<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 28, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
KOFAX IMAGE PRODUCTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 3577 33-0114967
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
3 JENNER STREET, IRVINE, CALIFORNIA 92618
(714) 727-1733
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DAVID S. SILVER, CHAIRMAN OF THE BOARD AND PRESIDENT
KOFAX IMAGE PRODUCTS, INC.
3 JENNER STREET
IRVINE, CALIFORNIA 92618
(714) 727-1733
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
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K.C. SCHAAF, ESQ. LIOR O. NUCHI, ESQ.
CHRISTOPHER D. IVEY, ESQ. WILLIAM J. NEWELL, ESQ.
WILLIAM E. GARRETT, ESQ. DAWN L. JUDD, ESQ.
MARC G. ALCSER, ESQ. WENDY M. PIZARRO, ESQ.
STRADLING, YOCCA, CARLSON & RAUTH, MCCUTCHEN, DOYLE, BROWN & ENERSEN LLP
A PROFESSIONAL CORPORATION ONE EMBARCADERO CENTER, SUITE 200
660 NEWPORT CENTER DRIVE, SUITE 1600 2100 GENG ROAD
NEWPORT BEACH, CALIFORNIA 92660 PALO ALTO, CALIFORNIA 94303
(714) 725-4000 (415) 846-4000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(2)
- ----------------------------------------------------------------------------------------------
Common Stock ($0.001 par value)........... $29,900,000 $9,061
==============================================================================================
</TABLE>
(1) Includes 300,000 shares of Common Stock that may be purchased by the
Underwriters to cover over-allotments, if any.
(2) Estimated pursuant to Rule 457(o) solely for the purpose of calculating the
registration fee.
-----------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION AUGUST 28, 1997
PROSPECTUS
2,000,000 Shares
[KOFAX LOGO]
Common Stock
------------------------
Of the 2,000,000 shares of common stock (the "Common Stock"), offered
hereby, 1,300,000 shares are being sold by Kofax Image Products, Inc. ("Kofax"
or the "Company") and 700,000 shares are being sold by certain stockholders of
the Company (the "Selling Stockholders"). The Company will not receive any of
the proceeds from the sale of shares by the Selling Stockholders. See "Principal
and Selling Stockholders." Prior to this offering, there has been no public
market for the Common Stock of the Company. It is currently estimated that the
initial public offering price of the Common Stock will be between $11.00 and
$13.00 per share. See "Underwriting" for the factors to be considered in
determining the initial public offering price. Application has been made for
quotation of the Common Stock on the Nasdaq National Market under the symbol
"KOFX."
------------------------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION
TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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========================================================================================================
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
- --------------------------------------------------------------------------------------------------------
Per Share....................... $ $ $ $
- --------------------------------------------------------------------------------------------------------
Total(3)........................ $ $ $ $
========================================================================================================
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting offering expenses payable by the Company estimated at
$800,000.
(3) Certain Selling Stockholders have granted the Underwriters a 30-day option
to purchase up to an additional 300,000 shares of Common Stock solely to
cover over-allotments, if any. If the Underwriters exercise this option in
full, the total Price to Public, Underwriting Discounts and Commissions,
Proceeds to Company and Proceeds to Selling Stockholders will be $ ,
$ , $ and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock offered by this Prospectus are offered by the
several Underwriters, subject to prior sale, when, as and if delivered to and
accepted by them, and subject to the right of the Underwriters to reject orders
in whole or in part. It is expected that delivery of the certificates for the
Common Stock will be made at the offices of Needham & Company, Inc., New York,
New York, on or about , 1997.
------------------------
NEEDHAM & COMPANY, INC. UNTERBERG HARRIS
The date of this Prospectus is , 1997
<PAGE> 3
[PICTURES]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
The Company intends to furnish to its stockholders annual reports
containing financial statements examined by an independent public accounting
firm and quarterly reports containing unaudited financial information for the
first three quarters of each fiscal year.
Kofax(R), KIPP(R), ImageControls(R), Ascent(R), Ascent Capture(R) and
NetScan(R) are registered trademarks of the Company. StorageControls(TM),
Adrenaline(TM) and Ascent Storage(TM) are trademarks of the Company and are the
subject of pending trademark registration applications. Alliance(SM) and The
Component Imaging Company(SM) are servicemarks of the Company and are the
subject of pending servicemark registration applications. This prospectus also
includes trademarks of companies other than the Company, whose mention herein is
with due recognition of, and without intent to, misappropriate their marks.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors," and Consolidated Financial Statements and
Notes thereto, appearing elsewhere in this prospectus.
THE COMPANY
Kofax develops and markets hardware and software products for the imaging
and document management market. The Company has increased its revenues every
year since its founding in 1985 and believes that it is the leader in the image
processing accelerator market it has historically served. The Company also
believes that new products it has recently introduced, as well as products it
plans to introduce in the next year, will significantly expand the size of the
Company's addressable market.
Document imaging systems improve efficiencies in paper intensive industries
by converting paper documents into electronic images (a process called
"capture") and managing the routing and storage of the document images. Examples
of the beneficial use of document imaging include expediting loan application
and insurance claim processing and speeding the processing of new drug
applications to the FDA. According to International Data Corporation, software
revenue for the imaging, workflow and document management industry was
approximately $2.3 billion in 1996 and is projected to grow approximately 30%
annually over the next four years.
Kofax currently has two product lines -- component application software and
scanner enhancement products, the latter of which consists primarily of image
processing accelerators. The Company believes that both product lines are well
positioned to take advantage of several major trends in the document imaging
market:
- - APPLICATION SOFTWARE. The document imaging market is transitioning from
"closed" monolithic systems supplied by turnkey vendors to a market where
VARs and system integrators integrate a set of software components from
different vendors into complete solutions. Anticipating this trend, Kofax
began developing its Ascent family of component software in early 1993. The
first Ascent product, Ascent Capture, was designed to reduce the cost of
scanning and indexing by using automated recognition techniques. In 1996 the
Company introduced Ascent Storage, an application for managing image
repositories on optical jukeboxes. These applications can be combined with
software components from other vendors, such as document management software
from Documentum, Inc., to form complete solutions. Revenue from Ascent
products was $0.2 million in fiscal 1995, $2.1 million in fiscal 1996, and
$5.2 million in fiscal 1997. The Company expects Ascent software to continue
to grow as a share of revenue.
- - IMAGE PROCESSING ACCELERATORS. As the speed and sophistication of imaging
systems have increased, so too have the demands on image processing. To meet
this demand, Kofax continues to advance its market leading family of hardware
accelerators and software development tools that enable PCs to control high-
speed scanners and perform complex image enhancement and recognition
functions. Kofax expects that image processing accelerators will continue to
account for a majority of its revenue over the next several years.
Kofax's primary growth strategy is to expand its addressable markets by
developing new products that leverage its core image processing technologies. To
further this strategy, Kofax has recently introduced, and plans to introduce
over the next 12 months, new products in each of its product lines. In late
1996, in response to the growth of the Internet and emerging collaborative
applications, Kofax introduced a network scan server called NetScan that
connects popular office scanners directly to a network and allows them to be
shared among multiple users. Products currently in development include a new
version of Ascent Capture that will allow the Company to address the substantial
market for forms processing; a new version of Ascent Storage that requires no
programming to implement and can be used with any standard Windows application;
a SCSI version of the Company's accelerator boards that will address the growing
SCSI scanner market; and the Company's first scanner-resident accelerator
product, which will provide scanner manufacturers with a low-cost image
processing board that provides enhanced functionality.
Kofax sells its products through a network of over 50 technically skilled,
independent distributors specializing in sales of document imaging products.
This channel is supported by a 56 person sales, marketing, and technical support
organization that targets VARs, system integrators, OEMs, and large end users to
supplement the selling efforts of the Company's distributors.
3
<PAGE> 5
THE OFFERING
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Common Stock offered by the Company................. 1,300,000 shares
Common Stock offered by the Selling Stockholders.... 700,000 shares
Common Stock outstanding after the offering......... 5,294,258 shares(1)
Use of proceeds..................................... For general corporate purposes. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol.............. KOFX
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................... $15,773 $18,076 $21,085 $24,964 $29,266
Gross profit................................ 10,361 11,682 13,867 17,038 21,546
Income (loss) from operations............... 1,657 1,970 2,643 (1,433)* 3,392
Net income (loss)........................... 1,298 1,492 1,811 (733) 2,135
Pro forma net income per share.............. $ 0.50
Pro forma weighted average common shares.... 4,285
</TABLE>
- ---------------
* In fiscal 1996, the Company took a one-time charge of $4,176,800 for acquired
research and development costs.
<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------------
PRO FORMA(2) AS ADJUSTED(3)
------------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and investments............................. $ 5,404 $ 18,291
Working capital.................................................... 8,676 21,956
Total assets....................................................... 16,327 29,214
Long-term notes payable............................................ 427 --
Total stockholders' equity(2)...................................... 12,254 25,962
</TABLE>
- ---------------
(1) Based on the number of shares of Common Stock outstanding as of June 30,
1997. Excludes 425,763 shares of Common Stock issuable upon exercise of
stock options outstanding as of August 22, 1997 at a weighted average
exercise price of $3.41 per share.
(2) Reflects on a pro forma basis the conversion of all outstanding shares of
the Company's Redeemable Convertible Preferred Stock into Common Stock upon
the closing of this offering on a one-for-one basis which results in an
increase to actual stockholders' equity of $7,146,200.
(3) Adjusted to reflect the sale of the 1,300,000 shares of Common Stock offered
by the Company hereby at an assumed initial public offering price of $12.00
per share and the application of the net proceeds therefrom. See
"Capitalization."
---------------
Except as otherwise noted, all information in this prospectus (i) reflects
the automatic conversion of all outstanding shares of the Company's Redeemable
Convertible Preferred Stock into an aggregate of 2,667,002 shares of Common
Stock upon the closing of this offering, (ii) assumes outstanding options to
purchase shares of Common Stock have not been exercised and (iii) assumes the
Underwriters' over-allotment option is not exercised. See "Description of
Capital Stock" and "Underwriting."
The Company was incorporated in California in August 1985 and
reincorporated in Delaware in February, 1996. As used in this prospectus,
references to the "Company" and "Kofax" refer to the Company, its predecessor
entity and to its subsidiary. The principal executive offices of the Company are
located at 3 Jenner Street, Irvine, California 92618, and the Company's
telephone number is (714) 727-1733.
4
<PAGE> 6
RISK FACTORS
This prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this prospectus. In addition
to the other information in this Prospectus, the following factors should be
considered carefully in evaluating the Company and its business before
purchasing shares of Common Stock.
PROBABLE FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's operating results have been, and its future operating results
are expected to be, subject to fluctuations due to a number of factors,
including the timing of orders from, and shipments to, major customers; the
timing of new product introductions by the Company or its competitors;
variations in the mix of products sold by the Company; changes in pricing
policies by the Company, its competitors or its suppliers, including possible
decreases in average selling prices of the Company's products in response to
competitive pressures; product returns or price protection charges from
customers; market acceptance of new and enhanced versions of the Company's
products; the availability and cost of key components; the availability of
manufacturing capacity; delays in the introduction of new products or product
enhancements by the Company, the Company's competitors or other providers of
hardware, software and components for the document imaging market; dependence
upon capital spending budgets; fluctuations in general economic conditions; and
the unpredictability of all of the foregoing. In addition, the Company has at
times experienced quarter-to-quarter declines in net sales. The Company believes
that these fluctuations in net sales result primarily from the budgeting and
purchasing cycles of its customers and, during the summer months, from European
holiday closures. As a result, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Quarterly Results of Operations."
The Company's expense levels are relatively fixed in the short term and are
based on the Company's sales forecasts; however, because substantially all of
the Company's net sales in each quarter result from orders received and shipped
in that quarter, net sales are difficult for the Company to forecast accurately.
The Company operates with little product backlog because its products are
typically shipped shortly after orders are received. In addition, a significant
portion of the Company's sales are made through indirect channels and are
difficult to predict. Any significant reduction in customer demand in a
particular quarter would therefore have an almost immediate adverse effect on
the Company's operating results. If significant shortfalls were to occur between
forecasted and actual orders, as has occurred in the past and as may occur in
the future, the Company might not be able to reduce its expenses proportionately
and in a timely manner. This could compound the resulting adverse effect on
operating results. In addition, in order to promptly fill orders, the Company
maintains inventories of finished goods and components with long lead times,
which could result in writedowns of inventory in the future and could contribute
to quarterly fluctuations in operating results. The Company's gross profit
margins may be adversely affected by the introduction of new products and
changes in product mix. Accordingly, there can be no assurance that the Company
will be able to sustain its current gross profit margins. The Company also may
reduce prices or increase spending in response to competition or to pursue new
market opportunities, which may adversely affect the Company's operating
results. Due to the foregoing factors, the Company's operating results may be
below the expectations of public market analysts and investors in some future
quarters, which would likely result in a decline in the trading price of the
Common Stock. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Overview" and "-- Quarterly Results of Operations."
DEPENDENCE ON A LIMITED NUMBER OF PRODUCTS FOR CURRENT AND FUTURE OPERATING
RESULTS
The Company focuses exclusively on document imaging hardware and software.
Historically, the Company has derived substantially all of its net sales from
its family of accelerator boards, software development tools and accessories.
This family of products is expected to continue to account for a majority of
5
<PAGE> 7
the Company's net sales for the foreseeable future. The Company expects that as
the family of accelerator boards and related products continues to mature, sales
of these products will not continue to grow at historical rates, and there can
be no assurance that the Company will be able to sustain the current level of
growth of such sales. Any reduction in the demand for the Company's family of
accelerator boards and related products due to introductions by the Company's
competitors of products based on new technologies or new industry standards, a
decline in the demand for computer systems or document imaging products, product
obsolescence or any other reason would have a material adverse effect on the
Company's business, operating results, cash flows and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Products."
In January 1995, the Company introduced its Ascent line of document image
processing application software for Microsoft Windows. The Company is directing
a significant amount of its research and development expenditures to the
development of its Ascent products, and plans to devote significant marketing
efforts to promotion of its Ascent products and NetScan. The Company believes
that its Ascent and NetScan products, together with other products under
development, will contribute an increasing share of the Company's net sales in
the future as the market for accelerator boards and related products continues
to mature. Accordingly, the Company believes that its operating results will in
the future become substantially dependent on the Company's ability to increase
sales of its Ascent products, achieve market acceptance of new products under
development and develop future products. There can be no assurance that the
Company will be successful in increasing sales of its Ascent products, achieving
market acceptance of its new products under development or develop additional
products. Failure to increase sales of the Company's Ascent products, achieve
market acceptance of products under development or develop additional products
would have a material adverse effect on the Company's business, operating
results, cash flows and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Business -- Products."
DEPENDENCE ON DOCUMENT IMAGE PROCESSING MARKET AND COMPONENT SOFTWARE STRATEGY
Substantially all of the Company's net sales have been attributable to
sales of document imaging products, and these products are currently expected to
account for substantially all of the Company's future net sales. The document
imaging market is a rapidly evolving market. If the document imaging market
fails to grow or grows more slowly than the Company currently anticipates, the
Company's business, operating results and financial condition would be
materially adversely affected. In addition, the Company has focused its product
development efforts on a component software strategy rather than seeking to
develop a complete turnkey imaging solution. If the component software approach
does not continue to achieve significant market acceptance, or develops more
slowly than the Company expects, the Company's business, operating results, cash
flows and financial condition could be materially adversely affected. See
"Business -- Industry Background."
RAPID TECHNOLOGICAL CHANGE
The market for the Company's document image processing products is
characterized by rapid technological advances, changes in end user requirements,
frequent new product introductions and enhancements and evolving industry
standards. The introduction of products embodying new technologies and the
emergence of new industry standards could render the Company's existing products
and products under development obsolete and unmarketable. For example,
increasing speeds of future generation Pentium-class microprocessors in standard
PCs could reduce demand for the Company's hardware accelerator products, which
could have a material adverse effect upon the Company's business, operating
results and financial condition. The Company's future success will depend upon
its ability to address the increasingly sophisticated needs of its customers by
enhancing its current products and by developing and introducing on a timely
basis new products that lead or keep pace with technological developments and
emerging industry standards, respond to evolving end user requirements and
achieve market acceptance. Any failure by the Company to anticipate or
adequately respond to technological developments or end user requirements, or
any significant delays in product development or introduction could result in a
loss of competitiveness or net sales. In the past, the
6
<PAGE> 8
Company has experienced delays in the introduction of new products and product
enhancements. There can be no assurance that the Company will be successful in
developing and marketing product enhancements or new products on a timely basis
or at all, that the Company will not experience difficulties that could delay or
prevent the successful development, introduction and sale of these products, or
that any of its new products and product enhancements will adequately meet the
requirements of the marketplace and achieve market acceptance. If the Company is
unable, for technological or any other reasons, to develop, introduce and sell
its products in a timely manner, the Company's business, operating results and
financial condition would be materially adversely affected. From time to time,
the Company or its present or future competitors may announce new products,
capabilities or technologies that have the potential to replace or shorten the
life cycles of the Company's existing products. There can be no assurance that
announcements of currently planned or other new products will not cause
customers to delay or alter their purchasing decisions in anticipation of such
products, which could have a material adverse effect on the Company's business,
operating results, cash flows and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business -- Products," "-- Competition" and "-- Technology/Research and
Development."
IMPACT OF COMPETITION
The market for document image processing hardware and software components
is highly competitive and is characterized by rapid changes in technology and
frequent introductions of new platforms and features. The Company expects
competition to increase as other companies introduce additional and more
competitive products in the developing document image processing market. In its
accelerator board and developer toolkit business, the Company competes primarily
with a number of small private companies. In its Ascent business, to which the
Company is a relative newcomer, Kofax competes indirectly against large
suppliers of turnkey systems, as well as directly with other component software
vendors, more of whom are expected to enter the market over the next few years.
Some of the Company's existing and potential competitors in the application
software segment of the document imaging market have larger technical staffs,
greater brand name recognition and market presence, more established and larger
marketing and sales organizations, and substantially greater financial resources
than the Company. There can be no assurance that the Company will be able to
compete successfully against current or future competitors or that competitive
pressures faced by the Company will not have a material adverse effect on the
Company's business, operating results, cash flows and financial condition.
The Company believes that the competitive factors affecting the market for
the Company's products include product performance, price and quality; product
functionality and features; the availability of products for existing and future
platforms; the ease of integration of the products with other hardware and
software components of document imaging systems; and the quality of support
services, product documentation and training. The relative importance of each of
these factors depends upon the specific customer involved. There can be no
assurance that the Company will be able to compete effectively with respect to
any of these factors.
The Company's present or future competitors may be able to develop products
comparable or superior to those offered by the Company or adapt more quickly
than the Company to new technologies or evolving customer requirements. In order
to remain competitive in the document imaging market, the Company must respond
to technological change, customer requirements, and competitors' current
products, product enhancements and innovations. The Company introduced its
Ascent line of application software products in January 1995, has recently
developed its new generation of accelerator boards and is currently developing
additional product enhancements to these products in an effort to address
customer requirements and respond to technological changes. However, there can
be no assurance that the Company will successfully complete the development or
introduction of these products on a timely basis or that these products will
achieve market acceptance. Accordingly, there can be no assurance that the
Company will be able to continue to compete effectively in the document imaging
market, that competition will not intensify or that future competition will not
have a material adverse effect on the Company's business, operating results,
cash flows and financial condition. See "Business -- Competition."
7
<PAGE> 9
DEPENDENCE UPON DISTRIBUTION CHANNELS
The Company relies heavily on its distributors and resellers for the
marketing and distribution of its products. In fiscal 1997, three of the
Company's distributors collectively accounted for approximately 38% of the
Company's net sales. The concentration of sales to a limited number of
distributors increases the credit risk of sales to such distributors. If one or
more of the Company's principal distributors became insolvent, the Company's
business, operating results and financial condition could be materially
adversely affected. The Company's products are hardware and software components
of complete document imaging systems. As such, sales of the Company's products
depend, in significant part, upon purchases of document imaging systems, which
include products supplied by vendors other than the Company. As a result, sales
of the Company's products are subject to a variety of factors outside of the
Company's control, including the ability of its resellers to successfully sell
their complete solutions to end users. The Company's agreements with resellers
and distributors are generally not exclusive and in many cases may be terminated
by either party without cause. There can be no assurance that these resellers
and distributors will continue to carry the Company's products or that they will
give a high priority to the marketing of the Company's products. In addition,
there can be no assurance that the Company will retain any of its current
resellers or distributors or that, if the Company were to lose any reseller or
distributor, the Company would be successful in recruiting replacement
organizations to represent it. Any changes in the Company's distribution
channels could materially adversely affect the Company's business, operating
results, cash flows and financial condition. See "Business -- Sales and
Distribution."
DEPENDENCE ON INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company currently holds no patents and relies on a combination of
copyright, trademark and trade secret laws, employee and third-party
nondisclosure agreements, licensing arrangements and other security measures
(which afford only limited protection) to establish and protect its software,
proprietary algorithms and other proprietary technology. There can be no
assurance that the Company will be successful in protecting its proprietary
technology, or that the Company's competitors will not independently develop
products or technologies that are substantially equivalent or superior to the
Company's products and technologies. It is possible that third parties will copy
or reverse engineer portions of the Company's products or otherwise obtain and
use information which the Company regards as proprietary. In addition, the laws
of some foreign countries do not protect the Company's proprietary rights to the
same extent as the laws of the United States. The failure or inability of the
Company to protect its intellectual property rights could have a material
adverse effect on its business, operating results and financial condition.
The PC hardware and software industry is characterized by vigorous
protection of intellectual property rights, which has resulted in significant
and often protracted and expensive litigation. Litigation may be necessary to
protect the Company's intellectual property rights and trade secrets, to
determine the validity and scope of the proprietary rights of others or to
defend against claims of infringement or invalidity. There can be no assurance
that infringement, invalidity, right to use or ownership claims by third parties
will not be asserted against the Company in the future. The Company expects that
it will increasingly be subject to such claims as the number of products and
competitors in the document image processing market grows and the functionality
of such products overlaps with other industry segments. If any claims or actions
are asserted against the Company, the Company may seek to obtain a license under
a third party's intellectual property rights. There can be no assurance,
however, that a license will be available upon reasonable terms if at all. In
addition, should the Company decide to litigate such claims, such litigation
could be expensive, protracted and time consuming, could divert management's
attention from other matters, could cause product shipment delays and could
materially adversely affect the Company's business, operating results, cash
flows and financial condition, regardless of the outcome of the litigation. See
"Business -- Intellectual Property."
DEPENDENCE ON SUPPLIERS AND SUBCONTRACTORS
The Company purchases circuit boards, integrated circuits and other
components from third parties. The Company's dependence on third-party suppliers
involves several risks, including limited control over pricing, availability,
quality and delivery schedules. The Company is dependent on sole-source
suppliers for ASICs
8
<PAGE> 10
and certain other components used in its products. The Company generally
purchases sole-sourced components pursuant to purchase orders placed in the
ordinary course of business and has no guaranteed supply arrangements with any
of its sole-source suppliers. There can be no assurance that the Company will
not experience quality control problems or supply shortages with respect to
these components in the future. Any quality control problems or interruptions in
supply with respect to one or more components could have a material adverse
effect on the Company's business, operating results and financial condition.
Because of the Company's reliance on these suppliers, the Company may also be
subject to increases in component costs, which could materially adversely affect
its business, operating results, cash flows and financial condition. See
"Business -- Manufacturing and Suppliers."
The Company relies on third-party subcontractors for the manufacture of
certain of its products and components, such as cable assemblies and circuit
boards. Reliance on third-party subcontractors involves several risks, including
the potential inadequacy of capacity, the unavailability of or interruptions in
access to certain process technologies and reduced control over product quality,
delivery schedules, manufacturing yields and costs. Shortages of raw materials
or production capacity constraints at the Company's subcontractors could
negatively affect the Company's ability to meet its production obligations and
result in increased prices for, or unavailability of, affected parts. Any such
reduction, constraint or unavailability could result in delays in shipments of
the Company's products or increases in the prices of components, either of which
could have a material adverse effect on the Company's business, operating
results, cash flows and financial condition. See "Business -- Manufacturing and
Suppliers."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends on the continued service of key management
personnel, including David S. Silver, Chief Executive Officer and Dean A. Hough,
Vice President, Engineering. None of the Company's personnel is subject to an
employment agreement with the Company. In addition, the competition to attract,
retain and motivate qualified technical, sales and operations personnel is
intense. The Company has at times experienced, and continues to experience,
difficulty in recruiting qualified personnel, particularly in software
development and customer support. There can be no assurance that the Company can
retain its key personnel or attract other qualified personnel in the future. The
failure to attract or retain such persons could have a material adverse effect
on the Company's business, operating results, cash flows and financial
condition. See "Business -- Employees" and "Management."
DEPENDENCE ON CAPITAL SPENDING
Substantially all of the Company's net sales are derived from the sale of
hardware and software components for use in document imaging systems purchased
by end users such as large corporations and domestic and foreign governmental
agencies. The decision to purchase a document imaging system generally involves
a significant commitment of capital, with the attendant delays associated with
significant capital expenditures. The Company's future success is directly
dependent upon the capital expenditure budgets of its customers and the
continued demand by such customers for document imaging systems. Certain
industries that utilize document imaging systems, such as the financial services
industry, are highly cyclical, and companies in such industries may experience
economic downturns, which could lead to significant reductions in capital
expenditures. In addition, many domestic and foreign governmental agencies have
experienced budget deficits that have also led to significant reductions in
capital expenditures. The Company's operations may in the future be subject to
substantial period-to-period fluctuations as a consequence of such industry
patterns and such factors affecting capital spending. There can be no assurance
that any such decrease in capital spending will not have a material adverse
effect on the Company's business, operating results, cash flows and financial
condition.
RISKS ASSOCIATED WITH INTERNATIONAL SALES
In fiscal 1995, 1996 and 1997, international sales represented
approximately 36%, 36% and 34%, respectively, of the Company's net sales, and
the Company believes that its future growth is dependent in part upon its
ability to increase sales in international markets. The Company intends to
attempt to continue to
9
<PAGE> 11
expand its operations outside of the United States and enter additional
international markets, which will require significant management attention and
financial resources. There can be no assurance, however, that the Company will
be able to successfully maintain or expand its international sales.
International sales are subject to inherent risks, including changes in
regulatory requirements, tariffs and other barriers, fluctuating exchange rates,
difficulties in staffing and managing foreign sales and support operations and
the possibility of greater difficulty in accounts receivable collection. To
date, the Company has avoided the risk of fluctuating exchange rates associated
with international sales by selling its products in United States currency,
however, there can be no assurance that the Company will be able to continue to
do so. There can be no assurance that any of these factors will not have a
material adverse effect on the Company's future international sales and,
consequently, on the Company's business, operating results, cash flows and
financial condition. See "Management's Discussion and Analysis of Financial
Conditions and Results of Operations -- Overview" and "-- Results of
Operations -- Net Sales."
RISK OF DEFECTS
The Company has occasionally discovered errors or defects in its products
after their commercial shipment. Although to date such defects and errors have
not been significant, there can be no assurance that significant defects and
errors will not be discovered in new products, existing products or in new
versions or enhancements of existing products, and if discovered, will be
successfully and timely corrected. Discovery of errors or defects in the
Company's products after commercial shipment could result in adverse customer
reaction, negative publicity regarding the Company or its products, a delay in
or failure to achieve market acceptance or a diversion of management and product
development resources, any of which could have a material adverse effect on the
Company's business, operating results, cash flows and financial condition.
CONTROL BY MANAGEMENT AND EXISTING STOCKHOLDERS
Upon consummation of this offering, the directors, executive officers and
principal stockholders of the Company and their affiliates will, in the
aggregate, own beneficially approximately 62% of the outstanding Common Stock
(59% if the Underwriters' over-allotment option is exercised in full). These
stockholders, acting together, will have the ability to control the election of
the Company's directors and most other stockholders' actions and, as a result,
direct the Company's affairs and business. Such concentration may have the
effect of delaying or preventing a change of control of the Company. See
"Principal and Selling Stockholders."
NO PRIOR PUBLIC MARKET; PROBABLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock of the Company, and there can be no assurance that an active market will
develop or be sustained after this offering or that the market price of the
Common Stock will not decline below the initial public offering price. The
initial public offering price will be determined through negotiations among the
Company, the Selling Stockholders and the representatives of the Underwriters
and may not be indicative of future market prices. See "Underwriting." The
market price of the Common Stock could be subject to wide fluctuations in
response to quarter-to-quarter variations in operating results, changes in
earnings estimates by analysts, announcements of technological innovations or
new products by the Company or its competitors, general conditions in the
software and computer industries or the document image processing market and
other events or factors. In addition, the securities of many technology
companies have experienced extreme price and volume fluctuations, which have
often been unrelated to the operating performance of such companies. These
conditions may adversely affect the market price of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of substantial amounts of Common Stock in the public market following
the offering made hereby could have an adverse effect on the market price of the
Common Stock. Upon completion of this offering, the Company will have 5,294,258
shares of Common Stock outstanding, assuming no exercise of options after June
30, 1997. Of these shares, the 2,000,000 shares offered hereby (2,300,000 shares
if the Underwriters'
10
<PAGE> 12
over-allotment option is exercised in full) will be freely tradeable without
restriction or further registration under the Securities Act of 1933, as amended
(the "Securities Act"), unless purchased by "affiliates" of the Company as that
term is defined in Rule 144 under the Securities Act. The remaining 3,294,258
shares of Common Stock outstanding upon completion of this offering are
"restricted securities" as that term is defined in Rule 144. Of these,
approximately shares of Common Stock will be eligible for immediate
sale in reliance on Rule 144(k). These restricted shares may be sold in the
public market only if registered or pursuant to an exemption from registration,
such as Rule 144 under the Securities Act. Holders of shares of Common
Stock have agreed, pursuant to certain lock-up agreements, that for a period of
180 days after the date of this Prospectus they will not offer, sell, contract
to sell, grant any option to sell or otherwise dispose of, directly or
indirectly, any shares of Common Stock owned by them or that could be purchased
by them through the exercise of options to purchase Common Stock, without the
prior written consent of Needham & Company, Inc. Upon expiration of the lock-up
agreements, approximately shares held by existing stockholders will be
eligible for sale, subject to the volume and other restrictions of Rule 144. As
of August 22, 1997, 425,763 shares were subject to outstanding options to
purchase Common Stock, of which shares are subject to the lock-up
agreements described above. Upon completion of this offering, the holders of
1,967,002 outstanding shares of Common Stock are entitled to certain demand and
piggyback registration rights with respect to such shares, the exercise of which
may have an adverse effect on the market price for the Common Stock or the
Company's ability to raise needed capital. See "Description of Capital
Stock -- Registration Rights," "Shares Eligible for Future Sale" and
"Underwriting."
DILUTION TO NEW INVESTORS
The initial public offering price will be substantially higher than the
book value per share of the Common Stock. Accordingly, investors purchasing
shares of Common Stock in this offering will incur immediate and substantial net
tangible book value dilution of $7.20 per share, assuming an initial public
offering price of $12.00 per share. In addition, investors purchasing shares in
this offering will incur additional dilution to the extent outstanding options
are exercised. See "Dilution."
POTENTIAL EFFECT OF ANTI-TAKEOVER PROVISIONS
The Company's Board of Directors has the authority to issue up to 5,000,000
shares of Preferred Stock and to determine the price, rights, preferences,
qualifications, limitations and restrictions, including voting rights, of those
shares without any further vote or action by the stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock could have the effect of delaying or
preventing a change of control. Further, Section 203 of the General Corporation
Law of Delaware prohibits the Company from engaging in certain business
combinations with interested stockholders. These provisions may have the effect
of delaying or preventing a change in control of the Company without action by
the stockholders, and could therefore adversely affect the price of the Common
Stock. See "Description of Capital Stock."
11
<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,300,000 shares of
Common Stock offered by the Company hereby at an assumed initial public offering
price of $12.00 per share, after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company, are
estimated to be approximately $13,708,000. The Company will not receive any
proceeds from the sale of shares of Common Stock offered by the Selling
Stockholders.
The Company will repay the outstanding amount under the Company's term loan
credit facility which was $821,400 as of June 30, 1997. The outstanding balance
of the term loan bears interest at the bank's prime rate plus 1.0%, matures on
July 5, 1999, and was incurred for working capital purposes. The Company expects
to use substantially all of the remaining net proceeds of this offering for
working capital, to augment the Company's sales, marketing and technical support
organization, and to increase the Company's funds available for general
corporate purposes. A portion of the net proceeds may also be used for strategic
acquisitions of businesses, products or technologies complementary to those of
the Company. The Company is not currently a party to any commitments or
agreements, and is not currently involved in any negotiations, with respect to
any such acquisitions. The Company has not determined the amounts it plans to
expend with respect to each of the listed uses or the timing of such
expenditures. The amounts actually expended for each use may vary significantly
depending on a number of factors, including future revenue growth, if any, the
amount of cash generated or used by the Company's operations, the progress of
the Company's product development efforts, technological advances, the status of
competitive products and acquisition opportunities presented to the Company.
Pending such uses, the net proceeds of this offering will be invested in short
to medium-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on shares of its
Common Stock. The Company currently anticipates that it will retain all
available funds for use in the operation of its business, and does not intend to
pay any cash dividends in the foreseeable future. Future cash dividends, if any,
will be determined by the Board of Directors. The payment of cash dividends by
the Company is restricted by the Company's current bank credit facilities, which
contain restrictions prohibiting the Company from paying any cash dividends
without the bank's prior approval, and future borrowings may contain similar
restrictions.
12
<PAGE> 14
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
as of June 30, 1997, (ii) the pro forma capitalization of the Company, giving
effect to the conversion of all outstanding shares of Redeemable Convertible
Preferred Stock into shares of Common Stock, and (iii) the as adjusted
capitalization of the Company after giving effect to the sale of 1,300,000
shares of Common Stock offered by the Company hereby at an assumed initial
public offering price of $12.00 per share, after deducting underwriting
discounts and commissions and estimated offering expenses payable by the
Company.
<TABLE>
<CAPTION>
JUNE 30, 1997
------------------------------------
ACTUAL PRO FORMA(1) AS ADJUSTED
------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term notes payable...................................... $ 427 $ 427 $ --
Redeemable Convertible Preferred Stock, $.001 par value;
2,667,002 actual shares outstanding, no pro forma or as
adjusted shares outstanding................................ 7,146 -- --
Stockholders' equity:
Preferred Stock, $.001 par value, 5,000,000 shares
authorized; no shares issued or outstanding............. -- -- --
Common Stock, $.001 par value; 40,000,000 shares
authorized; 1,327,256 actual shares outstanding and
3,994,258 pro forma shares outstanding; 5,294,258 shares
outstanding, as adjusted(2)............................. 172 4,261 17,969
Retained earnings............................................ 4,936 7,993 7,993
------- ------- -------
Total stockholders' equity................................. 5,108 12,254 25,962
------- ------- -------
Total capitalization.................................... $12,681 $ 12,681 $25,962
======= ======= =======
</TABLE>
- ---------------
(1) Reflects the conversion of all outstanding shares of the Company's
Redeemable Convertible Preferred Stock into Common Stock on a one-for-one
basis and an increase of approximately $3,057,000 in retained earnings and a
decrease in the value of the Redeemable Convertible Preferred Stock for the
cumulative accretion to the liquidation value of such Preferred Stock upon
the closing of this offering.
(2) Excludes 425,763 shares of Common Stock issuable upon exercise of
outstanding stock options as of August 22, 1997 at a weighted average
exercise price of $3.41 per share. Also excludes a total of 641,650
additional shares of Common Stock reserved for future issuance under the
Company's incentive stock plans. See "Management -- Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan," "-- Stock
Option Plan for Non-Employee Directors" and "-- Employee Stock Purchase
Plan."
13
<PAGE> 15
DILUTION
The pro forma net tangible book value of the Company's Common Stock as of
June 30, 1997 was $11,724,100, or $2.94 per share. Pro forma net tangible book
value per share represents the amount of the Company's total tangible assets
(total assets less $530,200 of intangible assets as of June 30, 1997) less total
liabilities divided by the pro forma number of shares of Common Stock
outstanding. Assuming the sale of the 1,300,000 shares offered by the Company
hereby at an assumed initial public offering price of $12.00 per share and the
application of the net proceeds therefrom, after deducting estimated offering
expenses and underwriting discounts and commissions, the pro forma, as adjusted,
net tangible book value of the Company as of June 30, 1997 would have been
approximately $25,432,100, or $4.80 per share. This represents an immediate
increase in the net tangible book value of $1.86 per share to existing
stockholders and an immediate dilution in net tangible book value of $7.20 per
share to purchasers of shares of Common Stock offered hereby. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................. $12.00
Pro forma net tangible book value per share as of June 30, 1997........ $2.94
Increase in net tangible book value per share attributable to new
investors............................................................. 1.86
-----
Pro forma, as adjusted, net tangible book value per share after the
offering.................................................................. 4.80
------
Dilution per share to new investors......................................... $ 7.20
======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1997,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by existing stockholders
and by purchasers of the shares of Common Stock offered hereby at an assumed
initial public offering price of $12.00 per share, before deducting the
underwriting discounts and commissions and estimated offering expenses payable
by the Company:
<TABLE>
<CAPTION>
SHARES TOTAL
PURCHASED(1)(2) CONSIDERATION(3)
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders............... 3,994,258 75% $ 4,261,600 21% $ 1.07
New Investors....................... 1,300,000 25 15,600,000 79 12.00
--------- --- ----------- ---
Total..................... 5,294,258 100% $19,861,600 100%
========= === =========== ===
</TABLE>
- ---------------
(1) Sales by the Selling Stockholders in this offering will reduce the number of
shares held by existing stockholders to 3,294,258 shares, or 62% of the
total number of shares to be outstanding after this offering, and will
increase the number of shares held by new investors to 2,000,000 shares, or
38% of the total shares of Common Stock outstanding after this offering. See
"Principal and Selling Stockholders."
(2) The number of shares assumes (i) the conversion of all outstanding shares of
Redeemable Convertible Preferred Stock into shares of Common Stock upon the
closing of this offering, and (ii) no exercise of outstanding options. At
August 22, 1997, 425,763 shares of Common Stock were subject to outstanding
options at a weighted average exercise price of $3.41 per share. To the
extent options are exercised, there will be further dilution to new
investors. See "Management -- Executive Compensation" and Note 8 of Notes to
Consolidated Financial Statements.
14
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below as of and for each
of the five years in the period ended June 30, 1997 have been derived from the
audited consolidated financial statements and notes thereto audited by Deloitte
& Touche LLP, independent auditors, of which the consolidated financial
statements and notes thereto as of June 30, 1996 and 1997 and for each of the
three years in the period ended June 30, 1997 are included elsewhere in this
Prospectus. The data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................ $15,773 $18,076 $21,085 $24,964 $29,266
Cost of sales............................ 5,412 6,394 7,218 7,926 7,720
------- ------- ------- ------- -------
Gross profit............................. 10,361 11,682 13,867 17,038 21,546
Operating expenses:
Sales and marketing................. 4,095 4,817 5,977 7,456 9,565
Research and development............ 3,365 3,455 3,693 5,090 6,653
General and administrative.......... 1,244 1,440 1,554 1,748 1,936
Acquired in-process research and
development costs................. 4,177
------- ------- ------- ------- -------
Total operating expenses....... 8,704 9,712 11,224 18,471 18,154
------- ------- ------- ------- -------
Income (loss) from operations............ 1,657 1,970 2,643 (1,433) 3,392
Other income, net........................ 69 108 264 200 69
------- ------- ------- ------- -------
Income (loss) before provision (benefit)
for income taxes....................... 1,726 2,078 2,907 (1,233) 3,461
Provision (benefit) for income taxes..... 428 586 1,096 (500) 1,326
------- ------- ------- ------- -------
Net income (loss)........................ $ 1,298 $ 1,492 $ 1,811 $ (733) $ 2,135
======= ======= ======= ======= =======
Pro forma net income per share........... $ 0.50
=======
Pro forma weighted average common
shares................................. 4,285
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
-------------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and investments... $ 4,135 $ 5,119 $ 6,759 $ 3,514 $ 5,404
Working capital.......................... 6,562 7,774 9,382 6,949 8,676
Total assets............................. 9,096 10,631 13,018 14,141 16,327
Long-term notes payable.................. 267 53 15 799 427
Total stockholders' equity(1)............ 7,507 9,008 10,832 10,106 12,254
</TABLE>
- ---------------
(1) Includes amounts attributable to the outstanding shares of the Company's
Redeemable Convertible Preferred Stock.
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements that involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth under "Risk Factors" and elsewhere in this
prospectus. The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto included elsewhere herein.
OVERVIEW
Kofax was founded in 1985 to develop image processing boards that could be
added to personal computers to facilitate high-speed scanning, manipulation and
printing of documents. The Company's first generation of PC-based scanner
acceleration products, the KF-8200 series, was introduced in April 1987. The
Company next developed a set of software development tools that allowed system
integrators and independent software vendors to develop document capture and
printing applications without the need for significant image processing
expertise. The new software development tools, called KIPP Developers Toolkits,
were targeted at Microsoft Windows developers and were introduced in 1990,
together with a second generation of accelerator boards, the KF-9200 series. The
current generation of toolkits, called ImageControls, is a set of 32-bit ActiveX
controls for the Windows NT and Windows 95 environment. The fourth generation of
hardware accelerators, the Adrenaline family, is expected to be released in the
first quarter of fiscal 1998.
In January 1995, the Company introduced its first application software
product, Ascent Capture. Ascent Storage was introduced in January 1996. Ascent
Capture and Ascent Storage are sold through the Company's existing reseller and
system integrator channels. In October 1996, the Company introduced NetScan, a
network scan server for workgroup scanning.
The KIPP and Adrenaline families of products are expected to continue to
account for a majority of the Company's net sales for the next several years.
The Company also expects that its Ascent and NetScan products, together with
other products under development, will contribute an increasing share of the
Company's net sales in the future.
Net sales represent gross sales less discounts, returns and adjustments.
The Company's net sales have grown from $287,000 in fiscal 1987 to $29.3 million
in fiscal 1997. The Company's revenue growth has resulted from the expansion of
the document image processing market, as well as from the growing market
acceptance of the Company's products. The Company typically ships its products
within a short period after acceptance of purchase orders from distributors and
other customers. Accordingly, the Company typically does not have a material
backlog of unfilled orders at the end of any quarter. Net sales of scanner
enhancement products (KIPP, Adrenaline, and NetScan collectively) amounted to
82.3% of fiscal 1997 revenue, of which NetScan contributed less than 1% of net
sales. Net sales of Ascent component software products amounted to 17.7% of
fiscal 1997 revenue compared to 8.5% in fiscal 1996 and 1.0% in fiscal 1995.
International sales (primarily to western European countries) accounted for
approximately 36%, 36% and 34% of net sales during fiscal 1995, 1996 and 1997,
respectively. The Company sells its products primarily through a channel of
distributors and resellers. Net sales through distribution amounted to 77% of
fiscal 1997 revenue. The Company has five domestic and two European sales
offices to support its distributors and resellers. Revenue from hardware and
software sales are recognized at the time of shipment in accordance with AICPA
Statement of Position 91-1, Software Revenue Recognition. Distributors have
certain rights of return and exchange privileges. The Company's distributors
generally do not stock significant amounts of inventory of the Company's
products, as these products are typically incorporated by resellers into
complete imaging and document management systems which are configured shortly
before scheduled delivery to end-user customers. The Company records estimates
for such rights of return and exchange privileges based on historical
experience. The Company provides a warranty for its products against defects in
materials and workmanship. A provision for estimated warranty costs is recorded
at the time of sale.
16
<PAGE> 18
The Company has been profitable for the last 24 quarters, with the
exception of the quarter ending December 1995, when $4,176,800 was charged to
acquired in-process research and development expenses in connection with the
acquisition of certain net assets of LaserData, Inc. ("LaserData"). See Note 3
of Notes to Consolidated Financial Statements.
Cost of sales primarily consist of the costs of components and
subassemblies, labor and manufacturing overhead and, with respect to the
Company's software products, software duplication and royalty expenses. The
Company believes that its gross margins reflect the relatively high software
content of the Company's product mix. Sales and marketing expenses consist
primarily of salaries and commissions, customer support, trade show, advertising
and other promotional expenses. General and administrative expense consists of
personnel costs for administration, finance, information systems, human
resources and general management, as well as professional services.
Research and development expenses consist primarily of personnel costs and
overhead costs relating to occupancy. The Company's research and development
personnel costs increased substantially in January 1996 because of the LaserData
acquisition. Despite the fact that the Company's net sales have increased,
research and development expenses as a percentage of net sales are relatively
high because of the high software content of the Company's KIPP and Adrenaline
family of products and the development of its Ascent application software
products. The Company expects that research and development expenses will
continue to increase in absolute amounts and will fluctuate as a percentage of
net sales, depending upon the timing of material research and product
development projects. As of June 30, 1997, the Company did not have any
capitalized software development expenses. See Note 2 of Notes to Consolidated
Financial Statements.
The Company expects the effective tax rate in future periods to approximate
the statutory rate.
RESULTS OF OPERATIONS
The following table sets forth certain income and expense items as a
percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Net sales................................................... 100.0% 100.0% 100.0%
Cost of sales............................................... 34.2 31.8 26.4
----- ----- -----
Gross profit................................................ 65.8 68.2 73.6
Operating expenses:
Sales and marketing....................................... 28.3 29.9 32.7
Research and development.................................. 17.5 20.4 22.7
General and administrative................................ 7.4 7.0 6.6
Acquired in-process research and development costs........ 16.7
----- ----- -----
Total operating expenses.......................... 53.2 74.0 62.0
----- ----- -----
Income (loss) from operations............................... 12.6 (5.8) 11.6
Other income, net........................................... 1.2 0.9 0.2
----- ----- -----
Income (loss) before provision (benefit) for income taxes... 13.8 (4.9) 11.8
Provision (benefit) for income taxes........................ 5.2 (2.0) 4.5
----- ----- -----
Net income (loss)........................................... 8.6% (2.9%) 7.3%
===== ===== =====
</TABLE>
Net Sales. Net sales increased by 18.4% from $21.1 million in fiscal 1995
to $25.0 million in fiscal 1996. In fiscal 1997, net sales increased by 17.2%,
to $29.3 million, from the prior fiscal year. The increase in fiscal 1996 net
sales was primarily attributable to a $2.0 million increase in sales of the
Company's KF-9275 high-end accelerator board, and $1.9 million from sales of
Ascent products. The increase in fiscal 1997 net sales was primarily
attributable to a $3.0 million increase in the sales of the Company's Ascent
products.
17
<PAGE> 19
Gross Profit. As a percentage of net sales, gross profit represented 65.8%,
68.2% and 73.6% in fiscal 1995, 1996 and 1997, respectively. Increases in gross
profit percentages over the past two years were primarily attributable to the
increasing sales of the Company's Ascent software products, changes in
accelerator board product mix and declining costs of DRAM components used in the
Company's accelerator boards.
