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EXHIBIT 10.13
KOFAX IMAGE PRODUCTS
FIRST RESTATED REGISTRATION RIGHTS AGREEMENT
This First Restated Registration Rights Agreement is entered into as of
March 6, 1989, by and among KoFax Image Products, a California corporation (the
"Company"), those Purchasers (the "Series A Purchasers") of the Company's Series
A Preferred Stock pursuant to that certain Series A Preferred Stock Purchase
Agreement dated as of August 19, 1986 (the "Series A Purchase Agreement"), those
Purchasers (the "Series B Purchasers") of the Company's Series B Preferred Stock
set forth on Exhibit A of that certain Series B Preferred Stock Purchase
Agreement dated as of November 10, 1987, (the "Series B Purchase Agreement"),
and those Purchasers (the "Series C Purchasers") of the Company's Series C
Preferred Stock set forth on Exhibit A of that certain Series C Preferred Stock
Purchase Agreement of even date herewith (the "Series C Agreement"). Such
Purchasers of Series A, Series B and Series C Preferred Stock shall be referred
to collectively hereinafter as the "Holders" and each individually as a
"Holder".
WHEREAS, the Series A Purchasers and the Series B Purchasers are parties
to that certain Registration Rights Agreement dated as of November 10, 1987 (the
"Prior Agreement") pursuant to which the Company granted to the Series A
Purchasers and the Series B Purchasers certain registration and information
rights and a right of first refusal; and
WHEREAS, in connection with the Company's issuance of Series C Preferred
Stock pursuant to the Series C Agreement, the Series A Purchasers and Series B
Purchasers have agreed to terminate the Prior Agreement in exchange for being
granted the registration and information rights and the right of first refusal
set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual agreements, covenants and
conditions and releases contained herein, the Company and each of the Holders
hereby agree as follows:
SECTION 1
REGISTRATION RIGHTS
The Company hereby grants to each of the Holders the registration rights
set forth in this Section 1, with respect to the Registrable Securities (as
hereinafter defined) owned by such Holders. In consideration for the grant by
the company of such registration rights and the information rights and the right
of first refusal set forth in this Agreement, each of the Series A Purchasers
and the Series B Purchasers hereby (i) agrees that the
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Prior Agreement is terminated in its entirety and (ii) forever releases, waives
and disclaims all rights of such Series A Purchaser or Series B Purchaser under
the Prior Agreement. The Company and Holders agree that the registration rights
provided herein set forth the sole and entire agreement on the subject matter
between the Company and the Holders.
1.1 Definitions. As used in this Section 1:
(a) The terms "register," "registered," and "registration" refer
to a registration effected by filing with the Securities and Exchange Commission
(the "SEC") a registration statement (the "Registration Statement") in
compliance with the Securities Act of 1933, as amended (the "1933 Act") and the
declaration or ordering by the SEC of the effectiveness of such Registration
Statement.
(b) The term "Registrable Securities" means (i) Common Stock
issued or issuable upon conversion of (A) the shares of Series A Preferred Stock
held by Holders on the date hereof; (B) the shares of Series B Preferred Stock
held by Holders on the date hereof; (C) the shares of Series C Preferred Stock
issued to the Series C Purchasers under the Series C Purchase Agreement; and
(ii) any Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right, or other security that is issued as) a
dividend or other distribution with respect to, or in exchange or in replacement
of, such Registrable Securities, Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock. In the event of any recapitalization by the
Company, whether by stock split, reverse stock split, stock dividend or the
like, the number of shares of Registrable Securities used throughout this
Agreement for various purposes shall be proportionately increased or decreased.
(c) The term "Initiating Holders" means any Holder or Holders of
not less than thirty-three percent (33%) of the Registrable Securities then
outstanding and not registered at the time of any request for registration
pursuant to paragraph 1.2 of this Agreement.
