traded for any period on Nasdaq, or on the
principal securities exchange or other securities market on which the Common
Stock is then being traded.
“Transaction
Documents” means the Purchase Agreement, this IR Agreement and any
and all agreements, documents and instruments contemplated hereby or
thereby.
ARTICLE
2
REGISTRATION
RIGHTS
2.1 Demand
Registration.
(a) If
at any time after the date of this IR Agreement Company receives a request
from Investor that Company file a Form S-1 registration statement with respect
to at least 500,000 shares of the Registrable Securities (subject to adjustment
for any stock split, stock dividend, recapitalization, reorganization, or the
like), then the Company shall, as soon as practicable, and in any event within
60 days after the date such request is given by Investor, file a Form S-1
registration statement under the Securities Act covering all Registrable
Securities that Investor requested to be registered, subject to the limitations
of Section 2.1(c)
and Section 2.1(d).
(b) If
at any time when it is eligible to use a Form S-3 registration statement,
Company receives a request from Investor that Company file a Form S-3
registration statement with respect to outstanding Registrable Securities of
Investor, then Company shall, as soon as practicable, and in any event within 30
days after the date such request is given by Investor, file a Form S-3
registration statement under the Securities Act covering all Registrable
Securities requested to be included in such registration by Investor, subject to
the limitations of Section 2.1(c)
and Section 2.1(d).
(c) If,
pursuant to Section 2.1(a)
or Section 2.1(b),
Investor intends to distribute the Registrable Securities covered by its request
by means of an underwriting, it shall so advise Company as a part of its request
for registration. The underwriter(s) will be selected by Investor,
subject only to the reasonable approval of Company. Investor shall,
together with Company as provided in Section 2.3(e),
enter into an underwriting agreement in customary form with the underwriter(s)
selected for such underwriting. Notwithstanding any other provision
of this Section 2.1(c),
if the managing underwriter(s) advise(s) Investor in writing that marketing
factors require a limitation on the number of shares to be underwritten, then
the number of Registrable Securities that may be included in the underwriting
shall be so reduced; provided, however, that the
number of Registrable Securities held by Investor to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(d) Notwithstanding
the obligations set forth in Section 2.1(a)
and Section 2.1(b),
if Company furnishes to Investor a certificate signed by Company’s chief
executive officer stating that in the good faith judgment of Company’s board of
directors it would be materially detrimental to Company and its stockholders for
such registration statement to either become effective or remain effective for
as long as such registration statement otherwise would be required to remain
effective, because such action would (i) materially interfere with a
significant acquisition, corporate reorganization, or other similar transaction
involving Company, (ii) require premature disclosure of material
information that Company has a bona fide business purpose for preserving as
confidential, or (iii) render Company unable to comply with requirements
under the Securities Act or Exchange Act, then Company shall have the right to
defer taking action with respect to such filing for a period of not more than 90
days after the request of Investor is given; provided, however, that Company
may not invoke this right more than once in any 12-month period; and, provided further, that Company
shall not register any securities for its own account or that of any other
stockholder during such 90-day period other than pursuant to an Excluded
Registration.
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2.2 Company
Registration.
(a) If
Company proposes to register (including, for this purpose, a registration
effected by Company for stockholders other than Investor) any of its securities
under the Securities Act in connection with the public offering of such
securities solely for cash (other than in an Excluded Registration), Company
shall, at such time, promptly give Investor notice of such
registration. Upon the request of Investor given within 20 days after
such notice is given by Company, Company shall, subject to the provisions of
Section 2.2(b),
cause to be registered all of the Registrable Securities that Investor has
requested to be included in such registration. Company shall have the
right to terminate or withdraw any registration initiated by it under this Section 2.2(a)
before the effective date of such registration, whether or not Investor has
elected to include Registrable Securities in such registration. The
expenses (other than Selling Expenses) of such withdrawn registration shall be
borne by Company in accordance with Section 2.5.
(b) In
connection with any offering involving an underwriting of shares of the
Company’s capital stock pursuant to Section 2.2(a),
Company shall not be required to include any of Investor’s Registrable
Securities in such underwriting unless Investor accepts the terms of the
underwriting as agreed upon between Company and its underwriters, and then only
in such quantity as the underwriters in their sole discretion determine will not
jeopardize the success of the offering by Company. If the total
number of Registrable Securities to be included in such offering exceeds the
number of securities to be sold (other than by Company) that the underwriters in
their reasonable discretion determine is compatible with the success of the
offering, then Company shall be required to include in the offering only that
number of Registrable Securities which the underwriters and Company in their
sole discretion determine will not jeopardize the success of the offering; provided, however, that in no
event shall the number of Registrable Securities included in the offering be
reduced unless all other securities (other than securities to be sold by
Company) are first entirely excluded from the offering.