Sales and Marketing. Sales and marketing expenses were $6.0 million, $7.5
million and $9.6 million in fiscal 1995, 1996 and 1997, respectively. As a
percentage of net sales, sales and marketing expenses represented 28.3%, 29.9%
and 32.7% in fiscal 1995, 1996 and 1997, respectively. The increase in fiscal
1996 was primarily attributable to additional sales and sales support personnel
necessary to support the Ascent Component software products and Ascent reseller
channel, and the establishment of a sales and support office in the U.K. The
increase in fiscal 1997 was primarily attributable to increased personnel and
marketing related expenses to launch NetScan, and the continued growth of
personnel and advertising expenses for the Ascent Component software products.
The Company expects that sales and marketing expenses will continue to increase
in absolute dollar amounts and will fluctuate as a percentage of net sales.
Research and Development. Research and development expenses were $3.7
million, $5.1 million and $6.7 million in fiscal 1995, 1996 and 1997,
respectively. As a percentage of net sales, research and development expenses
represented 17.5%, 20.4% and 22.7% in fiscal 1995, 1996 and 1997, respectively.
The increase in research and development expenditures was primarily due to the
acquisition of the Ascent Storage engineering group from LaserData effective
January 1996 as well as increased engineering staffing for ImageControls,
Adrenaline and NetScan product development. The Company expects that research
and development expenses will continue to increase in absolute dollar amounts
and will fluctuate as a percentage of net sales depending upon the timing of
material research and development projects.
General and Administrative. General and administrative expenses were $1.6
million, $1.7 million and $1.9 million in fiscal 1995, 1996 and 1997,
respectively. As a percentage of net sales, general and administrative expenses
were 7.4%, 7.0% and 6.6% in fiscal 1995, 1996 and 1997, respectively. The
percentage decreases were attributable to this overhead being absorbed by a
higher revenue base. The Company anticipates that it will incur increased
general and administrative costs in the future related to the additional
insurance and administrative requirements of a public company.
Acquired In-Process Research and Development Costs. Acquired in-process
research and development costs of $4.2 million in fiscal 1996 represented an
allocation of a portion of the purchase price of the acquisition of certain net
assets of LaserData to in-process research and development costs, that had no
future alternative use, based on an independent appraisal.
18
<PAGE> 20
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly consolidated
financial information for the fiscal years ended June 30, 1996 and 1997. In the
opinion of management, this information has been presented on the same basis as
the audited Consolidated Financial Statements appearing elsewhere in this
Prospectus, and includes all adjustments, consisting only of normal recurring
adjustments and accruals, that the Company considers necessary for a fair
presentation. The operating results for any quarter are not necessarily
indicative of the results to be expected for any future period. The unaudited
quarterly information should be read in conjunction with the audited
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
FISCAL 1996 FISCAL 1997
------------------------------------------ ------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUN. 30, SEPT. 30, DEC. 31, MAR. 31, JUN. 30,
1995 1995 1996 1996 1996 1996 1997 1997
--------- -------- -------- -------- --------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............................... $ 5,624 $ 6,171 $6,445 $6,724 $ 6,581 $7,429 $7,648 $7,608
Cost of sales........................... 1,807 2,004 2,142 1,973 1,858 2,058 1,935 1,869
------ ------- ------ ------ ------ ------ ------ ------
Gross profit............................ 3,817 4,167 4,303 4,751 4,723 5,371 5,713 5,739
Operating expenses:
Sales and marketing................... 1,636 1,761 2,043 2,016 2,092 2,400 2,466 2,607
Research and development.............. 1,130 1,101 1,406 1,453 1,600 1,558 1,764 1,731
General and administrative............ 460 440 460 388 420 489 529 498
Acquired in-process research and
development costs................... -- 4,159 -- 18 -- -- -- --
------ ------- ------ ------ ------ ------ ------ ------
Total operating expenses.......... 3,226 7,461 3,909 3,875 4,112 4,447 4,759 4,836
------ ------- ------ ------ ------ ------ ------ ------
Income (loss) from operations........... 591 (3,294) 394 876 611 924 954 903
Other income, net....................... 85 88 4 23 13 4 28 24
------ ------- ------ ------ ------ ------ ------ ------
Income (loss) before provision (benefit)
for income taxes...................... 676 (3,206) 398 899 624 928 982 927
Provision (benefit) for income taxes.... 260 (1,234) 153 321 240 367 379 340
------ ------- ------ ------ ------ ------ ------ ------
Net income (loss)....................... $ 416 $(1,972) $ 245 $ 578 $ 384 $ 561 $ 603 $ 587
====== ======= ====== ====== ====== ====== ====== ======
</TABLE>
The following table sets forth certain income and expense items as a
percentage of net sales for each quarter in fiscal 1996 and fiscal 1997.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
FISCAL 1996 FISCAL 1997
------------------------------------------ ------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUN. 30, SEPT. 30, DEC. 31, MAR. 31, JUN. 30,
1995 1995 1996 1996 1996 1996 1997 1997
--------- -------- -------- -------- --------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........................... 32.1 32.5 33.2 29.3 28.2 27.7 25.3 24.6
----- ----- ----- ----- ----- ----- ----- -----
Gross profit............................ 67.9 67.5 66.8 70.7 71.8 72.3 74.7 75.4
Operating expenses:
Sales and marketing................... 29.1 28.5 31.7 30.0 31.8 32.3 32.2 34.3
Research and development.............. 20.1 17.9 21.8 21.6 24.3 21.0 23.1 22.7
General and administrative............ 8.2 7.1 7.2 5.8 6.4 6.6 6.9 6.5
Acquired in-process research and
development costs................... -- 67.4 -- 0.3 -- -- -- --
----- ----- ----- ----- ----- ----- ----- -----
Total operating expenses.......... 57.4 120.9 60.7 57.7 62.5 59.9 62.2 63.5
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) from operations........... 10.5 (53.4) 6.1 13.0 9.3 12.4 12.5 11.9
Other income, net....................... 1.5 1.4 0.1 0.4 0.2 0.1 0.4 0.3
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before provision (benefit)
for income taxes...................... 12.0 (52.0) 6.2 13.4 9.5 12.5 12.9 12.2
Provision (benefit) for income taxes.... 4.6 (20.0) 2.4 4.8 3.7 4.9 5.0 4.5
----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)....................... 7.4% (32.0%) 3.8% 8.6% 5.8% 7.6% 7.9% 7.7%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
19
<PAGE> 21
The Company's net sales sometimes experience sequential declines in the
June and September quarters. In the quarter ended June 30, 1997, net sales and
net income declined from the levels experienced in the quarter ended March 31,
1997, primarily due to weakness in demand for the Company's products in
international markets.
In the second half of each of fiscal 1996 and 1997, operating expenses
increased significantly, both in absolute amounts and as a percentage of net
sales, primarily due to increased product development expenses and increased
sales and marketing expenses for advertising and promotion of Ascent Capture,
Ascent Storage, and NetScan.
The Company's past operating results have been, and its future operating
results will be, subject to fluctuations due to a number of factors, including
the timing of orders from, and shipments to, major customers; the timing of new
product introductions by the Company or its competitors; variations in the mix
of products sold by the Company; changes in pricing policies by the Company, its
competitors or suppliers, including possible decreases in average selling prices
of the Company's products in response to competitive pressures; product returns
or price protection charges from customers; market acceptance of new and
enhanced versions of the Company's products; the availability and cost of key
components; the availability of manufacturing capacity; delays in the
introduction of new products or product enhancements by the Company, the
Company's competitors or other providers of hardware, software and components
for the document imaging market; dependence upon capital spending budgets; and
fluctuations in general economic conditions.
LIQUIDITY AND CAPITAL RESOURCES
The Company financed its operations and capital requirements from 1986
through 1989 from the sale of approximately $4.0 million of preferred stock and,
thereafter, through cash flows from operations. The Company's primary sources of
funds at June 30, 1997 consisted of $5.4 million of cash, cash equivalents and
short-term investments. In December 1995, $4.6 million of cash was used in
connection with the acquisition of LaserData.
The Company generated cash from operations of $3.7 million during fiscal
1997, primarily due to net income of $2.1 million and depreciation and
amortization. During fiscal 1997, the Company used cash in investing activities
of $3.3 million for capital expenditures and additions to short-term
investments. The Company currently has no significant capital expenditure
commitments.
The Company has an unsecured $2.0 million revolving credit line with
Silicon Valley Bank and as of June 30, 1997 had no outstanding balance under the
revolving line of credit. The revolving line of credit expires in October 1997,
and the Company intends to enter into negotiations with Silicon Valley Bank for
the renewal of the line of credit. In January 1996, the Company entered into a
three-year, $1,150,000 term loan. The proceeds from this offering will be used
to prepay the term loan, which was $821,400 at June 30, 1997. See "Use of
Proceeds."
The Company believes that the net proceeds from the sale of Common Stock
offered by the Company hereby, together with cash flow from operations, if any,
existing cash balances and credit available under the Company's existing credit
facility, will be sufficient to meet its cash requirements for at least the next
12 months.
20
<PAGE> 22
BUSINESS
Kofax is a leading supplier of both document imaging application software
and scanner enhancement products for the imaging and document management market.
The Company specializes in the document capture segment of the market, which
involves converting paper documents to digital electronic images, enhancing and
indexing the images, and then compressing them for routing and storage. The
Company's products are used in conjunction with industry standard personal
computers and personal computer operating systems. The Company sells its
products to a wide variety of document imaging solution providers including
value-added resellers, system integrators, independent software vendors and
computer companies.
INDUSTRY BACKGROUND
Despite the proliferation of computers, the Association for Information and
Image Management estimates that more than 90% of all business information
continues to be stored on paper in file cabinets. In fact, data processing and
word processing have created more paper rather than less.
Document imaging systems are designed to increase operating efficiencies in
paper intensive industries by converting paper documents into electronic images
and then managing the routing and storage of these images. Some of the many uses
of document imaging systems include expediting the processing of loan
applications by financial institutions, processing of insurance claims, speeding
the processing of new drug applications with the FDA for pharmaceutical
companies, and archiving images for local government agencies such as land deed
offices and tax assessors. According to International Data Corporation, software
revenue for the imaging, workflow and document management industry was
approximately $2.3 billion in 1996 and is projected to grow approximately 30%
annually over the next four years.
The benefits of imaging systems include saving companies money by providing
less expensive storage of documents; improving customer service by allowing
workers faster access to files; allowing multiple users to access files
simultaneously; and providing remote access to documents via commercial
telephone lines or the Internet.
To allow documents to be electronically stored, retrieved and routed, most
imaging systems perform the following five functions:
- DOCUMENT CAPTURE performs the initial scanning and indexing of paper
documents.
- OPTICAL STORAGE is used for permanent storage of the scanned digital
images.
- RETRIEVAL AND DISPLAY software allows users to query the system and
display stored images.
- DOCUMENT MANAGEMENT provides centralized management and administration of
large volumes of documents.
- WORKFLOW allows for the automation of routine work processes by routing
documents electronically throughout an organization.
Document capture and optical storage are critical components of all
document imaging systems. Document capture subsystems perform the initial
scanning and conversion of paper documents into digital images as well as the
indexing of the documents for later retrieval by the imaging system. Indexing is
frequently assisted by optical character recognition (OCR), which recognizes
typewritten characters and converts them into computer-readable text, and by
image cleanup, which improves the accuracy of OCR and makes images more
readable.
Optical storage is the most commonly used method of permanently storing
scanned images because of its low cost and high reliability. Optical disks and
optical "jukeboxes" (robotic devices that manage large libraries of optical
disks) are managed by specialized software that allows users to retrieve optical
disks, read and write files from them, and perform automatic backups.
21
<PAGE> 23
THE KOFAX SOLUTION
Kofax develops, markets and supports document capture and image storage
application software, image processing accelerators, and has more recently
introduced a workgroup scanning product. The Company believes that its product
lines are well positioned to take advantage of major trends in the document
imaging market.
Component Software
Until the mid-1990s, most document imaging solutions were closed monolithic
systems supplied by turnkey vendors. Beginning in 1995, however, specialized
vendors began competing with these turnkey imaging systems by selling individual
software components through networks of VARs and system integrators who would
then integrate components from different vendors into a complete solution for
end users. The diagram below shows the breaking down of monolithic integrated
imaging systems into discrete component software applications.
EVOLUTION OF DOCUMENT IMAGING SOLUTIONS
[MONOLITHIC TURNKEY DOCUMENT IMAGING SYSTEMS GRAPHIC]
Although turnkey systems have the advantage of being supported by a single
vendor, best of breed component applications systems have gained
popularity due to their lower cost, greater flexibility, easier
upgradability, and greater depth of features.
Component systems have the advantage of being more flexible, less costly,
and easier to upgrade than comparable turnkey systems. In an effort to
capitalize on the component imaging trend, Kofax began shipping its Ascent
family of component software applications in January 1995. The first Ascent
application, Ascent Capture, was designed to reduce the cost of the scanning and
indexing process, which is usually extremely labor intensive and therefore an
expensive ongoing function of most imaging systems. Ascent Capture reduces
manual labor by using automated recognition techniques such as optical character
recognition (OCR) and bar code recognition and by automating the flow of images
through the entire capture process. In addition, sophisticated validation
techniques ensure the accuracy of the indexing process without requiring costly
human intervention. In 1996, the Company introduced Ascent Storage, an
application for managing image repositories on optical jukeboxes. In component
based systems, applications such as Ascent Capture and Storage are combined by
resellers and system integrators with other software components, such as
document management software from Documentum, Inc., to form complete imaging and
document management solutions.
22
<PAGE> 24
Increasing Demands for Image Processing
Kofax's first products, image processing accelerators, were designed to
give PCs sufficient processing power to operate high-speed scanners and then
compress and store the resulting images. The acceptance of PCs as replacements
for proprietary imaging workstations grew as Microsoft Windows became the most
popular client software environment for document imaging applications and as
PC-based LANs gained acceptance for large scale business applications.
More recently, as the speed and sophistication of imaging systems has
increased, so too have the requirements for image processing. To meet this
demand, Kofax continues to provide a family of hardware accelerators and
development tools that allow Pentium-class PCs to perform high-speed scanning,
image cleanup, and recognition functions, including operations such as
deskewing, despeckling, line removal, bar code recognition, and forms
recognition. These functions, which have grown increasingly CPU intensive, make
document images more readable, allow OCR to operate more accurately and decrease
the storage requirements for compressed images. The following diagram
illustrates the evolution of Kofax image processing accelerator technology.
EVOLUTION OF KOFAX ACCELERATOR TECHNOLOGY
DIAGRAM
As the demand for image processing functions in document capture
applications has increased, Kofax has introduced successive generations of
accelerators, each with the ability to perform additional functions
without slowing down the scanner.
In order to allow these image processing functions to operate at the rated
speed of modern scanners (40 to 150 pages per minute), Kofax develops core
algorithms that can be executed on the most cost-effective platform available in
any particular system. This involves producing algorithms that execute variously
on host PCs, on RISC processors embedded in hardware accelerators, on DSPs, or
on proprietary ASICs. By balancing the execution of algorithms across these
platforms, Kofax systems can perform multiple image processing functions
simultaneously at speeds as high as 250 images per minute.
23
<PAGE> 25
Workgroup Scanning
The growth of the Internet and the World Wide Web has spawned an increasing
use of low-end color desktop scanners in departments as well as in smaller
workgroups. Kofax has recently introduced a network scan server called NetScan
that allows these scanners to be shared among multiple users.
NetScan connects a flatbed scanner directly to a network and allows any
individual in a workgroup to scan an image and have it routed directly back to
his or her desktop or anywhere else on the network. These images can then be
distributed to others at lower cost than express mail and higher quality than a
fax or, can be inserted directly into any Windows application, such as a Web
publishing tool or a word processor.
STRATEGY
Kofax's primary growth strategy is to expand its addressable markets by
developing new products that leverage its core image processing technologies.
Expand Addressable Market for Component Software
Kofax is expanding into two new markets related to document capture and
optical storage in which it does not presently compete:
- Forms processing involves capturing data from printed forms and storing
the information in a database. Today, this data entry market is primarily
manual, with workers reading paper documents and keying information into
a mainframe database. Kofax plans to compete in this substantial market
with a forth-coming version of Ascent Capture that performs image
assisted data entry, in which paper forms are scanned, zoned, OCRed, and
the data stored with little or no human participation. This software will
make use of sophisticated forms recognition technology to automatically
recognize different form types, zonal image cleanup algorithms to
optimize different parts of the forms for the highest possible accuracy
in automated recognition, handprint recognition techniques in addition to
OCR (machine print) techniques, and automated validation procedures to
ensure the accuracy of the index data.
- Transparent storage is a method of managing optical devices that makes
the device work like just another drive letter on a network. The current
version of Ascent Storage can be used only with applications that have
been written using a Kofax toolkit and is therefore limited to VARs and
system integrators with programming skills and specialized requirements.
In 1998 Kofax expects to introduce a transparent version of Ascent
Storage for Windows NT networks that requires no programming and can be
used with any standard Windows application. This will broaden the market
for Ascent Storage to include Kofax's entire current distribution channel
of VARs and distributors.
Expand Addressable Market for Scanner Enhancement Products
Currently, Kofax accelerator boards are PC-based controllers that are
compatible only with scanners that use a proprietary interface known as a
"video" interface. Kofax is applying its accelerator technology to two new
markets, SCSI scanners and OEM scanner resident controllers:
- SCSI scanners use the standard SCSI interface technology that is also
used by hard disks and other common PC peripherals. This interface has
grown more popular in the past three years, and in August 1997 Kofax
introduced a new family of hardware accelerators that are compatible with
both video and SCSI scanners. SCSI scanners make up about half the total
market for high-speed document imaging scanners, and the Company believes
that the introduction of these new accelerator boards will allow Kofax to
aggressively compete in this market segment.
- In addition to image processing functions performed by Kofax accelerators
in host PCs, scanner manufacturers use specialized scanner resident image
processing boards to perform certain types of basic image manipulation
that are best executed on raw image data before it is passed to the PC.
Kofax has developed advanced technologies that the Company believes will
allow it to compete aggressively in this market on an OEM basis,
providing scanner manufacturers with a low-cost image processing board
that provides enhanced functionality.
24
<PAGE> 26
Pursue Workgroup Scanning
Kofax intends to be a leader in the emerging product category of workgroup
scanning, and plans to continue investing in NetScan and in certain follow-on
products related to workgroup network scanning. Kofax believes that the growth
of the Internet will continue to drive growth in the market for color desktop
scanners, and that Kofax is well positioned to take advantage of this trend.
Maintain and Expand Distribution Channels and Technical Support
Kofax has pursued a two-tier distribution strategy for eight years and
believes it has developed considerable expertise in selling to and supporting
this channel. Kofax plans to continue investing heavily in products that can be
effectively sold through VARs and distributors, and also plans to continue
investing heavily in technical support, an area that it believes differentiates
Kofax from its competitors.
PRODUCTS
Kofax offers products in two basic areas, both aimed at the imaging and
document management market:
- Component Application Software. The Ascent family of component software
applications today consists of Ascent Capture, a scanning and indexing
application, and Ascent Storage, an optical storage manager for Windows
NT and Novell NetWare networks.
- Scanner Enhancement Products. This area includes the KIPP and Adrenaline
families of PC-based hardware accelerators for scanning and image
processing; developers' toolkits for scanning, image processing, and
optical storage; NetScan, a box level product designed to connect a
low-end scanner directly to a local area network; and OEM hardware
designed to improve image quality inside a scanner.
Component Application Software
The Ascent family is a set of standalone software components designed to be
used in conjunction with components from other vendors to form a complete
document management system. Ascent applications are independent of both database
and network operating system selection, allowing them to work in a high
percentage of existing corporate IT environments. The first Ascent product
commenced shipment in January 1995, and sales of Ascent products currently
account for approximately 20% of the Company's overall net sales. The Company
expects that its Ascent products will contribute an increasing share of the
Company's net sales in the future. See "Risk Factors -- Dependence Upon Certain
Products for Current and Future Operating Results."
Ascent Capture is a batch-oriented document capture software application
designed to process up to 100,000 documents per day at high throughput and low
cost. The goal of Ascent Capture is to reduce the long-term operating cost of
production document capture by incorporating key technologies that are normally
found only in expensive turnkey imaging systems.
25
<PAGE> 27
Document capture is a sequential process that involves several steps, each
of which typically executes on a workstation on a network. The diagram and table
below explain each of the steps that make up a complete document capture
subsystem.
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------
OPERATION DESCRIPTION ASCENT BENEFITS
- -------------------------------------------------------------------------------------------
Scanning Converts paper documents into Ascent Capture implements a batch scanning
compressed images. system to increase throughput and reduce
the number of scanners and scanner
operators required.
- -------------------------------------------------------------------------------------------
OCR and Image Cleans up image, reads and Image processing cleans up the scanned
Processing retrieves index keywords. image and makes OCR more accurate.
Preprinted forms can be zoned and
automatically indexed by optical character
recognition of the zones.
- -------------------------------------------------------------------------------------------
Indexing and Assigns index keywords to all Bar codes can automate indexing and reduce
Quality documents so that they can be hand keying. For manual indexing, input
Assurance retrieved later. screens are designed for efficient "heads
up" indexing. To ensure accuracy, custom
validation rules can be enforced for each
index field.
- -------------------------------------------------------------------------------------------
Rescanning Sends poorly scanned Ascent Capture keeps track of rejected
documents back to be pages and allows rescanning of single pages
rescanned. within a batch. Rescanned pages are
automatically inserted back into batches in
the proper order.
- -------------------------------------------------------------------------------------------
Release Exports images to long-term Ascent Capture supports release of
storage and indexes to a documents to standard optical systems and
permanent database. common SQL databases. Database schema
conversion is built into the Ascent Capture
system.
- -------------------------------------------------------------------------------------------
</TABLE>
In Ascent Capture, each of these operations is integrated via internal
queues that provide scalability and flexibility. This allows Ascent Capture to
be used in many different environments, from mid-range systems with only a few
stations to enterprise installations with multiple scanners feeding multiple
OCR, index, rescan and release stations. Ascent's internal routing system
maximizes efficiency for every station and operator.
A typical mid-range capture system consists of one or two scan/rescan
stations and two to four stations performing image processing, OCR, indexing and
release. Ascent Capture has a recommended end user list price of $7,995 for each
high-end scan station, $3,495 for each mid-range scan station, and $2,495 for
all other stations, such as OCR, indexing or release. An update service,
available at a price equal to 15% of the software's list price, provides
customers with software upgrades for a period of 12 months.
26
<PAGE> 28
The following diagram illustrates the flow of documents through an Ascent
Capture system:
[The Ascent Capture Process]
Ascent Storage is an optical storage manager for Windows NT and Novell
NetWare networks. It works with applications written with the StorageControls
toolkit and allows these applications to efficiently read and write files to an
optical storage device on the network. Ascent Storage supports WORM
(nonerasable) optical drives, MO (rewritable) drives, and optical jukeboxes that
use mechanical robotics to swap libraries of optical disks into a single drive
on an as-needed basis.
The goal of Ascent Storage is to allow imaging applications to access
optical storage, which is inherently slower than magnetic storage, in the most
efficient possible way. Applications compatible with Ascent Storage can
communicate directly with optical jukeboxes on the network and can intelligently
pre-fetch archived files from optical to magnetic storage, providing users with
the fastest possible file access. In addition, Ascent Storage allows system
managers to manage off-line volumes (off-line disks that have been removed from
the jukebox and stored on a shelf), make real time backups, and check the status
and performance of all optical devices on their network.
Ascent Storage is priced on a device basis. Each optical device on the
network requires a separate Ascent Storage license, ranging in price from $995
for a standalone optical drive to $19,995 for a large optical jukebox. An update
service, available at a price equal to 15% of the software's list price,
provides customers with software upgrades for a period of 12 months.
Scanner Enhancement Products
Kofax manufactures a wide variety of hardware and toolkits designed to
accelerate scanning and image processing functions on PCs.
27
<PAGE> 29
Kofax accelerator boards are used to connect high-speed scanners to PCs and
perform critical image processing operations on the images after they are
scanned. Kofax's recently announced fourth generation of accelerators, to be
sold under the brand name Adrenaline, will contain memory, an on-board RISC
processor, one or two DSP devices, and proprietary ASICs that will accelerate
functions that are too processor intensive to execute efficiently on the PC's
processor.
Because standard processors commonly used in PCs are optimized to work on
bytes rather than bits, even fast PCs driven by Pentium-class processors are
poorly suited to perform image processing and are typically unable to perform
complex image processing in real time. Kofax accelerators are designed primarily
to optimize these image processing operations.
Typical image processing functions performed by Kofax hardware accelerators
include image deskewing, despeckling, deshading, line removal, edge enhancement,
bar code recognition, forms recognition, and others, all of which execute in
real time at scanner speeds of 40 to 150 pages per minute. The following diagram
illustrates Kofax's scanner enhancement technologies.
[Image Processing System]
The image processing engine used on the Adrenaline family of
accelerator boards performs a variety of image processing functions that
make images more readable, increase the accuracy of OCR, and reduce the
compressed file size.
The Adrenaline family will include four models with list prices of $3,500
and $1,500 for the two hardware models and prices of $1,100 and $400 for the two
software engines. The hardware accelerators are generally used to connect
scanners that run at 40 pages per minute and above while the software engines
are entry level products that support only SCSI scanners and support speeds of
up to about 30 pages per minute.
Special versions of the hardware accelerators are available for IBM
ImagePlus systems. These versions account for about 10% of total accelerator
revenue. These IBM-specific products have list prices ranging from $4,000 to
$9,000.
Kofax currently sells two software toolkit products designed for system
developers creating customized imaging and workflow solutions. The software
toolkits provide a powerful and easy environment for developing
28
<PAGE> 30
custom document capture and document storage applications that take advantage of
the features of Kofax hardware accelerators and optical storage management
software.
ImageControls is a set of 16-bit and 32-bit ActiveX controls designed for
use with Visual Basic and Visual C++. Using ImageControls, developers can build
applications that run on either Windows NT or Windows 95 workstations and
perform high-speed scanning, printing, image display, image cleanup (deskew,
despeckle, line removal, etc.), bar code recognition, and automatic forms
recognition. Three versions of the toolkit are available, ranging in price from
$1,000 to $5,000.
StorageControls is a set of 32-bit ActiveX controls that allows developers
to add to their applications the ability to read and write files directly to
optical jukeboxes on Windows NT and Novell NetWare networks. StorageControls
works in either a Visual Basic or Visual C++ environment and allows access both
to standalone optical drives as well as high-volume optical jukeboxes.
StorageControls is included in the high-end versions of ImageControls, and can
also be purchased separately at a list price of $1,000.
Developer toolkits do not contribute significant revenue to the Company but
are an important part of its overall marketing strategy. When a Kofax toolkit is
used to build an application, support is automatically built in for Kofax
hardware accelerators (with ImageControls) or Kofax storage engines (with
StorageControls). Sales of these products therefore depend heavily on gaining
widespread use of Kofax toolkits among application developers in the imaging
market.
An internal development project, expected to result in shipments in 1998,
is currently underway to produce a scanner resident image processing board that
will be sold on an OEM basis to scanner vendors and shipped as an integral part
of the scanner. This product will perform extremely high-speed functions
designed to improve image quality inside the scanner before the image is
delivered to the PC, by performing tasks such as grayscale thresholding, certain
types of image manipulation and cleanup, and automatic page segmentation. Other
functions will be added on a custom basis depending on the requirements of the
particular OEM.
NetScan is a small, box-level hardware device with communications software
that connects any Hewlett Packard ScanJet scanner to a local area network.
NetScan allows an entire workgroup to share a flatbed scanner, and its simple
keypad interface makes it as easy to use as a fax machine. To use NetScan, users
enter a personal ID code into the keypad, scan their document, and press the
"Send" key. The scanned image is routed to their desktop via standard e-mail
packages such as Microsoft Exchange or Lotus cc:Mail, at lower cost than express
mail and higher quality than a fax.
NetScan supports both color and black and white scanning and is commonly
used either for electronic document distribution by scanning documents and
routing them over the Internet, or for casual workgroup scanning of images for
use in presentations, Web pages, advertising, and similar applications.
NetScan began shipping in October 1996 and does not yet contribute
substantial revenue to the Company. It is available through national
distributors and mail order catalogs and has a suggested list price of $895.
TECHNOLOGY/RESEARCH AND DEVELOPMENT
As of July 31, 1997, the Company's research and development group consisted
of 59 employees, of which 49 persons manage, develop or test the Company's
software products. During the fiscal years ended June 30, 1995, 1996 and 1997,
research and development expenses were $3.7 million, $5.1 million and $6.7
million, respectively. The Company anticipates that it will continue to commit
substantial resources to product development in the future. See "Risk
Factors -- Rapid Technological Change."
As is common in the document imaging industry, the Company licenses various
software from third parties and includes or uses such software in certain of the
Company's application software products. To date, royalties payable under such
license arrangements are less than 10% of the selling price of the software
products.
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<PAGE> 31
Algorithm Development
An important aspect of the Company's research and development effort
involves developing proprietary, state-of-the-art image processing algorithms.
These algorithms are highly specialized and depend on a detailed knowledge of
advanced mathematics and computational processes. These algorithms are
encapsulated in proprietary ASICs, digital signal processor code and traditional
C and assembly language code.
The Company's library of algorithms covers two basic areas:
Recognition. This includes algorithms such as bar code recognition, patch
code detection and automatic forms recognition. These algorithms are widely used
to automate the indexing of scanned documents, thus lowering the ongoing labor
cost of the imaging operation.
Image enhancement. These algorithms are used to clean up scanned images so
that recognition operations run with greater accuracy. Image enhancement is used
both to improve the Company's recognition functions as well as recognition
functions performed by third party products, such as OCR and handprint
recognition. This is a key area of development, as very small increases in OCR
accuracy can save substantial amounts in annual operating costs for an imaging
installation.
A key part of this development is tuning the Company's algorithms for
maximum speed. Customers typically prefer to perform image processing during
scanning, which can only be done if all required algorithms execute in less time
than it takes to scan a page (usually one second or less). The Company believes
that its ability to perform image processing in real time is one of its key
competitive advantages.
The software development group includes engineers with significant design
experience in applied and theoretical image processing, real-time operating
systems, DOS and Windows operating systems, user interfaces, and embedded
systems and firmware. The software development group was an early adopter of
object oriented software development tools and now maintains an expanding base
of reusable code. The hardware design group includes engineers with significant
design experience in high-speed digital electronics, ASICs, field programmable
gate arrays, computer buses, complex computer systems and design for
manufacturability.
SALES AND DISTRIBUTION
Kofax pursues a two-tier distribution strategy. During fiscal 1997, Kofax
had over 50 stocking distributors in 32 countries who accounted for 76.6% of net
sales. Most of the Company's distributors specialize in document image
processing as either their sole business or as a major component of their
business. In fiscal 1997, three of these distributors, Tech Data Corporation,
Law-Cypress Distributing Co., and Cranel Inc. accounted for 14%, 14%, and 10%,
respectively, of the Company's total net sales.
In addition, the Company has a direct sales force that works closely with
its distribution channel. Kofax maintains five sales offices in the U.S. staffed
by technical sales managers and application engineers. The Company's European
headquarters in London covers Western Europe, Eastern Europe, Africa and the
Middle East. Two full-time sales people based in the Irvine, California office
cover Asia and South America. In fiscal 1997, approximately 66% of net sales was
generated in the United States, 25% in Europe and 9% in Asia, South America and
the rest of the world.
Kofax products generally reach the end user through the Company's two
distribution channels. Each of these sales channels plays a different role in
the Company's overall distribution strategy:
Distributors. Most Kofax products flow initially through one of the
Company's distributors. Distributors service a large base of VARs and resellers
and are responsible for handling credit issues and for stocking product to
provide quick shipping turnaround. The Company's distributors generally do not
stock significant amounts of inventory of the Company's products, as these
products are typically incorporated by resellers into complete imaging and
document management systems which are configured shortly before scheduled
delivery to end-user customers.
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<PAGE> 32
VARs/Resellers. VARs and resellers typically integrate Kofax products into
a specific market solution such as a health care or banking system that they
sell to an existing base of customers. The Company has selected and trained over
300 Ascent Certified Resellers (ACRs) who incorporate the Company's application
software components into complete document management systems. The ACRs are the
primary focus of the Company's component software sales strategy and,
accordingly, the Company is investing significantly in training and support of
these resellers.
Because NetScan is aimed at a broader audience than the Company's other
products, it uses a different distribution model. NetScan is sold primarily
through national distributors, rather than specialist imaging distributors, and
is also available through several mail order catalog houses. In addition,
NetScan is marketed by a direct inside sales telemarketing operation.
END USERS
Although Kofax generally does not sell products directly to end users, the
Company has an extensive and diverse list of end user customers who are serviced
and supported by its distributors and resellers. The list below, which was
derived from the Company's database of warranty registration cards received over
the past year, is illustrative of the wide range of industries and organizations
using the Company's products. There can be no assurance that any of the listed
organizations have purchased a material amount of the Company's products or that
they will purchase the Company's products in the future.
<TABLE>
<S> <C> <C>
- ------------------------------ ------------------------------ ------------------------------
MANUFACTURING FINANCIAL/BANKING SYSTEM INTEGRATORS
Kaiser Aluminum Franklin Templeton EDS
Rubbermaid Home Federal Savings Lucent Technologies
Siemens AG Sallie Mae Unisys
- ------------------------------ ------------------------------ ------------------------------
UTILITIES OIL AND CHEMICALS STATE AND LOCAL GOVERNMENT
Kentucky Utilities Co. British Petroleum City of Minneapolis
St. Johns River Water Mgmt Chevron Idaho Dept. of Health
Southern California Edison Dow Chemical Kern County Auditor
- ------------------------------ ------------------------------ ------------------------------
ELECTRONICS SERVICES/DISTRIBUTION EDUCATION
Digital Equipment Corp. Automobile Club of So. Calif. Calif. State University
Hayward
General Electric Avis University of Oklahoma
Hewlett Packard Sysco University of Wisconsin
- ------------------------------ ------------------------------ ------------------------------
HEALTHCARE INSURANCE NATIONAL GOVERNMENT
Baxter Healthcare Life Insurance Co. of Virginia Royal Canadian Mounted Police
Blue Cross/Blue Shield Midland Risk U.S. Marshal Service
Bristol-Meyers Squibb New York Life Insurance U.S. Navy
</TABLE>
MARKETING
The bulk of the Company's marketing efforts are aimed at generating short
term leads for itself and its distribution partners. Promotional efforts are
closely tracked and follow-up surveys help determine the effectiveness of
various marketing programs. This process is automated and is designed to ensure
that leads are fulfilled promptly and by the appropriate channel partner.
Longer term marketing efforts include education of end users via periodic
roadshows, trend and opinion articles placed in key publications, and meetings
with industry analysts. The Company actively uses its marketing efforts to
position itself as both a technological leader and an active supporter of
industry trade associations and standards committees. Currently, the Company's
Chief Executive Officer is vice-chair of the board of directors of the
industry's largest trade association, the Association for Information and Image
Management.
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<PAGE> 33
The Company has several specialized marketing programs designed to reach
specific audiences. The first three of these programs are used to promote the
Ascent product family and are considered important to the long-term success of
Ascent:
The Ascent Reseller Program is designed to attract qualified resellers for
the Company's Ascent family of products. Resellers are accepted into the program
if they meet a set of predefined criteria that includes a minimum level of
technical expertise, experience in the imaging channel and payment of a $3,000
fee. Benefits of the program include demonstration software, free training,
collateral materials, lead support and cooperative marketing funds.
The Component Application Partner Program is aimed at other vendors in the
imaging market who make products complementary to Ascent Capture and Ascent
Storage. Companies are accepted into the program if they support the engineering
work required to write an interface between Ascent and their products. Benefits
include extensive technical support, cooperative marketing opportunities and
reference sales.
Training is provided for the Ascent product family to all qualified
resellers and, for a fee, to interested end users. The basic training class is
three days long and costs $1,495.
The ImageControls ISV Program is targeted at independent software vendors
and provides incentives for these vendors to use Kofax toolkits and support
Kofax accelerators. Benefits of being in the program include reduced price
software and hardware, lead support, cooperative advertising and inclusion in
the Company's annual ISV catalog.
CUSTOMER SUPPORT
The Company believes its ability to provide comprehensive service, support
and training to its distributors, resellers and customers is an important factor
in its business. A high level of continuing service and support is fundamental
to helping developers, distributors and resellers be successful in selling and
supporting the Company's products. The Company's customer support and training
departments currently provide the following services:
Technical Support. A support staff of 11 engineers provides telephone, fax
and electronic mail support to the entire customer base. Additionally,
authorized resellers and subscribers to the support service program have
extended access to the Internet support site, which contains technical articles,
programming tips and source code samples.
Ascent Certified Resellers are entitled to full support under their
reseller program while Ascent end users may purchase an annual support contract
for $995. For software developers who purchase toolkit products, the Company
provides four months of free technical support, after which annual support costs
are between $795 and $995. End users of the Company's software and hardware
engines may contact this group at no charge for routine product installation and
configuration questions.
Software Upgrades. Customers of the Company's developer software toolkit
products receive free software upgrades as part of their subscription to the
Company's technical support program. Customers of the Ascent application
software products may purchase an update service for 15% of the product's list
price, which provides the customer with software upgrades for a period of 12
months.
Customer Education. The Company provides comprehensive product training to
authorized resellers of the Company's Ascent family of application software
products.
Hardware Repair or Replacement. The Company provides a warranty on all of
its hardware products for up to two years after installation. Customers with
hardware problems during the warranty period may return their hardware directly
to the Company, or in some cases to their local authorized distributor, for free
repair or replacement. Customers with hardware problems not covered under
warranty may purchase hardware repair service for a flat fee plus shipping
costs.
The Company maintains sales and support offices in the United States and
Europe. The Company believes that existing field sales and support facilities
are adequate to meet its current requirements. The
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<PAGE> 34
Company plans to continue to expand its field sales and support facilities
worldwide where appropriate to further penetrate existing and new market
opportunities.
COMPETITION
In the imaging and document management industry, the market for scanner
enhancement hardware and software application components is highly competitive
and is characterized by rapid changes in technology and frequent introductions
of new platforms and features. The Company expects competition to increase as
other companies introduce additional and more competitive products in the
emerging imaging and document management market. In its accelerator board and
developer toolkit business, the Company competes primarily with a number of
small private companies. In its Ascent business, Kofax competes indirectly
against suppliers of turnkey systems as well as directly with other component
software vendors, more of whom are expected to enter the market over the next
few years. Some of the Company's existing competitors, as well as a number of
potential competitors, in the document imaging application software segment of
the market have larger technical staffs, greater brand name recognition and
market presence, more established and larger marketing and sales organizations
and substantially greater financial resources than the Company. There can be no
assurance that the Company will be able to compete successfully against current
and future competitors or that competitive pressures faced by the Company will
not have a material adverse effect on the Company's business, operating results
and financial condition.
The Company believes that the competitive factors affecting the market for
the Company's products include product performance, price and quality; product
functionality and features; the availability of products for existing and future
platforms; the ease of integration of the products with other hardware and
software components of document imaging systems; and the quality of customer
support services, documentation and training. The relative importance of each of
these factors depends upon the specific end user involved. There can be no
assurance that the Company will be able to compete effectively with respect to
any of these factors.
The Company's present or future competitors may be able to develop products
comparable or superior to those offered by the Company or adapt more quickly
than the Company to new technologies or evolving customer requirements. In order
to remain successful in the imaging and document management market, the Company
must respond to technological change, customer requirements and competitors'
current products, product enhancements and innovations. In particular, the
Company recently introduced its NetScan networked scan server product and is
currently developing additional products and product enhancements in an effort
to address customer requirements in response to technological changes. However,
there can be no assurance that the Company will successfully complete the
development or introduction of these products on a timely basis or that these
products will achieve market acceptance. Accordingly, there can be no assurance
that the Company will be able to continue to compete effectively in its market,
that competition will not intensify or that future competition will not have a
material adverse effect on the Company's business, operating results and
financial condition.
INTELLECTUAL PROPERTY
The Company believes that its success is strongly related to its reputation
for technology, product innovation, technical competence, technical customer
support and the response of management to customers' needs. The Company
currently holds no patents and relies on a combination of copyright, trademark
and trade secret laws, employee and third-party nondisclosure agreements,
licensing arrangements and other security measures (which afford only limited
protection) to establish and protect its software, proprietary algorithms and
other proprietary technology. Despite these precautions, there can be no
assurance that the Company will be successful in protecting its proprietary
technology, or that the Company's competitors will not independently develop
products or technologies that are substantially equivalent or superior to the
Company's products and technologies. It is possible that unauthorized third
parties will copy or reverse engineer portions of the Company's products or
otherwise obtain and use information which the Company regards as proprietary.
In addition, the laws of some foreign countries do not protect the Company's
proprietary rights to the same extent as the laws of the United States. The
failure or inability of the Company to protect its
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<PAGE> 35
intellectual property rights could have a material adverse effect on its
business, operating results and financial condition.
The PC hardware and software industry is characterized by vigorous
protection of intellectual property rights, which has resulted in significant
and often protracted and expensive litigation. Litigation may be necessary to
protect the Company's intellectual property rights and trade secrets, to
determine the validity and scope of the proprietary rights of others or to
defend against claims of infringement or invalidity. There can be no assurance
that infringement, invalidity, right to use or ownership claims by third parties
will not be asserted against the Company in the future. The Company expects that
it will increasingly be subject to such claims as the number of products and
competitors in the document image processing market grows and the functionality
of such products overlaps with other industry segments. If any claims or actions
are asserted against the Company, the Company may seek to obtain a license under
a third party's intellectual property rights. There can be no assurance,
however, that a license will be available upon reasonable terms if at all. In
addition, should the Company decide to litigate such claims, such litigation
could be expensive, protracted and time consuming, could divert management's
attention from other matters, could cause product shipment delays and could
materially adversely affect the Company's business, operating results and
financial condition, regardless of the outcome of the litigation.
MANUFACTURING AND SUPPLIERS
The Company manufactures its products at its headquarters facility in
Irvine, California. The Company's manufacturing strategy focuses on producing
high quality products while controlling costs and maintaining the flexibility
necessary to introduce new products quickly and react to changing customer
demand. The Company's manufacturing operations consist primarily of materials
and procurement management, functional testing and final assembly of products,
burn-in, quality assurance and shipping. The Company employs one local
independent subcontractor to perform printed circuit board level assembly. The
Company purchases all components and raw materials and consigns them to its
assembly subcontractor. Cable assemblies are purchased complete from a company
that specializes in cable assembly manufacture. The Company has in-house
software duplication capability, but also uses subcontractors for software
duplication. Each of the Company's products undergoes thorough testing and
quality inspection at the final assembly stages of production.
The Company purchases circuit boards, integrated circuits and other
components from third parties. The Company's dependence on third-party suppliers
involves several risks, including limited control over pricing, availability,
quality and delivery schedules. The Company is dependent on sole-source
suppliers for ASICs and certain critical components used in its products. The
Company generally purchases sole-sourced components pursuant to purchase orders
placed in the ordinary course of business and has no guaranteed supply
arrangements with any of its sole-source suppliers. There can be no assurance
that the Company will not experience quality control problems or supply
shortages for these components in the future. Although the Company has attempted
to mitigate these risks by identifying alternate sources of sole-sourced
components and buying significant safety stocks, any quality control problems or
interruptions in supply with respect to one or more components could have a
material adverse effect on the Company's business, operating results and
financial condition. Because of the Company's reliance on these vendors, the
Company may also be subject to increases in component costs which could
materially adversely affect its business, operating results and financial
condition.
The Company relies on third-party subcontractors for the manufacture of
certain of its products and components such as cable assemblies and circuit
boards. Reliance on third-party subcontractors involves several risks, including
the potential inadequacy of capacity, the unavailability of or interruptions in
access to certain process technologies and reduced control over product quality,
delivery schedules, manufacturing yields and costs. Shortages of raw materials
to or production capacity constraints at the Company's subcontractors could
negatively affect the Company's ability to meet its production obligations and
result in increased prices for affected parts. Any such factor may result in
delays in shipments of the Company's products or increases in the prices of
components, either of which could have a material adverse effect on the
Company's business, operating results and financial condition.
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<PAGE> 36
BACKLOG
The Company typically ships its products within a short period after
acceptance of purchase orders from distributors and other customers.
Accordingly, the Company typically does not have a material backlog of unfilled
orders, and net sales in any quarter are substantially dependent on orders
booked in that quarter. Any significant weakening in customer demand would
therefore have an almost immediate adverse impact on the Company's operating
results and on the Company's ability to maintain profitability.
EMPLOYEES
As of July 31, 1997, the Company employed 151 individuals, including 59 in
research and development, 56 in sales, marketing and customer support, 14 in
manufacturing and 22 in administration, finance and MIS. The Company regularly
seeks to identify skilled engineering and other potential employee candidates,
and has found that competition for qualified personnel in the computer software
industry is intense. The Company believes that its ability to recruit and retain
highly skilled technical and other management personnel will be critical to its
ability to execute its business plans. None of the Company's employees is
represented by a labor union or is subject to a collective bargaining agreement.
The Company believes that its relations with its employees are good.
FACILITIES
The Company leases approximately 44,000 square feet of space in Irvine,
California, that serves as its headquarters. This space is used for research and
development, manufacturing, sales and marketing, customer support and
administration. The Company's lease expires in January 1999. The Company
believes that it will reach the effective capacity of this space when its lease
expires and will undertake to locate a new facility and to relocate its
headquarters operations. The Company believes there are adequate amounts of
affordable space in the nearby area; but expects that its rent expense will
increase after fiscal 1998 as a result of this relocation. The Company also
leases approximately 10,000 square feet of space in Tyngsboro, Massachusetts,
which is occupied by the Ascent Storage development team. This lease expires in
August 2000.
The Company also maintains a number of sales and support offices in the
United States and Europe. The Company believes that existing field sales and
support facilities are adequate to meet its current requirements. The Company
plans to continue to expand its field sales and support facilities worldwide
where appropriate to further penetrate existing and new market opportunities.
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<PAGE> 37
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, and their ages as of
July 31, 1997, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- --------------------------------
<S> <C> <C>
David S. Silver.................... 39 Chief Executive Officer,
President and Chairman of the
Board
Dean A. Hough...................... 39 Vice President, Engineering and
Director
Richard M. Murphy.................. 50 Vice President, Sales
Ronald J. Fikert................... 48 Vice President, Finance, Chief
Financial Officer and Secretary
Dennis Joyce....................... 50 Vice President, Operations
Kevin Drum......................... 38 Vice President, Marketing
Alexander P. Cilento(2)............ 48 Director
William E. Drobish(2).............. 58 Director
Clifford L. Haas(1)................ 40 Director
B. Allen Lay(1).................... 62 Director
David C. Seigle(1)(2).............. 57 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of Audit Committee.