1.2 Demand Registration.
(a) Demand for Registration. If the Company shall receive from
Initiating Holders a written demand (a "Demand Registration") that the Company
effect any registration under the 1933 Act of all or part of the Registrable
Securities (other than a registration on Form S-3 or any related form of
Registration Statement, such a request being provided for under paragraph 1.9
hereof) the Company will:
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(i) promptly (but in any event within 10 days) give
written notice of the proposed registration to all other Holders; and
(ii) use its diligent best efforts to effect such
registration as soon as practicable as may be so demanded and as will permit or
facilitate the sale and distribution of all or such portion of such Initiating
Holders' Registrable Securities as are specified in such demand, together with
all or such portion of the Registrable Securities of any Holder or Holders
joining in such demand as are specified in a written demand received by the
Company within 30 days after such written notice is given, provided that the
Company shall not be obligated to take any action to effect any such
registration, pursuant to this paragraph 1.2:
(A) Within 120 days immediately following the
effective date of any registration statement pertaining
to an underwritten public offering of securities of the
Company for its own account (other than a registration
on Form S-4 relating solely to an SEC Rule 145
transaction, or a registration relating solely to
employee benefit plans);
(B) After the Company has effected an aggregate of
two such registrations pursuant to this paragraph 1.2
and the sales of the shares of Common Stock under such
registrations have closed;
(C) If the Company shall furnish to such Holders a
certificate signed by the President of the Company,
stating that in the good faith judgment of the board of
directors of the Company it would be seriously
detrimental to the Company and its shareholders for such
Registration Statement to be filed at the date filing
would be required, in which case the Company shall have
an additional period of not more than 90 days within
which to file such Registration Statement; provided,
however, that the Company shall not use this right more
than once in any twelve month period;
(D) If the proposed aggregate offering price to
the public of the Registrable Securities to be included
in the registration by all Holders is less than (i)
$5,000,000 in the case of the Company's initial public
offering, or (ii) $2,000,000 in the case of any
subsequent registration; or
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(E) Prior to August 1, 1990.
(b) Underwriting. If the Initiating Holders intend to distribute
the Registrable Securities covered by their demand by means of an underwriting,
they shall so advise the Company as part of their demand made pursuant to this
paragraph 1.2; and the Company shall include such information in the written
notice referred to in subparagraph 1.2(a)(i). In such event, the right of any
Holder to registration pursuant to this paragraph 1.2 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.
The Company shall, together with all Holders proposing to distribute their
securities through such underwriting, enter into an underwriting agreement in
customary form with the underwriter or underwriters selected by a majority in
interest of the Initiating Holders and reasonably satisfactory to the Company.
Notwithstanding any other provision of this paragraph 1.2, if the underwriter
shall advise the Company in writing that marketing factors (including, without
limitation, an adverse effect on the per share offering price) require a
limitation of the number of shares to be underwritten, then the Company shall so
advise all Holders of Registrable Securities that would otherwise be registered
and underwritten pursuant hereto, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated pro rate among such Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration.
If any Holder disapproves of the terms of the underwriting, such Holder
may elect to withdraw therefrom by written notice to the Company, the
underwriter, and the Initiating Holders. The Registrable Securities so withdrawn
shall also be withdrawn from registration.
If the underwriter has not limited the number of Registrable Securities to
be underwritten, the Company may include securities for its own account (or for
the account of other shareholders) in such registration if the underwriter so
agrees and if the number of Registrable Securities that would otherwise have
been included in such registration and underwriting will not thereby be limited.
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1.3 Company Registration.
(a) If at any time or from time to time the Company shall
determine to register any of its securities, either for its own account or the
account of security holders, other than a registration relating solely to
employee benefit plans, a registration on Form S-4 relating solely to an SEC
Rule 145 transaction, or a registration pursuant to paragraph 1.2 hereof, the
Company will:
(i) promptly give to each Holder written notice thereof
(which shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other state
securities laws); and
(ii)include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within 20 days after receipt of such written notice from the
Company, by any Holder or Holders, except as set forth in subparagraph 1.3(b)
below.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to subparagraph 1.3(a)(i). In such event the right of any Holder to
registration pursuant to this paragraph 1.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall, together with the Company and the other parties distributing their
securities through such underwriting, enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this
paragraph 1.3, if the underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the underwriter may limit
the number of Registrable Securities to be included in the registration and
underwriting, or may exclude Registrable Securities entirely from such
registration and underwriting subject to the terms of this paragraph. The
Company shall so advise all holders of the Company's securities that would
otherwise be registered and underwritten pursuant hereto, and the number of
shares of such securities, including Registrable Securities, that may be
included in the registration and underwriting shall be allocated
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in the following manner: shares, other than Registrable Securities, requested to
be included in such registration by shareholders shall be excluded, and if a
limitation on the number of shares is still required, the number of Registrable
Securities that may be included shall be allocated among the Holders thereof in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by each such Holder at the time of filing the Registration
Statement. For purposes of any underwriter cutback, all Registrable Securities
held by any Holder which is a partnership or corporation, shall also include any
Registrable Securities held by the partners, retired partners, shareholders or
affiliated entities of such Holder, or the estates and family members of any
such partners and retired partners and any trusts for the benefit of any of the
foregoing persons, and such Holder and other persons shall be deemed to be a
single "selling Holder", and any pro rata reduction with respect to such
"selling Holder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling Holder", as defined in this sentence. No securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. If any Holder disapproves of the terms of the
underwriting, it may elect to withdraw therefrom by written notice to the
Company and the underwriter. The Registrable Securities so withdrawn shall also
be withdrawn from registration.