2.3 Obligations
of Company. Whenever required
under this Article 2 to
effect the registration of any Registrable Securities, 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 commercially reasonable efforts to cause such
registration statement to become effective and, upon the request of Investor,
keep such registration statement effective for a period of up to 120 days or, if
earlier, until the distribution contemplated in the registration statement has
been completed; provided, however, that
(i) such 120-day period shall be extended for a period of time equal to the
period Investor refrains, at the request of an underwriter of Common Stock (or
other securities) of Company, from selling any securities included in such
registration, and (ii) in the case of any registration of Registrable
Securities on Form S-3 that are intended to be offered on a continuous or
delayed basis, subject to compliance with applicable SEC rules, such 120-day
period shall be extended for up to an additional 60 days, if necessary, to keep
the registration statement effective until all such Registrable Securities are
sold;
(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 comply with the Securities Act in order to
enable the disposition of all securities covered by such registration
statement;
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(c) furnish
to Investor such numbers of copies of a prospectus, including a preliminary
prospectus, as required by the Securities Act, and such other documents as
Investor may reasonably request in order to facilitate its disposition of its
Registrable Securities;
(d) use
its commercially reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue-Sky
laws of such jurisdictions as shall be reasonably requested by Investor; provided that Company
shall not be required to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions unless Company is already
subject to service in such jurisdiction and except as may be required by the
Securities Act;
(e) in
the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the underwriter(s) of such offering;
(f) use
its commercially reasonable efforts to cause all Registrable Securities covered
by such registration statement to be listed on a national securities exchange or
trading system and each securities exchange and trading system (if any) on which
similar securities issued by Company are then listed;
(g) provide
a transfer agent and registrar for all Registrable Securities registered
pursuant to this IR Agreement and provide a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration;
(h) promptly
make available for inspection by Investor, any underwriter(s) participating in
any disposition pursuant to such registration statement, and any attorney or
accountant or other agent retained by any such underwriter or selected by
Investor, all financial and other records, pertinent corporate documents, and
properties of Company, and cause Company’s officers, directors, employees, and
independent accountants to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant, or agent, in each case, as
necessary or advisable to verify the accuracy of the information in such
registration statement and to conduct appropriate due diligence in connection
therewith;
(i) notify
Investor, promptly after Company receives notice thereof, of the time when such
registration statement has been declared effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
and
(j) after
such registration statement becomes effective, notify Investor of any request by
the SEC that Company amend or supplement, or any determination or decision by
Company to amend or supplement, such registration statement or
prospectus.
2.4 Agreement
to Furnish Information. It shall be a
condition precedent to the obligations of Company to take any action pursuant to
this Article 2 with
respect to the Registrable Securities of Investor that Investor shall furnish to
Company such information regarding itself, the Registrable Securities held by
it, and the intended method of disposition of such securities as is reasonably
required to effect the registration of such Registrable
Securities.
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2.5 Expenses of
Registration.
(a) All
expenses (other than Selling Expenses) incurred in connection with
registrations, filings, or qualifications pursuant to Article 2,
including all registration, filing, and qualification fees, all printers’ and
accounting fees, all fees and disbursements of counsel for Company, and the
reasonable fees and disbursements of one counsel for Investor (such fees and
disbursements of counsel for Investor being limited to $20,000 in respect of any
one registration), shall be borne and paid by Company; provided, however, that Company
shall not be required to pay for any expenses of any registration proceeding
begun pursuant to Section 2.1(a)
or Section 2.1(b)
if the registration request is subsequently withdrawn at the request of Investor
(in which case Investor shall bear such expenses); provided further that if, at
the time of such withdrawal, Investor shall have learned of a material adverse
change in the condition, business, or prospects of Company from that known to
Investor at the time of its request and has withdrawn the request with
reasonable promptness after learning of such information then Investor shall not
be required to pay any of such expenses.
(b) All
Selling Expenses relating to Registrable Securities registered pursuant to this
Article 2
shall be borne and paid by Investor.
2.6 Indemnification
and Contribution. If any of
Investor’s Registrable Securities are included in a registration statement under
this Article 2:
(a) To
the extent permitted by law, Company will indemnify and hold harmless Investor,
the officers, directors, and shareholders of Investor, legal counsel and
accountants for Investor, any underwriter (as defined in the Securities Act) for
Investor, and each Person, if any, who controls Investor or such underwriter
within the meaning of the Securities Act or the Exchange Act, against any
Damages, and Company will pay to Investor and each such underwriter, controlling
Person, or other aforementioned Person any legal or other expenses reasonably
incurred thereby in connection with investigating or defending any claim or
proceeding from which Damages may result, as such expenses are incurred; provided, however, that the
indemnity agreement contained in this Section 2.6(a)
shall not apply to amounts paid in settlement of any such claim or proceeding if
such settlement is effected without the consent of Company, which consent shall
not be unreasonably withheld, nor shall Company be liable for any Damages to the
extent that they arise out of or are based upon actions or omissions made in
reliance upon and in conformity with written information furnished by or on
behalf of Investor or any such underwriter, controlling Person, or other
aforementioned Person expressly for use in connection with such
registration.
(b) To
the extent permitted by law, Investor will indemnify and hold harmless Company,
and each of its directors, each of its officers who has signed the registration
statement, each Person (if any), who controls Company within the meaning of the
Securities Act, legal counsel and accountants for Company, any underwriter (as
defined in the Securities Act), any other shareholder of Company selling
securities in such registration statement, and any controlling Person of any
such underwriter or other shareholder, against any Damages, in each case only to
the extent that such Damages arise out of or are based upon actions or omissions
made in reliance upon and in conformity with written information furnished by or
on behalf of Investor expressly for use in connection with such registration;
and Investor will pay to Company and each other aforementioned Person any legal
or other expenses reasonably incurred thereby in connection with investigating
or defending any claim or proceeding from which Damages may result, as such
expenses are incurred; provided, however, that the
indemnity agreement contained in this Section 2.6(b)
shall not apply to amounts paid in settlement of any such claim or proceeding if
such settlement is effected without the consent of Investor, which consent shall
not be unreasonably withheld; and provided, further, that in no
event shall the aggregate amounts payable by Investor by way of indemnity or
contribution under Section 2.6(b)
and Section 2.6(d)
exceed the proceeds from the offering received by Investor (net of any Selling
Expenses paid by Investor).
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(c) Promptly
after receipt by an indemnified party under this Section 2.6 of
notice of the commencement of any action (including any governmental action) for
which a party may be entitled to indemnification hereunder, such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 2.6,
give the indemnifying party notice of the commencement thereof; provided, however, that the
failure to so notify the indemnifying party shall not relieve the indemnifying
party from any of its obligations under this Section 2.6
except to the extent the indemnifying party is materially prejudiced by such
failure. The indemnifying party shall have the right to participate
in such action and, to the extent the indemnifying party so desires, participate
jointly with any other indemnifying party to which notice has been given, and to
assume the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an
indemnified party (together with all other indemnified parties that may be
represented without conflict by one counsel) shall have the right to retain one
separate counsel, with the reasonable 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 differing interests between such indemnified party and any other party
represented by such counsel in such action.