David S. Silver co-founded the Company in August 1985 and has served as
President and Chief Executive Officer and a director of the Company since its
inception. From 1982 to 1985, Mr. Silver was employed by FileNet Corporation, a
manufacturer of document image processing systems, as a member of the
development team for the FileNet imaging system. Prior to 1982, Mr. Silver held
various engineering positions with MAI Basic Four Corporation, a manufacturer of
computer equipment and associated application software programs.
Dean A. Hough co-founded the Company in August 1985 and has served as Vice
President, Engineering and a director of the Company since its inception. From
1983 to 1985, Mr. Hough was employed by FileNet Corporation, where he
participated in the development of a variety of the imaging components of the
FileNet imaging system. Prior to 1983, Mr. Hough held various design and
engineering positions with MAI Basic Four Corporation and Scientific Atlanta, a
manufacturer of scientific instruments and equipment.
Richard M. Murphy joined the Company as a Vice President, Sales in November
1989. From 1984 to 1989, Mr. Murphy held various sales management positions with
Emulex Corporation, a manufacturer of computer storage, communications, graphics
and peripheral products, where he served as Vice President, Domestic Sales from
September 1987 to January 1989 and as Vice President, North American Sales from
January 1989 to November 1989. Prior to 1984, Mr. Murphy held various sales
positions with Hamilton-Avnet Electronics, Kierulff Electronics and Telefile
Computer Products.
Ronald J. Fikert joined the Company as Vice President, Finance in February
1990. From March 1989 to February 1990, Mr. Fikert worked as an independent
management consultant. From 1984 to 1989, Mr. Fikert was employed by General
Monitors, a manufacturer of sensing, monitoring and detection equipment, where
he served as Controller. From 1979 to 1984, he was employed by Modular Command
Systems, a manufacturer of electronic communications hardware and software, as
Vice President, Finance and Secretary. Prior to joining Modular Command Systems,
Mr. Fikert was Director of Finance for Esterline Electronics, a manufacturer of
electronic products, and was an accountant with Arthur Andersen & Co. Mr. Fikert
is a Certified Public Accountant.
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<PAGE> 38
Dennis Joyce joined the Company as Director of Manufacturing in June 1989
and was promoted to Vice President, Operations in July 1994. From 1984 to 1989,
Mr. Joyce was employed by FileNet Corporation as director of quality assurance
and test engineering.
Kevin Drum joined the Company in November 1992 and was promoted to Vice
President, Marketing in July 1995. Prior to that time, his positions with the
Company included Director of Marketing and Senior Product Manager. From 1984 to
1992, Mr. Drum was employed by Emulex Corporation, where he served as a senior
product manager from 1988 to 1992.
Alexander P. Cilento has been a member of the Company's Board of Directors
since 1986. Since 1991, Mr. Cilento has been a General Partner of Aspen Venture
Partners, a private venture capital investment partnership. From 1985 through
1991, Mr. Cilento was employed by 3i Securities Corporation, a venture capital
investment firm, where he served as Vice President.
William E. Drobish has been a member of the Company's Board of Directors
since 1986. Since 1984, Dr. Drobish has been an instructor at the University of
California, Irvine's Extension Program. Dr. Drobish was a founder, Vice
President, director and Secretary of Silicon Systems, Inc., a manufacturer of
integrated circuits. Dr. Drobish is also a director of Technology Modeling
Associates, Inc., a provider of software that simulates the integrated circuit
fabrication process.
Clifford L. Haas has been a member of the Company's Board of Directors
since 1987. Mr. Haas is a general partner of Sigma Partners and Sigma
Associates, private venture capital investment partnerships, which he has been
associated with since 1985.
B. Allen Lay has been a member of the Company's Board of Directors since
1990. Since 1982, Mr. Lay has been a general partner of Southern California
Ventures, a private venture capital investment partnership. Mr. Lay also serves
as Chief Executive Officer and a director of Westbrae Natural, Inc., a natural
foods company; and as a director of the following companies: PairGain
Technologies, Inc., a provider of telecommunications products; Viasat, Inc., a
provider of wireless telecommunications products; Helisys, Inc., a provider of
rapid prototyping systems.
David C. Seigle has been a member of the Company's Board of Directors since
1992. Mr. Seigle is president of Technology's Edge, a franchisor of technology
integrators. From 1982 to 1991, Mr. Seigle was employed by FileNet Corporation
in various positions, including Senior Vice President of International
Operations from 1987 to 1991. Mr. Seigle is currently a director of Interface
Systems, Inc., a manufacturer and distributor of computer peripherals and
software. He is also a director of ImageMatrix Corporation which supplies work
process management software to the health coverage provider market.
The Board of Directors of the Company is currently composed of seven
directors. All directors hold office until the next annual meeting of
stockholders or until their successors are elected and qualified. Officers serve
at the discretion of the Board of Directors. The Board of Directors has a
Compensation Committee that recommends salaries and incentive compensation for
executive officers of the Company and an Audit Committee that reviews the
results and scope of the audit and other services provided by the Company's
independent auditors.
The Company's directors do not receive compensation for attendance at Board
of Directors or committee meetings, but may be reimbursed for certain expenses
in connection with attendance at board and committee meetings.
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<PAGE> 39
EXECUTIVE COMPENSATION
The following table sets forth compensation earned during fiscal 1997, by
the Company's Chief Executive Officer and the four other most highly compensated
executive officers whose total salary and bonus during such year exceeded
$100,000 (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------- ---------------------
OTHER ANNUAL SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($)(1) OPTIONS/SARS(#)
- --------------------------------------- --------- -------- ------------------ ---------------------
<S> <C> <C> <C> <C>
David S. Silver........................ $ 135,000 $ 64,893 $750 0
President and Chief Executive Officer
Dean A. Hough.......................... 114,078 21,083 750 0
Vice President, Engineering
Ronald J. Fikert....................... 103,843 23,908 750 5,000
Vice President -- Finance, Chief
Financial Officer and Secretary
Richard Murphy......................... 100,000 76,761(2) 750 0
Vice President -- Sales
Kevin Drum............................. 102,290 22,295 750 26,625
Vice President -- Marketing
</TABLE>
- ---------------
(1) Consists of matching payments made under its 401(k) Plan.
(2) Includes $59,895 in sales commissions earned by Mr. Murphy during fiscal
1997.
STOCK BENEFIT PLANS
Stock Incentive Plan.
The Company adopted an Amended and Restated Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan (the "1992 Plan")
in September 1992. The 1992 Plan covers an aggregate of 1,250,000 shares of
Common Stock. In November 1996, the 1992 Plan was terminated. In June 1996, the
Company adopted its 1996 Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan (the "1996 Plan"). The 1996 Plan covers an
aggregate of 800,000 shares of Common Stock.
The 1992 Plan and the 1996 Plan (collectively, the "Plans") provide for the
granting of "incentive stock options," within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), nonstatutory options and
the sale of shares of restricted stock. Under the Plans, options to purchase
shares of the Company's Common Stock and the right to purchase restricted shares
of Common Stock may be granted to directors, officers and employees of the
Company, except that incentive stock options may not be granted to non-employee
directors. The Plans are administered by the Board of Directors. As of August
22, 1997, there were 425,763 options outstanding under the Plans at a weighted
average exercise price of $3.41 per share, and 538,769 shares of restricted
stock had been issued and sold under the Plans at a weighted average purchase
price of $0.25 per share.
Employee Stock Purchase Plan
The Company's Employee Stock Purchase Plan (the "Purchase Plan") covering
an aggregate of 150,000 shares of Common Stock was adopted by the Board of
Directors and approved by the Company's stockholders in August 1997. The
Purchase Plan, which is intended to qualify as an "employee stock purchase plan"
under Section 423 of the Internal Revenue Code, will be implemented by
twelve-month offerings with purchases occurring at three-month intervals
commencing on the date of this Prospectus. The Purchase Plan will be
administered by the Board of Directors. The Purchase Plan permits eligible
employees to purchase
38
<PAGE> 40
Common Stock through payroll deductions, which may not exceed 15% of an
employee's compensation. The price of stock purchased under the Purchase Plan
will be 85% of the lower of the fair market value of the Common Stock at the
beginning of the offering period or on the applicable purchase date.
Stock Option Plan for Non-Employee Directors
In August 1997, the Company adopted its 1997 Stock Option Plan for
Non-Employee Directors (the "Director Plan"), covering an aggregate of 100,000
shares of Common Stock. Under the Director Plan, each non-employee director of
the Company who was a director of the Company on August 31, 1997, or who is
thereafter elected as a director during the term of the Director Plan, shall be
granted an option consisting of 10,000 shares of Common Stock, which option
shall vest and become exercisable at the rate of 25% per year over the four-year
period following the grant date. The initial option grants under the Director
Plan shall be made at the effective date of this offering at the initial public
offering price. The exercise price of options granted under the Director Plan
shall be 100% of the fair market value of the Common Stock on the date of grant,
and such options shall have a term of ten years. In addition, upon the
expiration of each four-year period during a non-employee director's term of
office, such non-employee director shall receive an additional option covering
10,000 shares of Common Stock, with the same vesting schedule, subject to the
limitations set forth in the Director Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1997, decisions regarding executive compensation were made by
the Compensation Committee of the Board of Directors, which consisted of
Clifford L. Haas, B. Allen Lay and David C. Seigle, none of whom are, or have at
any time been, an officer or employee of the Company. No executive officer of
the Company serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a
member of the Company's Board of Directors or Compensation Committee.
No members of the Company's Board of Directors have entered into
transactions with the Company during the period from July 1, 1994 to the date of
this prospectus.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Bylaws provide that the Company will indemnify its directors
and officers and may indemnify its employees and other agents to the fullest
extent permitted by law. The Company believes that indemnification under its
Bylaws covers at least negligence and gross negligence by indemnified parties,
and permits the Company to advance litigation expenses in the case of
stockholder derivative actions or other actions, against an undertaking by the
indemnified party to repay such advances if it is ultimately determined that the
indemnified party is not entitled to indemnification. Prior to the closing of
this offering, the Company expects to have in place liability insurance for its
officers and directors.
In addition, the Company's Certificate of Incorporation provides that,
pursuant to Delaware law, its directors shall not be liable for monetary damages
for breach of the directors' fiduciary duty to the Company and its stockholders.
This provision in the Certificate of Incorporation does not eliminate the
directors' fiduciary duty, and in appropriate circumstances equitable remedies
such as injunctive or other forms of non-monetary relief will remain available
under Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Company for acts
or omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.
The Company has entered into separate indemnification agreements with its
directors and officers. These agreements require the Company, among other
things, to indemnify them against certain liabilities that may arise by reason
of their status or service as directors or officers (other than liabilities
arising from actions not taken in good faith or in a manner the indemnitee
believed to be opposed to the best interests of the
39
<PAGE> 41
Company) to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified and to obtain directors'
insurance if available on reasonable terms. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. The Company
believes that its Certificate of Incorporation and Bylaw provisions and
indemnification agreements are necessary to attract and retain qualified persons
as directors and officers.
CERTAIN TRANSACTIONS
The Company did not enter into any transactions with its executive
officers, directors and principal stockholders during the period from July 1,
1994 to the date of this prospectus.
40
<PAGE> 42
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth the beneficial ownership of the Common Stock
as of July 31, 1997 by (i) each person or entity known to the Company to own
beneficially 5% or more of the outstanding shares of Common Stock, (ii) each of
the Company's directors, (iii) each of the Named Executive Officers, (iv) the
Selling Stockholders and (v) by all directors and executive officers of the
Company as a group. The information as to each person or entity has been
furnished by such person or entity.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING(1) NUMBER OF AFTER OFFERING
--------------------- SHARES BEING ---------------------
NAME AND ADDRESS OF BENEFICIAL OWNERS NUMBER PERCENT OFFERED NUMBER PERCENT
- -------------------------------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Aspen Venture Partners, L.P.(2)....... 1,061,059 26.6 285,479 775,580 14.6
1000 Fremont Avenue, Suite V
Los Altos, CA 94024
Sigma Partners(3)..................... 700,000(4) 17.5 188,330 511,670 9.7
Sigma Associates
2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
Southern California Ventures(5)....... 614,392 15.4 165,304 449,088 8.5
406 Amapola Avenue, Suite 205
Torrance, CA 90501
Drobish Family Trust.................. 156,667 3.9 36,667 120,000 2.3
David S. Silver....................... 375,000 9.4 -- 375,000 7.1
3 Jenner Street,
Irvine, California 92618
Dean A. Hough......................... 375,000 9.4 -- 375,000 7.1
3 Jenner Street,
Irvine, California 92618
David C. Seigle....................... 10,000 * -- 10,000 *
Ronald J. Fikert(6)................... 40,000 1.0 -- 40,000 *
Kevin Drum(7)......................... 25,625 * -- 25,625 *
Richard Murphy........................ 50,000 1.3 -- 50,000 *
Avery Trust........................... 45,000 1.1 12,110 32,890 *
Overland Enterprises, Ltd. ........... 45,000 1.1 12,110 32,890 *
Alexander P. Cilento(8)............... 1,061,059 26.6 285,479 775,580 14.6
c/o Aspen Venture Partners, L.P.
1000 Fremont Avenue, Suite V
Los Altos, CA 94024
Clifford L. Haas(9)................... 700,000(4) 17.5 188,330 511,670 9.7
c/o Sigma Partners
Sigma Associates
2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
B. Allen Lay(10)...................... 614,392 15.4 165,304 449,088 8.5
c/o Southern California Ventures
406 Amapola Avenue, Suite 205
Torrance, CA 90501
All executive officers and directors
as a group (11 persons)(11)(12)..... 3,425,868 85.8 675,780 2,750,088 51.9
</TABLE>
- ---------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options currently exercisable, or exercisable within 60 days of the date
hereof, are deemed outstanding for computing the percentage of the person
holding such options but are not
41
<PAGE> 43
deemed outstanding for computing the percentage of any other person. Except
as indicated by footnote and subject to community property laws where
applicable, the persons named in the table have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially
owned by them.
(2) Alexander P. Cilento is a General Partner of Aspen Venture Partners, L.P.
and, accordingly, may be deemed to beneficially own such shares. Mr.
Cilento disclaims beneficial ownership of the shares owned by Aspen Venture
Partners, L.P., except to the extent of his pecuniary interest therein.
(3) Clifford L. Haas is a General Partner of Sigma Partners and Sigma
Associates and, accordingly, may be deemed to beneficially own such shares.
Mr. Haas disclaims beneficial ownership of the shares owned by Sigma
Partners and Sigma Associates, except to the extent of his pecuniary
interest therein.
(4) Includes 651,300 shares beneficially owned by Sigma Partners and 48,700
shares beneficially owned by Sigma Associates. Each such entity disclaims
beneficial ownership of the shares held by the other entity.
(5) B. Allen Lay is a General Partner of Southern California Ventures and,
accordingly, may be deemed to beneficially own such shares. Mr. Lay
disclaims beneficial ownership of the shares owned by Southern California
Ventures, except to the extent of his pecuniary interest therein.
(6) Includes 2,500 shares of Common Stock subject to options exercisable within
60 days from the date hereof.
(7) Consists of shares subject to options exercisable within 60 days from the
date hereof.
(8) Mr. Cilento, a director of the Company, is a General Partner of Aspen
Venture Partners, L.P. Mr. Cilento disclaims beneficial ownership of the
shares held by Aspen Venture Partners, L.P. except to the extent of his
pecuniary interest arising from his partnership interest in Aspen Venture
Partners, L.P.
(9) Mr. Haas, a director of the Company, is a General Partner of Sigma Partners
and Sigma Associates. Mr. Haas disclaims beneficial ownership of the shares
held by Sigma Partners and Sigma Associates, except to the extent of his
pecuniary interest arising from his partnership interests in Sigma Partners
and Sigma Associates.
(10) Mr. Lay, a director of the Company, is a General Partner of Southern
California Ventures. Mr. Lay disclaims beneficial ownership of the shares
held by Southern California Ventures except to the extent of his pecuniary
interest arising from his partnership interest in Southern California
Ventures.
(11) Excludes all shares owned of record by Aspen Venture Partners, L.P., Sigma
Partners, Sigma Associates and Southern California Ventures, as to which
the respective affiliated directors disclaim beneficial ownership.
(12) Includes 30,625 shares of Common Stock subject to options exercisable
within 60 days from the date hereof.
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<PAGE> 44
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 40,000,000 shares
of Common Stock, $0.001 par value, and 5,000,000 shares of Preferred Stock,
$0.001 par value.
COMMON STOCK
As of June 30, 1997, there were 1,327,256 shares of Common Stock
outstanding held of record by 150 stockholders. There will be 5,294,258 shares
of Common Stock outstanding after giving effect to the sale of the shares of
Common Stock offered by the Company hereby and the conversion of the Company's
Series A, Series B and Series C Preferred Stock.
Holders of Common Stock are entitled to one vote per share on all matters
to be voted upon by the stockholders. Subject to preferences that may be
applicable to the holders of outstanding shares of Preferred Stock, the holders
of Common Stock are entitled to receive ratably such dividends, if any, as may
be declared from time to time by the Board of Directors out of funds legally
available therefor. See "Dividend Policy." In the event of liquidation,
dissolution or winding up of the Company, and subject to the prior distribution
rights of the holders of outstanding shares of Preferred Stock, if any, the
holders of shares of Common Stock shall be entitled to receive pro rata all of
the remaining assets of the Company available for distribution to its
stockholders. The Common Stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are fully
paid and nonassessable, and shares of Common Stock to be issued pursuant to this
offering shall be fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, no shares of Preferred Stock will be
outstanding. The Board of Directors has the authority, without further action by
the stockholders, to issue shares of Preferred Stock in one or more series and
to fix the rights, preferences and privileges thereof, including dividend rates
and preferences, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
any series or the designation of such series, without further vote or action by
the stockholders. Although it presently has no intention to do so, the Board of
Directors, without stockholder approval, could issue Preferred Stock with voting
and conversion rights which could adversely affect the voting power of the
holders of Common Stock. The issuance of Preferred Stock may also have the
effect of delaying or preventing a change of control of the Company.
REGISTRATION RIGHTS
Pursuant to the First Restated Registration Rights Agreement, dated as of
March 6, 1989 (the "Registration Rights Agreement"), the holders of 1,967,002
outstanding shares of Common Stock (upon the closing of this offering) are
entitled to certain demand registration rights with respect to such shares (the
"Registrable Securities"), subject to the terms and conditions of the
Registration Rights Agreement. Under the Registration Rights Agreement, subject
to certain exceptions, the holders of at least 33% of the Registrable Securities
may require the Company to use its best efforts to register on two occasions the
Registrable Securities for public resale, subject to the underwriters' marketing
limitation. In addition, subject to certain exceptions, holders of Registrable
Securities may require the Company to use its best efforts to register on four
occasions Registrable Securities on Form S-3 for public resale. In addition,
whenever the Company proposes to register any of its securities under the
Securities Act, holders of Registrable Securities are entitled to notice of each
such registration and to include their Registrable Securities in such
registration, subject to certain restrictions, including any proposed
underwriter's right to limit the number of shares being registered. The Company
is required to bear all registration expenses in connection with the
registration of Registrable Securities in two demand registrations, four Form
S-3 registrations and all Company registrations. All selling expenses related to
securities registered by the holders are required to be paid by the holders. The
Company is required to indemnify the holders of such Registrable Securities and
the underwriters for such holders, if any, under certain circumstances.
43
<PAGE> 45
Registration rights may be transferred only to a transferee of Registrable
Securities who, in connection with such transfer, acquires at least the lesser
of 50,000 shares, or all of the transferor's shares. The registration rights may
be amended or waived only with the written consent of the Company and the
holders of at least two-thirds of the Registrable Securities then issuable and
outstanding.
The holders of Registrable Securities other than the Selling Stockholders
have waived any rights to include any Registrable Securities in this offering.
DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless either
(i) prior to the date at which the person becomes an interested stockholder, the
Board of Directors approves such transaction or business combination, (ii) the
stockholder acquires more than 85% of the outstanding voting stock of the
corporation (excluding shares held by directors who are officers or held in
certain employee stock plans) upon consummation of such transaction, or (iii)
the business combination is approved by the Board of Directors and by two-thirds
of the outstanding voting stock of the corporation (excluding shares held by the
interested stockholder) at a meeting of stockholders (and not by written
consent). A "business combination" includes a merger, asset sale or other
transaction resulting in a financial benefit to such interested stockholder. For
purposes of Section 203, an "interested stockholder" is a person who, together
with affiliates and associates, owns (or within three years prior, did own) 15%
or more of the corporation's voting stock.
The Company's Restated Certificate of Incorporation includes a provision
that allows the Board of Directors to issue Preferred Stock in one or more
series with such voting rights and other provisions as the Board of Directors
may determine. This provision may be deemed to have a potential anti-takeover
effect and the issuance of Preferred Stock in accordance with such provisions
may delay or prevent a change of control of the Company. See "Preferred Stock."
STOCK TRANSFER AGENT AND REGISTRAR
The stock transfer agent and registrar for the Company's Common Stock is
U.S. Stock Transfer Corporation.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offering, there has been no public market for the Common
Stock. Future sales of substantial amounts of Common Stock in the public market
could adversely affect prevailing market prices and adversely affect the
Company's ability to raise additional capital in the capital markets at a time
and price favorable to the Company.
Upon completion of the offering, the Company will have 5,294,258 shares of
Common Stock outstanding. Of these shares, the 2,000,000 shares sold in the
offering will be freely tradable without restriction or further registration
under the Securities Act, unless they are purchased by "affiliates" of the
Company as that term is used under the Securities Act. The remaining 3,294,258
shares held by existing stockholders will be "restricted securities" as defined
in Rule 144 under the Securities Act ("Restricted Shares"). Restricted Shares
may be sold in the public market only if registered or if they qualify for an
exemption from registration under Rule 144 promulgated under the Securities Act,
which is summarized below. Sales of Restricted Shares in the public market, or
the availability of such shares for sale, could adversely affect the market
price of the Common Stock.
All officers, directors and certain stockholders and option holders have
agreed with the Underwriters that they will not sell any Common Stock owned by
them for a period of 180 days after the effective date of the offering without
the prior written consent of Needham & Company, Inc. Of the 3,294,258 shares
held by existing shareholders, shares of Common Stock are subject to
the 180-day lock-up. Upon the
44
<PAGE> 46
expiration of the 180-day lock-up (or earlier upon the consent of Needham &
Company, Inc.), Restricted Shares (plus shares issuable upon exercise
of then vested outstanding options) will become eligible for sale subject to the
volume and other restrictions of Rule 144.
In general, under Rule 144, as recently amended by the Securities and
Exchange Commission, beginning 90 days after the effective date of the offering,
any person who has beneficially owned Restricted Shares for at least one year is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the then outstanding shares of the Company's
Common Stock (approximately 52,942 shares immediately after the offering) or the
average weekly trading volume during the four calendar weeks preceding such
sale. Sales under Rule 144 are also subject to certain requirements as to the
manner of sale, notice and availability of current public information about the
Company. A person who is not an affiliate, has not been an affiliate within
three months prior the sale and has beneficially owned the Restricted Shares for
a least two years is entitled to sell such shares under rule 144(k) as currently
in effect without regard to any of the limitations described above.
The Company intends to file a registration statement on Form S-8 under the
Act to register shares of Common Stock reserved for issuance under its stock
option plans, thus permitting the resale of shares issued under the plans by
non-affiliates in the public market without restriction under the Securities
Act. Such registration statement will become effective immediately upon filing
which is expected on or shortly after the closing of the offering. As of August
22, 1997, options or rights to purchase 425,763 shares of Common Stock were
outstanding under the Company's stock option plans, of which shares
are subject to lock-up agreements described above.
After this offering, the holders of approximately 1,967,002 shares of
Common Stock will be entitled to certain demand and piggyback rights with
respect to registration of such shares under the Securities Act. Registration of
such shares under the Securities Act would result in such shares becoming freely
tradeable without restriction under the Securities Act (except for shares
purchased by affiliates of the Company) immediately upon the effectiveness of
such registration. See "Description of Capital Stock -- Registration Rights." If
such holders, by exercising their demand registration rights, cause a large
number of securities to be registered and sold in the public market, such sales
could have an adverse effect on the market price for the Company's Common Stock.
If the Company were to include in a Company-initiated registration any such
shares pursuant to the exercise of piggyback registration rights, such sales may
have an adverse effect on the Company's ability to raise additional capital.
45
<PAGE> 47
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting
Agreement, the Underwriters named below, for whom Needham & Company, Inc. and
Unterberg Harris are acting as representatives (the "Representatives"), have
severally agreed to purchase from the Company and Selling Stockholders, and the
Company and Selling Stockholders have agreed to sell to each Underwriter, the
aggregate number of shares of Common Stock set forth opposite their respective
names in the table below. The Underwriting Agreement provides that the
obligations of the Underwriters to pay for and accept delivery of the shares of
Common Stock are subject to certain conditions precedent, and that the
Underwriters are committed to purchase and pay for all shares if any shares are
purchased.
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
------------------------------------------------------------------ ---------
<S> <C>
Needham & Company, Inc............................................
Unterberg Harris..................................................
---------
Total................................................... 2,000,000
=========
</TABLE>
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the public offering price
set forth on the cover page of this prospectus and to certain dealers (who may
include the Underwriters) at such price less a concession not in excess of
$ per share, of which $ may be reallowed to other dealers. After the
offering to the public, the offering price and other selling terms may be
changed by the Representatives. No such reduction shall change the amount of the
proceeds to be received the Company and the Selling Stockholders as set forth on
the cover page of this prospectus.
Certain Selling Stockholders have granted an option to the Underwriters,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to 300,000 shares of Common Stock at the same price per share as the
Company and the Selling Stockholders receive for the 2,000,000 shares that the
Underwriters have agreed to purchase from them. To the extent the Underwriters
exercise such option, each of the Underwriters will be committed, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares as the number of shares of Common Stock to be purchased by
such Underwriter, as shown in the above table, bears to the total shown. If
purchased, such additional shares will be sold by the Underwriters on the same
terms as those on which the 2,000,000 shares are being sold.
The Underwriting Agreement contains covenants of indemnity and contribution
between the Company and the Underwriters and the Selling Stockholders against
certain civil liabilities that may be incurred in connection with this offering,
including liabilities under the Securities Act.
Pursuant to the terms of lock-up agreements, all officers, directors and
certain stockholders holding an aggregate of approximately shares of
the Company's Common Stock have agreed with the Representatives not to sell,
otherwise dispose of, contract to sell, grant any option to sell, transfer or
otherwise dispose of, directly or indirectly, shares of Common Stock, or
securities exchangeable for or convertible into shares of Common Stock or any
substantially similar securities for a period of 180 days after the date of this
prospectus, without the prior written consent of Needham & Company, Inc. The
Company has agreed, with certain limited exceptions, not to sell, contract to
sell, grant any option to sell, transfer or otherwise dispose of, directly or
indirectly, shares of Common Stock, or securities exchangeable for or
convertible into shares of Common Stock, or any substantially similar
securities, other than the Company's sales of shares in this offering, the
issuance of shares of Common Stock upon the exercise of outstanding options, the
grant of options to purchase shares or the issuance of shares of Common Stock
under the Company's 1996 Plan,
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<PAGE> 48
Director Plan and Employee Stock Purchase Plan, for a period of 180 days after
the date of this prospectus, without the prior written consent of Needham &
Company, Inc.
The Underwriters will not make sales to accounts over which they exercise
discretionary authority in excess of 5% of the number of shares of Common Stock
offered hereby, and unless they obtain specific written consent of the customer.
In connection with the offering, the Underwriters and other persons
participating in the offering may engage in transactions that stabilize,
maintain or otherwise affect the price of the Common Stock. Specifically, the
Underwriters may over-allot in connection with the offering, creating a short
position in the Common Stock for their own account. To cover over-allotments or
to stabilize the price of the Common Stock, the Underwriters may bid for, and
purchase, Common Stock in the open market. The Underwriters may also impose a
penalty bid whereby they may reclaim selling concessions allowed to an
underwriter or a dealer for distributing Common Stock in the offering if the
Underwriters repurchase previously distributed Common Stock in transactions to
cover their short position, in stabilization transactions or otherwise. Finally,
the Underwriters may bid for, and purchase, shares of Common Stock in market
making transactions. These activities may stabilize or maintain the market price
of the Common Stock above market levels that might otherwise prevail. The
Underwriters are not required to engage in these activities and may end these
activities at any time.
Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price will be
determined through negotiations among the Company, the Selling Stockholders and
the Representatives. Among the factors to be considered in such negotiations
will be prevailing market conditions, the net sales and results of operations of
the Company in recent periods, market valuations of publicly traded companies
that the Company, the Selling Stockholders and the Representatives believe to be
comparable to the Company, estimates of the business potential of the Company,
the present state of the Company's development the current state of the industry
and the economy as a whole, and other factors deemed relevant.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Stockholders by Stradling, Yocca, Carlson & Rauth, a
Professional Corporation, Newport Beach, California. A shareholder of Stradling,
Yocca, Carlson & Rauth, a Professional Corporation, beneficially owns 6,667
shares of Common Stock. Certain legal matters in connection with this offering
will be passed upon for the Underwriters by McCutchen, Doyle, Brown & Enersen
LLP, Palo Alto, California.
EXPERTS
The consolidated financial statements and schedule of the Company as of
June 30, 1996 and 1997 and for each of the three years in the period ended June
30, 1997, included in this prospectus and elsewhere in the Registration
Statement have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein and elsewhere in the Registration
Statement, and are included in reliance upon the reports given upon their
authority as experts in accounting and auditing.
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<PAGE> 49
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the shares of Common Stock offered
hereby. This prospectus, which constitutes a part of the Registration Statement,
does not contain all the information set forth in the Registration Statement and
the exhibits and schedules thereto. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and to the exhibits and schedules filed therewith. A copy
of the Registration Statement may be inspected without charge at the public
reference facilities of the Commission located at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located at
7 World Trade Center, Suite 1300, New York, New York 10048, and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any part of the
Registration Statement may be obtained at the prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 and its public reference facilities in New York, New York and Chicago,
Illinois, upon the payment of the fees prescribed by the Commission. The
Registration Statement is also available through the Commission's Website on the
World Wide Web at http://www.sec.gov.
Statements made in this prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified by such reference.
48
<PAGE> 50
KOFAX IMAGE PRODUCTS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-1
Consolidated Balance Sheets as of June 30, 1996 and 1997.............................. F-2
Consolidated Statements of Operations for the years ended June 30, 1995, 1996 and
1997................................................................................ F-3
Consolidated Statements of Stockholders' Equity for the years ended June 30, 1995,
1996 and 1997....................................................................... F-4
Consolidated Statements of Cash Flows for the years ended June 30, 1995, 1996 and
1997................................................................................ F-5
Notes to Consolidated Financial Statements............................................ F-6
</TABLE>
49
<PAGE> 51
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Kofax Image Products, Inc.:
We have audited the accompanying consolidated balance sheets of Kofax Image
Products, Inc. and its subsidiary (the Company) as of June 30, 1996 and 1997,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended June 30, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Kofax Image Products, Inc. and its
subsidiary as of June 30, 1996 and 1997, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1997
in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Costa Mesa, California
July 29, 1997 (except Note 14
as to which the date is August 27, 1997)
F-1
<PAGE> 52
KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF JUNE 30,
-------------------------------------------
1996 1997 PRO FORMA
----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................... $ 741,300 $ 801,500
Investments (Note 4)......................................... 2,773,100 4,602,900
Accounts receivable, net of allowance for doubtful accounts
and sales returns of $381,500 in 1996 and $422,900 in 1997
(Note 6)................................................... 4,092,900 4,133,800
Inventories (Note 5)......................................... 1,869,500 2,011,700
Deferred income taxes (Note 7)............................... 517,900 566,700
Prepaid expenses and other current assets.................... 190,300 204,500
----------- -----------
Total current assets............................... 10,185,000 12,321,100
PROPERTY:
Machinery and equipment...................................... 3,662,100 4,878,800
Furniture and fixtures....................................... 732,100 865,900
Leasehold improvements....................................... 198,900 260,600
----------- -----------
4,593,100 6,005,300
Less accumulated depreciation and amortization............... (2,952,600) (4,040,100)
----------- -----------
Property, net.............................................. 1,640,500 1,965,200
NONCURRENT DEFERRED INCOME TAXES (Note 7).................... 1,382,500 1,463,700
OTHER ASSETS, net............................................ 933,200 576,900
----------- -----------
$14,141,200 $16,326,900
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of note payable (Note 6)..................... $ 351,400 $ 394,300
Accounts payable............................................. 713,200 771,900
Accrued compensation and related costs....................... 718,200 1,044,100
Accrued warranty............................................. 154,700 185,400
Accrued cooperative marketing (Note 9)....................... 253,300 335,500
Deferred revenue............................................. 188,300 356,400
Accrued acquisition costs (Note 3)........................... 469,200 --
Other accrued liabilities (Note 7)........................... 387,900 557,900
----------- -----------
Total current liabilities.......................... 3,236,200 3,645,500
LONG-TERM NOTES PAYABLE (Note 6)............................. 798,600 427,100
REDEEMABLE CONVERTIBLE PREFERRED STOCK (Note 8), $.001 par
value; 5,000,000 shares authorized; 2,667,002 actual shares
issued and outstanding in 1996 and 1997; no pro forma
shares outstanding......................................... 6,812,200 7,146,200
COMMITMENTS AND CONTINGENCIES (Notes 9 and 12)
STOCKHOLDERS' EQUITY (Notes 1 and 8):
Common stock, $.001 par value; 40,000,000 shares authorized;
1,311,419 and 1,327,256 actual shares outstanding in 1996
and 1997, 3,994,258 pro forma shares outstanding........... 159,400 172,000 $ 4,261,600
Retained earnings............................................ 3,134,800 4,936,100 7,992,700
----------- ----------- -----------
Total stockholders' equity......................... 3,294,200 5,108,100 $12,254,300
----------- -----------
$14,141,200 $16,326,900
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 53
KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales (Notes 9 and 10).......................... $21,085,300 $24,964,000 $29,265,700
Cost of sales....................................... 7,218,300 7,926,200 7,720,100
----------- ----------- -----------
Gross profit........................................ 13,867,000 17,037,800 21,545,600
Operating expenses (Notes 3 and 9):
Sales and marketing............................ 5,976,900 7,456,600 9,565,300
Research and development....................... 3,693,400 5,089,700 6,652,500
General and administrative..................... 1,553,500 1,748,100 1,935,900
Acquired in-process research and development
costs........................................ 4,176,800
----------- ----------- -----------
Total operating expenses.................. 11,223,800 18,471,200 18,153,700
----------- ----------- -----------
Income (loss) from operations....................... 2,643,200 (1,433,400) 3,391,900
Other income, net................................... 264,000 200,500 69,300
----------- ----------- -----------
Income (loss) before provision (benefit)............ 2,907,200 (1,232,900) 3,461,200
Provision (benefit) for income taxes (Note 7)....... 1,096,000 (499,800) 1,325,900
----------- ----------- -----------
Net income (loss)................................... $ 1,811,200 $ (733,100) $ 2,135,300
=========== =========== ===========
Pro forma income per share.......................... $ .50
===========
Pro forma weighted average common shares (Note 2)... 4,284,600
===========
Net income (loss) applicable to common stockholders
(Note 2).......................................... $ 1,477,200 $(1,067,100) $ 1,801,300
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 54
KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
--------- -------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCES, July 1, 1994.................... 1,290,044 $139,200 $2,724,700 $2,863,900
Issuance of common stock.................. 8,625 13,900 -- 13,900
Repurchase of common stock................ (1,150) (1,200) -- (1,200)
Accretion to current liquidation or
redemption value of preferred stock..... -- -- (334,000) (334,000)
Net income................................ -- -- 1,811,200 1,811,200
--------- -------- ---------- ----------
BALANCES, June 30, 1995................... 1,297,519 151,900 4,201,900 4,353,800
Issuance of common stock.................. 14,025 7,500 -- 7,500
Repurchase of common stock................ (125) -- -- --
Accretion to current liquidation or
redemption value of preferred stock..... -- -- (334,000) (334,000)
Net loss.................................. -- -- (733,100) (733,100)
--------- -------- ---------- ----------
BALANCES, June 30, 1996................... 1,311,419 159,400 3,134,800 3,294,200
Issuance of common stock.................. 15,837 12,600 -- 12,600
Accretion to current liquidation or
redemption value of preferred stock..... -- -- (334,000) (334,000)
Net income................................ -- -- 2,135,300 2,135,300
--------- -------- ---------- ----------
BALANCES, June 30, 1997................... 1,327,256 $172,000 $4,936,100 $5,108,100
========= ======== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 55
KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................................... $ 1,811,200 $ (733,100) $ 2,135,300
Adjustments to reconcile net income (loss) to net cash provided by operating
activities, net of effects of acquisition:
Depreciation and amortization............................................. 843,400 1,162,200 1,496,500
Acquired in-process research and development costs........................ -- 4,176,800 --
Provision for doubtful accounts and sales returns......................... 172,300 199,800 41,400
Provision for inventory reserves.......................................... 165,600 184,100 189,600
Loss on disposal of property.............................................. 1,300 1,200 900
Deferred income taxes..................................................... (12,400) (1,523,100) (130,000)
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable..................................................... (498,800) (656,900) (82,300)
Inventories............................................................. (565,600) (217,300) (331,800)
Prepaid expenses and other current assets............................... 132,100 (53,600) (14,200)
Accounts payable........................................................ 264,000 (636,000) 58,700
Accrued compensation and related costs.................................. 235,900 7,400 325,900
Accrued warranty........................................................ 1,300 (27,300) 30,700
Accrued cooperative marketing........................................... 69,300 32,500 82,200
Other accrued liabilities............................................... 100,600 208,300 (131,100)
----------- ----------- -----------
Net cash provided by operating activities.......................... 2,720,200 2,125,000 3,671,800
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in short-term investments............................... (1,335,300) 1,363,700 (1,829,800)
Acquisition of property..................................................... (815,600) (1,289,400) (1,532,200)
(Increase) decrease in other assets......................................... (207,300) (139,300) 66,400
Cash paid for acquisition................................................... -- (4,610,600) --
----------- ----------- -----------
Net cash used in investing activities.............................. (2,358,200) (4,675,600) (3,295,600)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable.................................................. -- 1,150,000 --
Principal payments on notes payable......................................... (70,600) (487,500) (328,600)
Net proceeds from issuance of common stock.................................. 13,900 7,500 12,600
Repurchase of common stock.................................................. (1,200) -- --
----------- ----------- -----------
Net cash (used in) provided by financing activities................ (57,900) 670,000 (316,000)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................ 304,100 (1,880,600) 60,200
CASH AND CASH EQUIVALENTS, beginning of year................................ 2,317,800 2,621,900 741,300
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year...................................... $ 2,621,900 $ 741,300 $ 801,500
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid............................................................... $ 3,900 $ 54,200 $ 108,800
=========== =========== ===========
Income taxes paid........................................................... $ 1,017,060 $ 1,018,000 $ 1,427,800
=========== =========== ===========
SCHEDULE OF NONCASH TRANSACTIONS -- The Company acquired certain assets of
LaserData, Inc. during the year ended June 30, 1996 (Note 3). In
conjunction with the acquisition, certain liabilities were assumed as
follows:
Fair value of assets acquired........................................... $ 1,394,800
Acquired in-process research and development costs...................... 4,176,800
Acquired developed technology........................................... 652,100
Cash paid............................................................... (4,610,600)
-----------
Liabilities assumed................................................ $ 1,613,100
===========
</TABLE>
NONCASH ACTIVITY -- During each of the three years in the period ended June 30,
1997, the Company recorded accretion of $334,000 for the increase in the
liquidation or redemption value of the redeemable convertible preferred stock
(Note 8).
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 56
KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL AND NATURE OF OPERATIONS
Kofax Image Products (the Company) was incorporated in California on August
13, 1985 and reincorporated in the State of Delaware on February 13, 1996. The
reincorporation resulted in a change in the Company name from Kofax Image
Products to Kofax Image Products, Inc., a change in the authorized number of
shares of common stock from 10,000,000 to 40,000,000, and a change in the par
value of both the Company's common stock and preferred stock from no par value
to $.001 par value. All share amounts have been restated to reflect the
reincorporation of the Company.
The Company is a leading supplier of application software, developers
toolkits, and image processing hardware for the image and document management
market. The Company specializes primarily in the area of document capture, which
involves converting paper documents into electronic images, indexing the
documents, and then compressing and routing the images across a network for
permanent storage. The Company's products are all designed for use on
Windows-based PC platforms and industry standard network operating systems. The
Company sells its products through a worldwide network of distributors, value
added resellers, systems integrators, and Original Equipment Manufacturers
(OEMs).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiary. All
intercompany transactions and balances have been eliminated in consolidation.
Cash and Cash Equivalents -- Short-term investments which have an original
maturity of three months or less are considered cash equivalents.
Investments -- The Company accounts for its investments under the
provisions of Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities. SFAS No. 115
requires investments to be classified into one of three categories:
held-to-maturity securities, trading securities and available-for-sale
securities. At June 30, 1997, all of the Company's investments were considered
to be held-to-maturity securities, which are reported at amortized cost. The
Company has the positive intent and ability to hold these securities to
maturity.
Accounts Receivable -- Accounts receivable arise in the normal course of
granting trade credit terms to customers. The Company performs credit
evaluations of its customers and generally does not require collateral. The
Company maintains reserves for potential credit losses. At June 30, 1996 and
1997, 29% and 30% of the Company's accounts receivable were due from two
distributors.
Inventories -- Inventories are stated at the lower of first-in, first-out
cost or market.
Property -- Property is stated at cost. Depreciation and amortization are
computed using the straight-line method over the shorter of the estimated useful
lives of the related assets, which are generally between two and five years, or
the term of the related lease agreement, if applicable.
Other Assets -- Other assets include software development costs, intangible
assets and prepaid license and royalty fees.
Software development costs capitalized are incurred subsequent to
establishing the technological feasibility of a product and are amortized over
the life of the product, which typically ranges from 12 to 24 months. At June
30, 1996, the Company had software development costs capitalized of $53,700, net
of accumulated amortization of $137,900. Because the Company believes that its
current process for developing new software products is essentially completed
concurrently with the establishment of technological feasibility, no costs are
capitalized as of June 30, 1997.
F-6
<PAGE> 57
KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Intangible assets represent the value of the Company's developed technology
from the acquisition of LaserData (Note 3), as determined by an independent
valuation. Such intangibles are amortized on a straight-line basis over three
years, the estimated recovery period.
Prepaid license and royalty fees are recorded at cost and amortized based
on estimated total revenue for the related product with an annual minimum equal
to the straight-line amortization over a maximum period of two years.
Long-Lived Assets -- The Company accounts for the impairment and
disposition of long-lived assets in accordance with SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
In accordance with SFAS No. 121, long-lived assets to be held are reviewed for
events or changes in circumstances which indicate that their carrying value may
not be recoverable. There was no impairment of the value of such assets for the
year ended June 30, 1997.
Income Taxes -- The provision for income taxes is determined in accordance
with SFAS No. 109, Accounting for Income Taxes. Deferred tax assets and
liabilities arise from temporary differences between the tax basis of assets and
liabilities and their reported amounts in the consolidated financial statements
that will result in taxable or deductible amounts in future years.
Revenue Recognition and Right of Return -- Revenues from software and
hardware sales are recognized upon the later of shipment of the related product
or transfer of title and are in accordance with Statement of Position 91-1,
Software Revenue Recognition, as there are no significant vendor obligations or
post-contract support at the time of delivery. The Company also offers its
distributors certain rights of return, price protection and exchange privileges
on sales. The Company records estimates for such rights of return, price
protection and exchange privileges at the time of product sale, based on
historical experience. Revenue from service and post-contract customer support
is recognized ratably over the term of the contract.
Product Warranty -- The Company provides a warranty for its products
against defects in materials and workmanship. A provision for estimated warranty
costs is recorded at the time of sale and periodically adjusted to reflect
actual experience.
Pro Forma Income per Share -- Pro forma income per share is calculated
using the weighted average number of shares of common stock and common stock
equivalents outstanding during the year and the assumed conversion of all
outstanding preferred shares into common shares at or prior to the Company's
proposed initial public offering. Pursuant to Staff Accounting Bulletin Topic
4(D), all options to purchase common shares issued in the twelve months
preceding the initial filing of the Company's Registration Statement for its
initial public offering have been treated as if they were outstanding for all
periods using the treasury stock method. The Financial Accounting Standards
Board issued SFAS No. 128, Earnings Per Share, in February 1997, effective for
financial statements issued after December 15, 1997 (Note 13).
Net Income (Loss) Applicable to Common Stockholders -- Net income
applicable to common stockholders represents net income less the accretion
attributable to the preferred stock redemption value (Note 8).
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles necessarily requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Statements -- Long-term debt bears interest at a
rate indexed to the prime rate; therefore, management believes the carrying
amount for the outstanding borrowings at June 30, 1997 approximates fair value.
F-7
<PAGE> 58
KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Stock-Based Compensation -- The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees
(Note 8).
Pro Forma Information -- The pro forma information, which is unaudited,
reflects the conversion of all outstanding shares of preferred stock into shares
of common stock on a share-for-share basis and an increase to retained earnings
of $3,056,600 to reflect a reduction of the cumulative amounts accreted to
preferred stock liquidation value through June 30, 1997 (Note 8).
Supplier and Subcontractor Concentration. The Company purchases circuit
boards, integrated circuits and other components from third parties. The
Company's dependence on third-party suppliers involves several risks, including
limited control over pricing, availability, quality and delivery schedules. The
Company is dependent on sole-source suppliers for ASICs and certain other
critical components used in its products. The Company generally purchases
sole-sourced components pursuant to purchase orders placed in the ordinary
course of business and has no guaranteed supply arrangements with any of its
sole-source suppliers. There can be no assurance that the Company will not
experience quality control problems or supply shortages for these components in
the future. Any quality control problems or interruptions in supply with respect
to one or more components could have a material adverse effect on the Company's
business, operating results and financial condition. Because of the Company's
reliance on these suppliers, the Company may also be subject to increases in
component costs which could materially adversely affect its business, operating
results and financial condition.
The Company relies on third-party subcontractors for the manufacture of
certain of its products and components such as cable assemblies and circuit
boards, reliance on third-party subcontractors involves several risks, including
the potential inadequacy of capacity, the unavailability of or interruptions in
access to certain process technologies and reduced control over product quality,
delivery schedules, manufacturing yields and costs. Shortages of raw materials
to or production capacity constraints at the Company's subcontractors could
negatively affect the Company's ability to meet its production obligations and
result in increased prices for affected parts. Any such reduction or constraint
could result in delays in shipments of the Company's products or increases in
the prices of components, either of which could have a material adverse effect
on the Company's business, operating results and financial condition.