1.4 Expenses of Registration. All expenses incurred in connection
with the first two registrations effected pursuant to paragraph 1.2 and all
registrations effected pursuant to paragraphs 1.3 and 1.9, including without
limitation all registration, filing, and qualification fees (including blue sky
fees and expenses), printing expenses, escrow fees, fees and disbursements of
counsel for the Company and of one special counsel for the participating
Holders, and expenses of any special audits incidental to or required by such
registration, shall be borne by the Company; provided, however, that the Company
shall not be required to pay stock transfer taxes or underwriters' discounts, or
commissions relating to Registrable Securities. Notwithstanding anything to the
contrary above, the Company shall not be required to pay for any expenses of any
registration proceeding under paragraph 1.2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to have been registered, unless such Holders agree to
forfeit their right to a demand registration pursuant to paragraph 1.2 (in which
event such right shall be forfeited by all Holders). In the absence of such an
agreement to forfeit, the Holders of Registrable Securities to have been
registered shall bear all such expenses pro rata on the basis of the Registrable
Securities to have been registered. Notwithstanding the preceding sentence,
however, if at the time of the withdrawal, the Holders have learned of a
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material adverse change in the condition, business, or prospects of the Company
from that known to the Holders at the time of their request, of which the
Company had knowledge at the time of the request, then the Holders shall not be
required to pay any of said expenses and shall retain their rights pursuant to
paragraph 1.2.
1.5 Obligations of the Company. Whenever required under this Section
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its diligent best efforts to
cause such registration statement to become effective, and keep such
registration statement effective for up to ninety (90) days or until the Holder
or Holders have completed the distribution relating thereto.
(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
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them.
(d) Use its best 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 the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(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 managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in
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effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 1, if such securities
are being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent accountants of the Company, in form and
substance as is customarily given by independent accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
1.6 Indemnification.
(a) The Company will, and does hereby undertake to, indemnify
and hold harmless each Holder of Registrable Securities, each of such Holder's
officers, directors, partners and agents, and each person controlling such
Holder, with respect to any registration, qualification, or compliance effected
pursuant to this Section 1, and each underwriter, if any, and each person who
controls any underwriter, of the Registrable Securities held by or issuable to
such Holder, against all claims, losses, damages, and liabilities (or actions in
respect thereto) to which they may become subject under the 1933 Act, the
Securities Exchange Act of 1934, as amended, (the "1934 Act"), or other federal
or state law arising out of or based on (i) any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular, or other similar document (including any related Registration
Statement, notification, or the like) incident to any such registration,
qualification, or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or (ii) any violation or alleged
violation by the Company of any federal, state or common law rule or regulation
applicable to the company in connection with any such registration,
qualification, or compliance, and will reimburse, as incurred, each such Holder,
each such underwriter, and each such director, officer, partner, agent and
controlling person, for any legal and any other expenses reasonably incurred in
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connection with investigating or defending any such claim, loss, damage,
liability, or action; provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense,
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by an instrument duly executed by such
Holder or underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by or
issuable to such Holder are included in such registration, qualification, or
compliance, indemnify the Company, each of its directors, and each officer who
signs a Registration Statement in connection therewith, and each person
controlling the Company, each underwriter, if any, and each person who controls
any underwriter, of the Company's securities covered by such a Registration
Statement, and each other Holder, each of such other Holder's officers,
partners, directors and agents and each person controlling such other Holder,
against all claims, losses, damages, and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such Registration Statement,
prospectus, offering circular, or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse, as
incurred, the Company, each such underwriter, each such other Holder, and each
such director, officer, partner, and controlling person, for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability, or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) was made in such Registration Statement,
prospectus, offering circular, or other document, in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein;
provided, however, that the liability of each Holder hereunder shall be limited
to the proceeds received by such Holder from the sale of securities under such
Registration Statement. In no event will any Holder be required to enter into
any agreement or undertaking in connection with any registration under this
Section 1 providing for any indemnification or contribution obligations on the
part of such Holder greater than such Holder's obligations under this paragraph
1.6.
(c) Each party entitled to indemnification under this paragraph
1.6 (the "Indemnified Party") shall give notice to the party required to provide
such indemnification (the "Indemnifying Party") of any claim as to which
indemnification may be sought promptly after such Indemnified Party has actual
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knowledge thereof, and shall permit the Indemnifying Party to assume the defense
of any such claim or any litigation resulting therefrom; provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be subject to approval by the Indemnified Party (whose
approval shall not be reasonably withheld) and the Indemnified Party may
participate in such defense at the Indemnifying Party's expense if
representation of such Indemnified 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 proceeding; and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 1, except
to the extent that such failure to give notice shall materially adversely affect
the Indemnifying Party in the defense of any such claim or any such litigation.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff therein, to such
Indemnified Party, of a release from all liability in respect to such claim or
litigation.