(d) To
provide for just and equitable contribution to joint liability under the
Securities Act in any case in which either (i) any party otherwise entitled
to indemnification hereunder makes a claim for indemnification pursuant to this
Section 2.6 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 2.6
provides for indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of any party hereto for which
indemnification is provided under this Section 2.6,
then, and in each such case, such parties will contribute to the aggregate
losses, claims, damages, liabilities, or expenses to which they may be subject
(after contribution from others) in such proportion as is appropriate to reflect
the relative fault of each of the indemnifying party and the indemnified party
in connection with the statements, omissions, or other actions that resulted in
such loss, claim, damage, liability, or expense, as well as to reflect any other
relevant equitable considerations. In no event shall Investor’s
liability pursuant to this Section 2.6(d),
when combined with the amounts paid or payable by Investor pursuant to Section 2.6(b),
exceed the proceeds from the offering received by Investor (net of any Selling
Expenses paid by Investor).
(e) Unless
otherwise superseded by an underwriting agreement entered into in connection
with the underwritten public offering, the obligations of Company and Investor
under this Section 2.6
shall survive the completion of any offering of Registrable Securities in a
registration under this Section 2.6, and
otherwise shall survive the termination of this IR Agreement.
2.7 Limitations
on Subsequent Registration Rights. From and after
the date of this IR Agreement, Company shall not, without the prior written
consent of Investor, enter into any agreement with any holder or prospective
holder of any securities of Company that would (a) allow such holder or
prospective holder to include such securities in any registration unless, under
the terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
such securities will not reduce the number of the Registrable Securities of
Investor that are included, or (b) allow such holder or prospective holder
to initiate a demand for registration of any securities held by such holder or
prospective holder.
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2.8 Termination
of Registration Rights. The right of
Investor to request registration or inclusion of Registrable Securities in any
registration pursuant to Section 2.1 or
Section 2.2
shall terminate upon the earliest to occur of:
(a) the
time when all of Investor’s Registrable Securities could be sold under SEC Rule
144 without the requirement for Company to be in compliance with the current
public information required under SEC Rule 144 as to such Registrable Securities
and without volume or manner-of-sale restrictions; and
(b) the
fifth anniversary of the date of this IR Agreement.
ARTICLE
3
INFORMATION
RIGHTS
3.1 Delivery
of Financial Information. Company shall
deliver the following financial information to Investor:
(a) as
soon as practicable, but in any event within 90 days after the end of each
fiscal year of Company, (i) a balance sheet as of the end of such year,
(ii) statements of income and of cash flows for such year, and (iii) a
statement of stockholders’ equity as of the end of such year, all such financial
statements audited and certified by independent public accountants selected by
Company;
(b) as
soon as practicable, but in any event within 45 days after the end of each of
the first three quarters of each fiscal year of Company, unaudited statements of
income and of cash flows for such fiscal quarter, and an unaudited balance sheet
and a statement of stockholders’ equity as of the end of such fiscal quarter,
all prepared in accordance with GAAP (except that such financial statements may
(i) be subject to normal year-end audit adjustments and (ii) not
contain all notes thereto that may be required in accordance with
GAAP);
(c) if
requested by Investor, as soon as practicable, but in any event within 30 days
of the end of each month, an unaudited income statement and statement of cash
flows for such month, and an unaudited balance sheet and statement of
stockholders’ equity as of the end of such month, all prepared in accordance
with GAAP (except that such financial statements may (i) be subject to
normal year-end audit adjustments and (ii) not contain all notes thereto
that may be required in accordance with GAAP);
(d) if
requested by Investor, as soon as practicable, but in any event 30 days before
the end of each fiscal year, an operating budget for the next fiscal year (the
“Budget”),
approved by Company’s board of directors and prepared on a monthly basis,
including a forecast of revenues, expenses and cash position on a month-to-month
basis for the next fiscal year; and
(e) such
other information relating to the financial condition of Company as shall be
determined by the board in its reasonable discretion.
The
financial information delivered pursuant to this Section 3.1
shall be the consolidated and consolidating financial statements of Company and
all of its consolidated subsidiaries. Company will be deemed to have
satisfied its obligations under clauses (a) and (b) above if such financial
information is included in a report that Company is required to file with the
SEC pursuant to Section 13 or 15(d) of the Exchange Act in respect of the
applicable period, and Company files such report with the SEC through the SEC’s
XXXXX database no later than the time such report is required to be filed with
the SEC pursuant to the Exchange Act (taking into account any applicable grace
periods provided thereunder).
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Notwithstanding
anything else in this Section 3.1 to
the contrary, Company may cease providing the information set forth in this
Section 3.1
during the period starting with the date 30 days before Company’s good-faith
estimate of the date of filing of a registration statement if it reasonably
concludes it must do so to comply with SEC rules applicable to such registration
statement and related offering; provided that
Company’s covenants under this Section 3.1
shall be reinstated at such time as Company is no longer actively employing its
commercially reasonable efforts to cause such registration statement to become
effective.
3.2 Notice of
Certain Transactions. Subject to the
fiduciary duties of Company’s board of directors, Company shall promptly (but in
any event, within 72 hours) notify Investor in writing in the event that Company
receives any proposal or offer from any Person or group of Persons that, in the
good faith judgment of the Company’s board of directors is “bona fide,” and that
provides for, directly or indirectly, in a single transaction or a series of
related transactions, (a) a transaction contemplated by subpart (b) or (c)
of the definition of “Change in Control,” or (b) the acquisition of
beneficial ownership of 25% or more of (i) the combined voting power of
Company’s then-outstanding securities or (ii) the value (as determined by
Company’s board of directors) of the consolidated assets of Company and its
Subsidiaries. Company’s notification to Investor shall include the
identity of such Person or group of Persons and the material details of the
proposed transaction. Company shall thereafter keep Investor
reasonably informed (orally and in writing) of the status of any such proposed
transaction, including the material terms and conditions thereof and of any
material modification thereto.