3. ACQUISITION
On December 30, 1995, the Company acquired certain assets and assumed
certain liabilities of LaserData, Inc., a developer of optical storage and
document management software and related hardware products. The purpose of the
acquisition was to acquire LaserData's optical storage product (which was
previously a component of LaserData's systems product), in-process research and
development and the related development team. The asset acquisition was
accounted for as a purchase, and the purchase price of $4,610,600, including
transaction expenses, was allocated to tangible net liabilities acquired of
$218,300, intangible assets of $652,100, and in-process research and development
expenses of $4,176,800, which had no future alternative use, based on an
independent appraisal.
The accompanying consolidated statements of operations include the results
of operations of LaserData, Inc. from its acquisition date of December 30, 1995.
The following unaudited pro forma information presents results of operations of
the Company for the years ended June 30, 1995 and 1996, as if the asset
acquisition had been consummated as of the beginning of fiscal 1995. The pro
forma information is presented for information purposes only. It is based on
historical information and does not necessarily reflect the actual results that
would have occurred nor is it necessarily indicative of future results of
operations of the combined enterprise.
F-8
<PAGE> 59
KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------
1995 1996
----------- -----------
<S> <C> <C>
Net sales........................................... $29,806,000 $28,273,600
Net income (loss)................................... $ 592,000 (949,000)
</TABLE>
4. INVESTMENTS
Held-to-maturity investments were comprised of the following:
<TABLE>
<CAPTION>
GROSS UNREALIZED
MATURITY AMORTIZED ----------------- ESTIMATED
DESCRIPTION DATES COST GAINS LOSSES FAIR VALUE
- ----------------------------------- ----------------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
June 30, 1997
U.S. Treasury securities and
obligations of U.S. government
authorities and agencies......... Within one year $4,560,500 $ -- $ 4,700 $4,555,800
Mortgage-backed securities......... Five years
through ten years 42,400 1,400 41,000
--------
--
---- ------
$4,602,900 $ -- $ 6,100 $4,596,800
==== ====== ==========
</TABLE>
<TABLE>
<CAPTION>
GROSS UNREALIZED
MATURITY AMORTIZED ----------------- ESTIMATED
DESCRIPTION DATES COST GAINS LOSSES FAIR VALUE
- ----------------------------------- ----------------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
June 30, 1996
U.S. Treasury securities and
obligations of U.S. government
authorities and agencies......... Within one year $2,666,900 $ -- $ 5,800 $2,661,100
Mortgage-backed securities......... Five years
through ten years 106,200 6,000 100,200
--------
--
------- -------
$2,773,100 $ -- $11,800 $2,761,300
========== ======= =======
</TABLE>
5. INVENTORIES
Inventories at June 30 consist of the following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Raw materials....................................... $1,228,200 $1,063,300
Work-in-process..................................... 410,200 550,100
Finished goods...................................... 231,100 398,300
---------- ----------
$1,869,500 $2,011,700
========== ==========
</TABLE>
6. NOTES PAYABLE
The Company has a financing agreement with a bank expiring in October 1997,
providing for borrowings under a line of credit up to the lesser of $2,000,000
or 80% of eligible accounts receivable (as defined) at the bank's prime rate
(8.5% at June 30, 1997).
Borrowings under the line of credit are unsecured. There were no borrowings
outstanding under the financing agreement at June 30, 1996 and 1997. The
financing agreement contains certain restrictive covenants, including certain
tangible net worth levels, current ratio percentages, profitability levels and
the nonpayment or declaration of cash dividends, with which the Company was in
compliance at June 30, 1997.
In January 1996, the Company entered into a three-year, $1,150,000 term
loan. The loan bears interest at the bank's prime rate plus 1.0% (9.5% at June
30, 1997) with interest payable on a monthly basis. The
F-9
<PAGE> 60
KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
principal payments are due in 35 equal installments, commencing on September 5,
1996 and continuing on the same day of each month thereafter until July 5, 1999,
on which date the entire unpaid aggregate principal and interest shall be due
and payable. Principal payments under the term loan amount to $394,300, $394,300
and $32,800 for fiscal 1998, 1999 and 2000, respectively. Borrowings under the
term loan are collateralized by substantially all of the Company's assets. The
financing agreement contains certain restrictive covenants including certain
tangible net worth levels, current ratio percentages, profitability levels and
the nonpayment or declaration of cash dividends with which the Company was in
compliance at June 30, 1997. Interest expense was $3,486, $54,212 and $106,783
for fiscal 1995, 1996 and 1997, respectively.
7. INCOME TAXES
The components of the Company's income tax provision (benefit) are as
follows:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ----------- ----------
<S> <C> <C> <C>
Current............................... $1,108,400 $ 1,023,300 $1,455,900
Deferred.............................. (12,400) (1,523,100) (130,000)
---------- ----------- ----------
Total....................... $1,096,000 $ (499,800) $1,325,900
========== =========== ==========
</TABLE>
Reconciliations between the provision for income taxes for fiscal 1995,
1996 and 1997 and the amounts computed by applying the federal statutory tax
rate to income before the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---------------- --------------- ----------------
AMOUNT % AMOUNT % AMOUNT %
---------- --- --------- --- ---------- ---
<S> <C> <C> <C> <C> <C> <C>
Provision for income taxes at statutory
rate................................... $1,017,500 35% $(431,500) (35)% $1,211,400 35%
State income taxes, net of federal income
tax benefit............................ 158,400 5 (61,600) (5) 140,100 4
Benefit of foreign sales corporation
subsidiary............................. (62,900) (3) (70,900) (6) (97,500) (3)
Other.................................... (17,000) 1 64,200 5 71,900 2
-- --
---------- --------- --- ----------
Provision for income taxes............... $1,096,000 38% $(499,800) (41)% $1,325,900 38%
========== == ========= === ========== ==
</TABLE>
At June 30, the Company's net deferred tax assets consisted of the
following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Bad debt and sales return reserves.......................... $ 119,500 $ 188,600
Inventory reserves.......................................... 76,500 157,300
Uniform capitalization of inventories....................... 42,600 53,100
Accrued vacation and bonus.................................. 112,400 74,600
Warranty reserves........................................... 67,200 80,500
State taxes................................................. (80,400) (72,400)
Depreciation................................................ 71,400 160,200
Capitalized software........................................ (23,100)
Difference between book and tax basis of acquired in-process
research and development and other intangible assets...... 1,311,100 1,303,300
Other reserves.............................................. 203,200 85,200
---------- ----------
Net deferred tax assets..................................... $1,900,400 $2,030,400
========== ==========
</TABLE>
F-10
<PAGE> 61
KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. STOCKHOLDERS' EQUITY
The Company has authorized 5,000,000 shares of $.001 par value preferred
stock (Note 1), 2,667,002 shares of which have been designated as Series A, B or
C preferred stock. The Company has issued 750,000 shares of its Series A
redeemable convertible preferred stock in exchange for $482,400, 1,117,002
shares of its Series B redeemable convertible preferred stock in exchange for
$1,628,800, and 800,000 shares of its Series C redeemable convertible preferred
stock in exchange for $1,978,400. The preferred stock has preference in
liquidation and is redeemable at any time at the election of the stockholders,
in each case at $.6667 per share for Series A, $1.50 per share for Series B and
$2.50 per share for Series C. The preferred stock has voting rights and entitles
the holder to an 8% cumulative dividend upon liquidation or redemption. The
value of the preferred stock has been accreted to reflect the current redemption
or liquidation value, which includes cumulative dividends in arrears amounting
to $3,056,600 as of June 30, 1997. Cumulative dividends in arrears would be
payable upon liquidation or redemption and would not be payable upon conversion
of the preferred stock into common stock.
Each share of Series A, Series B and Series C redeemable convertible
preferred stock is convertible at the holder's option into shares of the
Company's common stock on a one-for-one basis. The conversion ratio would be
adjusted to allow the preferred stock to be converted into a greater number of
shares if certain future stock sales by the Company (as defined) are made or in
the event of common stock splits or common stock dividends. If the preferred
stock has not been redeemed or converted as of the effective date of a public
offering of the Company's common stock, it will be converted automatically to
common stock at such time on a one-for-one basis. In addition, the preferred
stock agreement restricts the Company from paying dividends on its common stock
prior to the payment of dividends on preferred stock, selling or purchasing its
common stock under certain conditions, and disposing of substantial amounts of
assets (as defined). Rights of holders of preferred stock will discontinue upon
conversion of the preferred stock into common stock.
During 1986, the Company adopted a stock purchase plan for key employees,
directors and consultants. The plan was later amended in 1992 (the "Amended
Plan") to include the granting of incentive stock options and nonqualified stock
options. The Amended Plan provides for the granting of options to purchase or
the right to purchase up to an aggregate of 1,250,000 shares of the Company's
common stock at the fair market value at the date of grant or not less than 85%
of the fair market value at the date of grant for nonqualified options and stock
purchases (110% of fair market value if sold to individuals holding 10% or more
of the voting power of the then outstanding shares). Shares sold or options
granted under the plan generally vest over a four-year period, starting with the
date of employment or the respective vesting date as determined by the Board of
Directors, and terminate no later than ten years from the date of grant. The
Amended Plan also provides that, upon termination of employment of a
stockholder, the Company may repurchase any sold but unvested restricted shares
at the original purchase price, plus 5% interest per year.
The Amended Plan was terminated in November 1996, on the tenth anniversary
of the Effective Date of such plan and no options or rights to purchase may be
granted under the plan, but option agreements, stock purchase agreements and
rights to purchase then outstanding shall continue in effect in accordance with
their respective terms.
On June 19, 1996, the Company adopted an incentive stock option,
nonqualified stock option and restricted stock purchase plan (the 1996 Plan) for
qualified employees, officers and directors (including nonemployee directors)
and consultants. The 1996 Plan provides for the granting of options to purchase
or the right to purchase up to an aggregate of 800,000 shares, as amended, of
the Company's common stock at the fair market value at the date of grant for an
incentive stock option or not less than 85% of the fair market value at the date
of grant for nonqualified options (110% of fair market value if an option is
granted to a 10% stockholder on the date of grant). The purchase price per share
of restricted stock covered by each right to purchase shall not be less than 85%
of the fair market value on the date the right to purchase is granted (100% of
fair market value at the date of grant if the right to purchase is granted to a
10% stockholder on the date of grant).
F-11
<PAGE> 62
KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Stock purchase and option activity for each of the three years in the
period ended June 30, 1997 is as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES PROVIDED FOR PRICE RANGE PER SHARE
----------------------------------- -------------------------------------------
RESTRICTED NONQUALIFIED RESTRICTED NONQUALIFIED
STOCK OPTIONS OPTIONS STOCK OPTIONS OPTIONS
---------- ------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, July 1, 1994............. 539,544 141,250 -- $.10 - $ .60 $ .50 - $ .60
Granted............................ 89,600 .60 - 1.20
Shares sold or options exercised... 500 (8,125) 1.20 .50 - .60
Stock repurchased.................. (1,150) .30
Canceled........................... (29,975) .50 - 1.20
------- ------- ------
BALANCES, June 30, 1995............ 538,894 192,750 .10 - 1.20 .50 - 1.60
Granted............................ 142,975 13,000 2.50 - 5.00 5.00
Exercised.......................... (14,025) .50 - .60
Stock repurchased.................. (125) .30
Canceled........................... (16,950) .50 - 5.00
------- ------- ------
BALANCES, June 30, 1996............ 538,769 304,750 13,000 .10 - .30 .50 - 5.00 5.00
Granted............................ 123,400 5.00 - 5.00
Exercised.......................... (15,837) .50 - 5.00
Canceled........................... (36,375) .50 - 5.00
------- ------- ------
BALANCES, June 30, 1997............ 538,769 375,938 13,000 $.10 - .30 $ .50 - $5.00 $ 5.00
======= ======= ======
</TABLE>
At June 30, 1997, 480,300 shares of common stock were available for
issuance under the Company's stock option and purchase plan.
The following is a summary of the weighted average exercise prices for
activity during the years ended June 30, 1996 and 1997:
<TABLE>
<CAPTION>
NUMBER OF SHARES PROVIDED FOR WEIGHTED AVERAGE EXERCISE PRICE
----------------------------------- -----------------------------------
RESTRICTED NONQUALIFIED RESTRICTED NONQUALIFIED
STOCK OPTIONS OPTIONS STOCK OPTIONS OPTIONS
---------- ------- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
OUTSTANDING, July 1, 1995.................. 538,894 192,750 -- $ 0.25 $0.73 $ --
Granted.................................... 142,975 13,000 $ 4.13
Exercised.................................. (14,025) $0.54
Canceled................................... (16,950) $1.98
Stock repurchased.......................... (125) $ 0.30
------- ------- ------
OUTSTANDING, June 30, 1996................. 538,769 304,750 13,000 $ 0.25 $2.27 $ 5.00
Granted.................................... 123,400 $5.00
Exercised.................................. (15,837) $0.80
Canceled................................... (36,375) $3.06
------- ------- ------
OUTSTANDING, June 30, 1997................. 538,769 375,938 13,000 $ 0.25 $3.15 $ 5.00
======= ======= ======
Exercisable as of June 30, 1997............ 130,942 4,875 $1.69 $ 5.00
======= ======
</TABLE>
F-12
<PAGE> 63
KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Additional information regarding options outstanding as of June 30, 1997 is
as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------- OPTIONS EXERCISABLE
WEIGHTED -------------------------
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
RANGE OF AS OF JUNE 30, CONTRACTUAL EXERCISE AS OF JUNE 30, EXERCISE
EXERCISE PRICES 1997 LIFE IN YEARS PRICE 1997 PRICE
- ----------------------------------------- -------------- ------------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$.50 - .60............................... 110,113 1.39 $ 0.56 80,174 $ 0.55
1.20 - 1.60.............................. 26,100 2.59 $ 1.43 12,950 $ 1.43
2.50 - 3.50.............................. 46,525 3.06 $ 2.55 12,412 $ 2.54
5.00 - 5.00.............................. 193,200 4.12 $ 5.00 25,406 $ 5.00
------- -------
$.50 - 5.00.............................. 375,938 3.08 $ 3.15 130,942 $ 1.69
======= =======
</TABLE>
As discussed in Note 2, the Company continues to account for its
stock-based awards using the intrinsic value method in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees, and its related
interpretations. No compensation expense has been recognized in the financial
statements for employee stock arrangements.
In July 1997, the Company issued additional options to purchase 13,000
shares of common stock at $5.00 per share. The Company expects to record
compensation expense over the vesting period for the difference between option
price and the estimated fair value of $8.25 relating to these options.
SFAS No. 123, Accounting for Stock-Based Compensation, requires the
disclosure of pro forma net income and earnings per share had the Company
adopted the fair value method as of the beginning of fiscal 1996. Under SFAS No.
123, the fair value of stock-based awards to employees is calculated through the
use of option-pricing models, even though such models were developed to estimate
the fair value of freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the Company's stock option awards.
These models also require subjective assumptions, including future stock price
volatility and expected time to exercise, which greatly affect the calculated
values. The Company's calculations were made using the Black-Scholes
option-pricing model with the following weighted average assumptions: Expected
life, 48 months, no stock volatility in fiscal 1996 or in fiscal 1997; risk-free
interest rates, 5.63% in fiscal 1996 and 6.40% in fiscal 1997 and no dividends
during the expected term. The Company's calculations are based on a
single-option valuation approach and forfeitures are recognized as they occur,
if the computed fair values of the fiscal 1996 and 1997 awards had been
amortized to expense over the vesting period of the awards, net (loss) income
and earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1996 1997
--------- ----------
<S> <C> <C>
Pro forma net (loss) income......................... $(750,288) $2,091,393
Pro forma net (loss) income per share............... $ (0.83) $ 0.51
</TABLE>
The impact of outstanding nonvested stock options granted prior to 1996 has
been excluded from the pro forma calculation; accordingly, the fiscal 1996 and
fiscal 1997 pro forma adjustments are not indicative of future period pro forma
adjustments when the calculation will apply to all applicable stock options.
9. COMMITMENTS
The Company leases its production and office facilities under operating
leases, expiring on various dates through fiscal 2000. The leases require the
Company to pay certain building operating costs. Rent, which is recognized
ratably over the terms of the leases, and related building maintenance costs was
$505,700, $609,500 and $744,300 during fiscal 1995, 1996 and 1997, respectively.
Future minimum annual lease payments under facility and other operating leases
amount to $722,900, $476,800 and $147,100 for fiscal 1998, 1999 and 2000,
respectively.
F-13
<PAGE> 64
KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company has also entered into various licensing agreements which
require per unit fees or royalties between 3.5% and 5.0% of net sales of certain
products. The agreements are generally in effect over the life of the products.
Royalty expense for fiscal 1995, 1996 and 1997 was $26,800, $102,000 and
$390,400, respectively. Royalty fees of $33,000 and $116,600 were accrued for as
of June 30, 1996 and 1997.
The Company has agreements with various domestic distributors which are
cancelable at specified dates defined in the agreements. The agreements allow
for one or more of the following: certain price protection provisions, the right
to exchange inventories provided that subsequent purchases are made and/or the
right to return Company inventories for refunds of between 80% and 100% of the
actual net invoice price paid by the distributor upon termination of the
distribution agreement.
The Company offers a program to certain distributors to provide for
reimbursement of qualified cooperative marketing costs (as defined). Amounts
reimbursed under such programs were $245,400, $301,600 and $372,900 in fiscal
1995, 1996 and 1997, respectively.
10. EXPORT SALES AND SIGNIFICANT CUSTOMERS
The Company had export sales as a percentage of net sales for each of the
three years ended June 30, as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Europe....................................... 26% 26% 25%
Asia......................................... 5 6 5
Other........................................ 5 4 4
--- --- ---
36% 36% 34%
=== === ===
</TABLE>
During fiscal 1995, 1996 and 1997, the Company had sales of approximately
13% and 14% to two distributors; 16% and 13% to two distributors; 14%, 14% and
10% to three distributors, respectively. A decision by a significant customer to
decrease the amount purchased from the Company could have a material adverse
effect on the Company's financial condition and results of operations.
11. 401(K) SAVINGS PLAN
The Company has a 401(k) savings plan (the Plan). The Plan is a defined
contribution plan for all full-time employees (participants) of the Company who
have reached age 21 and have met the required service of 90 days. The Plan
permits a participant to contribute up to the lesser of 15% of the participant's
compensation for that calendar year or $9,500 for 1997. The Plan provides for
employer discretionary contributions determined by the Board of Directors on an
annual basis. Participant contributions are fully vested at all times. Employer
contributions vest at a rate of 20% per year after the second year of
participation. There were no employer contributions to the Plan during fiscal
1995 and 1996. Employer contributions of $67,500 were made to the Plan in fiscal
1997.
12. CONTINGENT LIABILITIES
The Company is involved from time to time in litigation or claims arising
in the ordinary course of its business. While the ultimate liability, if any,
arising from these claims cannot be predicted with certainty, the Company
believes that the resolution of these matters will not likely have a material
adverse effect on the Company's financial statements.
F-14
<PAGE> 65
KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. RECENT ACCOUNTING PRONOUNCEMENT
Effective December 27, 1997, the Company will adopt SFAS No. 128. At that
time, the Company will be required to change the method currently used to
calculate earnings per share and to restate all prior periods. Early adoption is
not permitted. The new requirements will include a calculation of basic earnings
per share from which the dilutive effect of stock options will be excluded. A
calculation of diluted earnings per share will also be required. A pro forma
calculation of basic earnings per share and diluted earnings per share for
fiscal 1997 would have been $1.37 and $0.52 per share.
For the years beginning after July 1, 1998, the Company will adopt
Statements of Financial Accounting Standards Board Statement No. 130, "Reporting
Comprehensive Income" and No. 131, "Disclosures About Segments of an Enterprise
and Related Information." The Company is reviewing the impact of such statements
on its financial statements.
14. SUBSEQUENT EVENTS
The Company's Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors on August 27, 1997 and approved by the
Company's stockholders on August 27, 1997, covering an aggregate of 150,000
shares of common stock. The Purchase Plan, which is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code,
will be implemented by twelve-month offerings with purchases occurring at
three-month intervals commencing on the date of this Prospectus. For the initial
offering period, the offering period will commence on the effective date for the
Purchase Plan and conclude on December 31, 1998. The Purchase Plan will be
administered by the Stock Option Committee. Employees will be eligible to
participate if they are employed by the Company for at least 30 hours per week
and if they have been employed by the Company for at least one year. The
Purchase Plan permits eligible employees to purchase common stock through
payroll deductions, which may not exceed 15% of an employee's compensation. The
price of stock purchased under the Purchase Plan will be 85% of the lower of the
fair market value of the common stock at the beginning of the three-month
offering period or on the applicable purchase date. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically on termination of employment. The Board of
Directors may at any time amend or terminate the Purchase Plan, except that no
such amendment or termination may adversely affect rights previously granted
under the Purchase Plan. The Purchase Plan will in all events terminate in
September 2007.
On August 27, 1997 the Company adopted its 1997 Stock Option Plan for
Non-Employee Directors (the "Director Plan"), covering an aggregate of 100,000
shares of common stock. Under the Director Plan, each non-employee director of
the Company who was a director of the Company on August 27, 1997, or who is
thereafter elected as a director during the term of the Director Plan, shall be
granted an option consisting of 10,000 shares of common stock, which option
shall vest and become exercisable at the rate of 25% per year over the four-year
period following the grant date. The exercise price of all options granted under
the Director Plan shall be 100% of the fair market value of the common stock on
the date of grant, and all such options shall have a term of 10 years. In
addition, upon the expiration of each such four-year period during such
non-employee director's term of office such non-employee director shall receive
an additional option covering 10,000 shares of common stock, with the same
vesting schedule, subject to the limitations set forth in the Director Plan.
F-15
<PAGE> 66
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SHARES OF COMMON STOCK TO WHICH THIS PROSPECTUS RELATES, OR AN
OFFER IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED,
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Summary Consolidated Financial Data.... 4
Risk Factors........................... 5
Use of Proceeds........................ 12
Dividend Policy........................ 12
Capitalization......................... 13
Dilution............................... 14
Selected Consolidated Financial Data... 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 16
Business............................... 21
Management............................. 36
Certain Transactions................... 40
Principal and Selling Stockholders..... 41
Description of Capital Stock........... 43
Shares Eligible for Future Sale........ 44
Underwriting........................... 46
Legal Matters.......................... 47
Experts................................ 47
Additional Information................. 48
Index to Financial Statements.......... 49
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
2,000,000 Shares
LOGO
Common Stock
------------------------
PROSPECTUS
------------------------
Needham & Company, Inc.
Unterberg Harris
------------------------
, 1997
======================================================
<PAGE> 67
APPENDIX
Inside front cover:
Product photos and screen shots of Ascent Software.
Gatefold:
Schematic diagram of scanning/capture/storage process
Inside back cover:
Product photos and screen shots of Andrenaline image
processing boards and ImageControls.
<PAGE> 68
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of the Common Stock being registered hereunder. All of the amounts
shown are estimates except for the SEC registration fee, the NASD filing fee and
the Nasdaq National Market application fee.
<TABLE>
<CAPTION>
TO BE PAID BY
THE COMPANY
--------------
<S> <C>
SEC registration fee............................................ $
NASD filing fee.................................................
Nasdaq National Market application fee..........................
Printing expenses............................................... *
Legal fees and expenses......................................... *
Accounting fees and expenses.................................... *
Blue sky fees and expenses...................................... 10,000
Transfer agent and registrar fees............................... *
Director and Officer liability insurance........................ *
Miscellaneous................................................... *
--------
Total................................................. $800,000
========
</TABLE>
- ---------------
* To be filed by amendment
The Company will bear the expenses of the Selling Stockholders in
connection with the registration of their shares, other than the underwriting
discounts and commissions.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Delaware General Corporation Law, the Restated
Certificate of Incorporation of the Company (Exhibit 3.1 hereto) eliminates the
liability of directors to the Company or its stockholders for monetary damages
for breach of fiduciary duty as a directors, except to the extent otherwise
required by the Delaware General Corporation Law.
The Restated Certificate of Incorporation provides that the Company will
indemnify each person who was or is made a party to any proceeding by reason of
the fact that such person is or was a director or officer of the Company against
all expense, liability and loss reasonably incurred or suffered by such person
in connection therewith to the fullest extent authorized by the Delaware General
Corporation Law. The Company's Bylaws (Exhibit 3.3 hereto) provide for a similar
indemnity to directors and officers of the Company to the fullest extent
authorized by the Delaware General Corporation Law.
The Restated Certificate of Incorporation also gives the Company the
ability to enter into indemnification agreements with each of its directors and
officers. The Company has entered into indemnification agreement with each of
its directors and officers (Exhibit 10.8 hereto), which provide for the
indemnification of directors an officers of the Company against any an all
expenses, judgments, fines, penalties and amounts paid in settlement, to the
fullest extent permitted by law.
II-1
<PAGE> 69
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of transactions by the Company during the last
three years preceding the date hereof involving sales of the Company's
securities that were not registered under the Securities Act:
From time to time since July 1, 1994, the Registrant issued an aggregate of
423,625 incentive stock options, nonqualified stock options and rights to
purchase Common Stock pursuant to the Registrant's Amended and Restated
Incentive Stock Option, Nonqualified Stock Option and Restricted Stock Purchase
Plan and the 1996 Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan (collectively the "Plans") to officers, directors
and employees of the Registrant. During the period referred to above, 40,987
options and rights to purchase granted pursuant to the Plans were exercised for
an aggregate exercise price of $35,250. Exemption from the registration
provisions of the Securities Act is claimed, with respect to the grant of
options referred to above, on the basis that the grant of options did not
involve a "sale" of securities and, therefore, registration thereof was not
required, and with respect to the exercise of options and rights to purchase
referred to above, on the basis that such transactions met the requirements of
Rule 701 as promulgated under Section 3(b) of the Securities Act.
In February 1996, Kofax Image Products, a California corporation ("Kofax
California"), merged with and into its wholly-owned subsidiary, Kofax Image
Products, Inc., a Delaware corporation ("Kofax Delaware"). In connection with
the merger, Kofax Delaware issued an aggregate of 1,306,769 shares of Common
Stock to the holders of common stock of Kofax California and an aggregate of
2,667,002 shares of preferred stock to the holders of preferred stock of Kofax
California, such that holders of Common Stock and preferred stock of Kofax
California received a proportionate interest in Kofax Delaware common stock and
preferred stock, respectively, without giving effect to the offering. The
issuances of securities will not be registered under the Securities Act due to
the exemption from registration thereunder provided by Section 3(a)(9) thereof.
II-2
<PAGE> 70
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.*
3.1 Restated Certificate of Incorporation of the Company.
3.2 Bylaws of the Company, as currently in effect.
4.1 Specimen Certificate of Common Stock.*
5.1 Opinion of Stradling, Yocca, Carlson & Rauth, a Professional Corporation.*
10.1 Amended and Restated Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan (the "1992 Plan"), as amended on September 11, 1992.
10.2 Form of Incentive Option Agreement pertaining to the 1992 Plan.*
10.3 Form of Nonqualified Option Agreement pertaining to the 1992 Plan.
10.4 Form of Restricted Stock Agreement pertaining to the 1992 Plan.
10.5 1996 Incentive Stock Option, Nonqualified Stock Option and Restricted Stock
Purchase Plan (the "1996 Plan").
10.6 Form of Stock Option Agreement pertaining to the 1996 Plan.
10.7 Form of Restricted Stock Purchase Agreement pertaining to the 1996 Plan.*
10.8 Kofax Image Products, Inc. 1997 Stock Option Plan for Non-Employee Directors (the
"Director Plan").
10.9 Form of Stock Option Agreement pertaining to the Director Plan.*
10.10 Kofax Image Products, Inc. 1997 Employee Stock Purchase Plan (the "1997 Plan").
10.11 Form of Indemnification Agreement for Officers and Directors of the Company.
10.12 Loan and Security Agreement, dated February 28, 1992, between the Company and
Silicon Valley Bank; Amendment to Loan Agreement, dated March 9, 1993; Amendment to
Loan and Security Agreement, dated October 10, 1994; Amendment to Loan and Security
Agreement, dated October 5, 1995; Amendment to Loan and Security Agreement, dated
January 26, 1996; and Amendment to Loan and Security Agreement, dated October 31,
1996.
10.13 First Restated Registration Rights Agreement, dated as of March 6, 1989, by and
among the Company and the Purchasers identified therein.
10.14 Lease, dated March 31, 1988, between The Irvine Company, as Landlord, and the
Company, as Tenant, relating to the Company's Irvine, California offices; First
Amendment to Lease, dated March 7, 1990; Second Amendment to Lease, dated May 4,
1990; Third Amendment to Lease, dated August 22, 1991; Fourth Amendment to Lease,
dated March 15, 1994; and Fifth Amendment to Lease, dated September 25, 1996.
10.15 Net Lease, dated February 24, 1989, between LaserData, Inc. and Vesper Properties I
Trust; Amendment 1, dated September 11, 1991; Amendment No. 2, dated August 31,
1994; and Amendment No. 3, dated July 24, 1997.
10.16 Asset Purchase Agreement, dated December 30, 1995, between the Company and
LaserData, Inc.
10.17 Distributor Agreement, dated August 16, 1990, between the Company and Law-Cypress
Distributing.**
10.18 Distributor Agreement, dated March 1, 1993, between the Company and Tech Data
Corporation; Modification Agreement, dated September 24, 1996; Letter Amendment,
dated October 16, 1996; Addendum, dated October 23, 1996.**
</TABLE>
II-3
<PAGE> 71
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<C> <S>
10.19 Distributor Agreement, dated July 25, 1990, between the Company and Cranel Inc.
10.20 License Agreement, dated September 10, 1996, between the Company and CAERE
Corporation.**
10.21 Software License Agreement, dated October 1, 1993, between the Company and
Softbridge Inc.**
10.22 Software License Agreement, dated June 1, 1993, between the Company and Pixel
Translations, Inc.; Modification to Software License Agreement, dated July 1, 1995;
and Modification to Software License Agreement, dated June 1, 1996.**
10.23 Services Contract, dated September 25, 1995, between the Company and Midcontinent
Business Systems, Inc.**
10.24 License Contract, dated July 1, 1996, between the Company and Midcontinent Business
Systems, Inc.**
10.25 NEST SDK Developer Product Distribution License Exhibit, dated July 31, 1996,
between the Company and Novell, Inc.**
10.26 Temporary Distribution License, dated October 17, 1996, between the Company and
Novell, Inc.
11.1 Computation of pro forma net income (loss) per share.
23.1 Consent of Stradling, Yocca, Carlson & Rauth (see Exhibit 5.1).*
23.2 Consent of Deloitte & Touche LLP.
24.1 Power of Attorney (see page II-6).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
** Registrant has sought confidential treatment pursuant to Rule 406 for a
portion of the referenced exhibit.
(b) FINANCIAL STATEMENT SCHEDULES
Schedule II -- Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.
ITEM 17. UNDERTAKINGS
The Company hereby undertakes to provide to the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-4
<PAGE> 72
The Company hereby undertakes that:
For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of a
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.
For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 73
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irvine, State of
California, on the 28th day of August, 1997.
KOFAX IMAGE PRODUCTS, INC.
By: /s/ DAVID S. SILVER
------------------------------------
David S. Silver
President and Chief Executive
Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of Kofax Image Products, Inc.,
do hereby constitute and appoint David S. Silver and Ronald J. Fikert, or either
of them, our true and lawful attorneys and agents, to do any and all acts and
things in our name and behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys and agents, or either of them, may deem
necessary or advisable to enable said corporation to comply with the Securities
Act of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names and in the capacities indicated below,
any and all amendments (including post-effective amendments) hereto or any
related registration statement that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended; and we do hereby
ratify and confirm all that the said attorneys and agents, or either of them,
shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ----------------------------- ----------------
<S> <C> <C>
/s/ DAVID S. SILVER Chairman of the Board, August 28, 1997
- --------------------------------------------- President, Chief Executive
David S. Silver Officer and Director
(Principal Executive Officer)
/s/ RONALD J. FIKERT Vice President Finance, Chief August 28, 1997
- --------------------------------------------- Financial Officer and
Ronald J. Fikert Secretary (Principal
Financial and Principal
Accounting Officer)
/s/ DEAN A. HOUGH Vice President, Engineering August 28, 1997
- --------------------------------------------- and Director
Dean A. Hough
/s/ ALEXANDER CILENTO Director August 28, 1997
- ---------------------------------------------
Alexander Cilento
/s/ WILLIAM E. DROBISH Director August 28, 1997
- ---------------------------------------------
William E. Drobish
/s/ CLIFFORD L. HAAS Director August 28, 1997
- ---------------------------------------------
Clifford L. Haas
</TABLE>
II-6
<PAGE> 74
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ----------------------------- ----------------
<S> <C> <C>
/s/ B. ALLEN LAY Director August 28, 1997
- ---------------------------------------------
B. Allen Lay
/s/ DAVID C. SEIGLE Director August 28, 1997
- ---------------------------------------------
David C. Seigle
</TABLE>
II-7
<PAGE> 75
KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING COSTS AND BALANCE AT
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS END OF YEAR
- --------------------------------------------------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Year ended June 30, 1995:
Allowance for doubtful accounts and sales
returns....................................... $ 191,500 172,300 (800) $ 363,000
Obsolete inventory reserve....................... $ 231,300 165,600 (238,500) $ 158,400
Year ended June 30, 1996:
Allowance for doubtful accounts and sales
returns....................................... $ 363,000 140,300 (121,800) $ 381,500
Obsolete inventory reserve....................... $ 158,400 184,100 (169,000) $ 173,500
Year ended June 30, 1997:
Allowance for doubtful accounts and sales
returns....................................... $ 381,500 155,800 (114,400) $ 422,900
Obsolete inventory reserve....................... $ 173,500 376,500 (186,800) $ 363,200
</TABLE>
<PAGE> 76
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------ ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement*.........................................
3.1 Restated Certificate of Incorporation of the Company....................
3.2 Bylaws of the Company, as currently in effect...........................
4.1 Specimen Certificate of Common Stock*...................................
5.1 Opinion of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation*............................................................
10.1 Amended and Restated Incentive Stock Option, Nonqualified Stock Option
and Restricted Stock Purchase Plan (the "1992 Plan"), as amended on
September 11, 1992......................................................
10.2 Form of Incentive Option Agreement pertaining to the 1992 Plan*.........
10.3 Form of Nonqualified Option Agreement pertaining to the 1992 Plan.......
10.4 Form of Restricted Stock Agreement pertaining to the 1992 Plan..........
10.5 1996 Incentive Stock Option, Nonqualified Stock Option and Restricted
Stock Purchase Plan (the "1996 Plan")...................................
10.6 Form of Stock Option Agreement pertaining to the 1996 Plan..............
10.7 Form of Restricted Stock Purchase Agreement pertaining to the 1996
Plan*...................................................................
10.8 Kofax Image Products, Inc. 1997 Stock Option Plan for Non-Employee
Directors (the "Director Plan").........................................
10.9 Form of Stock Option Agreement pertaining to the Director Plan*.........
10.10 Kofax Image Products, Inc. 1997 Employee Stock Purchase Plan (the "1997
Plan")..................................................................
10.11 Form of Indemnification Agreement for Officers and Directors of the
Company.................................................................
10.12 Loan and Security Agreement, dated February 28, 1992, between the
Company and Silicon Valley Bank; Amendment to Loan Agreement, dated
March 9, 1993; Amendment to Loan and Security Agreement, dated October
10, 1994; Amendment to Loan and Security Agreement, dated October 5,
1995; Amendment to Loan and Security Agreement, dated January 26, 1996;
and Amendment to Loan and Security Agreement, dated October 31, 1996....
10.13 First Restated Registration Rights Agreement, dated as of March 6, 1989,
by and among the Company and the Purchasers identified therein..........
10.14 Lease, dated March 31, 1988, between The Irvine Company, as Landlord,
and the Company, as Tenant, relating to the Company's Irvine, California
offices; First Amendment to Lease, dated March 7, 1990; Second Amendment
to Lease, dated May 4, 1990; Third Amendment to Lease, dated August 22,
1991; Fourth Amendment to Lease, dated March 15, 1994; and Fifth
Amendment to Lease, dated September 25, 1996............................
10.15 Net Lease, dated February 24, 1989, between LaserData, Inc. and Vesper
Properties I Trust; Amendment 1, dated September 11, 1991; Amendment No.
2, dated August 31, 1994; and Amendment No. 3, dated July 24, 1997......
10.16 Asset Purchase Agreement, dated December 30, 1995, between the Company
and LaserData, Inc. ....................................................
10.17 Distributor Agreement, dated August 16, 1990, between the Company and
Law-Cypress Distributing**..............................................
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------ ------------
<C> <S> <C>
10.18 Distributor Agreement, dated March 1, 1993, between the Company and Tech
Data Corporation; Modification Agreement, dated September 24, 1996;
Letter Amendment, dated October 16, 1996; Addendum, dated October 23,
1996**..................................................................
10.19 Distributor Agreement, dated July 25, 1990, between the Company and
Cranel Inc..............................................................
10.20 License Agreement, dated September 10, 1996, between the Company and
CAERE Corporation**.....................................................
10.21 Software License Agreement, dated October 1, 1993, between the Company
and Softbridge Inc.**...................................................
10.22 Software License Agreement, dated June 1, 1993, between the Company and
Pixel Translations, Inc.; Modification to Software License Agreement,
dated July 1, 1995; and Modification to Software License Agreement,
dated June 1, 1996**....................................................
10.23 Services Contract, dated September 25, 1995, between the Company and
Midcontinent Business Systems, Inc.**...................................
10.24 License Contract, dated July 1, 1996, between the Company and
Midcontinent Business Systems, Inc.**...................................
10.25 NEST SDK Developer Product Distribution License Exhibit, dated July 31,
1996, between the Company and Novell, Inc.**............................
10.26 Temporary Distribution License, dated October 17, 1996, between the
Company and Novell, Inc. ...............................................
11.1 Computation of pro forma net income (loss) per share....................
23.1 Consent of Stradling, Yocca, Carlson & Rauth (see Exhibit 5.1)*.........
23.2 Consent of Deloitte & Touche LLP........................................
24.1 Power of Attorney (see page II-6).......................................
27.1 Financial Data Schedule.................................................
</TABLE>
- ---------------
* To be filed by amendment.
** Registrant has sought confidential treatment pursuant to Rule 406 for a
portion of the referenced exhibit.
<PAGE> 1
EXHIBIT 3.1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED
CERTIFICATE OF "KOFAX IMAGE PRODUCTS INC.", CHANGING ITS NAME FROM "KOFAX IMAGE
PRODUCTS INC." TO "KOFAX IMAGE PRODUCTS, INC.", FILED IN THIS OFFICE ON THE
TWENTY-FIFTH DAY OF JANUARY, A.D. 1996, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ EDWARD J. FREEL
[SEAL] -----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7805157
DATE: 01-26-96
<PAGE> 2
RESTATED CERTIFICATE OF INCORPORATION
OF
KOFAX IMAGE PRODUCTS INC.
(Pursuant to Sections 242 and 245 of
the Delaware General Corporation Law)
Kofax Image Products Inc., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The present name of the corporation (hereinafter called the
"Corporation") is Kofax Image Products Inc., which is the name under which the
Corporation was originally incorporated. The original Certificate of
Incorporation of the Corporation was filed with Secretary of State of the State
of Delaware on August 11, 1995.
2. This Restated Certificate of Incorporation restates and
further amends the original Certificate of Incorporation, as heretofore amended
or supplemented.
3. The Certificate of Incorporation of the Corporation, as
heretofore amended or supplemented, is amended and restated hereby to read in
full as follows:
"ARTICLE 1.
The name of this Corporation is Kofax Image Products, Inc.
ARTICLE 2
The address of the registered office of the Corporation in the
State of Delaware is 1013 Centre Road, Wilmington, DE, County of New
Castle. The name of the Corporation's registered agent at that
address is The Prentice-Hall Corporation System, Inc.
ARTICLE 3
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware, as amended from time to
time.
<PAGE> 3
ARTICLE 4
A. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 45,000,000
shares, consisting of (a) 40,000,000 shares of Common Stock, $.001 par
value (the "Common Stock"), and (b) 5,000,000 shares of Preferred
Stock, $.001 par value (the "Preferred Stock").
B. The Board of Directors is authorized, subject to
limitations prescribed by law, to provide for the issuance of the
shares of Preferred Stock in series, and by filing a certificate
pursuant to the applicable law of the State of Delaware, to establish
from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations or
restrictions thereof.
The authority of the Board with respect to each series shall
include, but not be limited to, determination of the following:
(a) The number of shares constituting that series
and the distinctive designation of that series;
(b) The dividend rate on the shares of that
series, whether dividends shall be cumulative, and, if so, from which
date or dates, and the relative rights of priority, if any, of payment
of dividends on shares of that series;
(c) Whether that series shall have voting rights,
in addition to the voting rights provided by law, and if so, the terms
of such voting rights;
(d) Whether that series shall have conversion
privileges, and, if so, the terms and conditions of such conversion,
including provision for adjustment of the conversion rate in such
events as the Board of Directors shall determine;
(e) Whether or not the shares of that series
shall be redeemable, and, if so, the terms and conditions of such
redemption, including the date or date upon or after which they shall
be redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates;
(f) Whether that series shall have a sinking fund
for the redemption or purchase of shares of that series, and, if so,
the terms and amount of such sinking fund; and
(g) The rights of the shares of that series in
the event of voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, and the relative rights of priority, if
any, of payment of shares of that series.
2
<PAGE> 4
C. 750,000 of the authorized shares of Preferred Stock
are hereby designated as "Series A Preferred Stock," 1,117,002 of the
authorized shares of Preferred Stock are hereby designated as "Series
B Preferred Stock" and 800,000 of the authorized shares of Preferred
Stock are hereby designated as "Series C Preferred Stock." The
powers, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations and restrictions
thereof, in respect of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock are as follows:
1. Dividends.
(a) Accrual of Dividends.
(i) Dividends on each share of Series A, Series B
and Series C Preferred Stock shall accrue on the earlier to occur of
(A) the date on which such shares is redeemed pursuant to the
provisions of Section 3 below, and (B) the date of the liquidation and
winding up of the Corporation, (the "Date of Accrual") in an amount
equal to the cumulative dividends which would have accrued through
such date, if such dividends had accrued cumulatively on a daily basis
at the Dividend Rate (as defined below) from and including the issue
date to and including the Date of Accrual, less any dividends actually
declared and paid by the Corporation on such share prior to the Date
of Accrual.
(ii) The Dividend Rate for the Series A, Series B
and Series C Preferred Stock shall be eight percent (8%) per annum of
the per share liquidation preference amount specified in section 2(a)
for such series of Preferred.
(b) Payment of Dividends. The Corporation shall pay to
each holder of Series A, Series B and Series C Preferred Stock on the
Date of Accrual with respect to shares held by such holder any and all
dividends which have accrued through such date.
(c) Distribution of Partial Dividend Payments. If at any
time the Corporation pays less than the total amount of dividends then
accrued with respect to the Series A, Series B and Series C Preferred
Stock, such payment shall be distributed among the holders of Series
A, Series B and Series C Preferred Stock in proportion to the total
dividend amount due to each such holder.
(d) Other Dividends. Subject to the provisions of
Section 1(b) hereof, no dividend or other distribution shall be paid,
or declared and set apart for payment (other than dividends of Common
Stock on the Common Stock of the Corporation) on the shares of any
class or series of capital stock of the Corporation unless and until
there shall first be declared and paid on each share of the Series A,
Series B and Series C Preferred Stock a cash dividend in an amount
equal to the cumulative dividends which would have accrued through the
record date of such distribution (which shall be a date within at
least 30 days of the date of payment of such distribution), if such
dividends on the Series A, Series B and Series C Preferred Stock had
accrued cumulatively on a daily basis at the
3
<PAGE> 5
Dividend Rate from and including the issue date to and including such
record date, less any dividends actually declared and paid prior to
said date.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, the
holders of the Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds
of the Corporation to the holders of the Common Stock by reason of
their ownership thereof, the amount of $0.6666667 per share of the
Series A Preferred Stock, $1.50 per share of Series B Preferred Stock,
and $2.50 per share of Series C Preferred Stock (in each case as
adjusted for any combinations, consolidations, stock distributions or
stock dividends with respect to such shares) plus all declared or
accumulated but unpaid dividends on such share for each share of
Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock then held by them and no more. If upon the occurrence
of such event, the assets and funds thus distributed among the holders
of the Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amounts, then the entire
assets and funds of the Corporation legally available for distribution
shall be distributed among such holders in proportion to the full
preferential amount each such holder is otherwise entitled to receive.
(b) In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, and
subject to the payment in full of the liquidation preferences with
respect to the Preferred Stock as provided in subparagraph (a) of this
Section 2, the holders of the Common Stock shall be entitled to
receive, prior and in preference to any further distribution of any of
the assets or surplus funds of the Corporation to the holders of the
Preferred Stock by reason of their ownership thereof, an amount equal
to $0.10 per share (as adjusted for any combinations, consolidations,
stock distributions or stock dividends with respect to such shares)
plus all declared and unpaid dividends thereon for each share of
Common Stock then held by them and no more. Subject to the payment
in full of the liquidation preferences with respect to the Preferred
Stock as provided in subparagraph (a) of this Section 2, if upon the
occurrence of such event, the assets and funds thus distributed among
the holders of the Common Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amount,
then the entire remaining assets and funds of the Corporation legally
available for distribution shall be distributed among the holders of
the Common Stock in proportion to the shares of Common Stock then held
by them.
(c) After payment to the holders of the Preferred Stock
and the Common Stock of the amounts set forth in subparagraphs (a) and
(b) above, the entire remaining assets and funds of the Corporation
legally available for distribution, if any, shall be distributed among
the holders of the Common Stock, the Series A Preferred Stock, the
Series B Preferred Stock and the Series C
4
<PAGE> 6
Preferred Stock in proportion to the shares of Common Stock then held
by them and the shares of Common Stock which they then have the right
to acquire upon conversion of the shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock then held by
them.
(d) A consolidation or merger of the Corporation with or
into any other corporation or corporations, or a sale of all or
substantially all of the assets of the Corporation, shall not be
deemed to be a liquidation, dissolution or winding up within the
meaning of this Section 2, but shall be subject to the provisions of
Section 6 hereof.
(e) Each holder of any outstanding shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock
shall be deemed to have consented, for purposes of Sections 502, 503
and 506 of the California Corporations Code, to distributions made by
the Corporation in connection with the repurchase of shares of Common
Stock issued to or held by the employees, directors or consultants of
or to the Corporation or any of its subsidiaries upon termination of
their employment or services pursuant to agreements providing for the
right of such repurchase between the Corporation and any such persons.
3. Redemption.
(a) Redemption at the Option of the Corporation. The
Corporation shall not have the right to call or redeem any shares of
the Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock and the Corporation shall not purchase or otherwise
acquire for value any outstanding shares of the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock except as
provided in Section 3(b) hereof.