1.7 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may reasonably request in writing and as
shall be required in connection with any registration, qualification, or
compliance referred to in this Section 1.
1.8 Transfer of Registration Rights. The rights, contained in
paragraphs 1.2, 1.3 and 1.9 hereof, to cause the Company to register the
Registrable Securities, may be assigned or otherwise conveyed to a transferee or
assignee of Registrable Securities, who shall be considered a "Holder" for
purposes of this Section 1, provided that such transferree or assignee, (a)
receives such securities as a partner in connection with partnership
distributions of a Series A Purchaser, Series B Purchaser or Series C Purchaser
or (b) acquires at least 50,000 shares (as presently constituted), or 100% of
the Registrable Securities held by the transferring Holder, whichever is less,
and, provided further, that the Company is given written notice by such Holder
at the time of or within a reasonable time after said transfer, stating the name
and address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being assigned.
1.9 Form S-3. If the Company's stock becomes publicly traded, the
Company shall use its best efforts to qualify for registration on Form S-3 and
to that end the Company shall
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register (whether or not required by law to do so) its Common Stock under the
1934 Act within twelve (12) months following the effective date of the first
registration of any securities of the Company on Form S-1. After the Company has
qualified for the use of Form S-3, the Holders of Registrable Securities shall
have the right to request up to four (4) registrations on Form S-3 under this
paragraph 1.9. The Company shall give notice to all Holders of Registrable
Securities of the receipt of a request for registration pursuant to this
paragraph 1.9 and shall provide a reasonable opportunity for other Holders to
participate in the registration. Subject to the foregoing, the Company will use
its best efforts to effect promptly the registration of all shares of
Registrable Securities on Form S-3, as the case may be, to the extent requested
by the Holder or Holders thereof for purposes of disposition; provided, however,
that the Company shall not be obligated to effect any such registration if (i)
the Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public of less than $500,000 or (ii) in the event that the conditions set forth
in subparagraph 1.2(a)(ii)(C) obtain (but subject to the limitations set forth
therein).
1.10 Delay of Registration. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.11 Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of more than sixty-six and two-thirds percent (66-2/3%)
of the Registrable Securities, enter into any agreement with any holder or
prospective holder of any securities of the Company which would allow such
holder or prospective holder to (a) require the Company to effect a registration
or (b) include any securities in any registration filed under paragraph 1.2 or
1.3 hereof, 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 diminish the amount of
Registrable securities which are included in such registration and includes the
equivalent of Section 1.13 as a term.
1.12 Rule 144 Reporting. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
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(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the 1933 Act, at all times commencing ninety (90) days after
the effective date of the first registration filed by the Company for an
offering of its securities to the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the 1933 Act and 1934 Act;
(c) So long as a Holder owns any Registrable Securities, furnish
to such Holder forthwith upon request: a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 of the 1933 Act,
and of the 1934 Act (at any time after it has become subject to such reporting
requirements); a copy of the most recent annual or quarterly report of the
Company; and such other reports and documents as a Holder may reasonably request
in availing itself of any rule or regulation of the SEC allowing it to sell any
such securities without registration.
1.13. "Market Stand-Off" Agreement. Each Holder hereby agrees that
during the 90-day period following the effective date of a registration
statement of the Company filed under the 1933 Act, it shall not, to the extent
requested by the Company and any underwriter, sell or otherwise transfer or
dispose of (other than to donees who agree to be similarly bound) any Common
Stock of the Company held by it at any time during such period except Common
Stock included in such registration; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(b) all officers and directors of the Company and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.14 Amendment of Registration Rights. Any provision of this
Section 1 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders
of not less than sixty-six
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and two-thirds percent (66-2/3%) of the Registrable Securities then outstanding.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each Holder, each future holder of Registrable Securities, and the
Company.
1.15 Termination of Registration Rights. No Holder shall be entitled
to exercise any right provided for in this Section 1 after five (5) years
following the consummation of the sale of securities pursuant to a registration
statement filed by the Company under the 1933 Act in connection with the initial
firm commitment underwritten offering of its securities to the general public.