3.3 Right of
Inspection. Company shall
permit Investor, at Investor’s expense and on no fewer than five days’ prior
written notice to Company, to visit and inspect Company’s properties, examine
its books of account and records, and discuss Company’s affairs, finances, and
accounts with its officers, during normal business hours of Company as may be
reasonably requested by Investor; provided, however, that Company
shall not be obligated pursuant to this Section 3.3 to
provide access to any information that it reasonably and in good faith considers
to be a trade secret or confidential information (unless covered by an
enforceable confidentiality agreement, in form acceptable to Company) or the
disclosure of which would adversely affect the attorney-client privilege between
Company and its counsel; and provided, further, that Company
may conduct any such visitation, inspection, examination and discussion no more
than once per calendar quarter.
3.4 Termination
of Information Rights. The covenants set
forth in Section 3.1,
Section 3.2, and
Section 3.3
shall terminate and be of no further force or effect upon the earlier to occur
of: (a) the closing of a Change in Control of Company; and
(b) the date that Investor no longer holds at least 5% of the Shares
acquired by Investor on the date hereof.
ARTICLE
4
OPTION
TO PURCHASE ADDITIONAL SHARES
4.1 Grant of
Option; Option Period. Subject to the
terms and conditions set forth in this Article 4 and
elsewhere in the Transaction Documents, Investor is hereby granted by Company
the irrevocable option (the “Option”), exercisable
during the Option Period (as defined below), to purchase, in the sole discretion
of Investor, up to an additional $4,000,000 of Common Stock (the “Aggregate Option Amount”),
at the then-current Exercise Price (as defined below). The Option may
be exercised at any time or from time to time by Investor during the period that
begins on the date hereof and ends at 5:00 p.m. (Eastern Time) on the second
anniversary of such date (such period, the “Option Period”).
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4.2 Manner of
Exercise. During the Option
Period, the Option may be exercised, in full or in part, upon surrender of the
Notice of Exercise attached hereto as Exhibit A (the
“Notice of Exercise”),
duly completed and executed, together with the full Exercise Price for each
share of Common Stock as to which the Option is exercised (in accordance with
Section 4.3
below), at the office of Company (Document Capture Technologies, Inc., 0000
Xxxxxxxxxx Xxxxx, Xxxxx 000, Xxx Xxxx, Xxxxxxxxxx 00000; Fax: (000) 000-0000),
or at such other office or agency as Company may designate in writing, by
overnight mail. The “Date of Exercise”
of the Option shall be defined as the date that the Notice of Exercise attached
hereto as Exhibit A,
completed and executed, is sent by facsimile to Company, provided that the
original Notice of Exercise is received by Company and the Exercise Price is
satisfied, each as soon as practicable and in any event within three Business
Days thereafter. Alternatively, the Date of Exercise shall be defined
as the date that both the original Notice of Exercise and the full Exercise
Price for the shares of Common Stock being acquired in connection with such
exercise are received by Company, if Investor has not sent advance notice by
facsimile. Upon delivery of the duly completed and executed Notice of
Exercise to Company by facsimile or otherwise, and receipt by Company of the
full Exercise Price for the shares of Common Stock being acquired in connection
with such exercise, Investor shall be deemed for all corporate purposes to have
become the holder of record of the shares of Common Stock with respect to which
the Option has been exercised, irrespective of the date such shares of Common
Stock are credited to Investor’s Depository Trust Company account or the date of
delivery of the certificates evidencing such shares, as the case may
be.
4.3 Payment
of Exercise Price. Payment of the
Exercise Price may be made by Holder in cash, by bank or cashier’s check or by
wire transfer.
4.4 Delivery
of Common Stock Upon Exercise. Within three
Business Days after any Date of Exercise (the “Delivery Period”),
Company shall issue and deliver (or cause its transfer agent so to issue and
deliver) in accordance with the terms hereof to or upon the order of Investor
that number of shares of Common Stock (“Exercise Shares”)
for the portion of this Option that has been exercised thereby. Upon
the exercise of this Option or any part thereof, Company shall, at its own cost
and expense, take all necessary action, including obtaining and delivering an
opinion of counsel to ensure that the transfer agent shall issue stock
certificates in the name of Investor or such other persons as designated by
Investor and in such denominations as are specified in the Notice of Exercise
representing the number of shares of Common Stock issuable upon such
exercise.
4.5 Adjustments
to Exercise Price. The price per
share of Common Stock for which this Option may be exercised (the “Exercise Price”)
is $1.036, subject to adjustment as follows:
(a) If
Company shall, at any time or from time to time after the date hereof, effect a
subdivision of the outstanding Common Stock, the Exercise Price in effect
immediately before that subdivision shall be proportionately
decreased. Conversely, if Company shall, at any time or from time to
time after the date hereof, combine the outstanding shares of Common Stock into
a smaller number of shares, the Exercise Price in effect immediately before that
combination shall be proportionately increased. Any adjustment
pursuant to this clause (a) shall become effective at the close of business on
the date the subdivision or combination becomes effective.
(b) If
Company, at any time or from time to time after the date hereof, makes, or fixes
a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, in each such event the Exercise Price that is then in effect shall be
decreased as of the time of such issuance or, in the event such record date is
fixed, as of the close of business on such record date, by multiplying the
Exercise Price then in effect by a fraction (i) the numerator of which is
the total number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such record date,
and (ii) the denominator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date plus the number of shares of Common
Stock issuable in payment of such dividend or distribution; provided, however, that if such
record date is fixed and such dividend is not fully paid or if such distribution
is not fully made on the date fixed therefor, the Exercise Price shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Exercise Price shall be adjusted pursuant to this clause (b) to
reflect the actual payment of such dividend or distribution.