(b) Redemption at the Option of the Holders. Subject to
extension as provided below, from and after January 1, 1993 (the
"Redemption Date"), each holder of the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock, upon the
written approval of the holders of at least 50% of the Series A,
Series B and Series C Preferred Stock then outstanding (voting as a
single class in accordance with the provisions of Section 4 below)
may, at its option, require the Corporation to redeem all or a part of
the Series A, Series B and Series C Preferred Stock held by it by
delivery of a written notice requesting such redemption (the
"Redemption Notice"). The foregoing notwithstanding, the holders of
at least 50% of the Series A, Series B and Series C Preferred Stock
then outstanding (voting as a single class in accordance with the
provisions of Section 4 below) may at any time within six months prior
to the then applicable Redemption Date, elect by vote or written
consent to extend the then applicable Redemption Date to a date
specified by such vote or written consent, in which event the then
applicable Redemption Date shall be so extended for all purposes
herein. The Redemption Date may be extended from time to time
pursuant to the foregoing provisions without limitation. In the event
of any such extension, the Corporation shall deliver a written notice
to all holders of Series A, Series B and Series C Preferred Stock not
voting or consenting to the extension of the
5
<PAGE> 7
Redemption Date stating that the Redemption Date has been extended and
setting forth the date of extension. Within five days after the
receipt of a Redemption Notice, the Corporation shall deliver written
notice to all other holders of Series A, Series B and Series C
Preferred Stock informing each such holder of (A) the receipt of such
Redemption Notice, (B) the date of such receipt, (C) the number of
shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock requested to be redeemed in the Redemption
Notice, and (D) the total number of shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock
outstanding as of the date of receipt of the Redemption Notice. Any
such holder desiring to have any of its Series A, Series B or Series C
Preferred Stock redeemed by the Corporation at such time shall have
until thirty (30) days after the date of receipt of the Redemption
Notice in which to notify the Corporation of the number of shares of
Series A, Series B and/or Series C Preferred Stock which such holder
desires the Corporation to redeem. The Corporation shall redeem the
number of shares of Series A, Series B and/or Series C Preferred Stock
so requested to be redeemed at a purchase price equal to 100% of the
liquidation preference (calculated in accordance with Section 2(a)
above) of such shares (the "Redemption Price"). The Corporation shall
pay for shares redeemed hereunder by delivery of cash in the amount of
the Redemption Price pursuant to subparagraph (e) below.
(c) Surrender of Stock. On or before the Redemption
Date, each holder of shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock to be redeemed, unless
the holder has exercised its rights to convert the shares as provided
in Section 5 hereof, shall surrender the certificate or certificates
representing such shares to the Corporation, and thereupon the
Redemption Price for such shares shall be payable to the order of the
person whose name appears on such certificate or certificates as the
owner thereof, and each surrendered certificate shall be cancelled and
retired. In the event less than all of the shares represented by such
certificate are redeemed, a new certificate representing the
unredeemed shares shall be issued to the holder of such shares.
(d) Partial Redemption. From and after the Redemption
Date, unless there shall have been a default in payment of the
Redemption Price, all rights of the holders as to the shares of Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock requested to be redeemed (except the right to receive the
Redemption Price without interest upon surrender of their certificate
or certificates) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever.
If the funds of the Corporation legally available for redemption of
shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock on any Redemption Date are insufficient to
redeem the total number of such shares to be redeemed on such date,
those funds which are legally available will be used to redeem the
maximum possible number of such shares ratably among the holders of
such shares to be redeemed based upon the number of shares of Common
Stock into which their holdings of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock
6
<PAGE> 8
are convertible as of the Redemption Date. The shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
not redeemed shall remain outstanding and entitled to all the rights
and preferences provided herein. At any time thereafter when
additional funds of the Corporation are legally available for the
redemption of shares of Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock such funds will immediately be used
to redeem the balance of the shares which the Corporation has become
obliged to redeem on any Redemption Date but which is has not
redeemed.
(e) Deposit of Redemption Price. On or prior to each
Redemption Date, the Corporation shall deposit the Redemption Price of
all shares designated for redemption and not yet redeemed with a bank
or trust company having aggregate capital and surplus in excess if
$100,000,000 as a trust fund for the benefit of the respective holders
of the shares designated for redemption and not yet redeemed, with
irrevocable instructions and authority to the bank or trust company to
pay the Redemption Price for such shares to their respective holders
on or after the Redemption Date upon receipt of notification from the
Corporation that such holder has surrendered his share certificate to
the Corporation pursuant to Section 3(c) above. Such instructions
shall also provide that any moneys deposited by the Corporation
pursuant to this Section 3(e) for the redemption of shares thereafter
converted into shares of the Corporation's Common Stock pursuant to
Section 5 hereof prior to the Redemption Date shall be returned to the
Corporation forthwith upon such conversion. The balance of any moneys
deposited by the Corporation pursuant to this Section 3(e) remaining
unclaimed at the expiration of two (2) years following the Redemption
Date shall thereafter be returned to the Corporation upon its request
expressed in a resolution of its Board of Directors.
4. Voting Rights. Except as otherwise expressly provided herein
or as required by law, the holder of each share of the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
shall be entitled to the number of votes equal to the number of shares
of Common Stock into which such share of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock could be
converted and shall have voting rights and powers equal to the voting
rights and powers of the Common Stock (except as otherwise expressly
provided herein or as required by law, voting together with the Common
Stock as a single class) and shall be entitled to notice of any
shareholders' meeting in accordance with the Bylaws of the
Corporation. Fractional votes shall not, however, be permitted and
any fractional voting rights resulting from the above formula (after
aggregating all shares into which shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock held by each
holder could be converted) shall be rounded to the nearest whole
number (with one-half being rounded upward).
5. Conversion. The holders of the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
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<PAGE> 9
(a) Right to Convert.
(i) Each share of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after
the date of issuance of such share, at the office of the Corporation
or any transfer agent for such stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing
$0.6666667 in the case of Series A Preferred Stock, $1.50 in the case
of Series B Preferred Stock and $2.50 in the case of Series C
Preferred Stock, plus all declared or accumulated but unpaid dividends
on each such share, by the then applicable Conversion Price of each
such Series of Preferred Stock, determined as hereinafter provided, in
effect on the date the certificate is surrendered for conversion. The
initial Conversion Price per share for Series A Preferred Stock (the
"Series A Conversion Price") shall be $0.6666667; the initial
Conversion Price per share for Series B Preferred Stock (the "Series B
Conversion Price") shall be $1.50; and the initial Conversion Price
per share for Series C Preferred Stock (the "Series C Conversion
Price") shall be $2.50. Such initial Conversion Prices shall be
adjusted as hereinafter provided.
(ii) Each share of Series A, Series B and Series C
Preferred Stock shall automatically be converted into shares of Common
Stock at the then effective respective Conversion Price immediately
upon the closing of the sale of the Corporation's Common Stock in a
firm commitment, underwritten public offering registered under the
Securities Act of 1933, as amended (other than a registration relating
solely to a transaction under Rule 145 under such Act or any successor
rule thereto ) at a public offering price (prior to underwriter
commissions and expenses) equal to or exceeding $7.50 per share of
Common Stock (as presently constituted) and the aggregate proceeds to
the Corporation (after deduction for underwriter commissions and
offering expenses) of which equal or exceed $10,000,000.
(b) Mechanics of Conversion. Before any holder of Series
A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or certificates
thereof, duly endorsed, at the office of the Corporation or of any
transfer agent for such stock, and shall give written notice to the
Corporation at such office that it elects to convert the same and
shall state therein the name or names in which it wishes the
certificate or certificates for shares of Common Stock to be issued.
The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder a certificate or certificates
for the number of shares of Common Stock to which it shall be entitled
as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of surrender of
the shares of Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
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<PAGE> 10
(c) Adjustments to Conversion Price for Diluting Issues.
(i) Special Definitions. For purposes of this
Section 5(c), the following definitions apply:
(1) "Options" shall mean rights,
options, or warrants to subscribe for, purchase or otherwise acquire
either Common Stock or Convertible Securities.
(2) "Original Issue Date" shall mean the
date on which a share of Series C Preferred Stock was first issued.
(3) "Convertible Securities" shall mean
any evidences or indebtedness, shares or other securities directly or
indirectly convertible into or exchangeable for Common Stock.
(4) "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued (or, pursuant to Section
5(c)(iii), deemed to be issued) by the Corporation after the Original
Issue Date, other than shares of Common Stock issued or issuable:
(A) upon conversion of shares of
Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock;
(B) to officers, directors or
employees of, or consultants to, the Corporation pursuant to any stock
purchase plan or arrangement, stock option plan, or other stock
incentive plan or agreement approved by the Board of Directors not to
exceed 1,250,000 shares (plus any shares subject to an option granted
to any such person after the Original Issue Date which can no longer
under any circumstances be exercised and plus any shares repurchased
by the Corporation after the Original Issue Date from any officer,
director or employee of or consultant to the Corporation pursuant to
any of the plans or arrangements referred to in this clause (B)); or
(C) by way of dividend or other
distribution on shares excluded from the definition of Additional
Shares of Common Stock by the foregoing clauses (A) or (B) or this
clause (C).
(ii) No Adjustment of Conversion Price. No
adjustment in the Conversion Price of a particular share of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock
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 the Corporation
is less than the respective Conversion Price in effect on the date of,
and immediately prior to such issue, for such share of Series A,
Series B or Series C Preferred Stock.
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<PAGE> 11
(iii) Deemed Issue of Additional Shares of Common
Stock. In the event the Corporation at any time or from time to time
after the Original Issue Date shall issue any Options or Convertible
Securities or shall fix a record date for the determination of holders
of any class of securities then entitled to receive any such Options
or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such
number) of Common Stock issuable upon the exercise of such Options or,
in the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be deemed
to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the
close of business on such record date, provided that Additional Shares
of Common Stock shall not be deemed to have been issued with respect
to the Series A, Series B or Series C Preferred Stock unless the
consideration per share (determined pursuant to Section 5(c)(v)
hereof) of such Additional Shares of Common Stock would be less than
the respective Series A, Series B or Series C Conversion Price in
effect on the date of and immediately prior to such issue, or such
record date, as the case may be, and provided further that in any such
case in which Additional Shares of Common Stock are deemed to be
issued:
(1) no further adjustments in the
respective Conversion Prices shall be made upon the subsequent issue
of Convertible Securities or shares of Common Stock upon the exercise
of such Options or conversion or exchange of such Convertible
Securities;
(2) if such Options or Convertible
Securities by their terms provide, with the passage of time or
otherwise, for any increase in the consideration payable to the
Corporation, or decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof, the
respective Conversion Prices computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and
any subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to reflect such
increase or decrease insofar as it affects such Options or the rights
of conversion or exchange under such Convertible Securities (provided,
however, that no such adjustment of the respective Conversion Prices
shall affect Common Stock previously issued upon conversion of the
Series A, Series B or Series C Preferred Stock);
(3) upon the expiration of any such
Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the respective
Conversion Prices computed upon the original issue thereof (or upon
the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration, be
recomputed as if:
(A) in the case of Convertible
Securities or Options for Common Stock the only Additional Shares of
Common Stock issued were the shares of Common Stock, if any, actually
issued upon the exercise of
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<PAGE> 12
such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the
consideration actually received by the Corporation for the issue of
all such Options, whether or not exercised, plus the consideration
actually received by the Corporation upon such exercise, or for the
issue of all such Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if any, actually
received by the Corporation upon such conversion or exchange, and
(B) in the case of Options for
Convertible Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were issued at the time of
issue of such Options and the consideration received by the
Corporation for the Additional Shares of Common Stock deemed to have
been then issued was the consideration actually received by the
Corporation for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been received by the
Corporation (determined pursuant to Section 5(c)(v)) upon the issue of
the Convertible Securities with respect to which such Options were
actually exercised;
(4) no readjustment pursuant to clauses
(2) or (3) above shall have the effect of increasing the Series A,
Series B or Series C Conversion Price to an amount which exceeds the
lower of (A) such Conversion Price on the original adjustment date, or
(B) such Conversion Price that would have resulted from any issuance
of Additional Shares of Common Stock between the original adjustment
date and such readjustment date;
(5) in the case of any Options which
expire by their terms not more than thirty (30) days after the date of
issue thereof, no adjustment of the respective Conversion Prices shall
be made, (except as to shares of Series A, Series B or Series C
Preferred Stock converted in such period), until the expiration or
exercise of all such Options, whereupon such adjustment shall be made
in the same manner provided in clause (3) above; and
(6) if any such record date shall have
been fixed and such Options or Convertible Securities are not issued
on the date fixed thereof, the adjustment previously made in the
respective Conversion Prices which became effective on such record
date shall be cancelled as of the close of business on such record
date, and shall instead be made on the actual date of issuance, if
any.
(iv) Adjustment of Conversion Price Upon Issuance
of Additional Shares of Common Stock. In the event the Corporation
shall issue Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to Section
5(c)(iii) hereof) without consideration or for a consideration per
share less than the Series A, Series B or Series C Conversion Price in
effect on the date of and immediately prior to such issue, then and in
such event, such Series A, Series B or Series C Conversion Price shall
be reduced, concurrently with such issue in order to increase the
number of shares of Common Stock into which Series A, Series B or
Series C
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<PAGE> 13
Preferred Stock is convertible to a price (calculated to the nearest
cent) determined by the following formula:
C
-----
CP(1) = CP(0) x CS + CP(0)
----------
CS + AS
where:
(1) CP(0) = the respective Series A, Series B
or Series C Conversion Price in effect on the
date of and immediately prior to such issue,
(2) CP(1) = the Conversion Price as so
adjusted,
(3) CS = the number of shares of Common stock
issuable upon conversion of all Preferred
Stock outstanding immediately prior to such
issuance.
(4) C = the aggregate consideration received by
the Corporation for the total number of
Additional Shares of Common Stock so issued,
(5) AS = the number of such Additional Shares
of Common Stock so issued.
Notwithstanding the foregoing, the Conversion Price shall not be so
reduced at such time if the amount of such reduction would be an
amount less than one cent ($0.01), but any such amount shall be
carried forward and deduction with respect thereto made at the time of
and together with any subsequent reduction which, together with such
amount and any other amount or amounts so carried forward, shall
aggregate one cent ($0.01) or more.
(v) Determination of Consideration. For purposes
of this Section 5(c), the consideration received by the Corporation
for the issue of any Additional Shares of Common Stock shall be
computed as follows:
(1) Cash and Property: Such
consideration shall:
(A) insofar as it consists of cash,
be computed at the aggregate amount of cash received by the
Corporation excluding amounts paid or payable for accrued interest or
accrued dividends;
(B) insofar as it consists of
property other than cash, be computed at the fair value thereof at the
time of such issue, as determined in good faith by the Board; and
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<PAGE> 14
(C) in the event Additional Shares
of Common Stock are issued together with other shares or securities or
other assets of the Corporation for consideration which covers both,
be the proportion of such consideration so received, computed as
provided in clauses (A) and (B) above, as determined in good faith by
the Board.
(2) Options and Convertible Securities.
The consideration per share received by the Corporation for Additional
Shares of Common Stock deemed to have been issued pursuant to Section
5(c)(iii), relating to Options and Convertible Securities, shall be
determined by dividing
(A) the total amount, if any,
received or receivable by the Corporation as consideration for the
issue of such Options or Convertible Securities, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provisions
contained therein designed to protect against dilution) payable to the
Corporation upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible
Securities by
(B) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities.
(vi) Adjustments for Combinations or Subdivisions
of Common Stock. In the event that the Corporation at any time or
from time to time after the Original Issue Date shall declare or pay
any dividend on the Common Stock payable in Common Stock or in any
right to acquire Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of
Common Stock (by stock split, reclassification or otherwise), or in
the event the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number
of shares of Common Stock, then the respective Conversion Prices in
effect immediately prior to such event shall, concurrently with the
effectiveness of such event, be proportionately decreased or
increased, as appropriate.
(d) Other Distributions. In the event the Corporation
shall at any time or from time to time make or issue, or fix a record
date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the
Corporation or any of its subsidiaries, other than Additional Shares
of Common Stock, then in each such event provisions shall be made so
that the holders of Series A, Series B and Series C Preferred Stock
shall receive, upon the conversion thereof, the securities of the
Corporation which they would have received had their stock been
converted into Common Stock on the date of such event.
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<PAGE> 15
(e) No Impairment. The Corporation will not, by
amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation,
but will at all times in good faith assist in the carrying out of all
the provisions of this Section 5 and in the taking of all such action
as may be necessary or appropriate in order to protect the Conversion
Rights of the holders of the Series A, Series B and Series C Preferred
Stock against impairment.
(f) Certificates as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the Conversion Price pursuant to
this Section 5, the Corporation at its expense shall promptly compute
such adjustment or readjustment in accordance with the terms hereof
and cause independent public accountants selected by the Corporation
to verify such computation and prepare and furnish to each holder of
Series A, Series B and Series C Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Series A,
Series B or Series C Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the respective Conversion Price at the time in
effect, and (iii) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received upon the
conversion of Series A, Series B or Series C Preferred Stock.
(g) Notices of Record Date. In the event of any taking
by the Corporation of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend) or other
distribution, any security or right convertible into or entitling the
holder thereof to receive Additional Shares of Common Stock, or any
right to subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities or property, or to receive
any other right, the Corporation shall mail to each holder of Series
A, Series B and Series C Preferred Stock at least twenty (20) days
prior to the date specified therein, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend,
distribution, security or right, and the amount and character of such
dividend, distribution, security or right.
(h) Issue Taxes. The Corporation shall pay any and all
issue and other taxes that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of shares of Series
A, Series B or Series C Preferred Stock pursuant hereto; provided,
however, that the Corporation shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.
(i) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose
of effecting the conversion of the
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<PAGE> 16
shares of the Series A, Series B and Series C Preferred Stock, such
number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the
Series A, Series B and Series C Preferred Stock; and if at any time
the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares
of the Series A, Series B and Series C Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient
for such purpose, including, without limitation, engaging in best
efforts to obtain the requisite shareholder approval of any necessary
amendment to these Articles.
(j) Fractional Shares. No fractional share shall be
issued upon the conversion of any share or shares of Series A, Series
B or Series C Preferred Stock. All shares of Common Stock (including
fractions thereof) issuable upon conversion of more than one share of
Series A, Series B or Series C Preferred Stock by a holder thereof
shall be aggregated for purposes of determining whether the conversion
would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the
issuance of a fraction of a share of Common Stock, the Corporation
shall, in lieu of issuing any fractional share, pay the holder
otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined
in good faith by the Board of Directors of the Corporation).
(k) Notices. Any notice required by the provisions of
this Section 5 to be given to the holders of shares of Series A,
Series B and Series C Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of the
Corporation.
(l) Adjustments. In case of any reorganization or any
reclassification of the capital stock of the Corporation, any
consolidation or merger of the Corporation with or into another
corporation or corporations in a transaction not covered by Section 6
below, or the conveyance of all or substantially all of the assets of
the Corporation to another corporation in a transaction not covered by
Section 6 below, each share of Series A, Series B and Series C
Preferred Stock shall thereafter be convertible into the number of
shares of stock or other securities or property (including cash) to
which a holder of the number of shares of Common Stock deliverable
upon conversion of such share of Series A, Series B and Series C
Preferred Stock would have been entitled upon the record date of (or
date of, if no record date is fixed) such reorganization,
reclassification, consolidation, merger or conveyance; and, in any
case, appropriate adjustment (as determined by the Board of Directors)
shall be made in the application of the provisions herein set forth
with respect to the rights and interests thereafter of the holders of
such Series A, Series B and Series C Preferred Stock, to the end that
the provisions set forth herein shall thereafter be applicable, as
nearly as equivalent as is practicable, in relation to any shares of
stock or the securities or
15
<PAGE> 17
property (including cash) thereafter deliverable upon the conversion
of the shares of such Series A, Series B and Series C Preferred Stock.
6. Merger, Consolidation.
(a) Special Definitions. For purposes of this Section 6,
the following definitions shall apply:
(i) "Triggering Event" shall mean any of the
following:
(A) a consolidation or merger of the
Corporation with or into any other corporation, or any other entity or
person, other than a wholly-owned subsidiary,
(B) any corporate reorganization in
which the Corporation shall not be the continuing or surviving entity
of such reorganization,
(C) a sale of all or substantially all
of the assets of the Corporation, or
(D) any transaction approved by the
Corporation in which more than fifty percent (50%) of the outstanding
stock of the Corporation (on an as converted basis) is exchanged in
any three (3) month period.
(ii) "Acquisition Price" shall mean the total fair
market value (as determined in good faith by the Board of Directors;
provided, however, that for purposes of determining whether the
Acquisition Price per share is less than $5.00 in accordance with
subparagraph (b) below, no value shall be assigned to any future
contingent payments that may be payable in respect of a Triggering
Event) of all securities, cash and other property payable to the
Corporation or its shareholders in respect of a Triggering Event.
(b) Payments Upon Occurrence of a Triggering Event. At
any time, upon the occurrence of a Triggering Event, the Acquisition
Price shall be distributed among the holders of the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock and
the Common Stock in proportion to the shares of Common Stock then held
by them and the shares of Common Stock which they then have the right
to acquire upon conversion of the shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock then held by
them; provided, that if the aggregate Acquisition Price divided by the
total number of shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Common Stock then outstanding (as
presently constituted and treating the Series A, Series B and Series C
Preferred Stock as-if-converted) is less than $4.00, the Acquisition
Price shall be distributed among the holders of the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock and
the Common Stock as follows:
16
<PAGE> 18
(i) the holders of the Series A, Series B and
Series C Preferred Stock shall be entitled to receive, prior and in
preference to any payments to the holders of Common Stock, a portion
of the Acquisition Price equal to $0.6666667 per share of Series A
Preferred Stock, $1.50 per share of Series B Preferred Stock and $2.50
per share of Series C Preferred Stock. If in any such event, the
Acquisition Price shall be insufficient to permit the payment to such
shareholders of their full preferential amounts specified in this
Section 6(b)(i), then the Acquisition Price shall be distributed
ratably among the holders of Series A, Series B and Series C Preferred
Stock in proportion to the full preferential amount each such holder
is otherwise entitled to receive pursuant to this Section 6(b)(i);
(ii) after the payment or the setting apart for
payment to the holders of the Series A, Series B and Series C
Preferred Stock of the preferential amounts payable to them pursuant
to Section 6(b)(i), the holders of Common Stock shall be entitled to
receive a portion of the Acquisition Price equal to $0.6666667 per
share. If, in any such event the portion of the Acquisition Price to
be distributed among the holders of Common Stock shall be insufficient
to permit the payment to such shareholders of the full amounts
specified in this Section 6(b)(ii), the portion of the Acquisition
Price available for payment to the holders of Common Stock hereunder
shall be divided among the holders of Common Stock in proportion to
the number of shares of Common Stock then held by each of them; and
(iii) after the payment to the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Common Stock of the full amounts provided for in Sections 6(b)(i)
and (ii), any portion of the Acquisition Price remaining shall be
distributed among the holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Common Stock in
proportion to the shares of Common Stock then held by them and the
shares of Common Stock which they have the right to acquire upon
conversion of the shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock then held by them.
7. Amendment. Any term relating to the Series A, Series B or
Series C Preferred Stock may be amended and the observance of any term
relating to the Series A, Series B or Series C Preferred Stock may be
waived (either generally or in a particular instance) only with the
vote or written consent of holders of not less than sixty-six and
two-thirds percent (66-2/3%) of the outstanding shares of each such
Series. Any amendment or waiver so effected shall be binding upon the
Corporation and any holder of Series A, Series B or Series C Preferred
Stock.
8. Restrictions and Limitations. Except as otherwise required by
law, so long as any shares of Series A, Series B or Series C Preferred
Stock remain outstanding, the Corporation shall not, without the vote
or written consent by the holders of not less than sixty-six and
two-thirds percent (66-2/3%) of the outstanding shares of each such
series:
(i) Purchase, redeem or otherwise acquire (or pay
into or set aside for a sinking fund for such purpose), any of the
Common Stock of the Corporation, provided, however, that this
restriction shall not apply to the
17
<PAGE> 19
repurchase of shares of Common Stock from directors, officers,
consultants or employees of the Corporation or any subsidiary pursuant
to agreements approved by the Corporation's Board of Directors under
which the Corporation has a right of first refusal with respect to
such shares or the option to repurchase such shares upon the
occurrence of certain events, including termination of employment or
services, or
(ii) Effect any sale or other conveyance of all or
substantially all of the assets of the Corporation or any of its
subsidiaries, or any consolidation or merger involving the Corporation
or any of its subsidiaries, or
(iii) Effect any reclassification, recapitalization
or other change with respect to any outstanding shares of stock which
results in the issuance of shares of stock having any preference or
priority as to dividend or redemption rights, liquidation preferences,
conversion rights, voting rights or otherwise, superior to, or on a
parity with, any such preference or priority of the Series A, Series B
or Series C Preferred Stock, or
(iv) Increase or decrease (other than by
redemption or conversion) the total number of authorized shares of
Preferred Stock of the Corporation or the total numbers of such shares
of Preferred Stock designated as Series A, Series B or Series C
Preferred Stock, or
(v) Authorize or issue, or obligate itself to
issue, any other equity security senior to or on a parity with the
Series A, Series B or Series C Preferred Stock as to dividend or
redemption rights, liquidation preferences, conversion rights, voting
rights or otherwise, or create any obligation or security convertible
into or exchangeable for, or having any option rights to purchase, any
such equity security which is senior to or on a parity with the Series
A, Series B or Series C Preferred Stock.
9. No Reissuance of Series A, Series B or Series C Preferred
Stock. No share or shares of Series A, Series B or Series C Preferred
Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall
be returned to the status of undesignated shares of Preferred Stock.
ARTICLE 5
(a) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors and
elections of directors need not be by written ballot unless otherwise
provided in the Bylaws. The number of directors of the Corporation
shall be fixed from time to time by the Board of Directors either by a
resolution or Bylaw adopted by the affirmative vote of a majority of
the entire Board of Directors.
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(b) Meetings of the stockholders may be held within or
without the State of Delaware, as the Bylaws may provide. The books
of the Corporation may be kept (subject to any provision contained in
the Delaware Statutes) outside the State of Delaware at such place or
places as may be designated from time to time by the Board of
Directors or by the Bylaws of the Corporation.
(c) Any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided,
however, that if the Corporation has cumulative voting and less than
the entire Board of Directors is to be removed, no director may be
removed without cause if the votes cast against such director's
removal would be sufficient to elect such director if then
cumulatively voted at an election of the entire Board of Directors,
or, if there be classes of directors, at an election of the class of
directors of which such director is a part. Whenever the holders of
any class or series are entitled to elect one or more directors by the
Certificate of Incorporation, this section shall apply, in respect to
the removal without cause of a director or directors so elected, to
the vote of the holders of the outstanding shares of that class or
series and not to the vote of the outstanding shares as a whole.
ARTICLE 6
A director of this Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that this provision shall
not eliminate or limit the liability of a director (i) for any breach
of his duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law, (iii) under Section 174
of the General Corporation Law of the State of Delaware, or (iv) for
any transaction from which the director derives an improper personal
benefit. If the General Corporation Law of the State of Delaware is
hereafter amended to authorize corporate action further limiting or
eliminating the personal liability of directors, then the liability of
the directors of the Corporation shall be limited or eliminated to the
fullest extent permitted by the General Corporation Law of the State
of Delaware, as so amended from time to time. Any repeal or
modification of this Article 6 by the stockholders of the Corporation
shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation
existing at the time of such repeal or modification.
The Corporation may, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware,
as the same may be amended and supplemented, or by any successor
thereto, indemnify any and all persons whom it shall have power to
indemnify under said Section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by
said Section. The indemnification provided for herein shall not be
deemed exclusive of any other rights to which those seeking
indemnification may be
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entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
ARTICLE 7
In furtherance and not in limitation of the power conferred
upon the Board of Directors by law, the Board of Directors shall have
the power to make, adopt, alter, amend and repeal from time to time
Bylaws of this Corporation, subject to the right of the stockholders
entitled to vote with respect thereto to alter and repeal Bylaws made
by the Board of Directors.
ARTICLE 8
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute,
and all rights conferred upon stockholders herein are granted subject
to this reservation."
4. The foregoing Restated Certificate of Incorporation has been
approved by the stockholders of the Corporation by written consent and the
Corporation has provided written notice of the action in accordance with
Section 228 of the General Corporation Law of the State of Delaware.
5. The foregoing Restated Certificate of Incorporation has been
duly adopted in accordance with the applicable provisions of Sections 242 and
245 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by David S. Silver, its President, and attested by Ronald J. Fikert, its
Secretary, this 18th day of January, 1996.
By: /s/ DAVID S. SILVER
----------------------------------
David S. Silver,
President
ATTEST:
By: /s/ RONALD J. FIKERT
----------------------------------
Ronald J. Fikert,
Secretary
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<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
KOFAX IMAGE PRODUCTS, INC.
A DELAWARE CORPORATION
AS ADOPTED AUGUST 11, 1995
AND
AMENDED AND RESTATED ON JANUARY 16, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I
OFFICES
Section 1. Registered Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Other Offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Books. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Annual Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 4. Notification of Business to be Transacted at Meeting. . . . . . . . . . . . . . . . . . . . . 1
Section 5. Notice; Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 6. Quorum; Adjournment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 7. Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 8. Stockholder Action by Written Consent Without a Meeting. . . . . . . . . . . . . . . . . . . 2
Section 9. List of Stockholders Entitled to Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 10. Stock Ledger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 11. Inspectors of Election. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 12. Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 13. Order of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
DIRECTORS
Section 1. Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2. Number and Election of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3. Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Time and Place of Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5. Annual Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 6. Regular Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 7. Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 8. Quorum; Vote Required for Action; Adjournment. . . . . . . . . . . . . . . . . . . . . . . . 5
Section 9. Action by Written Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 10. Telephone Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 11. Committees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 12. Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 13. Interested Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 14. Removal of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV
OFFICERS
Section 1. Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2. Appointment of Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3. Subordinate Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4. Removal and Resignation of Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5. Vacancies in Offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 6. Chairman of the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 7. Vice Chairman of the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 8. Chief Executive Officer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 9. President. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 10. Vice President. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 11. Secretary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 12. Chief Financial Officer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE V
STOCK
Section 1. Form of Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2. Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. Lost Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4. Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5. Record Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VI
INDEMNIFICATION
Section 1. Right to Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2. Right of Indemnitee to Bring Suit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3. Non-Exclusivity of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5. Indemnification of Employees or Agents of the Corporation. . . . . . . . . . . . . . . . . . 11
Section 6. Indemnification Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7. Effect of Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2. Disbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4. Corporate Seal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6. Voting of Stock Owned by the Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. Construction and Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
ii
<PAGE> 4
BYLAWS
OF
KOFAX IMAGE PRODUCTS, INC.
A DELAWARE CORPORATION
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the
Corporation in the State of Delaware shall be in the City of Dover, County of
Kent.
SECTION 2. OTHER OFFICES. The Corporation may also have offices
at such other places both within and without the State of Delaware as the Board
of Directors may from time to time determine or the business of the Corporation
may require.
SECTION 3. BOOKS. The books of the Corporation may be kept
within or without the State of Delaware as the Board of Directors may from time
to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of stockholders for
the election of directors shall be held at such place either within or without
the State of Delaware as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of
Delaware as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
SECTION 2. ANNUAL MEETINGS. Annual meetings of stockholders
shall be held at a time and date designated by the Board of Directors for the
purpose of electing directors and transacting such other business as may
properly be brought before the meeting.
SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders,
for any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President and shall be
called by the President or Secretary at the request in writing of a majority of
the Board of Directors, or at the request in writing of a stockholder or
stockholders owning stock of the Corporation possessing ten percent (10%) of
the voting power possessed by all of the then outstanding capital stock of any
class of the Corporation entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.
SECTION 4. NOTIFICATION OF BUSINESS TO BE TRANSACTED AT MEETING.
To be properly brought before a meeting, business must be (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (b) otherwise properly brought before
1
<PAGE> 5
the meeting by or at the direction of the Board of Directors, or (c) otherwise
properly brought before the meeting by a stockholder entitled to vote at the
meeting.
SECTION 5. NOTICE; WAIVER OF NOTICE. Whenever stockholders are
required or permitted to take any action at a meeting, a written notice of the
meeting shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise required by law, such notice
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the Corporation. A written waiver of any such notice
signed by the person entitled thereto, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
SECTION 6. QUORUM; ADJOURNMENT. Except as otherwise required by
law, or provided by the Certificate of Incorporation or these Bylaws, the
holders of a majority of the capital stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum for the transaction of business at all meetings of the stockholders. A
meeting at which a quorum is initially present may continue to transact
business, notwithstanding the withdrawal of enough votes to leave less than a
quorum, if any action taken is approved by at least a majority of the required
quorum to conduct that meeting. If, however, such quorum shall not be present
or represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting of the time and place of the adjourned meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might
have been transacted at the meeting as originally noticed. If the adjournment
is for more than thirty (30) days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given to each stockholder entitled to vote at the meeting.
SECTION 7. VOTING. Except as otherwise required by law, or
provided by the Certificate of Incorporation or these Bylaws, any question
brought before any meeting of stockholders at which a quorum is present shall
be decided by the vote of the holders of a majority of the stock represented
and entitled to vote thereat. Unless otherwise provided in the Certificate of
Incorporation, each stockholder represented at a meeting of stockholders shall
be entitled to cast one vote for each share of the capital stock entitled to
vote thereat held by such stockholder. Such votes may be cast in person or by
proxy, but no proxy shall be voted on or after three (3) years from its date,
unless such proxy provides for a longer period. Elections of directors need
not be by ballot unless the Chairman of the meeting so directs or unless a
stockholder demands election by ballot at the meeting and before the voting
begins.
SECTION 8. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING. Except as otherwise provided in the Certificate of Incorporation, any
action which may be taken at any annual or special meeting of stockholders, may
be taken without a meeting and without prior notice, if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take such
2
<PAGE> 6
action at a meeting at which all shares entitled to vote thereon were present
and voted. All such consents shall be filed with the Secretary of the
Corporation and shall be maintained in the corporate records. Prompt notice of
the taking of corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
SECTION 9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer
who has charge of the stock ledger of the Corporation shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
SECTION 10. STOCK LEDGER. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 9 of this Article II or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
SECTION 11. INSPECTORS OF ELECTION. In advance of any meeting of
stockholders, the Board of Directors may appoint one or more persons (who shall
not be candidates for office) as inspectors of election to act at the meeting
or any adjournment thereof. If an inspector or inspectors are not so
appointed, or if an appointed inspector fails to appear or fails or refuses to
act at a meeting, the Chairman of any meeting of stockholders may, and on the
request of any stockholder or his proxy shall, appoint an inspector or
inspectors of election at the meeting. The duties of such inspector(s) shall
include: determining the number of shares outstanding and the voting power of
each; the shares represented at the meeting; the existence of a quorum; the
authenticity, validity and effect of proxies; receiving votes, ballots or
consents; hearing and determining all challenges and questions in any way
arising in connection with the right to vote; counting and tabulating all votes
or consents; determining the result; and such acts as may be proper to conduct
the election or vote with fairness to all stockholders. In the event of any
dispute between or among the inspectors, the determination of the majority of
the inspectors shall be binding.
SECTION 12. ORGANIZATION. At each meeting of stockholders the
Chairman of the Board of Directors, if one shall have been elected, (or in his
absence or if one shall not have been elected, the President) shall act as
Chairman of the meeting. The Secretary (or in his absence or inability to act,
the person whom the Chairman of the meeting shall appoint secretary of the
meeting) shall act as secretary of the meeting and keep the minutes thereof.
SECTION 13. ORDER OF BUSINESS. The order and manner of
transacting business at all meetings of stockholders shall be determined by the
Chairman of the meeting.
3
<PAGE> 7
ARTICLE III
DIRECTORS
SECTION 1. POWERS. Except as otherwise required by law or
provided by the Certificate of Incorporation, the business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors.
SECTION 2. NUMBER AND ELECTION OF DIRECTORS. Subject to any
limitations in the Certificate of Incorporation, the authorized number of
directors of the Corporation shall be seven (7) until changed by an amendment
to this Bylaw adopted by the affirmative vote of a majority of the entire Board
of Directors. Directors shall be elected at each annual meeting of
stockholders to replace directors whose terms then expire, and each director
elected shall hold office until his successor is duly elected and qualified, or
until his earlier death, resignation or removal. Any director may resign at
any time effective upon giving written notice to the Board of Directors, unless
the notice specifies a later time for such resignation to become effective.
Unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective. If the resignation of a director is
effective at a future time, the Board of Directors may elect a successor prior
to such effective time to take office when such resignation becomes effective.
Directors need not be stockholders.
SECTION 3. VACANCIES. Subject to the limitations in the
Certificate of Incorporation, vacancies in the Board of Directors resulting
from death, resignation, removal or otherwise and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, although less than a quorum, or
by a sole remaining director. Each director so selected shall hold office for
the remainder of the full term of office of the former director which such
director replaces and until his successor is duly elected and qualified, or
until his earlier death, resignation or removal. No decrease in the authorized
number of directors constituting the Board of Directors shall shorten the term
of any incumbent directors.
SECTION 4. TIME AND PLACE OF MEETINGS. The Board of Director
shall hold its meetings at such place, either within or without the State of
Delaware, and at such time as may be determined from time to time by the Board
of Directors.
SECTION 5. ANNUAL MEETING. The Board of Directors shall meet
for the purpose of organization, the election of officers and the transaction
of other business, as soon as practicable after each annual meeting of
stockholders, on the same day and at the same place where such annual meeting
shall be held. Notice of such meeting need not be given. In the event such
annual meeting is not so held, the annual meeting of the Board of Directors may
be held at such place, either within or without the State of Delaware, on such
date and at such time as shall be specified in a notice thereof given as
hereinafter provided in Section 7 of this Article III or in a waiver of notice
thereof.
SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware at
such date and time as the Board of Directors may from time to time determine
and, if so determined by the Board of Directors, notices thereof need not be
given.
SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President, the
Secretary or by any director. Notice of the date,
4
<PAGE> 8
time and place of special meetings shall be delivered personally or by
telephone to each director or sent by first-class mail or telegram, charges
prepaid, addressed to each director at the director's address as it is shown on
the records of the Corporation. In case the notice is mailed, it shall be
deposited in the United States mail at least four (4) days before the time of
the holding of the meeting. In case the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. The notice need not specify the purpose of the
meeting. A written waiver of any such notice signed by the person entitled
thereto, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 8. QUORUM; VOTE REQUIRED FOR ACTION; ADJOURNMENT.
Except as otherwise required by law, or provided in the Certificate of
Incorporation or these Bylaws, a majority of the directors shall constitute a
quorum for the transaction of business at all meetings of the Board of
Directors and the affirmative vote of not less than a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting, from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present. A meeting at which a quorum is initially present may
continue to transact business, notwithstanding the withdrawal of directors, if
any action taken is approved by at least a majority of the required quorum to
conduct that meeting. When a meeting is adjourned to another time or place
(whether or not a quorum is present), notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Board of Directors may
transact any business which might have been transacted at the original meeting.
SECTION 9. ACTION BY WRITTEN CONSENT. Unless otherwise
restricted by the Certificate of Incorporation, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all the members of the
Board of Directors or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or committee.
SECTION 10. TELEPHONE MEETINGS. Unless otherwise restricted by
the Certificate of Incorporation, members of the Board of Directors of the
Corporation, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or such committee, as the
case may be, by conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this Section 10 shall constitute
presence in person at such meeting.
SECTION 11. COMMITTEES. The Board of Directors may, by
resolution passed unanimously by the entire Board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any such committee, who may replace any absent or
disqualified member at any meeting of the committee. In the event of absence
or disqualification of a member of a committee, and in the absence of a
designation by the Board of Directors of an alternate member to replace the
absent or disqualified member, the committee member or members present at any
meeting
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<PAGE> 9
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of the absent or disqualified member. Any
committee, to the extent allowed by law and as provided in the resolution
establishing such committee, shall have and may exercise all the power and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, adopting
an agreement of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, or amending the Bylaws of the
Corporation; and, unless the resolution or the Certificate of Incorporation
expressly so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Each committee shall
keep regular minutes of its meetings and report to the Board of Directors when
required.
SECTION 12. COMPENSATION. The directors may be paid such
compensation for their services as the Board of Directors shall from time to
time determine.
SECTION 13. INTERESTED DIRECTORS. No contract or transaction
between the Corporation and one or more of its directors or officers, or
between the Corporation and any other corporation, partnership, association, or
other organization in which one or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the Board of Directors or the committee
thereof which authorizes the contract or transaction, or solely because his of
their votes are counted for such purpose if: (i) the material facts as to his
or their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the
Board of Directors or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(ii) the material facts as to his or their relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (iii) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a committee thereof, or the
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
SECTION 14. REMOVAL OF DIRECTORS. Any director or the entire
Board of Directors may be removed, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors;
provided, however, that if the Corporation has cumulative voting and less than
the entire Board of Directors is to be removed, no director may be removed
without cause if the votes cast against such director's removal would be
sufficient to elect such director if then cumulatively voted at an election of
the entire Board of Directors, or, if there be classes of directors, at an
election of the class of directors of which such director is a part. Whenever
the holders of any class or series are entitled to elect one or more directors
by the Certificate of Incorporation, this section shall apply, in respect to
the removal without cause of a director or directors so elected, to the vote of
the holders of the outstanding shares of that class or series and not to the
vote of the outstanding shares as a whole.
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<PAGE> 10
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be a
President, a Secretary and a Chief Financial Officer. The Corporation may also
have, at the discretion of the Board of Directors, a Chairman of the Board, a
Vice Chairman of the Board, a Chief Executive Officer, one or more Vice
Presidents, one or more Assistant Financial Officers and Treasurers, one or
more Assistant Secretaries and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article IV.
SECTION 2. APPOINTMENT OF OFFICERS. The officers of the
Corporation, except such officers as may be appointed in accordance with the
provisions of Section 3 or Section 5 of this Article IV, shall be appointed by
the Board of Directors, and each shall serve at the pleasure of the Board,
subject to the rights, if any, of an officer under any contract of employment.
SECTION 3. SUBORDINATE OFFICERS. The Board of Directors may
appoint, and may empower the Chief Executive Officer or President to appoint,
such other officers as the business of the Corporation may require, each of
whom shall hold office for such period, have such authority and perform such
duties as are provided in the Bylaws or as the Board of Directors may from time
to time determine.
SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights of an officer under any contract, any officer may be removed at any
time, with or without cause, by the Board of Directors or, except in case of an
officer chosen by the Board of Directors, by any officer upon whom such power
of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation shall be without prejudice
to the rights of the Corporation under any contract to which the officer is a
party.
SECTION 5. VACANCIES IN OFFICES. A vacancy in any office
because of death, resignation, removal, disqualification or any other cause
shall be filled in the manner prescribed in these Bylaws for regular
appointments to that office.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if
such an officer is elected, shall, if present, preside at meetings of the
stockholders and of the Board of Directors. He shall, in addition, perform
such other functions (if any) as may be prescribed by the Bylaws or the Board
of Directors.
SECTION 7. VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the
Board, if such an officer is elected, shall, in the absence or disability of
the Chairman of the Board, perform all duties of the Chairman of the Board and
when so acting shall have all the powers of and be subject to all of the
restrictions upon the Chairman of the Board. The Vice Chairman of the Board
shall have such other powers and duties as may be prescribed by the Board of
Directors or the Bylaws.
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<PAGE> 11
SECTION 8. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
of the Corporation shall, subject to the control of the Board of Directors,
have general supervision, direction and control of the business and the
officers of the Corporation. He shall exercise the duties usually vested in
the chief executive officer of a corporation and perform such other powers and
duties as may be assigned to him from time to time by the Board of Directors or
prescribed by the Bylaws. In the absence of the Chairman of the Board and any
Vice Chairman of the Board, the Chief Executive Officer shall preside at all
meetings of the stockholders and of the Board of Directors.
SECTION 9. PRESIDENT. The President of the Corporation shall,
subject to the control of the Board of Directors and the Chief Executive
Officer of the Corporation, if there be such an officer, have general powers
and duties of management usually vested in the office of president of a
corporation and shall have such other powers and duties as may be prescribed by
the Board of Directors or the Bylaws or the Chief Executive Officer of the
Corporation. In the absence of the Chairman of the Board, Vice Chairman of the
Board and Chief Executive Officer, the President shall preside at all meetings
of the Board of Directors and stockholders.
SECTION 10. VICE PRESIDENT. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a Vice President designated by the Board
of Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of, and subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by
the Board of Directors or the Bylaws, and the President, or the Chairman of the
Board.
SECTION 11. SECRETARY. The Secretary shall keep or cause to be
kept, at the principal executive office or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
Directors, committees of Directors, and stockholders, with the time and place
of holding, whether regular or special, and, if special, how authorized, the
notice given, the names of those present at Directors' meetings or committee
meetings, the number of shares present or represented at stockholders'
meetings, and a summary of the proceedings.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer agent or
registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required by the Bylaws or by
law to be given, and he shall keep or cause to be kept the seal of the
Corporation if one be adopted, in safe custody, and shall have such powers and
perform such other duties as may be prescribed by the Board of Directors or by
the Bylaws.
SECTION 12. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep and maintain, or cause to be kept and maintained, adequate and
correct books and records of accounts of the properties and business
transactions of the Corporation. The Chief Financial Officer shall deposit all
moneys and other valuables in the name and to the credit of the Corporation
with such depositories as may be designated by the Board of Directors. He
shall make such disbursements of
8
<PAGE> 12
the funds of the Corporation as are authorized and shall render from time to
time an account of all of his transactions as Chief Financial Officer and of
the financial condition of the Corporation. The Chief Financial Officer shall
also have such other powers and perform such other duties as may be prescribed
by the Board of Directors or the Bylaws.
ARTICLE V
STOCK
SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by, or in the name
of the Corporation (i) by the Chairman or Vice Chairman of the Board of
Directors, or the President or a Vice President and (ii) by the Chief Financial
Officer or the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned
by such stockholder in the Corporation.
SECTION 2. SIGNATURES. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
SECTION 3. LOST CERTIFICATES. The Corporation may issue a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation, alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. The Corporation may, in the discretion of the Board of
Directors and as a condition precedent to the issuance of such new certificate,
require the owner of such lost, stolen, or destroyed certificate, or his legal
representative, to give the Corporation a bond (or other security) sufficient
to indemnify it against any claim that may be made against the Corporation
(including any expense or liability) on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
SECTION 4. TRANSFERS. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these Bylaws or in any
agreement with the stockholder making the transfer. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be cancelled before a new
certificate shall be issued.
SECTION 5. RECORD HOLDERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the record
holder of shares to receive dividends, and to vote as such record holder, and
to hold liable for calls and assessments a person registered on its books as
the record holder of shares, and shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise required by law.