SECTION 2
RIGHT OF FIRST REFUSAL
2.1 Pro Rata Right. The Company hereby grants to each Preferred
Investor (as defined in paragraph 2.2(a) below) the right of first refusal to
purchase, pro rata, all New Securities (as defined in paragraph 2.2(b) below)
which the Company may, from time to time, propose to sell and issue. Each of the
Series A Purchasers and the Series B Purchasers hereby waives the right of first
refusal set forth in the Prior Agreement to the extent that such Series A
Purchaser or Series B Purchaser is not purchasing Series C Preferred Stock
pursuant to the Series C Agreement. A Preferred Investor's pro rata share, for
purposes of this right of first refusal, is the ratio (A) the numerator of which
is the number of shares of Common Stock issued or issuable upon conversion of
shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock held by such Preferred Investor on the date of the Company's
written notice pursuant to paragraph 2.3 below; and (B) the denominator of which
is the number of shares of Common Stock outstanding on such date, plus the total
aggregate number of shares of Common Stock issued or issuable upon conversion of
shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock held by all Preferred Investors on such date. This right of
first refusal shall be subject to the following additional provisions of this
Section 2.
2.2 Definitions.
(a) "Preferred Investor" shall mean each person which purchased
(i) Series A Preferred Stock under the Series A Purchase Agreement, (ii) Series
B Preferred Stock under the Series B Purchase Agreement, or (iii) Series C
Preferred Stock under the Series C Purchase Agreement; and which holds at least
66,667 shares of the Company's Common Stock (including Common Stock issuable
upon conversion of the Series A, Series B and Series C Preferred Stock) on the
date of the Company's written notice pursuant to paragraph 2.3 below.
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(b) "New Securities" shall mean any capital stock (including the
Common Stock or the Preferred Stock) of the Company whether now authorized or
not, and rights, options or warrants to purchase capital stock, and securities
of any type whatsoever that are, or may become, convertible into capital stock;
provided that the term "New Securities" does not include (i) securities issuable
upon conversion of or with respect to Series A, Series B or Series C Preferred
Stock; (ii) securities issued pursuant to the acquisition of another corporation
by the Company by merger, purchase of substantially all the assets or other
reorganization whereby the Company owns more than fifty percent (50%) of the
voting power of such corporation; (iii) any borrowings, direct or indirect, from
financial institutions or other persons by the Company, whether or not presently
authorized, including any type of loan or payment evidenced by any type of debt
instrument, provided such borrowings do not have any equity features, including
warrants, options or other rights to purchase capital stock, and are not
convertible into capital stock of the Company; (iv) Common Stock (including
options to purchase Common Stock) issued to employees, consultants or directors
of the Company pursuant to any stock option plan or stock purchase or stock
bonus agreement or arrangement approved by the Board of Directors of the
Company; or (v) securities issued pursuant to any stock dividend, stock split,
combination or other reclassification by the Company of any of its capital
stock.
2.3 Required Notices. In the event the Company proposes to undertake
an issuance of New Securities, it shall give each Preferred Investor written
notice, pursuant to the provisions of Section 4.3 hereof, of its intention,
describing the type of New Securities, the price and the general terms upon
which the company proposes to issue the same. Each Preferred Investor shall have
twenty (20) days from the date of receipt of any such notice to agree to
purchase the Preferred Investor's pro rata share of such New Securities for the
price and upon the general terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased.
2.4 Company's Right to Sell. In the event the Preferred Investors
fail to exercise the right of first refusal as to all New Securities offered
within said twenty (20) day period, the Company shall have one hundred and
twenty (120) days thereafter to sell or enter into an agreement (pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within one hundred and twenty (120) days from the date of said agreement) to
sell all such New Securities respecting which the Preferred Investors' option
was not exercised, at a price and upon general terms no more favorable in any
material respect to the purchasers thereof than specified in the Company's
notice.
14.
15
In the event the company has not sold within said one hundred and twenty (120)
day period or entered into an agreement to sell all such New Securities within
said one hundred and twenty (120) day period (or sold and issued all such New
Securities in accordance with the foregoing within one hundred and twenty (120)
days from the date of said agreement), the Company shall not thereafter issue or
sell any New Securities, without first offering such securities to the Preferred
Investors in the manner provided above.
2.5 Expiration of Right. The right of first refusal granted under
this Section 2 shall not apply to, and shall expire upon, the first sale of
Common Stock of the Company to the public pursuant to a firm underwriting, which
sale is effected pursuant to a registration statement filed with, and declared
effective by, the Securities and Exchange Commission (the 'Commission") under
the 1933 Act, at a public offering price of at least $7.50 per share, as
presently constituted, and with gross proceeds to the Company of not less than
$10,000,000.