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(c) If
at any time or from time to time after the date hereof, the Common Stock
issuable upon the exercise of the Option is changed into the same or a different
number of shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend or a reorganization, merger, consolidation or sale of assets
provided for elsewhere in this Section 4.5), in
any such event Investor shall have the right thereafter to exercise the Option
into the kind and amount of stock and other securities and property receivable
upon such recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock for which the Option could have been
exercised immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein or with respect to
such other securities or property by the terms thereof.
(d) If
at any time or from time to time after the date hereof, there is a capital
reorganization of the Common Stock (other than a recapitalization, subdivision,
combination, reclassification, exchange, or substitution of shares provided for
elsewhere in this Section 4.5), as
a part of such capital reorganization, provision shall be made so that Investor
shall thereafter be entitled to receive upon exercise of the Option the number
of shares of stock or other securities or property of Company to which a holder
of the number of shares of Common Stock deliverable upon exercise would have
been entitled on such capital reorganization, subject to adjustment in respect
of such stock or securities by the terms thereof. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 4.5 with
respect to the rights of Investor after the capital reorganization to the end
that the provisions of this Section 4.5
shall be applicable after that event and be as nearly equivalent as
practicable.
(e) If
at any time or from time to time after the date hereof Company issues or sells,
or is deemed by the provisions of this clause (f) to have issued or sold,
Additional Shares of Common Stock, otherwise than in connection with a stock
split or combination as provided in clause (a) above, a dividend or distribution
as provided in clause (b) above, a reclassification, exchange or substitution as
provided in clause (c) above, or a reorganization, merger, consolidation or sale
of assets as provided in clause (d) above, for an Effective Price that is less
than the Exercise Price in effect immediately prior to such issue or sale (or
deemed issue or sale), then, and in each such case, the then-existing Exercise
Price shall be reduced as of the close of business on the date of such issue or
sale to a price equal to the consideration per share received by Company for
such Additional Shares of Common Stock so issued.
(f) For
the purpose of making any adjustment to the Exercise Price required under this
Section 4.5, if
Company issues or sells any Rights or Options or Convertible Securities and if
the Effective Price of the shares of Common Stock issuable upon exercise of such
Rights or Options and/or the conversion or exchange of Convertible Securities
(computed without reference to any additional or similar protective or
antidilution clauses) is less than the Exercise Price then in effect, then
Company shall be deemed to have issued, at the time of the issuance of such
Rights, Options or Convertible Securities, that number of Additional Shares of
Common Stock that is equal to the maximum number of shares of Common Stock
issuable upon exercise or conversion of such Rights, Options or Convertible
Securities upon their issuance and to have received, as the Aggregate
Consideration Received for the issuance of such shares, an amount equal to the
total amount of the consideration, if any, received by Company for the issuance
of such Rights or Options or Convertible Securities, plus, in the case of such
Rights or Options, the minimum amounts of consideration, if any, payable to
Company upon the exercise in full of such Rights or Options, plus, in the case
of Convertible Securities, the minimum amounts of consideration, if any, payable
to Company (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) upon the conversion or exchange thereof;
provided that:
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(i) if
the minimum amounts of such consideration cannot be ascertained, but are a
function of antidilution or similar protective clauses, then Company shall be
deemed to have received the minimum amounts of consideration without reference
to such clauses;
(ii) if
the minimum amount of consideration payable to Company upon the exercise of
Rights or Options or the conversion or exchange of Convertible Securities is
reduced over time or upon the occurrence or non-occurrence of specified events
other than by reason of antidilution or similar protective adjustments, then the
Effective Price shall be recalculated using the figure to which such minimum
amount of consideration is reduced; and
(iii) if
the minimum amount of consideration payable to Company upon the exercise of such
Rights or Options or the conversion or exchange of Convertible Securities is
subsequently increased, then the Effective Price shall again be recalculated
using the increased minimum amount of consideration payable to Company upon the
exercise of such Rights or Options or the conversion or exchange of such
Convertible Securities.
(g) No
further adjustment of the Exercise Price shall be made as a result of the actual
issuance of shares of Common Stock on the exercise of any such Rights or Options
or the conversion or exchange of any such Convertible Securities. If
any such Rights or Options or the conversion rights represented by any such
Convertible Securities shall expire without having been fully exercised, then
the Exercise Price as adjusted upon the issuance of such Rights or Options or
Convertible Securities shall be readjusted to the Exercise Price which would
have been in effect had an adjustment been made on the basis that the only
shares of Common Stock so issued were the shares of Common Stock, if any, that
were actually issued or sold on the exercise of such Rights or Options or rights
of conversion or exchange of such Convertible Securities, and such shares of
Common Stock, if any, were issued or sold for the consideration actually
received by Company upon such exercise, plus the consideration, if any, actually
received by Company for the granting of all such Rights or Options, whether or
not exercised, plus the consideration received for issuing or selling all such
Convertible Securities actually converted or exchanged, plus the consideration,
if any, actually received by Company (other than by cancellation of liabilities
or obligations evidenced by such Convertible Securities) on the conversion or
exchange of such Convertible Securities.
(h) No
adjustment in the Exercise Price shall be made in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share for an
Additional Share of Common stock issued or deemed to be issued by Company is
less than the Exercise Price in effect immediately prior to such
issue.
(i) All
calculations under this Section 4.5
shall be made to the nearest 1/100th of a
share, as the case may be.
4.6 No
Fractional Shares. No fractional
shares or scrip representing fractional shares shall be issuable upon the
exercise of the Option, but on exercise of the Option, Investor may purchase
only a whole number of shares of Common Stock. If, on exercise of the
Option, Investor would be entitled to a fractional share of Common Stock or a
right to acquire a fractional share of Common Stock, such fractional share shall
be disregarded and the number of shares of Common Stock issuable upon exercise
shall be the next higher whole number of shares.
-13-
4.7 Anti-Dilution
Protection.