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ARTICLE VI
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is
made a party or is threatened to be made a party to or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director or officer of the Corporation or is or was serving at
the request of the Corporation as a director or officer of another corporation
or of a partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans (hereinafter an "indemnitee"),
whether the basis of such proceeding is alleged action in an official capacity
as a director or officer or in any other capacity while serving as a director
or officer, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation Law, as the same
exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith and such indemnification shall continue as
to an indemnitee who has ceased to be a director or officer and shall inure to
the benefit of the indemnitee's heirs, executors and administrators; provided,
however, that, except as provided in Section 2 of this Article VI with respect
to proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined that such indemnitee is not entitled to be indemnified for such
expenses under this Article VI or otherwise (hereinafter an "undertaking").
SECTION 2. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under
Section 1 of this Article VI is not paid in full by the Corporation within
forty-five (45) days after a written claim has been received by the
Corporation, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole
or part in any such suit or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit. In (i) any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right to an advancement of expenses) it shall be a defense that, and
(ii) any suit by the Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking the Corporation shall be entitled to recover
such expenses upon a final adjudication that, the indemnitee has not met the
applicable standard of conduct set forth in the Delaware General Corporation
Law. Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee
is proper in the
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circumstances because the indemnitee has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual determination
by the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) that the indemnitee has not met such applicable
standard of conduct, shall create a presumption that the indemnitee has not met
the applicable standard of conduct or, in the case of such a suit brought by
indemnitee, be a defense to such suit. In any suit brought by the indemnitee
to enforce a right hereunder, or by the Corporation to recover an advancement
of expenses pursuant to the terms of an undertaking, the burden of proving that
the indemnitee is not entitled to be indemnified or to such advancement of
expenses under this Article VI or otherwise shall be on the Corporation.
SECTION 3. NON-EXCLUSIVITY OF RIGHTS. The rights of
indemnification and to the advancement of expenses conferred in this Article VI
shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
SECTION 4. INSURANCE. The Corporation may maintain insurance,
at its expense, to protect itself and any director, officer, employee or agent
of the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECTION 5. INDEMNIFICATION OF EMPLOYEES OR AGENTS OF THE
CORPORATION. The Corporation may, to the extent authorized from time to time
by the Board of Directors, grant rights to indemnification and to the
advancement of expenses, to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article VI with respect to the
indemnification and advancement of expenses of directors or officers of the
Corporation.
SECTION 6. INDEMNIFICATION CONTRACTS. The Board of Directors is
authorized to enter into a contract with any director, officer, employee or
agent of the Corporation, or any person serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including employee
benefit plans, providing for indemnification rights equivalent to or, if the
Board of Directors so determinates, greater than, those provided for in this
Article VI.
SECTION 7. EFFECT OF AMENDMENT. Any amendment, repeal or
modification of any provision of this Article VI by the stockholders or the
directors of the Corporation shall not adversely affect any right or protection
of a director or officer of the Corporation existing at the time of such
amendment, repeal or modification.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Subject to limitations contained in the
General Corporation Law of the State of Delaware and the Certificate of
Incorporation, the Board of Directors may declare and pay dividends upon the
shares of capital stock of the Corporation, which dividends may be paid either
in cash, securities of the Corporation or other property.
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SECTION 2. DISBURSEMENTS. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
SECTION 4. CORPORATE SEAL. The Corporation shall have a
corporate seal in such form as shall be prescribed by the Board of Directors.
SECTION 5. RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty (60) days nor
less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting. Stockholders on the
record date are entitled to notice and to vote or to receive the dividend,
distribution or allotment of rights or to exercise the rights, as the case may
be, notwithstanding any transfer of any shares on the books of the Corporation
after the record date, except as otherwise provided by agreement or by
applicable law.
SECTION 6. VOTING OF STOCK OWNED BY THE CORPORATION. The
Chairman of the Board, the Chief Executive Officer, the President and any other
officer of the Corporation authorized by the Board of Directors shall have
power, on behalf of the Corporation, to attend, vote and grant proxies to be
used at any meeting of stockholders of any corporation (except this
Corporation) in which the Corporation may hold stock.
SECTION 7. CONSTRUCTION AND DEFINITIONS. Unless the context
requires otherwise, the general provisions, rules of construction and
definitions in the General Corporation Law of the State of Delaware shall
govern the construction of these Bylaws.
SECTION 8. AMENDMENTS. Subject to the General Corporation Law
of the State of Delaware, the Certificate of Incorporation and these Bylaws,
the Board of Directors may by the affirmative vote of a majority of the entire
Board of Directors amend or repeal these Bylaws, or adopt other Bylaws as in
their judgment may be advisable for the regulation of the conduct of the
affairs of the Corporation. Unless otherwise restricted by the Certificate of
Incorporation, these Bylaws may be altered, amended or repealed, and new Bylaws
may be adopted, at any annual meeting of the stockholders (or at any special
meeting thereof duly called for that purpose) by a majority of the combined
voting power of the then outstanding shares of capital stock of all classes and
series of the Corporation entitled to vote generally in the election of
directors, voting as a single class, provided that, in the notice of any such
special meeting, notice of such purpose shall be given.
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EXHIBIT 10.1
KOFAX IMAGE PRODUCTS
AMENDED AND RESTATED
INCENTIVE STOCK OPTION, NONQUALIFIED STOCK
OPTION AND RESTRICTED STOCK PURCHASE PLAN
(the "1992 Stock Plan")
(As Amended as of September 11, 1992)
<PAGE> 2
KOFAX IMAGE PRODUCTS
AMENDED AND RESTATED
INCENTIVE STOCK OPTION, NONQUALIFIED STOCK
OPTION AND RESTRICTED STOCK PURCHASE PLAN
1. Amendment and Restatement of Restricted Stock Plan. This Amended and
Restated Incentive Stock Option, Nonqualified Stock Option and Restricted Stock
Purchase Plan (the "1992 Stock Plan") amends and restates the Restricted Stock
Purchase Plan - 1986 (the "Original Plan") of Kofax Image Products, a California
corporation (the "Company").
2. Purposes of the 1992 Stock Plan.
The purposes of the 1992 Stock Plan are (a) to insure the retention
of the services of existing executive personnel, employees and non-employee
directors of the Company or its affiliates; (b) to attract and retain competent
new executive personnel and employees; (c) to provide incentive to all such
personnel, employees and non-employee directors to devote their utmost effort
and skill to the advancement and betterment of the Company, by permitting them
to participate in the ownership of the Company and thereby in the success and
increased value of the Company; and (d) to allow consultants, business
associates and others with important business relationships with the Company the
opportunity to participate in the ownership of the Company and thereby have an
interest in the success and increased value of the Company.
<PAGE> 3
3. Shares Subject to the 1992 Stock Plan.
The shares of stock subject to the incentive options having the
terms and conditions set forth in Section 7 below (hereinafter "incentive
options") and/or nonqualified options or restricted shares having the terms and
conditions set forth in Section 8 below (hereinafter "nonqualified options" and
"restricted shares") and other provisions of the 1992 Stock Plan shall be shares
of the Company's authorized but unused or reacquired common stock (herein
sometimes referred to as the "Common Stock"). The total number of shares of the
Common Stock of the Company which may be issued under the 1992 Stock Plan shall
not exceed, in the aggregate, one million two hundred fifty thousand (1,250,000)
shares, including shares issued under the Original Plan. The limitations
established by the preceding sentence shall be subject to adjustment as provided
in Section 9 below. In the event that any outstanding incentive option or
nonqualified option granted under the 1992 Stock Plan can no longer under any
circumstances be exercised, or in the event that any shares purchased pursuant
to the 1992 Stock Plan are reacquired by the Company, for any reason, the shares
of Common Stock allocable to the unexercised portion of such incentive option or
nonqualified option, or the shares reacquired, as the case may be, may again be
subject to grant or issuance under the 1992 Stock Plan.
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<PAGE> 4
4. Eligibility.
(a) Incentive Options. Officers and other key employees of the
Company or its parent or of any subsidiary corporation (including directors if
they are also employees of the Company or a subsidiary), as may be determined by
the Board or the Committee, who qualify for incentive stock options under the
applicable provisions of the Internal Revenue Code, will be eligible for
selection to receive incentive options under the 1992 Stock Plan. An employee
who has been granted an incentive option may, if otherwise eligible, be granted
an additional incentive option or options and/or receive nonqualified options or
restricted shares if the Board or Committee shall so determine.
(b) Nonqualified Options and Restricted Shares. Officers and other
employees of the Company or of any subsidiary corporation, any member of the
Board of Directors of the Company, whether or not he or she is employed by the
Company, or consultants, business associates or others with important business
relationships with the Company, will be eligible to receive nonqualified options
or purchase restricted shares under the 1992 Stock Plan. An individual who has
been granted a Nonqualified option or who has received restricted shares may, if
otherwise eligible, be granted an incentive option (if otherwise eligible) or an
additional nonqualified option or options or receive additional restricted
shares if the Board or Committee shall so determine.
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<PAGE> 5
5. Administration of the 1992 Stock Plan.
(a) The 1992 Stock Plan shall be administered by the Board of
Directors of the Company (the "Board") or by a committee (the "Committee")
consisting of three (3) or more persons, at least two of whom shall be directors
of the Company, who shall be appointed by, and serve at the pleasure of, the
Board of Directors. No person serving as a member of the Board or the Committee
shall act on any matter relating solely to such person's own interests under the
1992 Stock Plan or any option thereunder. For purposes of the 1992 Stock Plan,
the term "Administrator" shall mean the Board, or if the Board delegates
responsibility for any matter to the Committee, the Committee. The Administrator
may from time to time, in its discretion, determine which persons shall be
granted incentive options, nonqualified options or receive restricted shares
under the 1992 Stock Plan, the terms thereof, and the number of shares for which
an incentive option or options or nonqualified option or options shall be
granted or the number of restricted shares to be received.
(b) The Administrator shall have full and final authority to
determine the persons to whom, and the time or times at which, incentive options
or nonqualified options shall be granted and restricted shares issued, the
number of shares to be represented by each incentive option or nonqualified
option and the number of restricted shares and the consideration to be received
by the Company upon the exercise
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<PAGE> 6
or issuance thereof; to interpret the 1992 Stock Plan; to amend and rescind
rules and regulations relating to the 1992 Stock Plan; to determine the form and
content of the incentive options or nonqualified options to be issued and terms
and conditions of restricted shares to be offered under the 1992 Stock Plan; to
determine the identity or capacity of any persons who may be entitled to
exercise a participant's rights under any incentive option, nonqualified option
or restricted share agreement under the 1992 Stock Plan; to correct any defect
or supply any omission or reconcile any inconsistency in the 1992 Stock Plan or
in any incentive option, nonqualified option or restricted share agreement in
the manner and to the extent the Board or Committee deems desirable to carry the
1992 Stock Plan, incentive option, nonqualified option or restricted share
agreement into effect; to accelerate the exercise date of any incentive option,
nonqualified option or release and/or waive any repurchase rights or rights of
first refusal of the Company contained in any option or restricted share
agreement; to provide for an option to the Company to repurchase any shares
issued upon exercise of an option or acceptance of a right of purchase upon
termination of employment; and to make all other determinations necessary or
advisable for the administration of the 1992 Stock Plan, but only to the extent
not contrary to the express provisions of the 1992 Stock Plan. Any action,
decision, interpretation or determination by the Administrator with respect to
the application or administration
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<PAGE> 7
of the 1992 Stock Plan shall be final and binding on all participants and
prospective participants.
6. Option Price and Purchase Price of Shares.
(a) Incentive Options. The exercise price of the shares of Common
Stock covered by each incentive option granted under the 1992 Stock Plan shall
not be less than the fair market value of such shares on the date the incentive
option is granted; provided, however, that the exercise price shall not be less
than 110% of the fair market value if the person to whom such shares are granted
owns 10% or more of the total combined voting power of all classes of
outstanding stock of the Company, its parent or subsidiary corporation.
(b) Nonqualified Options. The exercise price of the shares of Common
Stock covered by each nonqualified option granted under the 1992 Stock Plan
shall not be less than eighty-five percent (85%) of the fair market value of
such shares on the date the nonqualified option is granted; provided, however,
that the exercise price shall not be less than 110% of the fair market value if
the person to whom such shares are granted owns 10% or more of the total
combined voting power of all classes of outstanding stock of the Company, its
parent or subsidiary corporation. The exercise price for nonqualified options
shall be determined by the Administrator in its sole discretion within the
restrictions in the preceding sentence.
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<PAGE> 8
(c) Restricted Shares. The purchase price for restricted shares to
be issued under the 1992 Stock Plan shall not be less than 85% of the fair
market value of such shares, calculated either on the date the time the purchase
right is granted or on the date of the actual purchase of the restricted shares;
provided, however, that the purchase price shall not be less than 110% of the
fair market value if the person to whom such shares are granted owns 10% or more
of the total combined voting power of all classes of outstanding stock of the
Company, its parent or subsidiary corporation. The purchase price for restricted
shares shall be determined by the Administrator in its sole discretion within
the restrictions in the preceding sentence.
(d) Fair Market Value. For purposes of this Section 6, fair market
value shall, if the Common Stock is not listed or admitted to trading on a stock
exchange, be the average of the closing bid price and asked price of the Common
Stock in the over-the-counter market on the date the incentive option or
nonqualified option is granted or restricted share is issued, or, if the Common
Stock is then listed or admitted to trading on any stock exchange or the NASDAQ
National Market System in the over-the-counter market, the closing sale price on
such day on the principal stock exchange on which the Common Stock is then
listed or admitted to trading, or, if no sale takes place on such day on such
national market system or principal exchange, then the closing sale price of the
Common
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<PAGE> 9
Stock on such national market system or exchange on the next preceding day on
which a sale occurred. During such times as there is not a market price
available, the fair market value of the Company's Common Stock shall be
determined by the Administrator, which shall consider, among other facts which
it considers to be relevant, preferred stock preferences, the book value of such
stock and the earnings of the Company. The exercise price or the purchase price,
as the case may be, shall be subject to adjustment as provided in Section 9
below.
7. Terms and Conditions of Incentive Options.
Each incentive option granted pursuant to the 1992 Stock Plan shall
be evidenced by a written Incentive Option Agreement which shall specify that
the options subject thereto are incentive options within the meaning of Section
422A of the Internal Revenue Code of 1986, as amended. The granting of an
incentive option shall take place only when a written Incentive Option Agreement
shall have been duly executed and delivered by or on behalf of the Company to
the optionee to whom such incentive option shall be granted. Neither anything
contained in the 1992 Stock Plan nor in any resolution adopted or to be adopted
by the Administrator shall constitute the granting of any incentive option. The
Incentive Option Agreement shall be in such form as the Administrator shall,
from time to time, recommend, but shall comply with and be subject to the
following terms and conditions:
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<PAGE> 10
(a) Medium and Time of Payment. The option price upon the exercise
of the incentive option shall be payable (i) in United States dollars payable in
cash, certified check, or bank draft; (ii) upon the written consent of the
Administrator and subject to any legal restrictions on the acquisition or
purchase of its shares by the Company, by the delivery of shares of Common Stock
which shall be deemed to have a value to the Company equal to the aggregate fair
market value of such shares determined at the date of such exercise in
accordance with the provisions of Section 6 above; (iii) by the issuance of a
promissory note in a form acceptable to the Administrator, (iv) by cancellation
of indebtedness of the Company to optionee, (v) by waiver of compensation due or
accrued to optionee for services rendered, (vi) provided that a public market
for the Company's stock exists, through a "same day sale" commitment from the
optionee and a broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD" Dealer) whereby the optionee irrevocably elects to
exercise the incentive option and to sell a portion of the shares so purchased
to pay for the exercise price and whereby the NASD Dealer irrevocably commits
upon receipt of such shares to forward the exercise price directly to the
Company, (vii) provided that a public market for the Company's stock exists,
through a "margin" commitment from the optionee and a NASD Dealer whereby the
optionee irrevocably elects to exercise the incentive option and to pledge the
shares so purchased to the
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<PAGE> 11
NASD Dealer in a margin account as security for a loan from the NASD Dealer in
the amount of the exercise price, and whereby the NASD Dealer irrevocably
commits upon receipt of such shares to forward the exercise price directly to
the Company, or (viii) any combination of (i), (ii), (iii), (iv), (v), (vi), or
(vii) above, as the Administrator shall in its discretion determine.
(b) Grant of Incentive Option. Any incentive option shall be granted
within ten years from the date of the adoption of the Original Plan or the date
the Original Plan was approved by the shareholders of the Company, whichever is
earlier.
(c) Number of Shares. The incentive option shall state the total
number of shares to which it pertains.
(d) Term of Incentive Option. Each incentive option granted under
the 1992 Stock Plan shall expire within a period of not more than ten (10) years
from the date the incentive option is granted; provided, however, that the
incentive option shall expire within a period of not more than five (5) years if
granted to a person who is the beneficial owner of 10% or more of the total
combined voting power of all classes of outstanding stock of the Company.
(e) Date of Exercise. The Administrator may, in its discretion,
provide that an incentive option may be exercised immediately or that it may not
be exercised in whole or in part for any specified period or periods of time or
subject to the completion of specified projects or fulfillment of specified
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<PAGE> 12
duties or responsibilities, or fulfillment of specified financial or other
objectives. Except as may be so provided, any incentive option may be exercised
in whole at any time or in part from time to time during its term.
(f) Termination of Employment Except Death or Disability. In the
event that an optionee who is an employee of the Company shall cease to be
employed by the Company or a parent or any subsidiary corporation of the Company
or a corporation or a parent or subsidiary corporation of a corporation issuing
and assuming an incentive option in a transaction to which Section 425(a) of the
Internal Revenue Code of 1986, as amended, applies, for any reason other than
his death or disability, (i) all incentive options granted to any such optionee
pursuant to the 1992 Stock Plan which are not exercisable at the date of such
cessation shall terminate immediately and become void and of no effect, and (ii)
all incentive options granted to any such optionee pursuant to the 1992 Stock
Plan which are exercisable at the date of such cessation may be exercised at any
time within three (3) months of the date of such cessation, but in any event no
later than the date of expiration of the incentive option period, and if not so
exercised within such time shall become void and of no effect at the end of such
time.
(g) Death or Disability of Optionee. If the optionee shall die or
become disabled (within the meaning of Section 22(e)(3) of the Internal Revenue
Code of 1986, as amended) and
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<PAGE> 13
shall not have fully exercised his or her incentive options granted pursuant to
the 1992 Stock Plan, all of such incentive options, whether or not otherwise
exercisable, may be exercised at any time within one (1) year after the
optionee's cessation of employment as a result of such death or disability but
in any event no later than the date of expiration of the incentive option
period, by such optionee, or in the event of death, by the executors or
administrators of the optionee's estate or by any person or persons who shall
have acquired the incentive option directly from the optionee by bequest or
inheritance.
(h) Rights as a Shareholder. An optionee or a transferee of an
incentive option shall have no rights as a shareholder with respect to any
shares of Common Stock covered by his or her incentive option until the date of
the issuance of a share certificate to him or her for such shares. No adjustment
shall be made for dividends or distributions or other rights for which the
record date is prior to the date such share certificate is issued.
(i) Nonassignability of Rights. No incentive option shall be
assignable or transferable by the person receiving same except by will or the
laws of descent and distribution. During the life of such person, the incentive
option shall be exercisable only by the optionee.
(j) Limitation. Notwithstanding any other provisions of the 1992
Stock Plan, the aggregate fair market value (determined in accordance with the
provisions of Section 6
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<PAGE> 14
above as of the time the incentive option is granted) of the shares of Common
Stock with respect to which incentive stock options are exercisable for the
first time by the optionee during any calendar year (under all such plans of the
Company and its parent and subsidiary corporations) shall not exceed $100,000.
(k) Other Provisions. Any Incentive Option Agreement may contain
such other terms, provisions and conditions as may be determined by the
Administrator, which are not inconsistent with the provisions of Section 422A of
the Internal Revenue Code of 1986, as amended, including the option of the
Company to repurchase any shares issued upon the exercise of an option upon
termination of employment. Incentive options granted to different persons, or to
the same person at different times, may be subject to terms, conditions and
restrictions which differ from each other.
8. Terms and Conditions of Nonqualified Options and Restricted Stock
Purchase Agreements.
(a) Terms and Conditions Applicable to Nonqualified Options. Each
nonqualified option granted pursuant to the 1992 Stock Plan shall be evidenced
by a written Nonqualified Option Agreement which shall specify that the options
subject thereto are nonqualified options. The granting of a nonqualified option
shall take place only when this written Nonqualified Option Agreement shall have
been duly executed and delivered by or on behalf of the Company to the optionee
to whom such
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<PAGE> 15
nonqualified option shall be granted. Neither anything contained in the 1992
Stock Plan nor in any resolution adopted or to be adopted by the Administrator
shall constitute the granting of any nonqualified option. The Nonqualified
Option Agreement shall be in such form as the Administrator shall, from time to
time, recommend, but shall comply with and be subject to the following terms and
conditions:
(i) Medium and Time of Payment. The nonqualified option
price shall be payable (i) in United States dollars payable in cash,
certified check, or bank draft; (ii) upon the written consent of the
Administrator and subject to any legal restrictions on the acquisition or
purchase of its shares by the Company, by the delivery of shares of Common
Stock which shall be deemed to have a value to the Company equal to the
aggregate fair market value of such shares determined at the date of such
exercise in accordance with the provisions of Section 6 above; (iii) or by
the issuance of a promissory note in a form acceptable to the
Administrator; (iv) by cancellation of indebtedness of the Company to
optionee, (v) by waiver of compensation due or accrued to optionee for
services rendered, (vi) provided that a public market for the Company's
stock exists, through a "same day sale" commitment from the optionee and
an NASD Dealer whereby the optionee irrevocably elects to exercise the
nonqualified option and to sell a portion of the shares so purchased to
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<PAGE> 16
pay for the exercise price and whereby the NASD Dealer irrevocably commits upon
receipt of such shares to forward the exercise price directly to the Company,
(vii) provided that a public market for the Company's stock exists, through a
"margin" commitment from the optionee and a NASD Dealer whereby the optionee
irrevocably elects to exercise the nonqualified option and to pledge the shares
so purchased to the NASD Dealer in a margin account as security for a loan from
the NASD Dealer in the amount of the exercise price, and whereby the NASD Dealer
irrevocably commits upon receipt of such shares to forward the exercise price
directly to the Company, or (viii) any combination of (i), (ii), (iii), (iv),
(v), (vi), or (vii) above, as the Administrator in its discretion shall
determine.
(ii) Number of Shares. The nonqualified option shall state
the total number of shares to which it pertains.
(iii) Term of Nonqualified Option. Each nonqualified option
granted under the 1992 Stock Plan shall expire within a period of not more
than ten (10) years from the date the nonqualified option is granted.
(iv) Date of Exercise. The Administrator may, in its
discretion, provide that a nonqualified option may be exercised
immediately or that it may not be exercised in whole or in part for any
specified period or periods of time or subject to the completion of
specified projects or fulfillment of specified duties or responsibilities
or the
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<PAGE> 17
fulfillment of specified financial or other objectives. Except as may be
so provided, any nonqualified option may be exercised in whole at any time
or in part from time to time during its term.
(v) Termination of Employment Except Death or Disability.
In the event that an optionee who is an employee of the Company shall
cease to be employed by the Company or any of its subsidiaries for any
reason other than his or her death or disability, or, in the event that an
optionee who is a director but not an employee of the Company shall cease
to be a director of the Company for any reason other than his or her death
or disability, (i) all nonqualified options granted to any such optionee
pursuant to the 1992 Stock Plan which are not exercisable at the date of
such cessation shall terminate immediately and become void and of no
effect, and (ii) all nonqualified options granted to any such optionee
pursuant to the 1992 Stock Plan which are exercisable at the date of such
cessation may be exercised at any time within three (3) months of the date
of such cessation, but in any event no later than the date of expiration
of the nonqualified option period, and if not so exercised within such
time shall become void and of no effect at the end of such time.
(vi) Death or Disability of Optionee. If the optionee shall
die or become permanently disabled and shall not have fully exercised his
or her nonqualified options
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<PAGE> 18
granted pursuant to the 1992 Stock Plan, all of such nonqualified options,
whether or not otherwise exercisable, may be exercised at any time within
one (1) year after the optionee's death or permanent disability but in any
event no later than the date of expiration of the nonqualified option
period, by such optionee, or in the event of death, by the executors or
administrators of the optionee's estate or by any person or persons who
shall have acquired the nonqualified option directly from the optionee by
bequest or inheritance.
(b) Terms and Conditions Applicable to Restricted Stock Purchase
Agreements Under the 1992 Stock Plan. After the Administrator shall have
determined to offer to a person eligible to participate (hereinafter "offeree")
the right to purchase or receive restricted shares under the 1992 Stock Plan, it
shall cause to be delivered to the offeree a written stock purchase agreement
(the "Stock Purchase Agreement") which shall constitute the Company's offer to
sell or issue restricted shares and shall contain the terms and conditions of
purchase, including, without limitation, the number of shares which the offeree
shall be entitled to purchase, the purchase price per share, any other terms,
conditions or restrictions relating thereto, and the number of days or period
the offeree shall have to accept such offer. The execution and delivery of the
Stock Purchase Agreement by the offeree to the Company within said number of
days or period shall constitute
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<PAGE> 19
acceptance of the offer and said Stock Purchase Agreement shall, thereupon,
become a binding obligation of the Company and the offeree. Each Stock Purchase
Agreement shall be in such form as the Administrator shall, from time to time,
recommend, but shall comply with and be subject to the following terms and
conditions:
(i) Method of Payment. The purchase price of the restricted
shares shall be paid to the Company, (i) in United States dollars, payable
in cash, certified check or bank draft; (ii) upon the written consent of
the Administrator and so specified in the Stock Purchase Agreement and
subject to any legal restrictions on the acquisition or purchase of its
shares by the Company, by the delivery of shares of Common Stock which
shall be deemed to have a value equal to the aggregate fair market value
of such shares determined at the date of such issuance in accordance with
the provisions of Section 6 above; (iii) upon the written consent of the
Administrator and if so specified in the Stock Purchase Agreement by a
promissory note in a form acceptable to the Administrator; (iv) by
cancellation of indebtedness of the Company to the purchaser; (v) by
waiver of compensation due or accrued to the purchaser for services
rendered; or (vi) any combination of (i), (ii), (iii), (iv), or (v) above,
as the Administrator shall in its discretion determine. The terms, manner
and timing of such payment and the form and
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<PAGE> 20
content of any promissory note, shall be included or made a part of the
Stock Purchase Agreement. If payment, in whole or in part, is made by a
promissory note, the shares so purchased with such note shall be held in
pledge with the Company to secure payment of the note. The pledge shall be
in such form and shall contain such terms as the Administrator may deem
appropriate.
(ii) Number of Shares. The Stock Purchase Agreement shall
state the total number of shares which the offeree shall be entitled to
purchase and whether or not the offeree may purchase less than all of the
shares offered.
(iii) Term of Offer. The Stock Purchase Agreement shall
specify the number of days or other period the offeree shall have to
accept the offer, not to exceed ninety (90) days from the date of such
offer. If not accepted by the offeree within such number of days or other
period, the offer shall automatically terminate upon expiration thereof,
and the offer shall thereupon be null and void and without further effect,
except that the Administrator may extend such number of days or other
period available for acceptance, not to exceed an additional ninety (90)
days. Acceptance of the offer shall occur when the offeree has executed
and redelivered to the Company one or more counterparts of the Stock
Purchase Agreement in the form delivered to him by the Company and,
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<PAGE> 21
to be effective, such acceptance must be without condition or reservation
of any kind whatsoever.
(iv)Escrow of Dividends. If payment for shares is made by a
promissory note, all cash dividends paid with respect to the shares so
purchased shall be held in escrow by the Company for the account of the
purchaser without interest until such time as the shares are fully paid.
Upon full payment of the promissory note, all of such escrowed dividends
shall be paid to the purchaser without interest.
(c) Terms and Conditions Applicable Equally to Nonqualified Options
Granted and to Restricted Shares Issued Under the 1992 Stock Plan.
(i) Rights as a Shareholder. A nonqualified optionee or an
offeree of restricted shares shall have no rights as a shareholder with
respect to any shares of Common Stock covered by his or her nonqualified
option or Stock Purchase Agreement until the date of the issuance of a
share certificate to such optionee or offeree for such shares. No
adjustment shall be made for dividends or distributions or other rights
for which the record date is prior to the date such share certificate is
issued.
(ii)Nonassignability of Rights. No nonqualified option or
Stock Purchase Agreement shall be assignable or transferable by the person
receiving same except by will or the laws of descent and distribution.
During the life of such person, the nonqualified option or offer to
purchase restricted shares shall be exercisable only by him or her.
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<PAGE> 22
(iii) Other Provisions. Any Nonqualified Option Agreement
and any Stock Purchase Agreement may contain such other terms, provisions
and conditions as may be determined by the Administrator, and, without
limiting the generality of the foregoing, the Board of Directors or the
Committee, as the case may be, shall have discretion to offer to a person
a choice between having nonqualified options granted or having restricted
shares offered to him, or to grant both nonqualified options and issue
restricted shares or to condition a grant of nonqualified options upon a
purchase of shares under a Stock Purchase Agreement under the 1992 Stock
Plan. Nonqualified options granted or offers to purchase restricted shares
made to different persons, or to the same person at different times, may
be subject to terms, conditions and restrictions which differ from each
other.
9. Changes in Capital Structure.
In the event that the outstanding shares of Common Stock of the
Company are hereafter increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company by reason
of merger, consolidation or reorganization in which the Company is the
surviving corporation or of a recapitalization, stock split, combination of
shares, reclassification, reincorporation, stock dividend (in excess of 2%), or
other change in the corporate structure of the Company, appropriate adjustments
shall be made
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<PAGE> 23
by the Board of Directors in the aggregate number and kind of shares subject to
the 1992 Stock Plan, and the number and kind of shares and the price per share
subject to outstanding incentive options, nonqualified options and Stock
Purchase Agreements in order to preserve, but not to increase, the benefits to
persons then holding incentive options, nonqualified options and/or persons who
are a party to Stock Purchase Agreements.
In the event that the Company at any time proposes to sell
substantially all of its assets, merge into, consolidate with or to enter into
any other reorganization (including the sale of substantially all of its assets)
in which the Company is not the surviving corporation, or if the Company is the
surviving corporation and the ownership of the outstanding capital stock of the
Company following the transaction changes by 80% or more as a result of such
transaction, the 1992 Stock Plan and all unexercised incentive options or
nonqualified options granted hereunder and all offers to purchase restricted
shares shall terminate, unless provision is made in writing in connection with
such transaction for the continuance of the 1992 Stock Plan and for the
assumption of incentive options and nonqualified options theretofore granted,
and all outstanding offers to purchase restricted shares and Stock Purchase
Agreements, or the substitution for such incentive options, nonqualified
options, offers to purchase restricted shares and Stock Purchase Agreements of
new options covering, and new
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<PAGE> 24
offers to purchase, shares of a successor corporation, and new Stock Purchase
Agreements covering shares of a successor corporation, with appropriate
adjustments as to number and kind of shares and prices, in which event the 1992
Stock Plan and the incentive options, nonqualified options, offers to purchase
restricted shares theretofore granted and outstanding Stock Purchase Agreements,
or the new incentive options, nonqualified options, new offers to purchase
restricted shares and Stock Purchase Agreements substituted therefor, shall
continue in the manner and under the terms so provided. If such provision is not
made in such transaction for the continuance of the 1992 Stock Plan and the
assumption of incentive options, nonqualified options and rights of purchase
theretofore granted and new Stock Purchase Agreements or the substitution for
such incentive options, nonqualified options, rights of purchase of new
incentive options, nonqualified options, rights of purchase and new Stock
Purchase Agreements covering the shares of a successor corporation, then the
Administrator shall cause written notice of the proposed transaction to be given
to the persons holding incentive options, nonqualified options or rights of
purchase, or persons who are a party to a Stock Purchase Agreement, not less
than thirty (30) days prior to the anticipated effective date of the proposed
transaction.
10. Amendment and Termination of the 1992 Stock Plan.
The Board of Directors of the Company may from time to time alter, amend,
suspend or terminate the 1992 Stock Plan in
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<PAGE> 25
such respects as the Board of Directors may deem advisable; provided, however,
that no such alteration, amendment, suspension or termination shall be made
which shall substantially affect or impair the rights of any person under any
incentive option or nonqualified option theretofore granted to him or under any
Stock Purchase Agreement without his consent. Without limiting the generality of
the foregoing, to the extent permitted by applicable law, the Board of Directors
of the Company may alter or amend the 1992 Stock Plan to comply with
requirements under the Internal Revenue Code relating to restricted stock
options, incentive options, qualified options or other options which give the
optionee more favorable tax treatment than that applicable to options granted
under this 1992 Stock Plan as of the date of its adoption. Upon any such
alteration or amendment, to the extent permitted by applicable law, any
outstanding option granted hereunder shall be subject to the more favorable tax
treatment afforded to an optionee pursuant to such terms and conditions as the
Administrator may determine.
Unless the 1992 Stock Plan shall theretofore have been terminated,
the 1992 Stock Plan was effective on November 14, 1986, and shall terminate on
November 14, 1996.
11. Application of Funds.
The proceeds received by the Company from the sale of Common Stock
pursuant to incentive options, nonqualified options and Stock Purchase
Agreements, except as otherwise provided herein, will be used for general
corporate purposes.
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<PAGE> 26
12. No Obligation to Exercise Option or Right of Purchase.
The granting of an incentive option, nonqualified option or the
offer to purchase restricted shares shall impose no obligation upon the optionee
to exercise such an incentive option, nonqualified option or the offeree to
accept such offer to purchase restricted shares.
13. Continuance of Employment.
The 1992 Stock Plan or the granting of any incentive option,
nonqualified option or offer to purchase any restricted share thereunder shall
not impose any obligation on the Company to continue the employment of any
optionee or offeree.
14. Annual and Other Periodic Reports.
Until the expiration of an incentive option, nonqualified option
or right to purchase restricted shares, the Company will furnish to the
optionee copies of all annual or other periodic reports that the Company
distributes generally to its shareholders.
Dates of Adoption of Amendments
(a) First Amendment to the Plan:
By the Board of Directors - June 11, 1992
By the Shareholders - June 30, 1992
(b) Second Amendment to the Plan:
By the Board of Directors - September 21, 1992
(No Shareholder approval required.)
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<PAGE> 1
EXHIBIT 10.3
NONQUALIFIED OPTION AGREEMENT
THIS NONQUALIFIED OPTION AGREEMENT (the "Agreement"), made this ____ day
of ________ 19___, between KOFAX IMAGE PRODUCTS, a California corporation
(hereinafter referred to as the "Company"), and ________, an employee of the
Company, its parent or one or more of its subsidiaries (the "Optionee"), is made
with reference to the following facts:
R E C I T A L S:
A. Optionee is employed with the Company and is a valued employee of the
Company.
B. The Company desires, by affording the Optionee an opportunity to
purchase shares of Common Stock of the Company (hereinafter called "Shares"), as
hereinafter provided, to carry out the purpose of the "Amended and Restated
Incentive Stock Option, Nonqualified Stock Option and Restricted Stock Purchase
Plan", a copy of which is attached hereto as Exhibit A (the "Plan").
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants hereinafter set
forth, and for good and valuable consideration, the parties hereto have agreed,
and do hereby agree, as follows:
1. Grant of Option.
The Company hereby irrevocably grants to the Optionee the right and option
(hereinafter called the "Option") to purchase all or any part of an aggregate of
(________) Shares (such number being subject to adjustment as provided in
Section 7 hereof) on the terms and conditions herein set forth. The Option
granted herein is a "nonqualified option" and is not subject to the provisions
of Section 422A of the Internal Revenue Code of 1986, as amended.
2. Purchase Price.
The purchase price of the Shares covered by the Option shall be _______
($______) per share, representing one hundred percent (100%) of the fair market
value of the shares as determined pursuant to Section 6 of the Plan as of the
date hereof.
<PAGE> 2
3. Term of Option.
The term of the Option shall commence on the date hereof and all
rights to purchase shares hereunder shall cease at 11:59 p.m. on the day before
the fifth (5th) anniversary of the date hereof, subject to earlier termination
as provided herein. Except as may otherwise be provided in this Agreement,
options granted hereunder may be exercised pursuant to Section 10 cumulatively,
as follows:
(a) The Option may not be exercised as to any Shares prior to one
year following the date of this Agreement;
(b) The Option may be exercised as to twenty-five percent (25%) of
the total number of Shares subject to the option on or after one year
following the date of this Agreement;
(c) The Option may be exercised as to an additional twenty-five
percent (25%) of the total number of Shares subject to the Option on or
after two years following the date of this Agreement;
(d) The Option may be exercised as to an additional twenty-five
percent (25%) of the total number of Shares subject to the Option on or
after three years following the date of this Agreement; and
(e) The Option may be exercised as to an additional twenty-five
percent (25%) of the total number of Shares subject to the Option on or
after four years following the date of this Agreement, such that on or
after four years following the date of this Agreement all of the Shares
subject to the Option may be exercised.
For the purpose of this Agreement, the Optionee shall be deemed to
be a "Service Provider" to the Company for so long as the Optionee is employed
by the Company, or a parent or subsidiary of the Company, or a corporation or a
parent or subsidiary of a corporation issuing or assuming an option to which
Section 425(a) of the Internal Revenue Code of 1986, as amended, applies. A
leave of absence (regardless of the reason therefor) shall be deemed to
constitute the cessation of Service Provider status as of the commencement date
of the leave, unless such leave is authorized by the Company in writing and the
Optionee recommences providing services prior to the expiration date of such
leave. Accordingly, the Optionee shall receive credit as a Service Provider to
the Company during a leave of absence only if the leave is authorized by the
Company and the Optionee recommences providing services on or prior to the
expiration date of the
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<PAGE> 3
leave. All Shares as to which the Option may have been exercised shall, however,
continue to be subject to the right of first refusal of the Company and its
assignees under Section 8.
The purchase price of the Shares as to which the option shall be
exercised shall be paid in full at the time of exercise (i) in cash or by
certified check or by bank draft; (ii) subject to any legal restrictions on the
acquisition or purchase of such shares by the Company and with the prior written
consent and approval of the Company, by the delivery of shares of Common Stock
of the Company which shall be deemed to have a value to the Company equal to the
aggregate fair market value of such shares determined in accordance with Section
6 of the Plan; (iii) with the prior written consent and approval of the Company,
by the execution and delivery of Optionee's promissory note in the principal
amount of the exercise price, with such term, interest rate and other terms and
provisions, including, without limitation, requiring the shares acquired upon
exercise to be pledged to the Company to secure payment of the note, as the
Board of Directors of the Company may specify, (iv) by cancellation of
indebtedness of the Company to Optionee, (v) by waiver of compensation due or
accrued to Optionee for services rendered, (vi) provided that a public market
for the Company's stock exists, through a "same day sale" commitment from the
Optionee and a broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD" Dealer) whereby the Optionee irrevocably elects to
exercise his Option and to sell a portion of the Shares so purchased to pay for
the exercise price and whereby the NASD Dealer irrevocably commits upon receipt
of such Shares to forward the exercise price directly to the Company, (vii)
provided that a public market for the Company's stock exists, through a "margin"
commitment from the Optionee and a NASD Dealer whereby the Optionee irrevocably
elects to exercise this option and to pledge the Shares so purchased to the NASD
Dealer in a margin account as security for a loan from the NASD Dealer in the
amount of the exercise price, and whereby the NASD Dealer irrevocably commits
upon receipt of such Shares to forward the exercise price directly to the
Company, or (viii) any combination of (i), (ii), (iii), (iv), (v), (vi), or
(vii) above. Except as provided in Section 5 hereof, the Option may not be
exercised at any time unless the Optionee shall have been continuously, from
the date hereof to the date of the exercise of the Option, a Service Provider to
the Company. The holder of the Option shall not have any of the rights of a
shareholder with respect to the Shares covered by the Option as to any Shares of
Common Stock not actually issued and delivered to Optionee.
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<PAGE> 4
4. Nontransferability.
The Option shall not be transferable otherwise than by will or the
laws of descent and distribution, and the Option may be exercised, during the
lifetime of the Optionee, only by Optionee. More particularly (but without
limiting the generality of the foregoing), the Option may not be assigned,
transferred (except as provided in Section 6 hereof), pledged or hypothecated in
any way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the Option contrary to the
provisions hereof, and the levy of any execution, attachment or similar process
upon the Option, shall be null and void and without effect.
5. Termination of Option.
Except as provided below in this Section, this Option shall
terminate on the date Optionee ceases to be a Service Provider for the Company
(the "Termination Date"). Optionee shall be considered to be a Service Provider
to the Company for all purposes under this Section 5 if the Board of Directors
determines that Optionee is rendering substantial services as a part-time
employee, consultant, contractor or adviser to the Company or any Parent,
Subsidiary or Affiliate of the Company.
(a) Termination Generally. In the event Optionee ceases to be a
Service Provider to the Company for any reason except death or disability, this
Option, to the extent (and only to the extent) that it would have been
exercisable by Optionee on the Termination Date, may be exercised by Optionee
within three (3) months after the Termination Date, but in no event later than
the Expiration Date.
(b) Death or Disability. In the event Optionee ceases to be a
Service Provider to the Company because of the death of Optionee or the
disability of Optionee within the meaning of Section 22(e)(3) of the Code, this
Option, to the extent (and only to the extent) that it would have been
exercisable by Optionee on the Termination Date, may be exercised by Optionee
(or Optionee's legal representative) within one year after the Termination Date,
but in no event later than the Expiration Date.
6. Other Terminations or Expirations.
In addition to any other event causing an expiration or termination
of this Option, this Option shall expire and all rights to purchase Shares shall
cease (to the extent not theretofore terminated or expired as herein provided)
upon the
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<PAGE> 5
effective date of the dissolution or liquidation of the Company or upon a
merger, consolidation, acquisition of property or shares, separation or
reorganization of the Company with one or more entities, corporate or otherwise,
as a result of which the Company is not the surviving entity, or if the Company
is the surviving entity and the ownership of the outstanding capital stock of
the Company following the transaction changes by 80% or more as a result of such
transaction, or of a sale of substantially all of the property or shares of the
Company to another entity, corporate or otherwise (collectively, a
"Transaction"); provided, however, that the Company may, in its discretion, and
immediately prior to any such Transaction, cause a new option to be substituted
for this Option or cause this Option to be assumed by an employer entity or a
parent or subsidiary of such entity; and such new option shall apply to all
shares issued in addition to or substitution, replacement or modification of the
shares theretofore covered by such option; provided that:
(1) the excess of the aggregate fair market value of the shares
subject to the option immediately after the substitution or assumption
over the aggregate option price of such shares shall not be more than the
excess of the aggregate fair market value of all shares subject to the
option immediately before such substitution or assumption over the
aggregate option price of such shares; and
(2) the new option or the assumption of the existing option shall
not give the Optionee additional benefits which he did not have under the
old option or prior to such assumption; and
(3) an appropriate adjustment of the original option price shall be
made among original shares subject to the option and any additional shares
or shares issued in substitution, replacement or modification thereof.
If such provision is not made in the Transaction for the substitution or
assumption of this Option, then the Company shall give written notice to the
Optionee of the proposed Transaction not less than thirty (30) days prior to the
anticipated effective date of the Transaction.
7. Adjustments.
The number and class of shares subject to this Option, and the
purchase price per share (but not the total purchase price), and the minimum
number of shares as to which this Option may be exercised at any one time, shall
all be proportionately adjusted in the event of any change or increase or
decrease in the number of issued shares of Common Stock in
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<PAGE> 6
the Company, without receipt of consideration by the Company, which result from
a split-up or consolidation of shares, payment of a share dividend (in excess of
two percent (2%)), a recapitalization, combination of shares or other like
capital adjustment, so that, upon exercise of this Option, the Optionee shall
receive the number and class of shares Optionee would have received had Optionee
been the holder of the number of shares of Common Stock in the Company, for
which this Option is being exercised, on the date of such change or increase or
decrease in the number of issued shares of Common Stock in the Company. Subject
to any required action by its shareholders, if the Company shall be a surviving
entity in any reorganization, merger or consolidation, this Option shall be
proportionately adjusted so as to apply to the securities to which the holder of
the number of shares of Common Stock in the Company subject to this Option would
have been entitled. Adjustments under this Section 7 shall be made by the Board
of Directors whose determination with respect thereto shall be final and
conclusive. No fractional share shall be issued under this Option or upon any
such adjustment.
8. Right of First Refusal.
(a) Grant. In the event the Optionee shall exercise the Option or
any portion thereof, the Company, in the first instance, and all other
shareholders of the Company holding more than 100,000 shares of common stock or
any shares of any other class or series having voting power equivalent to more
than 100,000 shares of common stock of the Company (as adjusted for any change
in the capital structure of the Company) ("Purchasing Shareholders" herein) are
hereby granted the right of first refusal with respect to any proposed sale or
other transfer of the Shares so acquired (to be hereinafter called the
"Purchased Shares") by the Optionee. For purposes of this Section 8, the term
"transfer" shall include any assignment, pledge, encumbrance or other
disposition for value of the Purchased Shares, but shall not include (i) a
gratuitous transfer of the Purchased Shares made to the Optionee's spouse,
parents, siblings, or issue, or a trust for the benefit of any such persons, or
(ii) a transfer of title to the Purchased Shares pursuant to the Optionee's will
or the laws of intestate succession.
(b) Notice of Intended Disposition. In the event the Optionee
desires to accept a bona fide third-party offer to purchase any or all of the
Purchased Shares (the shares subject to such offer to be hereinafter referred to
as the "Target Shares"), the Optionee shall promptly (i) deliver to the
Secretary of the Company written notice of the offer and the basic terms and
conditions thereof, including the proposed purchase price, and (ii) provide
satisfactory proof that the
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<PAGE> 7
disposition of the Target Shares to the third-party offeror would not be
in contravention of the representations made by Optionee in his Investment
Letter to the Company, a form of which is attached hereto as Exhibit B.
(c) Exercise of Right by the Company. The Company (or its assignees)
shall, for a period of fifteen (15) days following receipt of the notice of
intended disposition under Section 8(b), have the right to repurchase the lesser
of (i) all of the Target Shares, or (ii) the greatest number of the Target
Shares that the Company can legally purchase under applicable law upon
substantially the same terms and conditions specified in such notice. Such right
shall be exercisable by written notice given to the Optionee prior to the
expiration of the fifteen (15)-day exercise period.