2.6 Assignment. The right of first refusal set forth in this section
2 is nonassignable, except that (a) such right is assignable by each Preferred
Investor to any wholly-owned subsidiary or parent of, or to any corporation,
entity or other person which is, within the meaning of the 1933 Act,
controlling, controlled by or under common control with, any such Preferred
Investor, (b) such right is assignable between and among any of the Preferred
Investors, (c) upon the death of any individual Preferred Investor, such right
shall pass to the beneficiaries under the deceased Preferred Investor's last
will and testament or to the distributees of the deceased Preferred Investor's
estate, provided that such beneficiaries or distributees receive at least the
number of shares of the Company's Common Stock (including Common Stock issuable
upon conversion of Series A, Series B or Series C Preferred Stock) specified in
Section 2.2(a) hereof, and (d) such right is assignable by a partnership to its
partners in connection with distributions to the partners and if so assigned
will be treated as one Preferred Investor for purposes of this Section 2.
SECTION 3
COMPANY COVENANTS
The Company hereby covenants and agrees as follows:
3.1 Basic Financial Information.
(a) So long as any Holder or any subsidiary, affiliate or
partner of such Holder shall own any shares of series A, Series B or Series C
Preferred Stock or Registrable Securities, to furnish the following reports:
15.
16
(i) As soon as practicable after the end of each fiscal
year, and in any event within 120 days thereafter, audited consolidated balance
sheets of the Company and its subsidiaries, if any, as at the end of such fiscal
year, and audited consolidated statements of income and cash flows of the
Company and its subsidiaries, if any, for such fiscal year, prepared in
accordance with generally accepted accounting principles and setting forth in
each case in comparative form the figures for the previous fiscal year, all in
reasonable detail and accompanied by a report and opinion thereon by independent
public accountants selected by the Company's board of directors and by a copy of
such accountants' management letter prepared in connection therewith.
(ii) As soon as practicable after the end of each of the
first three (3) quarters of the fiscal year, but in any event within forty-five
(45) days after the end of each such quarter, the Company's unaudited
consolidated balance sheet as of the end of such quarter, and its unaudited
consolidated statements of income and cash flows for such quarter, all in
reasonable detail and prepared in accordance with generally accepted accounting
principles and certified by the principal financial or accounting officer of the
Company.
(b) So long as any Holder, when considered together with any
subsidiary, affiliate or partner of such Holder shall own at least 100,000
shares of Series A, Series B or Series C Preferred Stock or Registrable
Securities, (i) to furnish to such Holder as soon as practicable after the end
of each month, but in any event within thirty (30) days thereafter, the
Company's unaudited consolidated balance sheet as of the end of such month and
its unaudited statement of income and cash flows for such month, indicating
actual results versus the Company's plan, all in reasonable detail and prepared
in accordance with generally accepted accounting principles and certified by the
principal financial or accounting officer of the Company; and (ii) to furnish to
such Holder no later than thirty (30) days prior to the beginning of each fiscal
year a copy of the Company's annual operating plan for the forthcoming fiscal
year and, as soon as practicable after the adoption thereof, copies of any
revisions to such annual operating plan.
(c) The rights granted pursuant to this paragraph 3.1 may not be
assigned or otherwise conveyed by any Holder or by any subsequent transferee of
any such rights without the written consent of the Company, which consent shall
not be unreasonably withheld; provided that the Company may refuse such written
consent if the proposed transferee is a competitor of the Company; and provided
further, that no such written consent shall be required if the transfer is in
connection with the transfer of Series A, Series B or Series C Preferred Stock
to any partner or
16.
17
retired partner of any Holder that is a general or limited partnership or to any
such partner's estate.
3.2 Inspection. The Company shall permit each Holder, its attorney,
or its other representative to visit and inspect the Company's properties, to
examine the Company's books of account and other records, to make copies or
extracts therefrom and to discuss the Company's affairs, finances and accounts
with its officers, management employees and independent accountants, all at such
reasonable times and as often as such Holder may reasonably request; provided,
however, that the Company shall not be obligated pursuant to this paragraph 3.2
to provide trade secret or confidential information or to provide information to
any person who the Company reasonably believes is a competitor of the Company.
3.3 Board of Directors. The Company agrees to use its best efforts
to have (a) one representative of Sigma Partners elected to the Company's Board
of Directors at each election of the Board for so long as Sigma Partners
continues to hold at least 150,000 shares of Series B or Series C Preferred
Stock; and (b). one representative of 3i Securities corporation elected to the
Company's Board of Directors at each election of the Board for so long as 3i
Securities corporation continues to hold at least 150,000 shares of Series A,
Series B or Series C Preferred Stock. In this regard, each of Xxxxx X. Silver
and Xxxx X. Xxxxx hereby agrees that for so long as Sigma Partners continues to
hold at least 150,000 shares of Series B or Series C Preferred Stock, and so
long as 3i Securities Corporation continues to hold at least 150,000 shares of
Series A, Series B or Series C Preferred Stock, whenever necessary to ensure the
election of a representative of Sigma Partners and 3i Securities Corporation to
the Board of Directors, he shall vote the shares of the Company's capital stock
held by him so that one representative of Sigma Partners and one representative
of 3i Securities Corporation is elected to the Company's Board of Directors. The
Company will place appropriate legends on the share certificates of Messrs.