(a) If
at any time or from time to time after the date hereof and prior to the eighteen
(18) month anniversary of the date hereof (such period, the “Common Stock Anti-Dilution
Period”), Company issues or sells, or is deemed to have issued or sold
pursuant to Section 4.7(b),
Additional Shares of Common Stock for an Effective Price that is less than
$1.036 per share, as adjusted for any stock splits, stock dividends, stock
combinations, mergers, reorganizations or other actions occurring after the date
hereof which generally affect the number of shares of stock of the Company
outstanding, (the “Purchase Price”),
then, and in each such case, the Company shall issue additional shares of Common
Stock to the Investor without further consideration, in an amount equal to the
difference between (x) the number of Shares held, as of the time immediately
prior to such issuance or sale, or deemed issuance or sale, as the case may be,
by Investor (which, in the case of more than one issuance of shares pursuant to
this Section 4.7, may
include shares of Common Stock previously received by Investor pursuant to this
Section 4.7)
(the “Existing
Shares”), and (y) the number of shares of Common Stock determined in
accordance with the following formula:
Number of
Shares = (A * B) ÷ C.
For
purposes of the foregoing formula, the following definitions shall
apply:
|
(i) “A”
shall mean the Existing Shares as defined
above;
|
|
(iv)
|
“B”
shall mean the Purchase Price as defined above;
and
|
|
(v) “C”
shall mean the Effective Price as defined
above.
|
(b) For
purposes of this Section 4.7, if
during the Common Stock Anti-Dilution Period, Company issues or sells any Rights
or Options or Convertible Securities and if the Effective Price of the shares of
Common Stock issuable upon exercise of such Rights or Options and/or the
conversion or exchange of Convertible Securities (computed without reference to
any additional or similar protective or antidilution clauses) is less than the
Purchase Price, then Company shall be deemed to have issued, at the time of the
issuance of such Rights, Options or Convertible Securities, that number of
Additional Shares of Common Stock that is equal to the maximum number of shares
of Common Stock issuable upon exercise or conversion of such Rights, Options or
Convertible Securities upon their issuance and to have received, as the
Aggregate Consideration Received for the issuance of such shares, an amount
equal to the total amount of the consideration, if any, received by Company for
the issuance of such Rights or Options or Convertible Securities, plus, in the
case of such Rights or Options, the minimum amounts of consideration, if any,
payable to Company upon the exercise in full of such Rights or Options, plus, in
the case of Convertible Securities, the minimum amounts of consideration, if
any, payable to Company (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) upon the conversion or
exchange thereof; provided that:
(i) if
the minimum amounts of such consideration cannot be ascertained, but are a
function of antidilution or similar protective clauses, then Company shall be
deemed to have received the minimum amounts of consideration without reference
to such clauses;
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(ii) if
the minimum amount of consideration payable to Company upon the exercise of
Rights or Options or the conversion or exchange of Convertible Securities is
reduced over time or upon the occurrence or non-occurrence of specified events
other than by reason of antidilution or similar protective adjustments, then the
Effective Price shall be recalculated using the figure to which such minimum
amount of consideration is reduced; and
(iii) if
the minimum amount of consideration payable to Company upon the exercise of such
Rights or Options or the conversion or exchange of Convertible Securities is
subsequently increased, then the Effective Price shall again be recalculated
using the increased minimum amount of consideration payable to Company upon the
exercise of such Rights or Options or the conversion or exchange of such
Convertible Securities.
(c) No
additional shares of Common Stock shall be issued pursuant to this Section 4.7
as a result of the actual issuance of shares of Common Stock on the exercise of
any such Rights or Options or the conversion or exchange of any such Convertible
Securities.
(d) Investor
shall have the right to waive the receipt or issuance of additional shares of
Common Stock which would otherwise be issuable to it pursuant to this Section 4.7.
4.8 No Rights
as Stockholder. Nothing in this
Article 4
shall be construed as conferring upon Investor any rights as a stockholder of
Company.
ARTICLE
5
OTHER
COVENANTS
5.1 Restrictions on
Transfer.
(a) The
Registrable Securities may only be disposed of pursuant to an effective
registration statement under the Securities Act, to Company, to an Affiliate, or
pursuant to an available exemption from or in a transaction not subject to the
registration requirements of the Securities Act, and in compliance with any
applicable federal and state securities laws. Until such time as the
Registrable Securities can be freely transferred in a public sale without
registration under the Securities Act, in connection with any transfer of any
such securities, other than pursuant to an effective registration statement, to
an Affiliate or to Company, an opinion of counsel will be required to the effect
that such transfer does not require registration of such transferred securities
under the Securities Act. Any such transferee shall agree in writing
to be bound by the terms of this IR Agreement and shall have the
obligations of Investor hereunder.
(b) Investor
agrees to the imprinting, so long as is required by this Section 5.1, of
the following legend on any certificates representing Registrable
Securities:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”). THESE SECURITIES ARE “RESTRICTED” AND MAY NOT BE OFFERED OR
SOLD UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, OR ELIGIBLE TO BE
OFFERED OR SOLD PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT, AND, EXCEPT WITH RESPECT TO A TRANSFER TO AN AFFILIATE
OF HOLDER OR TO COMPANY, COMPANY WILL BE PROVIDED WITH OPINION OF COUNSEL OR
OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
EXEMPTIONS ARE AVAILABLE.