(d) Exercise of Right by the Purchasing Shareholders. If any of the
Target Shares are not being purchased by the Company, the Company shall notify
the Purchasing Shareholders within five (5) days after the expiration of the
Company's fifteen (15)-day option exercise period. Within fifteen (15) days
after the required date of delivery of the Company's notice, if any of the
Purchasing Shareholders desire to acquire any of the Target Shares pursuant to
the terms of the notice from the Optionee, they shall each deliver to the
Company a written notice of election to purchase such Target Shares or a
specified number thereof. If such notices specify in the aggregate more Target
Shares than are subject to purchase by the Purchasing Shareholders, the Target
Shares shall be allocated as follows:
(i) Each Purchasing Shareholder electing to purchase Target Shares
shall be allocated a number of Target Shares equal to the lesser of (a)
the number of Target Shares which that shareholder has offered to
purchase, or (b) the number of Target Shares which bears the same ratio to
the number of Target Shares which are not being purchased by the Company
as the number of shares owned by that shareholder bears to the number of
shares owned by all shareholders who have elected to purchase Target
Shares.
(ii) If any Target Shares remain to be allocated after the
application of subsection (i) above, they shall be allocated to the
Purchasing Shareholders who elected to purchase more Target Shares than
were allocated to them. Each such Purchasing Shareholder shall be
allocated a number of Target Shares equal to the lesser of (a) the number
of Target Shares which that Purchasing Shareholder has elected to purchase
less the number of Target Shares already allocated to that Purchasing
Shareholder, or (b)
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<PAGE> 8
the number of Target Shares which bears the same ratio to the number of
Target Shares which have not yet been allocated as the number of shares
owned by that Purchasing Shareholder bears to the total number of shares
owned by all Purchasing Shareholders who have elected to purchase more
Target Shares than were allocated to them. If, as a result of the
foregoing provisions of this subsection (ii) all of the Target Shares not
being purchased by the Company have not been allocated, the balance shall
be allocated by successively applying this subsection (ii) as many times
as is necessary to allocate all of the Target Shares.
(iii) For the purpose of subsection (i) and subsection (ii), shares
owned by any Purchasing Shareholder shall include all shares of Common
Stock and all shares of any class or series which are convertible or
exchangeable for shares of Common Stock, determined as if such convertible
or exchangeable shares had been converted or exchanged for shares of
Common Stock.
(iv) After such allocation, the Company shall deliver to the
Optionee, within ten (10) days from the expiration of the fifteen (15)-day
option period of the Purchasing Shareholders, a written notice indicating
the number of Target Shares to be purchased by the Company and each of the
Purchasing Shareholders.
(e) Procedure for Exercise. If such right is exercised with respect
to all the Target Shares specified in the notice of intended disposition, the
Company (or its assignees) and/or the Purchasing Shareholders shall, except as
provided below, effect the repurchase of the Target Shares, including payment of
the purchase price, not more than ten (10) days after the expiration of the
fifteen (15)-day option period of the Purchasing Shareholders or fifteen (15)
days after the expiration of the fifteen (15)-day option period of the Company
if the Company elects to exercise the option with respect to all of the Target
Shares; and at such time the Optionee shall deliver to the Company the
certificates representing the Target Shares to be repurchased, each certificate
to be properly endorsed for transfer. The Target Shares so purchased shall
thereupon be cancelled and cease to be issued and outstanding shares of the
Company's Common Stock. However, (i) should the purchase price specified in the
notice of intended disposition be payable in property other than cash or
evidences of indebtedness, the Company (or its assignees) and/or the Purchasing
Shareholders shall have the right to pay the purchase price in the form of cash
equal in amount to the value of such property, and (ii) if there is no purchase
price for the intended disposition, the Company (or its assignees) and/or the
Purchasing Shareholders shall have the right to purchase
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<PAGE> 9
any or all of the Target Shares for a purchase price in the form of cash equal
in amount to the value of such Target Shares. If the Optionee and the Company
(or its assignees) and/or the Purchasing Shareholders cannot agree on such cash
value within ten (10) days after the Company's receipt of the notice of intended
disposition, the valuation shall be made by an appraiser of recognized standing
selected by the Optionee and the Company (or its assignees) or, if they cannot
agree on an appraiser within twenty (20) days after the Company's receipt of
such notice, each shall select an appraiser of recognized standing and the two
appraisers shall designate a third appraiser of recognized standing, whose
appraisal shall be determinative of such value. In the event that the valuation
is made by an appraiser, the fees associated with such appraisal shall be borne
by the Company. The closing shall then be held on the later of (i) the fifth
business day following the Company's (or its assignees') exercise of its
purchase rights hereunder or (ii) the fifteenth day after such cash valuation
shall have been made.
(f) Non-Exercise of Right. In the event written notice of exercise
of the Company's and/or the Purchasing Shareholder's right of first refusal is
not given to the Optionee within forty-five (45) days following the date of the
Company's receipt of the notice of intended disposition under Section 8(b), the
Optionee shall, for a period of ninety-five (95) days thereafter, have the right
to sell or otherwise dispose of the Target Shares upon terms and conditions
(including the purchase price) no more favorable to the third party purchaser
than those specified in the notice of intended disposition given to the Company;
provided, however, that any such sale or disposition must not be effected in
contravention of the representations made by the Optionee in Section 10 of this
Agreement. The third party purchaser shall acquire the Target Shares free and
clear of all the terms and provisions of this Agreement (including the Company's
first refusal rights hereunder). In the event Optionee does not sell or
otherwise dispose of the Target Shares within the specified ninety-five (95) day
period, the Company's right of first refusal shall continue to be applicable to
any subsequent disposition of the Target Shares by the Optionee until such right
lapses in accordance with Section 8(i).
(g) Judicial Transfers. All proposed judicial transfers and sales of
the Shares by order of any court or referee in bankruptcy ("Order") shall be
subject to the terms and provisions of Section 8 of this Agreement. In the event
a sale or transfer is proposed pursuant to an Order, all of the terms of this
Section 8 shall apply, with the following modification. Instead of a notice of
intent to transfer being
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<PAGE> 10
delivered to the Company, a copy of the Order shall be delivered to the Company
by the proposed transferee, which shall state the name and address of the
proposed transferee and shall specify the number of the Shares to be sold and
the consideration per Share. For other purposes of this Section 8, the receipt
of the Order shall be treated as the receipt of the notice of intended
disposition as set forth in Section 8(b) above. All proposed transfers pursuant
to an Order which do not set forth the purchase price capable of valuation which
would allow the Company to exercise its rights of first refusal are expressly
prohibited. Any purported transfer in contravention of this Section 8(g) shall
be null and void and shall pass no title to the proposed transferee.
(h) Partial Exercise of Right. In the event the Company (or its
assignees) and/or the Purchasing Shareholders make a timely exercise of its
first refusal rights hereunder with respect to a portion, but not all, of the
Target Shares specified in the Optionee's notice of intended disposition, the
optionee shall have the option, exercisable by written notice to the Company
delivered within sixty (60) days after the date of the initial notice of
intended disposition, to effect the sale of the Target Shares pursuant to one of
the following alternatives:
(i) sale or other disposition of all the Target Shares to a
third-party purchaser in compliance with the requirements of Section 8(a),
as if the Company and/or the Purchasing Shareholders did not exercise
their respective first refusal rights hereunder; or
(ii) sale to the Company (or its assignees) and/or the Purchasing
Shareholders of the portion of the Target Shares which the Company (or its
assignees) and/or the Purchasing Shareholders have elected to purchase,
such sale to be effected in substantial conformity with the provisions of
Sections 8(c), (d) and (e) and, at the option of Optionee, sale of the
remaining portion of the Target Shares to a third-party purchaser in
compliance with Section 8(f).
Failure of the Optionee to deliver timely notification to the
Company under this Section 8(h) shall be deemed to be an election by the
Optionee to sell the Target Shares pursuant to alternative (i) above.
(i) Lapse. The Company's right of first refusal under this Section 8
shall lapse and cease to have effect upon the closing of an underwritten public
offering pursuant to an effective registration statement under the 1933 Act
covering
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<PAGE> 11
the offer and sale of common stock for the account of the Company.
(j) Restrictive Legend. Until such time as the Company's right of first
refusal lapses and ceases to have effect pursuant to the provisions of Section
8(h), the stock certificate for the Purchased Shares shall be endorsed with the
following additional legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, PLEDGED OR ENCUMBERED, EXCEPT IN CONFORMITY WITH THE TERMS OF
A NONQUALIFIED OPTION AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED
HOLDER OF THE SHARES (OR HIS PREDECESSOR IN INTEREST). SUCH AGREEMENT
GRANTS CERTAIN RIGHTS OF FIRST REFUSAL TO THE COMPANY (OR ITS ASSIGNS)
UPON THE SALE, ASSIGNMENT, TRANSFER, PLEDGE OR ENCUMBRANCE OF THE SHARES.
A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE
COMPANY.
9. Notice.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered or
mailed, by United States certified or registered mail, prepaid, to the parties
or their assignees at the addresses set forth opposite their signatures below
(or such other address as shall be given in writing by either party to the
other).
10. Method of Exchanging Option.
Subject to the terms and conditions of this Option Agreement, this
Option may be exercised by written notice to the Company, at its principal
office in the State of California, which presently is located at 3 Jenner
Street, Irvine, California 92718. Such notice shall state the election to
exercise the Option and the number of shares in respect of which it is being
exercised and shall be signed by the person or persons so exercising the Option.
Such notice shall be accompanied by payment as provided in Section 3 hereof. The
notice of exercise shall be accompanied with an executed investment letter in
the form of Exhibit B attached hereto as a condition to exercise. The Company
shall deliver a certificate or certificates representing the Shares subject to
such exercise as soon as practicable after the notice and investment letter
shall be received. The certificate or certificates for the shares as to which
the Option shall have been so exercised shall be registered in the name of the
person or persons so exercising the Option and shall be delivered as provided
above
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<PAGE> 12
to or upon the written order of the person or persons exercising the Option. In
the event the Option shall be exercised by any person or persons other than the
Optionee in accordance with the terms hereof, such notice shall be accompanied
by appropriate proof of the right of such person or persons to exercise the
Option. All shares that shall be purchased upon the exercise of the Option as
provided herein shall be fully paid and nonassessable. The holder of this Option
shall not be entitled to the privileges of share ownership as to any shares of
Common Stock not actually issued and delivered to Optionee. The Optionee hereby
certifies that all shares of Common Stock in the Company purchased or to be
purchased by Optionee pursuant to the exercise of this Option are being or are
to be acquired by Optionee for investment and not with a view to the
distribution thereof.
11. No Agreement to Employ.
Nothing in this Agreement shall be construed to constitute or be
evidence of any agreement or understanding, express or implied, on the part of
the Company to employ or retain Optionee for any specific period of time.
12. Market Standoff Agreement.
Optionee agrees in connection with any registration of the Company's
securities that, upon the request of the Company or the underwriters managing
any public offering of the Company's securities, Optionee will not sell or
otherwise dispose of any Shares without the prior written consent of the Company
or such underwriters, as the case may be, for a period of time (not to exceed 90
days) from the effective date of such registration as the Company or the
underwriters may specify.
13. Stop-Transfer Notices.
Optionee understands and agrees that, in order to ensure compliance
with the restrictions referred to herein, the Company may issue appropriate
"stop-transfer" instructions to its transfer agent, if any, and that, if the
Company transfers its own securities, it may make appropriate notations to the
same effect in its own records.
14. Reports to Optionee.
Until the expiration of the right to exercise this option as
provided in Section 3 above, the Company will furnish to the Optionee copies of
all annual and other periodic financial and informational reports that the
Company distributes generally to its shareholders.
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<PAGE> 13
15. General.
The Company shall at all times during the term of the Option reserve
and keep available such number of shares of Common Stock as will be sufficient
to satisfy the requirements of this Option Agreement, shall pay all original
issue and transfer taxes with respect to the issue and transfer of shares
pursuant hereto and all other fees and expenses necessarily incurred by the
Company in connection therewith, and will from time to time use its best efforts
to comply with all laws and regulations, which, in the opinion of counsel for
the Company, shall be applicable thereto.
16. Counterparts.
This Agreement may be executed in one or more counterparts, all of
which taken together shall constitute one agreement and any party hereto may
execute this Agreement by signing any such counterpart. This Agreement shall be
binding upon Optionee and the Company at such time as the Agreement, in
counterpart or otherwise, is executed by Optionee and the Company.
17. Applicable Law.
This Agreement shall be construed under, and enforced in accordance
with and governed by the laws of the State of California.
IN WITNESS WHEREOF, the Company has caused this Nonqualified Option
Agreement to be duly executed by its officers thereunto duly authorized, and the
Optionee has hereunto set his hand, all as of the day and year first above
written.
COMPANY:
KOFAX IMAGE PRODUCTS
Address:
3 Jenner Street
Irvine, CA 92718 By
---------------------------------------
OPTIONEE:
Address:
- ------------------------------ ---------------------------------------
- ------------------------------
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<PAGE> 14
EXHIBIT A
The Plan
<PAGE> 15
EXHIBIT B
Kofax Image Products
3 Jenner Street
Irvine, California 92718
Gentlemen:
1. (a) In connection with the acquisition of _________ shares of the common
stock of Kofax Image Products, a California corporation (the "Company"), by the
undersigned, the undersigned represents that the shares which the undersigned is
acquiring are being acquired for investment and not with a view to the sale or
distribution of any part thereof, and that the undersigned has no present intent
of selling or otherwise distributing the same.
You have advised the undersigned that the shares have not
been registered under the Securities Act of 1933, as the offering of the shares
is to be effected pursuant to an exemption from the registration provisions of
such Act, and, in this connection, you are relying in part on the
representations of the undersigned set forth herein.
Without in any way limiting the representations set forth
above, the undersigned further agrees in no event to make any disposition of all
or any part of said shares unless and until (i) the undersigned shall have
notified you of the proposed disposition; (ii) the undersigned shall have
furnished you with an opinion of counsel to the effect that such disposition
will not require registration of such shares under the Act, and (iii) such
opinion of counsel shall have been concurred in by the Company's counsel and the
Company shall have advised you of such concurrence.
(b) The undersigned acknowledges receipt of all such information as
the undersigned deems necessary and appropriate to enable the undersigned to
evaluate the financial risk inherent in acquiring said shares and acknowledges
receipt of satisfactory and complete information covering the business and
financial condition of the Company, including the opportunity to obtain
information regarding the Company's financial status, in response to all
inquiries in respect thereof.
2. The undersigned understands and agrees that the certificate evidencing
said shares will bear the following legends:
<PAGE> 16
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933; THEY HAVE BEEN ACQUIRED BY THE HOLDER
FOR INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT
OF 1933, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
The undersigned acknowledges receipt of a copy of Rule 260.141.11 of Title 10 of
the California Administrative Code, which is attached hereto as Exhibit A. The
undersigned represents and warrants that he will give a copy of such Rule to any
transferee or successor of the undersigned. Such Rule and the conditions of its
application restrict the transfer and assignment of the shares and certificates
evidencing such shares.
3. (a) The undersigned recognizes that said shares are unregistered and
must be held indefinitely unless they are subsequently registered under the Act
or an exemption from such registration is available, and further recognizes that
you are under no obligation to register said shares or to comply with any
exemption from such registration.
(b) The undersigned understands that Rule 144 under the Act does
not presently apply and may never apply to the Company's securities because the
Company does not now, and may never, file reports required by the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and has not made, and may
never make, publicly available the information required by Rule 15c2-11 of the
Exchange Act. Furthermore, if Rule 144 were available, the undersigned
understands that sales of securities made in reliance thereof could be made only
in certain limited amounts, after certain holding periods and only when there
was available specified current public information, all in accordance with the
terms and conditions of said Rule. The undersigned understands that, in the case
of securities to which said rule is not applicable, compliance with some other
exemption under the Act will be required.
Dated:
------------------------
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<PAGE> 17
Exhibit A
CALIFORNIA ADMINISTRATIVE CODE
Title 10, Section 260.141.11
Restriction on Transfer.
(a) The issuer of any security upon which a restriction on transfer
has been imposed pursuant to Section 260.102.6, 260.141.10 or 260.534 shall
cause a copy of this section to be delivered to each issuee or transferee of
such security at the time the certificate evidencing the security is delivered
to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant
to Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the
Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's ancestors,
descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory or
country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113, or
25121 of the Code, of the securities to be transferred, provided that no order
under Section 25140 or subdivision (a) of Section 25143 is in effect with
respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation,
or by a wholly owned subsidiary of a corporation to such corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140 or subdivision
(a) of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or
to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or
by the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the sale
that transfer of the securities is restricted under this rule, (ii) delivers
to each purchaser a copy of this rule, and (iii) advises the Commissioner of
the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102;
provided that any such transfer is on the condition that any
certificate evidencing the security issued to such transferee shall contain the
legend required by this section.
(c) The certificates representing all such securities subject to such
a restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
<PAGE> 1
EXHIBIT 10.4
RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT (the "Agreement") is entered into as of
this ____ day of _________, 19___, between ___________________ (hereinafter
referred to as "Purchaser"), and KOFAX IMAGE PRODUCTS, a California corporation
(hereinafter referred to as the "Company"), with reference to the following
facts:
R E C I T A L S :
A. Purchaser is an employee of the Company and in connection therewith
has rendered services for and on behalf of the Company.
B. The Company desires, by affording the Purchaser an opportunity to
purchase shares of Common Stock of the Company (hereinafter called "Shares"), as
hereinafter provided, to carry out the purpose of the "Amended and Restated
Incentive Stock Option, Nonqualified Stock Option and Restricted Stock Purchase
Plan", a copy of which is attached hereto as Exhibit A (the "Plan").
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and for other good and valuable consideration, the parties hereto have
agreed, and do hereby agree, as follows:
1. ISSUANCE OF SHARES.
The Company hereby offers to issue to Purchaser an aggregate of
______________ (_____ ) shares of the Common Stock, without par value, of the
Company (the "Shares") on the terms and conditions herein set forth. Unless this
offer is earlier revoked in writing by the Company, Purchaser shall have ninety
(90) days from the date of the delivery of this Agreement to Purchaser to accept
the offer of the Company by executing and delivering to the Company two copies
of this Agreement, without condition or reservation of any kind whatsoever,
together with the consideration to be delivered by Purchaser pursuant to Section
2 below.
2. CONSIDERATION.
The purchase price for the Shares shall be $____ per share, or $______
in the aggregate, which shall be paid by the delivery of Purchaser's check
payable to the Company, receipt of which is hereby acknowledged.
3. RECONVEYANCE UPON TERMINATION OF EMPLOYMENT.
(a) RECONVEYANCE OPTION. If at any time prior to four years from
__________ (the "Employment Commencement Date"), Purchaser should cease to be an
employee of the Company or a parent or its subsidiaries, for any reason
(hereinafter referred to
<PAGE> 2
as the "Termination Date"), the Company and/or all other shareholders of the
Company holding more than 100,000 shares of common stock of the Company or
shares of any other class or series having voting power equivalent to more than
100,000 shares of common stock of the Company (as adjusted for any change in the
capital structure of the Company) ("Purchasing Shareholders" herein) shall have
the option to acquire (hereinafter referred to as the "Reconveyance Option")
from Purchaser all, but not less than all (unless Purchaser consents), of the
Shares subject to the Reconveyance Option on the following basis:
(i) If the Termination Date should occur on or before one
year from the Employment Commencement Date, one hundred percent (100%) of
the Shares shall be subject to the Reconveyance Option;
(ii) If the Termination Date should occur after one year
from the Employment Commencement Date, but on or before two years from the
Employment Commencement Date, seventy-five percent (75%) of the Shares
shall be subject to the Reconveyance Option;
(iii) If the Termination Date should occur after two years
from the Employment Commencement Date, but on or before three years from
the Employment Commencement Date, fifty percent (50%) of the Shares shall
be subject to the Reconveyance Option;
(iv) If the Termination Date should occur after three years
from the Employment Commencement Date, but on or before four years from the
Employment Commencement Date, twenty-five percent (25%) of the Shares shall
be subject to the Reconveyance Option;
(v) If the Termination Date should occur after four years
from the Employment Commencement Date, none of the Shares shall be subject
to the Reconveyance Option.
(b) ADDITIONAL VESTING IN THE EVENT OF DEATH OR DISABILITY. If
during the term of his employment with the Company, Purchaser shall die or
become physically or mentally disabled such that he is unable to fulfill the
duties of his or her position with the Company (as certified by a competent,
licensed physician or psychiatrist reasonably satisfactory to the Company), the
Termination Date shall be deemed to have occurred one year beyond the actual
date of death or disability and Purchaser's Shares shall be deemed to be vested
to the extent of one year beyond the actual date of such death or disability.
(c) CONSIDERATION FOR RECONVEYANCE OPTION. The Company and/or the
Purchasing Shareholders shall pay Purchaser as consideration for the Shares to
be acquired upon exercise of the Reconveyance Option the original purchase price
paid by Purchaser plus five percent (5%) simple interest (without compounding)
per annum from the date of issuance of the Shares until the date of payment.
(d) PROCEDURE FOR EXERCISE OF RECONVEYANCE OPTION. The Company
shall have the right to exercise the Reconveyance Option by acquiring all, but
not less than all (unless Purchaser consents), of the Shares subject to the
Reconveyance Option by delivery to
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<PAGE> 3
Purchaser and/or any other person obligated to transfer the Shares written
notice of election to purchase the Shares or any portion thereof within thirty
(30) days following the Termination Date. In the event any of the Shares are not
being purchased by the Company, the Company shall notify all other Purchasing
Shareholders in writing within five (5) days of the expiration of the Company's
30-day option exercise period. If any of the other Purchasing Shareholders
desire to exercise the Reconveyance Option as to any of the remaining Shares
which are not being purchased by the Company, they shall each deliver to the
Company within thirty (30) days after the required date of delivery of the
notice from the Company, a written notice of election to purchase the Shares or
a specified number thereof. If such notices specify in the aggregate more shares
than are subject to purchase by the Purchasing Shareholders, the Shares shall be
allocated in accordance with Section 4(c). After such allocation, the Company
shall deliver to the Purchaser and/or any other person obligated to transfer the
Shares, within ten (10) days following the expiration of the Purchasing
Shareholders' 30-day option exercise period a written notice indicating the
number of Shares to be purchased by the Company and each of the other Purchasing
Shareholders. In the event that the Company and the Purchasing Shareholders do
not elect to exercise the Reconveyance Option as to all or part of the Shares
under the provisions of this Section 3 by written notice to Purchaser within
seventy-five (75) days following the Termination Date, the Reconveyance Option
shall expire as to all Shares which the Company and/or the Purchasing
Shareholders have not elected to acquire.
(e) NOTIFICATION AND SETTLEMENT. In the event that the Company
and/or the Purchasing Shareholders have elected to exercise the Reconveyance
Option as to part or all of the Shares within the period described above, the
Company shall notify Purchaser and/or any other person obligated to transfer the
Shares as set forth in paragraph (d) above within seventy-five (75) days from
the Termination Date and Purchaser or such other person shall deliver to the
Company and/or the Purchasing Shareholders certificate(s) representing the
Shares to be acquired by the Company and/or the Purchasing Shareholders within
ten (10) days following the date of the notice from the Company. The Company
and/or the Purchasing Shareholders shall deliver to Purchaser against delivery
of the Shares, checks of the Company and/or the Purchasing Shareholders payable
to Purchaser and/or any other person obligated to transfer the Shares in the
aggregate amount of the purchase price to be paid as set forth in paragraph (c)
above.
(f) DEPOSIT OF UNVESTED SHARES. Purchaser shall deposit with the
Company certificates representing the unvested Shares, together with a duly
executed stock assignment separate from certificate in blank, which shall be
held by the Secretary of the Company pending the vesting of such Shares.
Purchaser shall be entitled to vote and to receive dividends and distributions
on all such deposited Shares.
4. RIGHT OF FIRST REFUSAL.
(a) Unless otherwise required or permitted by this Agreement,
Purchaser shall not sell, transfer, assign, hypothecate, or in any way alienate
any of the Shares which are not subject to the Reconveyance Option, or any right
or interest therein, unless Purchaser delivers a notice, as provided in Section
7 hereof, to the Company and/or the Purchasing Shareholders stating the price,
terms and conditions of the proposed transfer, and the identity of the proposed
transferee (the "Offer Notice") and, except as hereinafter provided, the Company
and/or the Purchasing Shareholders shall not have agreed to purchase Purchaser's
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<PAGE> 4
Shares as provided hereinafter. Delivery of the Offer Notice to the Company
and/or the Purchasing Shareholders shall be deemed to be an offer by Purchaser
to sell the Shares to the Company and/or the Purchasing
Shareholders (the shares subject to such offer to be hereinafter referred to as
the "Target Shares").
(b) If the Company desires to exercise the option, it must
exercise the option to at least the lesser of (i) all of the Target Shares
offered; or (ii) the greatest number of the Target Shares offered that the
Company can legally purchase under applicable law. If the Company desires to
exercise the option, the secretary of the Company shall give written notice, in
the manner set forth in Section 7 below, of that fact to Purchaser within
fifteen (15) days following receipt of the Offer Notice. The Company may not
elect to purchase any smaller amount of the Target Shares.
(c) If any of the Shares are not being purchased by the Company,
the Company shall notify the Purchasing Shareholders within five days after the
expiration of the Company's 15-day option exercise period. Within fifteen days
after the expiration of the Company's 15-day option period, if any of the other
Purchasing Shareholders desire to acquire any of the Target Shares pursuant to
the terms of the Offer Notice, they each shall deliver to the Company a written
notice of election to purchase such Target Shares or a specified number thereof.
If such notices specify in the aggregate more Target Shares than are subject to
purchase by the Purchasing Shareholders, the Target Shares shall be allocated as
follows:
(i) Each Purchasing Shareholder electing to purchase Shares
shall be allocated a number of Target Shares equal to the lesser of (a) the
number of Target Shares which that shareholder has offered to purchase, or
(b) the number of Target Shares which bears the same ratio to the number of
Target Shares which are not being purchased by the Company as the number of
shares owned by that Shareholder bears to the number of shares owned by all
shareholders who have elected to purchase Target Shares.
(ii) If any Target Shares remain to be allocated after the
application of subsection (i) above, they shall be allocated to Purchasing
Shareholders who elected to purchase more Target Shares than were allocated
to them. Each such Purchasing Shareholder shall be allocated a number of
Target Shares equal to the lesser of (a) the number of Target Shares which
that Purchasing Shareholder elected to purchase less the number of Target
Shares already allocated to that Purchasing Shareholder, or (b) the number
of Target Shares which bears the same ratio to the number of Target Shares
which have not yet been allocated as the number of shares owned by that
Purchasing Shareholder bears to the total number of shares owned by all
Purchasing Shareholders who have elected to purchase more Target Shares
than were allocated to them. If, as a result of the foregoing provisions of
this subsection (ii) all of the Target Shares subject to the Offer Notice
not being purchased by the Company have not been allocated, the balance
shall be allocated by successively applying this subsection (ii) as many
times as is necessary to allocate all of the Target Shares subject to the
Offer Notice.
(iii) For the purposes of subsection (i) and subsection
(ii), shares owned by any Purchasing Shareholder shall include all shares
of common stock and all shares of any class or series which are convertible
or exchangeable for shares of
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<PAGE> 5
common stock, determined as if such convertible or exchangeable shares have
been converted or exchanged for shares of common stock.
(iv) After such allocation, the Company shall deliver to
Purchaser, within ten days from the expiration of the 15-day option period
of the Purchasing Shareholders, a written notice indicating the number of
Target Shares to be purchased by the Company and each of the Purchasing
Shareholders.
(d) If such right is exercised with respect to all the Target
Shares specified in the notice of intended disposition, the Company (or its
assignees) and/or the Purchasing Shareholders shall, except as provided below,
effect the repurchase of the Target Shares, including payment of the purchase
price, not more than ten (10) days after the expiration of the fifteen (15)-day
option period of the Purchasing Shareholders or fifteen (15) days after the
expiration of the fifteen (15)-day option period of the Company if the Company
elects to exercise the option with respect to all of the Target Shares; and at
such time the Purchaser shall deliver to the Company the certificates
representing the Target Shares to be repurchased, each certificate to be
properly endorsed for transfer. The Target Shares so purchased shall thereupon
be cancelled and cease to be issued and outstanding shares of the Company's
Common Stock. However, (i) should the purchase price specified in the notice of
intended disposition be payable in property other than cash or evidences of
indebtedness, the Company (or its assignees) and/or the Purchasing Shareholders
shall have the right to pay the purchase price in the form of cash equal in
amount to the value of such property, and (ii) if there is no purchase price for
the intended disposition, the Company (or its assignees) and/or the Purchasing
Shareholders shall have the right to purchase any or all of the Target Shares
for a purchase price in the form of cash equal in amount to the value of such
Target Shares. If the Purchaser and the Company (or its assignees) and/or the
Purchasing Shareholders cannot agree on such cash value within ten (10) days
after the Company's receipt of the notice of intended disposition, the valuation
shall be made by an appraiser of recognized standing selected by the Purchaser
and the Company (or its assignees) or, if they cannot agree on an appraiser
within twenty (20) days after the Company's receipt of such notice, each shall
select an appraiser of recognized standing and the two appraisers shall
designate a third appraiser of recognized standing, whose appraisal shall be
determinative of such value. In the event that the valuation is made by an
appraiser, the fees associated with such appraisal shall be borne by the
Company. The closing shall then be held on the later of (i) the fifth business
day following the Company's (or its assignees') exercise of its purchase rights
hereunder or (ii) the fifteenth day after such cash valuation shall have been
made.
(e) In the event written notice of exercise of the Company's
and/or the Purchasing Shareholder's right of first refusal is not given to the
Purchaser within forty-five (45) days following the date of the Company's
receipt of the notice of intended disposition under Section 4(a), the Purchaser
shall, for a period of ninety-five (95) days thereafter, have the right to sell
or otherwise dispose of the Target Shares upon terms and conditions (including
the purchase price) no more favorable to the third party purchaser than those
specified in the notice of intended disposition given to the Company; provided,
however, that any such sale or disposition must not be effected in contravention
of the representations made by the Purchaser in Section 5 of this Agreement. The
third party purchaser shall acquire the Target Shares free and
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<PAGE> 6
clear of all the terms and provisions of this Agreement (including the Company's
first refusal rights hereunder). In the event Purchaser does not sell or
otherwise dispose of the Target Shares within the specified ninety-five (95) day
period, the Company's right of first refusal shall continue to be applicable to
any subsequent disposition of the Target Shares by the Purchaser until such
right lapses in accordance with Section 4(h).
(f) All proposed judicial transfers and sales of the Shares by
order of any court or referee in bankruptcy ("Order") shall be subject to the
terms and provisions of Section 4 of this Agreement. In the event a sale or
transfer is proposed pursuant to an Order, all of the terms of this Section 4
shall apply, with the following modification. Instead of a notice of intent to
transfer being delivered to the Company, a copy of the Order shall be delivered
to the Company by the proposed transferee, which shall state the name and
address of the proposed transferee and shall specify the number of the Shares to
be sold and the consideration per Share. For other purposes of this Section 4,
the receipt of the Order shall be treated as the receipt of the notice of
intended disposition as set forth in Section 4(a) above. All proposed transfers
pursuant to an Order which do not set forth the purchase price capable of
valuation which would allow the Company to exercise its rights of first refusal
are expressly prohibited. Any purported transfer in contravention of this
Section 4(f) shall be null and void and shall pass no title to the proposed
transferee.
(g) In the event the Company (or its assignees) and/or the
Purchasing Shareholders make a timely exercise of its first refusal rights
hereunder with respect to a portion, but not all, of the Target Shares specified
in the Purchaser's notice of intended disposition, the Purchaser shall have the
option, exercisable by written notice to the Company delivered within sixty (60)
days after the date of the initial notice of intended disposition, to effect the
sale of the Target Shares pursuant to one of the following alternatives:
(i) sale or other disposition of all the Target Shares to a
third-party purchaser in compliance with the requirements of Section 4(a),
as if the Company and/or the Purchasing Shareholders did not exercise their
respective first refusal rights hereunder; or
(ii) sale to the Company (or its assignees) and/or the
Purchasing Shareholders of the portion of the Target Shares which the
Company (or its assignees) and/or the Purchasing Shareholders have elected
to purchase, such sale to be effected in substantial conformity with the
provisions of Sections 4(b), (c) and (d) and, at the option of Purchaser,
sale of the remaining portion of the Target Shares to a third-party
purchaser in compliance with Section 4(e).
Failure of the Purchaser to deliver timely notification to the Company
under this Section 4(g) shall be deemed to be an election by the Purchaser to
sell the Target Shares pursuant to alternative (i) above.
(h) LAPSE. The Company's right of first refusal under this
Section 4 shall lapse and cease to have effect upon the closing of an
underwritten public offering pursuant to an effective registration statement
under the 1933 Act covering the offer and sale of common stock for the account
of the Company.
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<PAGE> 7
(i) Restrictive Legend. Until such time as the Company's
right of first refusal lapses and ceases to have effect pursuant to the
provisions of Section 4(g), the stock certificate for the Shares shall be
endorsed with the following additional legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, PLEDGED OR ENCUMBERED, EXCEPT IN
CONFORMITY WITH THE TERMS OF A RESTRICTED STOCK AGREEMENT BETWEEN
THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR HIS
PREDECESSOR IN INTEREST). SUCH AGREEMENT GRANTS CERTAIN RIGHTS OF
FIRST REFUSAL TO THE COMPANY (OR ITS ASSIGNS) UPON THE SALE,
ASSIGNMENT, TRANSFER, PLEDGE OR ENCUMBRANCE OF THE SHARES. A COPY
OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE
COMPANY.
5. INVESTMENT REPRESENTATIONS.
(a) Purchaser represents and warrants that he or she is
acquiring the Shares for his or her own account, not as a nominee or agent, for
investment and not with a view to or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities Act
of 1933 (the "1933 Act").
(b) Purchaser understands that (i) the Shares have not been
registered under the 1933 Act by reason of a specific exemption therefrom, that
they must be held by Purchaser indefinitely, and that Purchaser must therefore
bear the economic risk of such investment indefinitely, unless a subsequent
disposition thereof is registered under the 1933 Act or is exempt from such
registration; (ii) each certificate representing the Shares will be endorsed
with the following legends:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933; THEY HAVE BEEN
ACQUIRED BY THE HOLDER FOR INVESTMENT AND MAY NOT BE PLEDGED,
HYPOTHECATED, SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT
AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT OF 1933, AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY,
OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION
THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED
IN THE COMMISSIONER'S RULES.
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<PAGE> 8
and (iii) the Company will instruct any transfer agent not to register the
transfer of any of the Shares unless the conditions specified in the foregoing
legend are satisfied.
(c) Purchaser is a key employee of the Company and has been
furnished with such materials and has been given access to such information
relating to the Company as Purchaser or Purchaser's qualified representative has
requested and Purchaser has been afforded the opportunity to ask questions
regarding the Company and the Shares, all as Purchaser has found necessary to
make an informed investment decision.
(d) Purchaser represents and warrants that Purchaser is
either an accredited investor within the meaning of Regulation D under the 1933
Act, or by reason of Purchaser's business or financial experience, or the
business or financial experience of Purchaser's professional advisor, Purchaser
has the capacity to protect Purchaser's own interests in connection with this
transaction.
6. SHARES FREE AND CLEAR.
All Shares purchased by the Company and/or the Purchasing
Shareholders pursuant to this Agreement shall be delivered by Purchaser free and
clear of all claims, liens and encumbrances of every nature (except the
provisions of this Agreement and any conditions concerning the Shares relating
to compliance with applicable federal or state securities laws), and the
purchaser thereof shall acquire full and complete title and right to all of the
shares, free and clear of any claims, liens and encumbrances of every nature
(again except for the provisions of this Agreement and such securities laws).
7. NOTICE.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or mailed, by United States certified or registered mail, prepaid, to
the parties or their assignees at the addresses set forth opposite their
signatures below (or such other address as shall be given in writing by either
party to the other).
8. BINDING OBLIGATIONS.
All covenants and agreements herein contained by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
9. CAPTIONS AND PARAGRAPH HEADINGS.
Captions and paragraph headings used herein are for
convenience only, and are not part of this Agreement and shall not be used in
construing it.
10. ENTIRE AGREEMENT.
This instrument contains the entire agreement of the
parties. This Agreement may be amended only by an agreement in writing signed by
all of the parties.
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<PAGE> 9
11. ASSIGNMENT.
No party hereto shall have the right, without the prior
written consent of the other party, to sell, assign, mortgage, pledge or
otherwise transfer any interest or right created hereby. This Agreement is made
solely for the benefit of the parties hereto, and no other person, partnership,
association or corporation shall acquire or have any right under or by virtue of
this Agreement.
12. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
all of which taken together shall constitute one agreement and any party hereto
may execute this Agreement by signing any such counterpart. This Agreement shall
be binding upon Purchaser and the Company at such time as the Agreement, in
counterpart or otherwise, is executed by Purchaser and the Company.
13. APPLICABLE LAW.
This Agreement shall be construed under, and enforced in
accordance with and governed by the laws of the State of California.
14. TAX ELECTIONS.
Purchaser acknowledges that Purchaser has considered the
advisability of all tax elections in connection with the purchase of the Shares
hereunder, including the making of an election under Section 83(b) under the
Internal Revenue Code of 1986, as amended, and that the Company has no
responsibility for the making of any such election.
15. REPORTS TO PURCHASER.
Until the expiration of the right to purchase the Shares as
provided in Section 1 above, the Company will furnish to Purchaser copies of all
annual and other periodic reports that the Company distributes generally to its
shareholders.
16. MARKET STANDOFF AGREEMENT.
Purchaser agrees in connection with any registration of the
Company's securities that, upon the request of the Company or the underwriters
managing any public offering of the Company's securities, Purchaser will not
sell or otherwise dispose of any Shares without the prior written consent of the
Company or such underwriters, as the case may be, for a period of time (not to
exceed 90 days) from the effective date of such registration as the Company or
the underwriters may specify.
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<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE COMPANY:
KOFAX IMAGE PRODUCTS
Address:
3 Jenner Street
Irvine, CA 92718 By
-----------------------------------------
PURCHASER:
Address:
- ----------------------------------
- ---------------------------------- -------------------------------------------
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CONSENT AND RATIFICATION OF SPOUSE
The undersigned, the spouse of _____________, a party to the attached
Restricted Stock Agreement (the "Agreement"), dated as of _____________, hereby
consents to the execution of said Agreement by such party; and ratifies,
approves, confirms and adopts said Agreement, and agrees to be bound by each and
every term and condition thereof as if the undersigned had been a signatory to
said Agreement, with respect to the Shares (as defined in the Agreement) made
the subject of said Agreement in which the undersigned has an interest,
including any community property interest herein.
Date:_______________ _______________________
<PAGE> 1
EXHIBIT 10.5
KOFAX IMAGE PRODUCTS, INC.
1996 INCENTIVE STOCK OPTION,
NONQUALIFIED STOCK OPTION
AND RESTRICTED STOCK PURCHASE PLAN
This 1996 INCENTIVE STOCK OPTION, NONQUALIFIED STOCK OPTION AND
RESTRICTED STOCK PURCHASE PLAN (the "Plan") is hereby established by Kofax
Image Products, Inc., a Delaware corporation (the "Company") and adopted by
its Board of Directors as of 1996 (the "Effective Date").
ARTICLE 1.
PURPOSES OF THE PLAN
1.1 PURPOSES. The purposes of the Plan are (a) to enhance the Company's
ability to attract and retain the services of qualified employees, officers
and directors (including non-employee directors), and consultants and other
service providers upon whose judgment, initiative and efforts the successful
conduct and development of the Company's business largely depends, and (b) to
provide additional incentives to such persons or entities to devote their
utmost effort and skill to the advancement and betterment of the Company, by
providing them an opportunity to participate in the ownership of the Company
and thereby have an interest in the success and increased value of the
Company.
ARTICLE 2.
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings
indicated:
2.1 ADMINISTRATOR. "Administrator" means the Board or, if the Board
delegates responsibility for any matter to the Committee, the term
Administrator shall mean the Committee.
2.2 AFFILIATED COMPANY. "Affiliated Company" means any "parent
corporation" or "subsidiary corporation" of the Company, whether now existing
or hereafter created or acquired, as those terms are defined in Sections
424(e) and 424(f) of the Code, respectively.
2.3 BOARD. "Board" means the Board of Directors of the Company.
2.4 CHANGE IN CONTROL. "Change in Control" shall mean (i) the
acquisition, directly or indirectly, by any person or group (within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended) of the beneficial ownership of more than fifty percent (50%) of the
outstanding securities of the Company; (ii) a merger or consolidation in which
the Company is not the surviving entity, except for a transaction the
principal purpose of which is to change the state in which the Company is
incorporated; (iii) the sale, transfer or other disposition of all or
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substantially all of the assets of the Company; (iv) a complete liquidation or
dissolution of the Company; or (v) any reverse merger in which the Company is
the surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Company's outstanding
securities are transferred to a person or persons different from the persons
holding those securities immediately prior to such merger.
2.5 CODE. "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
2.6 COMMITTEE. "Committee" means a committee of two or more members of
the Board appointed to administer the Plan, as set forth in Section 7.1
hereof.
2.7 COMMON STOCK. "Common Stock" means the Common Stock, $0.01 par
value, of the Company, subject to adjustment pursuant to Section 4.2 hereof.
2.8 DISABILITY. "Disability" means permanent and total disability as
defined in Section 22(e)(3) of the Code. The Administrator's determination of
a Disability or the absence thereof shall be conclusive and binding on all
interested parties.
2.9 EFFECTIVE DATE. "Effective Date" means the date on which the Plan
is adopted by the Board, as set forth on the first page hereof.
2.10 EXERCISE PRICE. "Exercise Price" means the purchase price per
share of Common Stock payable upon exercise of an Option.
2.11 FAIR MARKET VALUE. "Fair Market Value" on any given date means the
value of one share of Common Stock, determined as follows:
(a) If the Common Stock is then listed or admitted to trading on
a Nasdaq market system or a stock exchange which reports closing sale prices,
the Fair Market Value shall be the closing sale price on the date of valuation
on such Nasdaq market system or principal stock exchange on which the Common
Stock is then listed or admitted to trading, or, if no closing sale price is
quoted on such day, then the Fair Market Value shall be the closing sale price
of the Common Stock on such Nasdaq market system or such exchange on the next
preceding day on which a closing sale price is quoted.
(b) If the Common Stock is not then listed or admitted to trading
on a Nasdaq market system or a stock exchange which reports closing sale
prices, the Fair Market Value shall be the average of the closing bid and
asked prices of the Common Stock in the over-the-counter market on the date of
valuation.
(c) If neither (a) nor (b) is applicable as of the date of
valuation, then the Fair Market Value shall be determined by the Administrator
in good faith using any reasonable method of evaluation, which determination
shall be conclusive and binding on all interested parties.
2.12 INCENTIVE OPTION. "Incentive Option" means any Option designated
and qualified as an "incentive stock option" as defined in Section 422 of the
Code.
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2.13 INCENTIVE OPTION AGREEMENT. "Incentive Option Agreement" means an
Option Agreement with respect to an Incentive Option.
2.14 NASD DEALER. "NASD Dealer" means a broker-dealer that is a member
of the National Association of Securities Dealers, Inc.
2.15 NONQUALIFIED OPTION. "Nonqualified Option" means any Option that
is not an Incentive Option. To the extent that any Option designated as an
Incentive Option fails in whole or in part to qualify as an Incentive Option,
including, without limitation, for failure to meet the limitations applicable
to a 10% Stockholder or because it exceeds the annual limit provided for in
Section 5.6 below, it shall to that extent constitute a Nonqualified Option.
2.16 NONQUALIFIED OPTION AGREEMENT. "Nonqualified Option Agreement"
means an Option Agreement with respect to a Nonqualified Option.
2.17 OFFEREE. "Offeree" means a Participant to whom a Right to Purchase
has been offered or who has acquired Restricted Stock under the Plan.
2.18 OPTION. "Option" means any option to purchase Common Stock granted
pursuant to the Plan.
2.19 OPTION AGREEMENT. "Option Agreement" means the written agreement
entered into between the Company and the Optionee with respect to an Option
granted under the Plan.
2.20 OPTIONEE. "Optionee" means a Participant who holds an Option.
2.21 PARTICIPANT. "Participant" means an individual or entity who holds
an Option, a Right to Purchase or Restricted Stock under the Plan.
2.22 PURCHASE PRICE. "Purchase Price" means the purchase price per
share of Restricted Stock payable upon acceptance of a Right to Purchase.
2.23 RESTRICTED STOCK. "Restricted Stock" means shares of Common Stock
issued pursuant to Article 6 hereof, subject to any restrictions and
conditions as are established pursuant to such Article 6.
2.24 RIGHT TO PURCHASE. "Right to Purchase" means a right to purchase
Restricted Stock granted to an Offeree pursuant to Article 6 hereof.
2.25 SERVICE PROVIDER. "Service Provider" means a consultant or other
person or entity who provides services to, or has an important business
relationship with, the Company or an Affiliated Company and who the
Administrator authorizes to become a Participant in the Plan.
2.26 STOCK PURCHASE AGREEMENT. "Stock Purchase Agreement" means the
written agreement entered into between the Company and the Offeree with
respect to a Right to Purchase offered under the Plan.
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2.27 10% STOCKHOLDER. "10% Stockholder" means a person who, as of a
relevant date, owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or of
an Affiliated Company.
ARTICLE 3.
ELIGIBILITY
3.1 INCENTIVE OPTIONS. Officers and other key employees of the Company
or of an Affiliated Company (including members of the Board if they are
employees of the Company or of an Affiliated Company) are eligible to receive
Incentive Options under the Plan.
3.2 NONQUALIFIED OPTIONS AND RIGHTS TO PURCHASE. Officers and other key
employees of the Company or of an Affiliated Company, members of the Board
(whether or not employed by the Company or an Affiliated Company), and Service
Providers are eligible to receive Nonqualified Options or Rights to Purchase
under the Plan.
3.3 Limitation on Shares. In no event shall any Participant be granted
Rights to Purchase or Options in any one calendar year pursuant to which the
aggregate number of shares of Common Stock that may be acquired thereunder
exceeds 200,000 shares.
ARTICLE 4.
PLAN SHARES
4.1 SHARES SUBJECT TO THE PLAN. A total of 600,000 shares of Common
Stock may be issued under the Plan, subject to adjustment as to the number and
kind of shares pursuant to Section 4.2 hereof. For purposes of this
limitation, in the event that (a) all or any portion of any Option or Right to
Purchase granted or offered under the Plan can no longer under any
circumstances be exercised, or (b) any shares of Common Stock are reacquired
by the Company pursuant to an Incentive Option Agreement, Nonqualified Option
Agreement or Stock Purchase Agreement, the shares of Common Stock allocable to
the unexercised portion of such Option or such Right to Purchase, or the
shares so reacquired, shall again be available for grant or issuance under the
Plan.
4.2 CHANGES IN CAPITAL STRUCTURE. In the event that the outstanding
shares of Common Stock are hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of a recapitalization, stock split, combination of shares,
reclassification, stock dividend, or other change in the capital structure of
the Company, then appropriate adjustments shall be made by the Administrator
to the aggregate number and kind of shares subject to this Plan, and the
number and kind of shares and the price per share subject to outstanding
Option Agreements, Rights to Purchase and Stock Purchase Agreements in order
to preserve, as nearly as practical, but not to increase, the benefits to
Participants.