Silver and Xxxxx to reflect their agreement to vote in this manner. In the event
that its representative is not elected to the Company's Board of Directors, each
of Sigma Partners and 3i Securities Corporation shall have the right, at its
expense, for so long as it holds at least 150,000 shares of Series A, Series B
or Series C Preferred Stock, to attend, through a single representative who
shall not be employed by, or be a consultant to, a competitor of the Company,
all meetings of the Company's Board of Directors in a nonvoting observer
capacity, and in this respect, the Company shall give each of Sigma Partners and
3i Securities Corporation, or their respective representatives, copies of all
notices, minutes, consents, and other materials that it provides to its
directors, any reports and registration statements filed with the SEC, and any
materials forwarded to the holders of the Common Stock as a class; provided,
however, that
17.
18
Sigma Partners, 3i Securities Corporation and their respective representatives
shall agree to hold in confidence and trust all such information so provided and
all confidential information learned by Sigma Partners, 3i Securities
Corporation and their respective representatives at meetings of the Company's
Board of Directors (to the extent not known by such person before such
disclosure, not learned from a third party entitled to disclose such
information, or not generally available to the public other than through
disclosure by such person in violation of this paragraph 3.3).
3.4 Reservation of Common Stock. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the conversion
of the Shares, all shares of Common Stock issuable upon such conversion.
3.5 Restriction on Issuance of Stock to Employees. The Company shall
not issue any Common Stock, options for the purchase of Common Stock, or other
equity securities to any person who is then an employee of the Company or in
connection with the commencement of any person's employment, except where the
shares are issued pursuant to an agreement that contains a vesting schedule
approved by the Board of Directors of the Company (or a committee thereof) and a
right of first refusal provision in favor of the Company with respect to
subsequent transfers of the shares acquired thereunder.
3.6 Key Man Life Insurance. The Company shall maintain or cause to
be maintained, with financially sound and reputable insurers, term life
insurance in the amount of $500,000 on the lives of each of Xxxxx X. Silver and
Xxxx X. Xxxxx. Such policies shall be owned by the Company and all benefits
thereunder shall be payable to the Company.
3.7 Expiration of Covenants. The covenants set forth in this
Section 3 (other than those set forth in Section 3.1(a)) shall expire and be of
no further force or effect upon the first sale of Common Stock of the Company to
the public pursuant to a firm underwriting, which sale is effected pursuant to a
registration statement filed with, and declared effective by, the SEC under the
1933 Act, at a public offering price of at least $7.50 per share, as presently
constituted, and with gross proceeds of not less than $10,000,000.
SECTION 4
MISCELLANEOUS
4.1 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents made and to be performed entirely with the State of
California.
18.
19
4.2 Entire Agreement; Amendment. This Agreement constitutes the full
and entire understanding and agreement between the parties with respect to the
subject matter hereof. Except as otherwise provided in paragraph 1.14 above,
this Agreement may be amended, waived, discharged or terminated only by written
consent of the Company and the Holders of not less than sixty-six and two-thirds
percent (66-2/3%) of the Registrable Securities.
4.3 Notices. Any notice, request or other communication required or
permitted hereunder shall be given in writing and shall be deemed to have been
duly given if personally delivered or if telegraphed or mailed by registered or
certified mail, postage prepaid, at the respective addresses of the parties as
set forth on Exhibit 1 hereto and shall be deemed to have been received when
delivered. Any party hereto may by notice so given change its address for future
notices hereunder.
4.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.5 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
4.6 Captions. The captions and headings to Sections of this
Agreement have been inserted for identification and reference purposes only and
shall not be used to construe the meaning or the interpretation of this
Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties as of the date first above written.
KOFAX IMAGE PRODUCTS HOLDER:
By: By:
-------------------------------- ----------------------------------
Title: Title:
----------------------------- -------------------------------
-----------------------------------
Xxxxx X. Silver
-----------------------------------
Xxxx X. Xxxxx
19.
20
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties as of the date first above written.
KOFAX IMAGE PRODUCTS HOLDER: SIGMA PARTNERS, A CALIFORNIA
LIMITED PARTNERSHIP
BY ITS GENERAL PARTNER:
SIGMA MANAGEMENT, A CALIFORNIA
LIMITED PARTNERSHIP
By: [SIG] By: XXXXXXXX X. XXXX
-------------------------------- ----------------------------------
Title: President Xxxxxxxx X. Xxxx
---------------------------- Title: General Partner
-------------------------------
XXXXX X. SILVER
-----------------------------------
Xxxxx X. Silver
XXXX X. XXXXX
-----------------------------------
Xxxx X. Xxxxx
20.