-15-
(c) Certificates
representing Registrable Securities shall not be required to contain any
restrictive legend: (i) while a registration statement covering
the resale of such securities is effective under the Securities Act;
(ii) following any sale of such securities pursuant to SEC Rule 144 under
the Securities Act; (iii) if such securities are eligible for sale under
SEC Rule 144 without the requirement for Company to be in compliance with the
current public information required under SEC Rule 144 as to such Registrable
Securities and without volume or manner-of-sale restrictions; or (iv) if
such legend is not required under applicable law, or, in the opinion of the
Company’s counsel, in accordance with the requirements of the Securities Act, or
other interpretations and pronouncements of the SEC. Upon request of
Investor, Company shall cause its counsel to issue a legal opinion to Company’s
transfer agent promptly to effect the removal of such legend pursuant to the
foregoing sentence. If the Option is exercised at a time when
(x) there is an effective registration statement covering the resale under
the Securities Act of the Registrable Securities issued in connection therewith,
(y) such Registrable Securities may be sold under SEC Rule 144 without the
requirement for Company to be in compliance with the current public information
required under SEC Rule 144 as to such Registrable Securities and without volume
or manner-of-sale restriction, or (z) such legend is not otherwise required
under applicable law, then the certificate(s) evidencing such Registrable
Securities shall be issued free of all restrictive legends. Company
agrees that at such time as such restrictive legend is not required as provided
in this Section 5.1(c),
it will, as soon as practicable following the delivery by Investor to Company’s
transfer agent of certificates representing the Registrable Securities, as the
case may be, deliver or cause to be delivered to Investor replacement
certificates free from all restrictive legends. Unless otherwise
required by law or judicial order, Company shall not make any notation on its
records or give any instructions to its transfer agent that enlarge the
restrictions on transfer set forth in this IR Agreement.
5.2 Listing
of Registrable Securities. If, after the
date hereof, Company shall list its Common Stock on any of the New York Stock
Exchange, NYSE AMEX, or the NASDAQ Stock Market (each, a “Subsequent Market”),
then Company shall include in such listing for the benefit of Investor all
Registrable Securities. If the number of Registrable Securities
issuable upon exercise in full of the Option exceed the number of Registrable
Securities previously listed on account thereof with a Subsequent Market, then
Company shall take the necessary actions to immediately list a number of
Registrable Securities equal to such difference.
5.3 Reports. With a view to
making available to Investor the benefits of SEC Rule 144 and any other rule or
regulation of the SEC that may at any time permit Investor to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, Company shall:
(a) make
and keep available adequate current public information, as those terms are
understood and defined in SEC Rule 144, at all times after the date
hereof;
(b) timely
file (or obtain extensions in respect thereof and file within the applicable
grace period) with the SEC all reports and other documents required of Company
under the Securities Act and the Exchange Act (including Section 13(a) and 15(d)
thereof); and
(c) furnish
to Investor, so long as Investor owns any Registrable Securities, forthwith upon
request: (i) to the extent accurate, a written statement by
Company that it has complied with the reporting requirements of SEC Rule 144,
the Securities Act, and the Exchange Act, or that it qualifies as a registrant
whose securities may be resold pursuant to Form S-3 (at any time after the
Company so qualifies); (ii) a copy of the most recent annual or quarterly
report of Company and such other reports and documents so filed by Company; and
(iii) such other information as may be reasonably requested in availing
Investor of any rule or regulation of the SEC that permits the selling of any
such securities without registration (including causing its attorneys to render
and deliver any legal opinion required in order to permit Investor to receive
Registrable Securities free of all restrictive legends and to subsequently sell
Registrable Securities under SEC Rule 144 upon receipt of a notice of an
intention to sell or other form of notice having a similar effect) or pursuant
to Form S-3 (at any time after Company so qualifies to use such
form).
-16-
Without
limiting the generality of clause (a) above, if at any time Company is not
required to file reports pursuant to Section 13(a) or 15(d) the Exchange Act, it
will, at its expense, prepare and furnish to Investor and make publicly
available in accordance with SEC Rule 144 such information as is required for
Investor to sell Registrable Securities under SEC Rule 144.
5.4 Directors’ Liability;
Indemnification; Insurance.
(a) Company’s
certificate of incorporation and bylaws shall provide (i) for elimination
of the liability of directors to the maximum extent permitted by law and
(ii) for indemnification of directors for acts on behalf of Company to the
maximum extent permitted by law. In addition, Company shall enter
into and use its best efforts to at all times maintain indemnification
agreements with each of its directors to indemnify such directors to the maximum
extent permissible under applicable law.
(b) If
Company or any of its successors or assignees consolidates with or merges into
any other Person and is not the continuing or surviving corporation or entity of
such consolidation or merger, then to the extent necessary, proper provision
shall be made so that the successors and assignees of Company assume the
obligations of Company with respect to indemnification of members of the board
of directors as in effect immediately before such transaction, whether such
obligations are contained in Company’s bylaws, its certificate of incorporation,
or elsewhere, as the case may be.
(c) Company
has, from financially sound and reputable insurers, Directors and Officers
liability insurance in an amount and on terms and conditions satisfactory to the
board of directors with total limits of $5 million of “Side A” and “Side B”
coverage, and will use reasonable best efforts to cause such insurance policy to
be maintained at all times during the term of that certain Voting Agreement, of
even date herewith, among Company, Investor and the stockholders of Company
whose names are set forth on the signature pages thereto (the “Voting Agreement”). In
addition, the policy shall not be cancelable by Company without prior approval
by the board of directors, including the Investor Designee.
5.5 Termination
of Covenants. The covenants set
forth in this Article 5,
except for Section 5.1 and
Section 5.4(b),
shall terminate and be of no further force or effect upon the earlier to occur
of: (a) the closing of a Change in Control of Company; and
(b) the date that Investor no longer owns, beneficially or of record, any
Registrable Securities.
5.6 Confidential
Treatment. In the event that
Company is required by law or stock market or trading facility regulation to
file with the SEC as an exhibit to any filing under the Exchange Act or the
Securities Act all or any portion of that certain Strategic Supplier Master
Procurement Agreement between Company and Investor (including, without
limitation, any portion of the amendment thereto of even date herewith), or any
other commercial agreement between Company and Investor, Company shall use its
best efforts to seek confidential treatment under applicable securities laws of
such portions of such agreement(s) as may reasonably be available, and shall
consult with Investor in connection therewith.