21
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties as of the date first above written.
KOFAX IMAGE PRODUCTS HOLDER: SIGMA ASSOCIATES, A CALIFORNIA
LIMITED PARTNERSHIP
By: [SIG] By: XXXXXXXX X. XXXX
-------------------------------- ----------------------------------
Xxxxxxxx X. Xxxx
Title: PRESIDENT Title: General Partner
----------------------------- -------------------------------
XXXXX X. SILVER
-----------------------------------
Xxxxx X. Silver
XXXX X. XXXXX
-----------------------------------
Xxxx X. Xxxxx
20.
22
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties as of the date first above written.
KOFAX IMAGE PRODUCTS HOLDER:
By: [SIG] By: [SIG]
-------------------------------- ----------------------------------
Title: President Title: Vice President
----------------------------- -------------------------------
3 Securities Corp.
XXXXX X. SILVER
-----------------------------------
Xxxxx X. Silver
XXXX X. XXXXX
-----------------------------------
Xxxx X. Xxxxx
20.
23
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties as of the date first above written.
KOFAX IMAGE PRODUCTS HOLDER:
SOUTHERN CALIFORNIA VENTURES
By: [SIG] By: [SIG]
-------------------------------- ----------------------------------
Title: PRESIDENT Title: General Partner
----------------------------- -------------------------------
XXXXX X. SILVER
-----------------------------------
Xxxxx X. Silver
XXXX X. XXXXX
-----------------------------------
Xxxx X. Xxxxx
20.
24
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties as of the date first above written.
KOFAX IMAGE PRODUCTS HOLDER:
[SIG]
-----------------------------------
By: [SIG] By: [SIG]
-------------------------------- ----------------------------------
Title: PRESIDENT Title: TTEES
----------------------------- -------------------------------
XXXXX X. SILVER
-----------------------------------
Xxxxx X. Silver
XXXX X. XXXXX
-----------------------------------
Xxxx X. Xxxxx
20.
25
EXHIBIT 1
I. SERIES A PURCHASERS
Number
Name/Address of Shares
------------ ---------
Southern California Ventures 315,225
0000 Xx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
3i Securities Corporation 315,225
000 Xxxxxxx Xxxxxx Xx., Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Xxxxxxx X. Xxxxxxxx 3,750
0000 Xxxx Xxxxx Xxxxx Xxxx, Xxx. 00X
Xxxxx Xxxx, XX 00000
Xxxxxx X. Xxxxxxx 3,750
c/o Petroware, Inc.
Two Energy Square
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Xxxxxxx X. Xxxxxxx 7,500
c/o Radionics
0000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Xxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx 7,500
0000 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Xxxxxxx X. Xxxxxx 9,000
0000 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Xxxxxx X. Xxxxx 75,000
0000 Xxxxxxxxxx Xxxxx
Xxxxx Xxx, XX 00000
Xxxxxx Xxxxxxxxx 7,500
40 W. 000 Xxxxxx Xxxxx
Xxxxxx, XX 00000
Xxxxxx X. Xxxxxxx 1,800
c/o Zycad
0000 Xxxxx Xxxxx
Xx. Xxxx, XX 00000
Xxxxxx Xxxxxxx, III 3,750
000 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
1.
26
II. SERIES B PURCHASERS
Number
Name/address of Shares
-------------- ---------
Sigma Partners, A California 465,200
Limited Partnership
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Sigma Associates, A California 34,800
Limited Partnership
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
3i Securities Corporation 345,834
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Southern California Ventures 179,167
0000 Xx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Xxxxxxx X. Xxxxxxx 66,667
and Xxxxx X. Xxxxxxx, Trustees,
Xxxxxxx Family Trust Dated 11/12/80
00000 Xxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Xxxxxxx X. Xxxxxx 3,667
0000 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Xxxxxx X. Xxxxx 15,000
0000 Xxxxxxxxxx Xxxxx
Xxxxx Xxx, XX 00000
X.X. Xxxxxx
x/x Xxxxxxxxx, Xxxxx, Xxxxxxx & Xxxxx 6,667
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000
2.
27
III. SERIES C PURCHASERS
Number
Name/Address of Shares
------------ ---------
Sigma Partners, A California 184,000
Limited Partnership
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Sigma Associates, A California 16,000
Limited Partnership
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
3i Securities Corporation 400,000
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Southern California Ventures 120,000
0000 Xx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Xxxxxxx X. Xxxxxxx and 80,000
Xxxxx X. Xxxxxxx, Trustees,
Xxxxxxx Family Trust Dated 11/12/80
00000 Xxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
3.