-17-
ARTICLE
6
MISCELLANEOUS
6.1 Successors
and Assigns. The rights under
this IR Agreement may be assigned (but only with all related obligations)
by Investor to a transferee in connection with a transfer of the Registrable
Securities that is permissible under the terms of the Transaction Documents;
provided, however, that
(a) Company is, within a reasonable time after such transfer, furnished
with written notice of the name and address of such transferee and, if
applicable, the Registrable Securities with respect to which such rights are
being transferred; and (b) such transferee agrees in a written instrument
delivered to Company to be bound by and subject to the terms and conditions of
this IR Agreement. The terms and conditions of this
IR Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties. Nothing in this
IR Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
IR Agreement, except as expressly provided in this
IR Agreement.
6.2 Governing
Law. All questions
concerning the construction, validity, enforcement and interpretation of this
IR Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof.
6.3 Execution. This
IR Agreement may be executed in two or more counterparts, all of which when
taken together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that all parties need not sign the same
counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
6.4 Notices. Any and all
notices or other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section at or prior to 5:00 p.m. (Eastern Time) on a Business
Day, (b) the Business Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this IR Agreement later than 5:00 p.m. (Eastern Time) on any
date and earlier than 11:59 p.m. (Eastern Time) on such date, (c) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom
such notice is required to be given. The address for such notices and
communications shall be as follows:
If to Investor,
to:
XXX
Xxxxxxxxxxx
0000
Xxxxxxxxx Xxxxxxxxx
Xxxxxx,
XX 00000
Attn: General
Counsel
Fax: (000)
000-0000
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with a copy (if such notice
is being provided pursuant to Section 3.2 hereof) to:
XXX
Xxxxxxxxxxx
7 World
Trade Center
000
Xxxxxxxxx Xxxxxx
Xxx Xxxx,
XX 00000
Attn: Chief
Financial Officer
Fax: (000)
000-0000
If to Company,
to:
0000
Xxxxxxxxxx Xxxxx
Xxxxx
000
Xxx Xxxx,
Xxxxxxxxxx 00000
Attn: Chief
Executive Officer
Fax: (000)
000-0000
or such
other address as may be designated in writing hereafter, in the same manner, by
such Person.
6.5 Amendments;
Waivers. No provision of
this IR Agreement may be waived or amended except in a written instrument
signed, in the case of an amendment, by Company and Investor or, in the case of
a waiver, by the party against whom enforcement of any such waiver is
sought. No waiver of any default with respect to any provision,
condition or requirement of this IR Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
6.6 Delays or
Omissions. No delay or
omission to exercise any right, power or remedy accruing to any party under this
IR Agreement, upon any breach or default of any other party under this
IR Agreement, shall impair any such right, power or remedy of such
non-breaching or non-defaulting party 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.
6.7 Severability. Any provision of
this IR Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions of this
IR Agreement, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by law, each party hereto
hereby waives any provision of law that renders any such provision prohibited or
unenforceable in any respect.
6.8 Entire
Agreement. This
IR Agreement and the other Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.
6.9 Specific
Performance. In addition to
being entitled to exercise all rights provided herein or granted by law,
including recovery of damages, Investor and Company will be entitled to specific
performance of each other’s obligations under this
IR Agreement. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation the defense that a remedy
at law would be adequate.
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6.10 Remedies
Cumulative. No right, remedy,
or election given by any term of this IR Agreement shall be deemed
exclusive, but each shall be cumulative with all other rights, remedies, and
elections available at law or in equity.
6.11 Further
Assurances. At any time or
from time to time after the date hereof, the parties agree to cooperate with
each other, and at the request of any other party, to execute and deliver any
further instruments or documents and to take all such further action as the
other party may reasonably request in order to evidence or effectuate the
consummation of the transactions contemplated hereby and to otherwise carry out
the intent of the parties hereunder.
6.12 Costs of
Enforcement. If any party to
this IR Agreement seeks to enforce its rights under this IR Agreement
by legal proceedings, the non-prevailing party shall pay all costs and expenses
incurred by the prevailing party, including, without limitation, all reasonable
attorneys’ fees.
[signatures
on following page]
-20-
IN WITNESS WHEREOF, the
parties have executed and caused this IR Agreement to be executed and
delivered on the date first above written.
XXX
Xxxxxxxxxxx
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By:
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Name:
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Title:
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By:
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Name:
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Title:
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[Signature
Page to Investor Rights Agreement]
EXHIBIT
A
NOTICE
OF EXERCISE
The
undersigned hereby irrevocably exercises the right to purchase _______________
of the shares of Common Stock (the “Common Stock”)
of DOCUMENT CAPTURE TECHNOLOGIES, INC., a Delaware corporation (“Company”), evidenced
by the option granted to the undersigned by Company under Article 4 of that
certain Investor Rights Agreement, dated _______________, 2010, between Company
and XXX Xxxxxxxxxxx, a Maryland corporation (the “IR Agreement”),
to which this Notice of Exercise is attached (the “Option”), and
herewith makes payment of the Exercise Price with respect to such shares in
full, all in accordance with the conditions and provisions of said
Option.
The
undersigned agrees not to offer, sell, transfer or otherwise dispose of any of
the Common Stock obtained on exercise of the Option, except in accordance with
the provisions of the Transaction Documents (as such term is defined in the
IR Agreement).
The
undersigned requests that any stock certificates for such shares be issued free
of any restrictive legend, if permitted by the terms of the
IR Agreement.
Please
issue a certificate or certificates representing the shares of Common Stock
acquired hereby in the name of the undersigned or in such other name as is
specified below:
The
shares of Common Stock acquired hereby shall be delivered to the following DWAC
Account Number or by physical delivery of a certificate to:
The
undersigned is an “accredited investor” as defined in Regulation D promulgated
under the Securities Act of 1933, as amended.
[NAME OF ENTITY] | |||
By:
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Name:
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Title:
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Date:
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[Notice
of Exercise]