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ARTICLE 5.
OPTIONS
5.1 OPTION AGREEMENT. Each Option granted pursuant to this Plan shall
be evidenced by an Option Agreement which shall specify the number of shares
subject thereto, the Exercise Price per share, and whether the Option is an
Incentive Option or Nonqualified Option. As soon as is practical following the
grant of an Option, an Option Agreement shall be duly executed and delivered
by or on behalf of the Company to the Optionee to whom such Option was
granted. Each Option Agreement shall be in such form and contain such
additional terms and conditions, not inconsistent with the provisions of this
Plan, as the Administrator shall, from time to time, deem desirable,
including, without limitation, the imposition of any rights of first refusal
and resale obligations upon any shares of Common Stock acquired pursuant to an
Option Agreement. Each Option Agreement may be different from each other
Option Agreement.
5.2 EXERCISE PRICE. The Exercise Price per share of Common Stock
covered by each Option shall be determined by the Administrator, subject to
the following: (a) the Exercise Price of an Incentive Option shall not be less
than 100% of Fair Market Value on the date the Incentive Option is granted,
(b) the Exercise Price of a Nonqualified Option shall not be less than 85% of
Fair Market Value on the date the Nonqualified Option is granted, and (c) if
the person to whom an Option is granted is a 10% Stockholder on the date of
grant, the Exercise Price shall not be less than 110 % of Fair Market Value
on the date the Option is granted.
5.3 PAYMENT OF EXERCISE PRICE. Payment of the Exercise Price shall be
made upon exercise of an Option and may be made, in the discretion of the
Administrator, subject to any legal restrictions, by: (a) cash; (b) check; (c)
the surrender of shares of Common Stock owned by the Optionee that have been
held by the Optionee for at least six (6) months, which surrendered shares
shall be valued at Fair Market Value as of the date of such exercise; (d) the
Optionee's promissory note in a form and on terms acceptable to the
Administrator; (e) the cancellation of indebtedness of the Company to the
Optionee; (f) the waiver of compensation due or accrued to the Optionee for
services rendered; (g) provided that a public market for the Common Stock
exists, a "same day sale" commitment from the Optionee and an NASD Dealer
whereby the Optionee irrevocably elects to exercise the Option and to sell a
portion of the shares so purchased to pay for the Exercise Price and whereby
the NASD Dealer irrevocably commits upon receipt of such shares to forward the
Exercise Price directly to the Company; (h) provided that a public market for
the Common Stock exists, a "margin" commitment from the Optionee and an NASD
Dealer whereby the Optionee irrevocably elects to exercise the Option and to
pledge the shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such shares to
forward the Exercise Price directly to the Company; or (i) any combination of
the foregoing methods of payment or any other consideration or method of
payment as shall be permitted by applicable corporate law.
5.4 TERM AND TERMINATION OF OPTIONS. The term and termination of each
Option shall be as fixed by the Administrator, but no Option may be
exercisable more than ten (10) years after the date it is granted. An
Incentive Option granted to a person who is a 10% Stockholder on the date of
grant shall not be exercisable more than five (5) years after the date it is
granted.
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5.5 VESTING AND EXERCISE OF OPTIONS. Each Option shall vest and be
exercisable in one or more installments at such time or times and subject to
such conditions, including without limitation the achievement of specified
performance goals or objectives, as shall be determined by the Administrator;
provided, however, that no Option shall vest and become exercisable at a rate
slower than at least 20% per year over five years from the date of grant.
5.6 ANNUAL LIMIT ON INCENTIVE OPTIONS. To the extent required for
"incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the Common
Stock shall not, with respect to which Incentive Options granted under this
Plan and any other plan of the Company or any Affiliated Company become
exercisable for the first time by an Optionee during any calendar year, exceed
$100,000.
5.7 NONTRANSFERABILITY OF OPTIONS. No Option shall be assignable or
transferable except by will or the laws of descent and distribution, and
during the life of the Optionee shall be exercisable only by such Optionee;
provided, however, that, in the discretion of the Administrator, any Option
may be assigned or transferred in any manner which an "incentive stock option"
is permitted to be assigned or transferred under the Code.
5.8 RIGHTS AS STOCKHOLDER. An Optionee or permitted transferee of an
Option shall have no rights or privileges as a Stockholder with respect to any
shares covered by an Option until such Option has been duly exercised and
certificates representing shares purchased upon such exercise have been issued
to such person.
ARTICLE 6.
RIGHTS TO PURCHASE
6.1 NATURE OF RIGHT TO PURCHASE. A Right to Purchase granted to an
Offeree entitles the Offeree to purchase, for a Purchase Price determined by
the Administrator, shares of Common Stock subject to such terms, restrictions
and conditions as the Administrator may determine at the time of grant
("Restricted Stock"). Such conditions may include, but are not limited to,
continued employment or the achievement of specified performance goals or
objectives.
6.2 ACCEPTANCE OF RIGHT TO PURCHASE. An Offeree shall have no rights
with respect to the Restricted Stock subject to a Right to Purchase unless the
Offeree shall have accepted the Right to Purchase within ten (10) days (or
such longer or shorter period as the Administrator may specify) following the
grant of the Right to Purchase by making payment of the full Purchase Price to
the Company in the manner set forth in Section 6.3 hereof and by executing and
delivering to the Company a Stock Purchase Agreement. Each Stock Purchase
Agreement shall be in such form, and shall set forth the Purchase Price and
such other terms, conditions and restrictions of the Restricted Stock, not
inconsistent with the provisions of this Plan, as the Administrator shall,
from time to time, deem desirable. Each Stock Purchase Agreement may be
different from each other Stock Purchase Agreement.
6.3 PURCHASE PRICE; PAYMENT OF PURCHASE PRICE. The Purchase Price per
share of Restricted Stock covered by each Right to Purchase shall be
determined by the Administrator, subject to the following: (a) the Purchase
Price shall be not less than 85% of Fair Market Value on the date
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the Right to Purchase is granted; and (b) if the person to whom the Right to
Purchase is a 10% Stockholder on the date of grant, the Purchase Price shall
not be less than 100% of Fair Market Value on the date the Right to Purchase
is granted. Subject to any legal restrictions, payment of the Purchase Price
upon acceptance of a Right to Purchase Restricted Stock may be made, in the
discretion of the Administrator, by: (a) cash; (b) check; (c) the surrender of
shares of Common Stock owned by the Offeree that have been held by the Offeree
for at least six (6) months, which surrendered shares shall be valued at Fair
Market Value as of the date of such exercise; (d) the Offeree's promissory
note in a form and on terms, including security arrangements, acceptable to
the Administrator; (e) the cancellation of indebtedness of the Company to the
Offeree; (f) the waiver of compensation due or accrued to the Offeree for
services rendered; or (g) any combination of the foregoing methods of payment
or any other consideration or method of payment as shall be permitted by
applicable corporate law.
6.4 RIGHTS AS A STOCKHOLDER. Upon complying with the provisions of
Section 6.2 hereof, an Offeree shall have the rights of a Stockholder with
respect to the Restricted Stock purchased pursuant to the Right to Purchase,
including voting and dividend rights, subject to the terms, restrictions and
conditions as are set forth in the Stock Purchase Agreement. Unless the
Administrator shall determine otherwise, certificates evidencing shares of
Restricted Stock shall remain in the possession of the Company in accordance
with the terms of the Stock Purchase Agreement.
6.5 RESTRICTIONS. Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided in the Stock Purchase Agreement or by the Administrator.
In the event of termination of a Participant's employment, service as a
director of the Company or Service Provider status for any reason whatsoever
(including death or disability), the Stock Purchase Agreement may provide, in
the discretion of the Administrator, that the Company shall have the right,
exercisable at the discretion of the Administrator, to repurchase (i) at the
original Purchase Price, any shares of Restricted Stock which have not vested
as of the date of termination, and (ii) at Fair Market Value, any shares of
Restricted Stock which have vested as of such date, on such terms as may be
provided in the Stock Purchase Agreement.
6.6 VESTING OF RESTRICTED STOCK. The Stock Purchase Agreement shall
specify the date or dates, the performance goals or objectives which must be
achieved, and any other conditions on which the Restricted Stock may vest.
6.7 DIVIDENDS. If payment for shares of Restricted Stock is made by
promissory note, any cash dividends paid with respect to the Restricted Stock
may be applied, in the discretion of the Administrator, to repayment of such
note.
6.8 NONASSIGNABILITY OF RIGHTS. No Right to Purchase shall be
assignable or transferable except by will or the laws of descent and
distribution or as otherwise provided by the Administrator.
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ARTICLE 7.
ADMINISTRATION OF THE PLAN
7.1 ADMINISTRATOR. Authority to control and manage the operation and
administration of the Plan shall be vested in the Board, which may delegate
such responsibilities in whole or in part to a committee consisting of two (2)
or more members of the Board (the "Committee"). Members of the Committee may
be appointed from time to time by, and shall serve at the pleasure of, the
Board. As used herein, the term "Administrator" means the Board or, with
respect to any matter as to which responsibility has been delegated to the
Committee, the term Administrator shall mean the Committee.
7.2 POWERS OF THE ADMINISTRATOR. In addition to any other powers or
authority conferred upon the Administrator elsewhere in the Plan or by law,
the Administrator shall have full power and authority: (a) to determine the
persons to whom, and the time or times at which, Incentive Options or
Nonqualified Options shall be granted and Rights to Purchase shall be offered,
the number of shares to be represented by each Option and Right to Purchase
and the consideration to be received by the Company upon the exercise thereof;
(b) to interpret the Plan; (c) to create, amend or rescind rules and
regulations relating to the Plan; (d) to determine the terms, conditions and
restrictions contained in, and the form of, Option Agreements and Stock
Purchase Agreements; (e) to determine the identity or capacity of any persons
who may be entitled to exercise a Participant's rights under any Option or
Right to Purchase under the Plan; (f) to correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Option Agreement
or Stock Purchase Agreement; (g) to accelerate the vesting of any Option or
release or waive any repurchase rights of the Company with respect to
Restricted Stock; (h) to extend the exercise date of any Option or acceptance
date of any Right to Purchase; (i) to provide for rights of first refusal
and/or repurchase rights; (j) to amend outstanding Option Agreements and Stock
Purchase Agreements to provide for, among other things, any change or
modification which the Administrator could have provided for upon the grant of
an Option or Right to Purchase or in furtherance of the powers provided for
herein; and (k) to make all other determinations necessary or advisable for
the administration of the Plan, but only to the extent not contrary to the
express provisions of the Plan. Any action, decision, interpretation or
determination made in good faith by the Administrator in the exercise of its
authority conferred upon it under the Plan shall be final and binding on the
Company and all Participants.
7.3 LIMITATION ON LIABILITY. No employee of the Company or member of
the Board or Committee shall be subject to any liability with respect to
duties under the Plan unless the person acts fraudulently or in bad faith. To
the extent permitted by law, the Company shall indemnify each member of the
Board or Committee, and any employee of the Company with duties under the
Plan, who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed proceeding, whether civil, criminal,
administrative or investigative, by reason of such person's conduct in the
performance of duties under the Plan.
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ARTICLE 8.
CHANGE IN CONTROL
8.1 CHANGE IN CONTROL. In order to preserve a Participant's rights in
the event of a Change in Control of the Company, the time period relating to
vesting, or the exercise or realization of all outstanding Options, Rights to
Purchase and Restricted Stock shall automatically accelerate immediately prior
to the consummation of such Change in Control, such that all outstanding
Options shall be vested and all repurchase rights with respect to unvested
Restricted Stock shall lapse as of such time. In addition to the acceleration
as provided in the preceding sentence, in the event of a Change in Control,
the Administrator in its discretion may, at any time an Option or Right to
Purchase is granted, or at any time thereafter, take one or more of the
following actions: (A) provide for the purchase of each Option or Right to
Purchase for an amount of cash or other property that could have been received
upon the exercise of the Option or Right to Purchase had the Option been
currently exercisable, (B) adjust the terms of the Options and Rights to
Purchase in a manner determined by the Administrator to reflect the Change in
Control, (C) cause the Options and Rights to Purchase to be assumed, or new
rights substituted therefor, by another entity, through the continuance of the
Plan and the assumption of outstanding Options and Rights to Purchase, or the
substitution for such Options and Rights to Purchase of new options and new
rights to purchase of comparable value covering shares of a successor
corporation, with appropriate adjustments as to the number and kind of shares
and Exercise Prices, in which event the Plan and such Options and Rights to
Purchase, or the new options and rights to purchase substituted therefor,
shall continue in the manner and under the terms so provided or (D) make such
other provision as the Administrator may consider equitable. If the
Administrator does not take any of the foregoing actions, all Options and
Rights to Purchase shall terminate upon the consummation of the Change in
Control and the Administrator shall cause written notice of the proposed
transaction to be given to all Participants not less than fifteen (15) days
prior to the anticipated effective date of the proposed transaction.
ARTICLE 9.
AMENDMENT AND TERMINATION OF THE PLAN
9.1 AMENDMENTS. The Board may from time to time alter, amend, suspend
or terminate the Plan in such respects as the Board may deem advisable. No
such alteration, amendment, suspension or termination shall be made which
shall substantially affect or impair the rights of any Participant under an
outstanding Option Agreement or Stock Purchase Agreement without such
Participant's consent. The Board may alter or amend the Plan to comply with
requirements under the Code relating to Incentive Options or other types of
options which give Optionee more favorable tax treatment than that applicable
to Options granted under this Plan as of the date of its adoption, or to
comply with provisions under applicable securities laws, including without
limitation, Rule 16b-3 under the Securities Exchange Act of 1934, as amended.
Upon any such alteration or amendment, any outstanding Option granted
hereunder may, if the Administrator so determines and if permitted by
applicable law, be subject to the more favorable tax treatment afforded to an
Optionee pursuant to such terms and conditions.
9.2 PLAN TERMINATION. Unless the Plan shall theretofore have been
terminated, the Plan shall terminate on the tenth (10th) anniversary of the
Effective Date and no Options or Rights to
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Purchase may be granted under the Plan thereafter, but Option Agreements,
Stock Purchase Agreements and Rights to Purchase then outstanding shall
continue in effect in accordance with their respective terms.
9.3 STOCKHOLDER APPROVAL. The Company shall submit this Plan for
approval by its Stockholders within 12 months after the Effective Date. Any
Option exercised or any issuance of Restricted Stock before Stockholder
approval is obtained must be rescinded if Stockholder approval is not obtained
within 12 months after the Effective Date. No shares of Common Stock issued
upon such exercise shall be counted in determining whether such Stockholder
approval is obtained.
ARTICLE 10.
TAX WITHHOLDING
10.1 WITHHOLDING. The Company shall have the power to withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
any applicable Federal, state, and local tax withholding requirements with
respect to any Options exercised or Restricted Stock issued under the Plan. To
the extent permissible under applicable tax, securities and other laws, the
Administrator may, in its sole discretion and upon such terms and conditions
as it may deem appropriate, permit a Participant to satisfy his or her
obligation to pay any such tax, in whole or in part, up to an amount
determined on the basis of the highest marginal tax rate applicable to such
Participant, by (a) directing the Company to apply shares of Common Stock to
which the Participant is entitled as a result of the exercise of an Option or
as a result of the purchase of or lapse of restrictions on Restricted Stock or
(b) delivering to the Company shares of Common Stock owned by the Participant.
'Me shares of Common Stock so applied or delivered in satisfaction of the
Participant's tax withholding obligation shall be valued at their Fair Market
Value as of the date of measurement of the amount of income subject to
withholding.
ARTICLE 11.
MISCELLANEOUS
11.1 BENEFITS NOT ALIENABLE. Other than as provided above, benefits
under the Plan may not be assigned or alienated, whether voluntarily or
involuntarily. Any unauthorized attempt at assignment, transfer, pledge or
other disposition shall be without effect.
11.2 NO ENLARGEMENT OF EMPLOYEE RIGHTS. This Plan is strictly a
voluntary undertaking on the part of the Company and shall not be deemed to
constitute a contract between the Company and any Participant to be
consideration for, or an inducement to, or a condition of, the employment of
any Participant. Nothing contained in the Plan shall be deemed to give the
right to any Participant to be retained as an employee of the Company or any
Affiliated Company or to interfere with the right of the Company or any
Affiliated Company to discharge any Participant at any time.
11.3 APPLICATION OF FUNDS. The proceeds received by the Company from
the sale of Common Stock pursuant to Option Agreements and Stock Purchase
Agreements, except as otherwise provided herein, will be used for general
corporate purposes.
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11.4 INFORMATION TO PARTICIPANTS. The Company shall furnish to all
Participants copies of all annual or other periodic reports that the Company
distributes generally to its Stockholders, including annual financial
statements of the Company.
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EXHIBIT 10.6
KOFAX IMAGE PRODUCTS, INC.
STOCK OPTION AGREEMENT
TYPE OF OPTION (CHECK ONE): [ ] INCENTIVE [ ] NONQUALIFIED
This Stock Option Agreement (the "Agreement") is entered into as of
________, 19___ by and between Kofax Image Products, Inc., a Delaware
corporation (the "Company") and ____________ (the "Optionee") pursuant to the
Company's 1996 Incentive Stock Option, Nonqualified Stock Option and Restricted
Stock Purchase Plan (the "Plan").
1. GRANT OF OPTION. The Company hereby grants to Optionee an option (the
"Option") to purchase all or any portion of ________ shares a total of Common
Stock of the Company at a purchase price of $_________ shares (the "Shares")
_________ of the per share (the "Exercise Price"), subject to the terms and
conditions set forth herein and the provisions of the Plan. If the box marked
"Incentive" above is checked, then this Option is intended to qualify as an
"incentive stock option" as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"). If this Option fails in whole or in part to
qualify as an incentive stock option, or if the box marked "Nonqualified" is
checked, then this Option shall to that extent constitute a nonqualified stock
option.
2. VESTING OF OPTION. The right to exercise this Option shall vest in
installments, and this Option shall be exercisable from time to time in whole or
in part as to any vested installment, as follows:
This Option shall be
On or After: Exercisable as to:
------------ --------------------
(i) ,19 shares
-------------------------- -- ---------------
(ii) ,19 an additional shares
-------------------------- -- ---------------
(iii) ,19 an additional shares
-------------------------- -- ---------------
(iv) ,19 an additional shares
-------------------------- -- ---------------
The right to exercise may vest sooner as provided in Section 12 below.
Notwithstanding the foregoing, no shares shall vest after the date of
termination of Optionee's "Continuous Service" (as defined in Section 3 below),
but this Option shall continue to be exercisable in accordance with Section 3
hereof with respect to that number of shares that have vested as of the date of
termination of Optionee's Continuous Service.
3. TERM OF OPTION. Optionee's right to exercise this Option shall
terminate upon the first to occur of the following:
(a) the expiration of ______________ (___) years from the date
of this Agreement;
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(b) the expiration of three (3) months from the date of
termination of Optionee's Continuous Service if such termination occurs for any
reason other than permanent disability or death; provided, however, that if
Optionee dies during such three-month period the provisions of Section 3(d)
below shall apply;
(c) the expiration of one (1) year from the date of termination
of Optionee's Continuous Service if such termination is due to permanent
disability of the Optionee (as defined in Section 22(e)(3) of the Code);
(d) the expiration of one (1) year from the date of termination
of Optionee's Continuous Service if such termination is due to Optionee's death
or if death occurs during the three-month period following termination of
Optionee's Continuous Service pursuant to Section 3(b) or 3(c) above, as the
case may be; or
(e) a Change in Control of the Company if such options are
terminated pursuant to Section 12.
As used herein, the term "Continuous Service" means (i) employment by
either the Company or any parent or subsidiary corporation of the Company, or by
a corporation or a parent or subsidiary of a corporation issuing or assuming a
stock option in a transaction to which Section 424(a) of the Code applies, which
is uninterrupted except for vacations, illness (except for permanent disability,
as defined in Section 22(e)(3) of the Code) or leaves of absence which are
approved in writing by the Company or any of such other employer corporations,
if applicable, (ii) service as a member of the Board of Directors of the
Company, or (iii) so long as Optionee is engaged as a consultant or service
provider to the Company or other corporation referred to in clause (i) above.
4. EXERCISE OF OPTION. On or after the vesting of any portion of this
Option in accordance with Section 2 above, and until termination of this Option
in accordance with Section 3 above, the portion of this Option which has vested
may be exercised in whole or in part by the Optionee (or, after Optionee's
death, by the successor designated in Section 5 below) upon delivery of the
following to the Company at its principal executive offices:
(a) a written notice of exercise which identifies this Agreement
and states the number of Shares then being purchased (but no fractional Shares
may be purchased);
(b) a check or cash in the amount of the Exercise Price (or
payment of the Exercise Price in such other form of lawful consideration as the
Administrator may approve from time to time under the provisions of Section 5.3
of the Plan);
(c) a check or cash in the amount reasonably requested by the
Company to satisfy the Company's withholding obligations under federal, state or
other applicable tax laws with respect to the taxable income, if any, recognized
by the Optionee in connection with the exercise of this Option (unless the
Company and Optionee shall have made other arrangements for deductions or
withholding from Optionee's wages, bonus or other compensation payable to
Optionee, or by the withholding of Shares issuable upon exercise of this Option
or the delivery of Shares owned by the Optionee in accordance with Section 10.1
of the Plan, provided such arrangements satisfy the
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requirements of applicable tax laws); and
(d) a letter, if requested by the Company, in such form and
substance as the Company may require, setting forth the investment intent of the
Optionee, or person designated in Section 5 below, as the case may be.
5. DEATH OF OPTIONEE; NO ASSIGNMENT. The rights of the Optionee under
this Agreement may not be assigned or transferred except by will or by the laws
of descent and distribution, and may be exercised during the lifetime of the
Optionee only by such Optionee. Any attempt to sell, pledge, assign,
hypothecate, transfer or dispose of this Option in contravention of this
Agreement or the Plan shall be void and shall have no effect. If the Optionee's
Continuous Service terminates as a result of Optionee's death, and provided
Optionee's rights hereunder shall have vested pursuant to Section 2 hereof,
Optionee's legal representative, Optionee's legatee, or the person who acquired
the right to exercise this Option by reason of the death of the Optionee
(individually, a "Successor") shall succeed to the Optionee's rights and
obligations under this Agreement. After the death of the Optionee, only a
Successor may exercise this Option.
6. REPRESENTATIONS AND WARRANTIES OPTIONEE.
(a) Optionee represents and warrants that this Option is being
acquired by Optionee for Optionee's personal account, for investment purposes
only, and not with a view to the distribution, resale or other disposition
thereof.
(b) Optionee acknowledges that the Company may issue Shares upon
the exercise of the Option without registering such Shares under the Securities
Act of 1933, as amended (the "Act"), on the basis of certain exemptions from
such registration requirement. Accordingly, Optionee agrees that Optionee's
exercise of the Option may be expressly conditioned upon Optionee's delivery to
the Company of an investment certificate including such representations and
undertakings as the Company may reasonably require in order to assure the
availability of such exemptions, including a representation that Optionee is
acquiring the Shares for investment and not with a present intention of selling
or otherwise disposing thereof and an agreement by Optionee that the
certificates evidencing the Shares may bear a legend indicating such
non-registration under the Act and the resulting restrictions on transfer.
Optionee acknowledges that, because Shares received upon exercise of an Option
may be unregistered, Optionee may be required to hold the Shares indefinitely
unless they are subsequently registered for resale under the Act or an exemption
from such registration is available.
(c) Optionee acknowledges receipt of a copy of the Plan and
understands that all rights and obligations connected with this Option are set
forth in this Agreement and in the Plan.
7. RESTRICTIVE LEGENDS. Optionee hereby acknowledges that federal
securities laws and the securities laws of the state in which Optionee resides
may require the placement of certain restrictive legends upon the Shares issued
upon exercise of this Option, and Optionee hereby consents to the placing of any
such legends upon certificates evidencing the Shares as the Company, or its
counsel, may deem necessary or advisable.
8. LIMITATION OF COMPANY'S LIABILITY FOR NONISSUANCE. The Company agrees
to use
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its reasonable best efforts to obtain from any applicable regulatory agency such
authority or approval as may be required in order to issue and sell the Shares
to the Optionee pursuant to this Option. Inability of the Company to obtain,
from any such regulatory agency, authority or approval deemed by the Company's
counsel to be necessary for the lawful issuance and sale of the Shares hereunder
and under the Plan shall relieve the Company of any liability in respect of the
nonissuance or sale of such Shares as to which such requisite authority or
approval shall not have been obtained.
9. RIGHT OF FIRST REFUSAL
(a) The Shares acquired pursuant to the exercise of this Option
may be sold by the Optionee only in compliance with the provisions of this
Section 9, and subject in all cases to compliance with the provisions of Section
6(b) hereof. Prior to any intended sale, Optionee shall first give written
notice (the "Offer Notice") to the Company specifying (i) Optionee's bona fide
intention to sell or otherwise transfer such Shares, (ii) the name and address
of the proposed purchaser(s), (iii) the number of Shares the Optionee proposes
to sell (the "Offered Shares"), (iv) the price for which Optionee proposes to
sell the Offered Shares, and (v) all other material terms and conditions of the
proposed sale.
(b) Within 30 days after receipt of the Offer Notice, the Company
or its nominee(s) may elect to purchase all or any portion of the Offered Shares
at the price and on the terms and conditions set forth in the Offer Notice by
delivery of written notice (the "Acceptance Notice") to the Optionee specifying
the number of Offered Shares that the Company or its nominees elect to purchase.
Within 15 days after delivery of the Acceptance Notice to the Optionee, the
Company and/or its nominee(s) shall deliver to the Optionee a check (or, at the
discretion of the Company, such other form of consideration set forth in the
Offer Notice) in the amount of the purchase price of the Offered Shares to be
purchased pursuant to this Section 9, against delivery by the Optionee of a
certificate or certificates representing the Offered Shares to be purchased,
duly endorsed for transfer to the Company or such nominee(s), as the case may
be. If the Company and/or its nominee(s) do not elect to purchase all of the
Offered Shares, the Optionee shall be entitled to sell the balance of the
Offered Shares to the purchaser(s) named in the Offer Notice at the price
specified in the Offer Notice or at a higher price and on the terms and
conditions set forth in the Offer Notice, provided, however, that such sale or
other transfer must be consummated within 60 days from the date of the Offer
Notice and any proposed sale after such 60-day period may be made only by again
complying with the procedures set forth in this Section 9.
(c) The Optionee may transfer all or any portion of the Shares to
a trust established for the sole benefit of the Optionee and/or his or her
spouse or children without such transfer being subject to the right of first
refusal set forth in this Section 9, provided that the Shares so transferred
shall remain subject to the terms and conditions of this Agreement and no
further transfer of such Shares may be made without complying with the
provisions of this Section 9.
(d) Any Successor of Optionee pursuant to Section 5 hereof, and
any transferee of the Shares pursuant to this Section 9, shall hold the Shares
subject to the terms and conditions of this Agreement and no further transfer of
the Shares may be made without complying with the provisions of this Section 9.
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(e) All stock certificates evidencing the Shares shall be
imprinted with a legend substantially as follows:
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS AGAINST TRANSFER, INCLUDING
A RIGHT OF FIRST REFUSAL IN FAVOR OF THE COMPANY, AS SET
FORTH IN A STOCK OPTION AGREEMENT DATED ___________, 19__.
TRANSFER OF THESE SHARES MAY BE MADE ONLY IN COMPLIANCE WITH
THE PROVISIONS OF SAID AGREEMENT, A COPY OF WHICH IS ON FILE
AT THE PRINCIPAL OFFICE OF THE COMPANY."
(f) The rights provided the Company and its nominee(s) under this
Section 9 shall terminate upon the closing of an underwritten public offering of
Shares of the Company's Common Stock pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act").
10. REPURCHASE OPTION.
(a) In the event Optionee ceases Continuous Service with the
Company for any reason (the "Termination"), any Shares acquired or which may
thereafter be acquired pursuant to the exercise of this Option (the "Purchased
Shares") (whether held by Optionee or one or more of Optionee's transferees)
will be subject to repurchase by the Company pursuant to the terms and
conditions set forth in this Section 10 (the "Repurchase Option").
(b) The purchase price for each Purchased Share will be the "Fair
Market Value" (as defined below) for such share as determined on the date of
Termination (the "Repurchase Price").
(c) The Company's board of directors (the "Board") may elect to
purchase all or any portion of the Purchased Shares by delivering written notice
(the "Repurchase Notice") to the holder or holders of the Purchased Shares
within 120 days after the Termination. The Repurchase Notice will set forth the
number of Purchased Shares to be acquired from Optionee, the aggregate
consideration to be paid for such Shares and the time and place for the closing
of the transaction. The number of Purchased Shares to be repurchased by the
Company shall first be satisfied to the extent possible from the Purchased
Shares held by Optionee at the time of delivery of the Repurchase Notice. If the
number of Purchased Shares then held by Optionee is less than the total number
of Purchased Shares which the Company has elected to purchase, the Company shall
purchase the remaining Purchased Shares elected to be purchased from the other
holder(s) of Purchased Shares under this Agreement, pro rata according to the
number of Purchased Shares held by such other holder(s) at the time of delivery
of such Repurchase Notice (determined as nearly as practicable to the nearest
share).
(d) The closing of the purchase of the Purchased Shares pursuant
to the Repurchase Option shall take place on the date designated by the Company
in the Repurchase Notice, which date shall not be more than one (1) month nor
less than five (5) days after the
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delivery of such notice (the "Repurchase Date"). The Company may, at its option,
pay for the Purchased Shares to be purchased pursuant to the Repurchase Option
either (i) in one lump sum payment by delivery of a check or wire transfer on
the Repurchase Date in an amount equal to the Repurchase Price, or (ii) by
delivery on the Repurchase Date of (A) a check or wire transfer in an amount
equal to the sum of the aggregate original cost of the Purchased Shares to be
repurchased, in any event not exceeding in the aggregate the Repurchase Price
(the "Cash Repurchase Payment"), and (B) a promissory note of the Company in a
principal amount equal to the Repurchase Price minus the Cash Repurchase
Payment, bearing interest at the rate of nine percent (9%) per annum
non-compounded commencing on the Repurchase Date and providing for payment of
the principal amount, plus accrued interest, in twelve (12) installments on the
last day of each calendar month for the next twelve (12) months following the
Repurchase Date. In addition, the Company may pay the Repurchase Price for such
Shares by offsetting amounts outstanding under any bona fide debts owed by
Optionee to the Company. The Company will be entitled to receive customary
representations and warranties from the sellers regarding such sale and to
require all sellers' signatures be guaranteed.
(e) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Purchased Shares by the Company shall be subject
to applicable restrictions contained in the applicable state law and in the
Company's and its subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Purchased Shares hereunder which
the Company has otherwise elected to make, the Company may make such repurchases
as soon as it is permitted to do so under such restrictions; provided, however,
that, notwithstanding such restrictions, the Company shall deliver the
Repurchase Notice as provided in paragraph 10(c) above, and shall remain bound
by the terms of such Repurchase Notice until such time as the Purchased Shares
are actually purchased by the Company pursuant to such notice.
(f) For purposes of this Section 10, the Fair Market Value will
be the fair value of the Common Stock determined as provided in Section 2. 1 0
of the Plan.
(g) The rights provided the Company under this Section 10 shall
terminate upon the closing of an underwritten public offering of Shares of the
Company's Common Stock pursuant to an effective registration statement under the
Securities Act.
11. ADJUSTMENTS UPON CHANGES IN CAPITAL STRUCTURE. In the event that the
outstanding Shares of Common Stock of the Company are hereafter increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of a recapitalization, stock split,
combination of shares, reclassification, stock dividend or other similar change
in the capital structure of the Company, then appropriate adjustment shall be
made by the Administrator to the number of Shares subject to the unexercised
portion of this Option and to the Exercise Price per share, in order to
preserve, as nearly as practical, but not to increase, the benefits of the
Optionee under this Option, in accordance with the provisions of Section 4.2 of
the Plan.
12. MERGERS AND OTHER REORGANIZATIONS. In the event that the Company at
any time proposes to enter into any transaction approved by the Board to sell
substantially all of its assets or merge or consolidate with any other entity as
a result of which either the Company is not the surviving corporation or the
Company is the surviving corporation and the ownership of the voting
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power of the Company's capital stock changes by more than 50% as a result of
such transaction, or in the event of a "Recommended Share Purchase Offer" (as
defined below) (a "Change in Control"), this Option, if not already exercisable,
shall concurrent with and conditioned upon the effective date of the proposed
transaction, be accelerated and the Optionee shall have the right to exercise
the Option in respect to any or all of the Shares at such time. In addition, in
the event of a Change in Control, this Option shall terminate upon the effective
date of such transaction unless provision is made in writing in connection with
such transaction for the continuance or assumption of this Option or the
substitution for this Option of a new option of comparable value covering shares
of a successor corporation, with appropriate adjustments as to the number and
kind of shares and the Exercise Price, in which event this Option or the new
option substituted therefor shall continue in the manner and under the terms so
provided. If such provision is not made in such transaction, then the
Administrator shall cause written notice of the proposed transaction to be given
to Optionee not less than fifteen (15) days prior to the anticipated effective
date of the proposed transaction. For purposes of this Section 12, a
"Recommended Share Purchase Offer" shall be a transaction in which an offer is
made to purchase outstanding securities of the Company constituting more than
50% of the voting power of the Company's capital stock, which offer is
recommended to the Company's security holders by the Company's Board.
13. NO EMPLOYMENT CONTRACT CREATED. Neither the granting of this Option
nor the exercise hereof shall be construed as granting to the Optionee any right
with respect to continuance of employment by the Company or any of its
subsidiaries. The right of the Company or any of its subsidiaries to terminate
at will the Optionee's employment at any time (whether by dismissal, discharge
or otherwise), with or without cause, is specifically reserved, subject to any
other written employment agreement to which the Company and Optionee may be a
party.
14. RIGHTS AS SHAREHOLDER. The Optionee (or transferee of this option by
will or by the laws of descent and distribution) shall have no rights as a
shareholder with respect to any Shares covered by this Option until the date of
the issuance of a stock certificate or certificates to him or her for such
Shares, notwithstanding the exercise of this Option.
15. "MARKET STAND-OFF" AGREEMENT. Optionee agrees that, if requested by
the Company or the managing underwriter of any proposed public offering of the
Company's securities, Optionee will not sell or otherwise transfer or dispose of
any Shares held by Optionee without the prior written consent of the Company or
such underwriter, as the case may be, during such period of time, not to exceed
180 days following the effective date of the registration statement filed by the
Company with respect to such offering, as the Company or the underwriter may
specify.
16. INTERPRETATION. This Option is granted pursuant to the terms of the
Plan, and shall in all respects be interpreted in accordance therewith. The
Administrator shall interpret and construe this Option and the Plan, and any
action, decision, interpretation or determination made in good faith by the
Administrator shall be final and binding on the Company and the Optionee. As
used in this Agreement, the term "Administrator" shall refer to the committee of
the Board of Directors of the Company appointed to administer the Plan, and if
no such committee has been appointed, the term Administrator shall mean the
Board of Directors.
17. NOTICES. Any notice, demand or request required or permitted to be
given under
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this Agreement shall be in writing and shall be deemed given when delivered
personally or three (3) days after being deposited in the United States mail, as
certified or registered mail, with postage prepaid, and addressed, if to the
Company, at its principal place of business, Attention: the Chief Financial
Officer, and if to the Optionee, at Optionee's most recent address as shown in
the employment or stock records of the Company.
18. ANNUAL AND OTHER PERIODIC REPORTS. During the term of this
Agreement, the Company will furnish to the Optionee copies of all annual and
other periodic financial and informational reports that the Company distributes
generally to its shareholders.
19. SEVERABILITY. Should any provision or portion of this Agreement be
held to be unenforceable or invalid for any reason, the remaining provisions and
portions of this Agreement shall be unaffected by such holding.
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be deemed one instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
KOFAX IMAGE PRODUCTS, INC. "OPTIONEE"
By:
-------------------------- --------------------------------
Its: (Signature)
--------------------------
--------------------------------
(Type or print name)
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EXHIBIT 10.8
KOFAX IMAGE PRODUCTS, INC.
1997 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
----------------------
THIS 1997 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS (the "Plan") is
hereby established by KOFAX IMAGE PRODUCTS, INC., a Delaware corporation (the
"Company"), approved by the Company's Board of Directors this ____ day of
__________, 1997, and effective as of , 1997 (the "Effective Date").
ARTICLE I
PURPOSE
-------
1.1 PURPOSE. The Kofax Image Products, Inc. 1997 Stock Option Plan for
Non-Employee Directors is intended to provide incentive to directors of the
Company who are not employees of the Company, or a parent or subsidiary
corporation, to encourage such directors to acquire a proprietary interest in
the Company and to continue their association with the Company.
ARTICLE II
DEFINITIONS
-----------
2.1 ANNUAL MEETING. "Annual Meeting" means the Company's Annual Meeting
of Stockholders held at a time and date designated by the Board of Directors, or
any postponement or adjournment thereof.
2.2 BOARD. "Board" means the Board of Directors of the Company.
2.3 CODE. "Code" means the Internal Revenue Code of 1986, as amended.
2.4 COMPANY. "Company" means Kofax Image Products, Inc., and its
majority-owned subsidiaries and wholly-owned subsidiaries of its majority-owned
subsidiaries, as well as any parent corporation of Kofax Image Products, Inc.
2.5 COMPANY STOCK. "Company Stock" means shares of the common stock of
the Company.
2.6 DISABILITY. "Disability" means the condition, as determined by the
Company, of a Participant who is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to last for a continuous period of not less than twelve
months. The Company's determination of Disability or the absence thereof shall
be conclusive and binding on all interested parties.
<PAGE> 2
2.7 EXERCISE PRICE. "Exercise Price" means the price per share of
Company Stock at which an Option may be exercised.
2.8 FAIR MARKET VALUE. "Fair Market Value" means the value of one share
of Company Stock, determined as follows:
(a) If the Company Stock is not listed or admitted to trading on a
stock exchange or the NASDAQ National Market System, the last sale price of the
Company Stock in the over-the-counter market on the date of valuation; or
(b) If the Company Stock is then listed or admitted to trading on
any stock exchange or the NASDAQ National Market System, the closing sale price
on the date of valuation on the principal stock exchange on which the Company
Stock is then listed or admitted to trading.
If no closing sale price is quoted on such day, or if no sale takes
place on such day on such principal exchange or the NASDAQ National Market
System, as the case may be, then the closing sale price on the over-the-counter
market or the closing sale price of the Company Stock on such exchange or the
NASDAQ National Market System on the next preceding day on which a sale occurred
or closing sale price was reported, as the case may be, shall be the Fair Market
Value. During such times as there is not a market price available, the Fair
Market Value shall be determined by the Company in good faith, which
determination shall be conclusive and binding on all interested parties.
2.9 OPTION. "Option" means any stock option granted pursuant to the
Plan.
2.10 OPTION AGREEMENT. "Option Agreement" means the written agreement
entered into between the Company and the Optionee with respect to which an
Option or Options are granted under the Plan.
2.11 OPTIONEE. "Optionee" means a Participant who has received an
Option.
2.12 PARTICIPANT. "Participant" means a member of the Board who is
neither an employee (within the meaning of Code Section 3401 and the regulations
thereunder) of the Company nor a prepaid consultant of the Company.
2.13 PLAN. "Plan" means Kofax Image Products, Inc. 1997 Stock Option
Plan for Non-Employee Directors.
2.14 PURCHASE PRICE. "Purchase Price" means the Exercise Price times
the number of whole shares of Company Stock with respect to which an Option is
exercised.
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ARTICLE III
ELIGIBILITY
-----------
3.1 ELIGIBILITY. The persons who shall be eligible to receive Options
under the Plan shall be all directors of the Company who are neither employees
nor paid consultants of the Company or any parent or subsidiary corporation of
the Company.
ARTICLE IV
ADOPTION AND EFFECTIVE DATE OF PLAN
-----------------------------------
4.1 EFFECTIVE DATE. The Plan shall be effective on the Effective Date,
subject to approval of the stockholders of the Company, and shall terminate ten
years after such Effective Date. Notwithstanding the above, the Plan shall
become effective without approval of the stockholders of the Company on:
(a) The date on which any "person" or "group" of "persons" (as the
terms "person" and "group" are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 and the rules thereunder), acquires beneficial
ownership, directly or indirectly, of securities of the Company representing 25%
or more of the combined voting power of the then outstanding securities of the
Company (whether by purchase or acquisition of such securities or voting rights
with respect thereto, or by agreement to act in concert with respect to the
voting of such securities or otherwise); or
(b) The date on which a majority of the Board of Directors of the
Company shall be comprised of persons who were not elected to such office as
part of the "Company Nominated Slate" of directors (i.e., the slate of nominees
proposed by the Board of Directors in office immediately prior to the election
or other change in directors).
ARTICLE V
COMPANY STOCK
-------------
5.1 GRANT OF COMPANY STOCK. The stock subject to Options granted under
the Plan shall be shares of the Company's authorized but unissued or reacquired
Company Stock. The aggregate number of shares which may be issued under Options
exercised under the Plan shall not exceed ___________ shares. The number of
shares subject to Options outstanding under the Plan at any time may not exceed
the number of shares remaining available for issuance under the Plan. In the
event that any outstanding Option under the Plan for any reason expires or is
terminated, the shares allocable to the unexercised portion of such Option may
again be subjected to an Option under the Plan. The limitations established by
this Section shall be subject to adjustment upon the occurrence of the events
specified and in the manner provided in Article IX.
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ARTICLE VI
TIMING AND SIZE OF OPTION GRANTS
--------------------------------
6.1 INITIAL GRANT OF OPTIONS. Each director Participant in service as
of August 31, 1997 shall be granted an option as of such date covering
___________ shares of the Company Stock ("Options"). Options shall vest and
become exercisable at the rate of 25% for each full twelve calendar month
period, commencing on the date of grant and continuing thereafter for so long as
the Participant continues as a director.
6.2 SUBSEQUENT GRANTS OF OPTIONS. Each director Participant who does
not qualify for the grant of an Option under Section 6.1 above shall be granted
an Option covering _______ shares of the Company's stock as of the date such
person becomes a director. In addition, each director Participant who has
received Options hereunder, whether pursuant to the preceding sentence or
Section 6.1 hereof, shall receive an additional Option covering _________ shares
as of the date the Option previously granted to such director becomes fully
vested (other than accelerated vesting as provided in Section 9.2 hereof),
provided that as of such date (i) this Plan shall remain in effect, and (ii)
such person is a qualifying Participant hereunder. All Options granted hereunder
shall vest and become exercisable at the rate of 25% for each twelve calendar
months as a director, commencing on the date of grant (each Participant shall be
25% vested twelve months following the grant as long as the Participant
continues as a director).
ARTICLE VII
TERMS AND CONDITIONS OF OPTIONS
-------------------------------
7.1 EXERCISE OF OPTION. Any Option granted pursuant to the Plan shall
be evidenced by an Option Agreement in such form as the Company shall from time
to time determine, which Option Agreement shall comply with and be subject to
the terms and conditions of this Article. Any Optionee may exercise any vested
Option by executing and delivering to the Chief Financial Officer of the Company
the Notice of Exercise of Stock Option.
7.2 OPTIONEE'S AGREEMENT. Each Optionee shall agree to remain a
director and to render to the Company his or her services for the remainder of
the term for which he or she was elected or hired, but such agreement shall not
impose upon the Company any obligation to retain the Optionee as a director for
any period.
7.3 NUMBER OF SHARES. Each Option Agreement shall state the number of
shares to which it pertains and shall provide for the adjustment thereof in
accordance with the provisions of Article IX.
7.4 EXERCISE PRICE. Each Option shall state the Exercise Price, which
price shall be 100% of the Fair Market Value on the date of grant of the Option.
7.5 MEDIUM AND TIME OF PAYMENT. The Purchase Price shall be payable in
full upon the exercise of the Option. The Purchase Price may be paid in cash, by
check, or, with the consent of the Company, by delivery of Company Stock of the
Company owned by Optionee. No share of
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Company Stock shall be issued upon the exercise of an Option until full payment
therefor has been made.
7.6 WITHHOLDING TAXES. In the event the Company determines that it is
required to withhold state or federal income tax or FICA tax as a result of the
exercise of any Option, it may require the Optionee to make arrangements
satisfactory to the Company to enable it to satisfy such withholding
requirements as a condition to the exercise of the Option, including the
cancellation of a portion of the Option.
7.7 TERM AND EXERCISE OF OPTIONS. Each Option Agreement shall state the
time or times when the Option so evidenced becomes exercisable. Except as
provided in Section 6.1 with respect to initial grants, Options shall vest and
become exercisable at the rate of 25% of the shares covered thereby per each
twelve consecutive calendar month period during which the Participant continues
as a director, commencing on the date of grant and continuing through the fourth
anniversary of the date of grant. All Options under this Plan expire not later
than the tenth anniversary of the date of grant.
7.8 TERMINATION OF STATUS AS DIRECTOR. In the event that an Optionee
shall cease to be a director of the Company for any reason, including death or
Disability, such Optionee or his or her heirs and personal representatives, as
the case may be, shall have the right to exercise his or her Options at any time
within six months after such termination to the extent that, at the date of such
termination, the Optionee's right to exercise such Options had vested pursuant
to the terms hereof and of the Option Agreement and had not previously been
exercised. An Optionee's right to exercise the then unvested portion of Options
shall terminate as of the date of termination of the Optionee's status as a
director.
7.9 NONTRANSFERABILITY OF OPTIONS. During the lifetime of an Optionee,
his or her Options shall be exercisable only by the Optionee and shall not be
assignable or transferable. In the event of the Optionee's death, no Option
shall be transferable by the Optionee otherwise than by will or by the laws of
descent and distribution.
7.10 RIGHTS AS A STOCKHOLDER. An Optionee or a transferee of an
Optionee shall have no rights as a stockholder with respect to any shares
covered by his or her Option until the date of the issuance of a stock
certificate for such shares. No adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Article IX.
7.11 REGISTRATION RIGHTS. An Option may provide for the right of an
Optionee to require the Company to register the shares issuable on exercise of
an Option and the right to include such shares in other registrations of the
Company.
7.12 OTHER PROVISIONS. An Option Agreement authorized under the Plan
shall contain such other provisions not inconsistent with the terms of the Plan,
including, without limitation, restrictions upon the exercise of the Option.
5
<PAGE> 6
7.13 USE OF EXERCISE PROCEEDS. The proceeds received by the Company
from the sale of Company Stock pursuant to the exercise of Options will be used
for general corporate purposes.
ARTICLE VIII
ADMINISTRATION
--------------
8.1 PLAN ADMINISTRATION.
(a) Authority to control and manage the operation and
administration of the Plan shall be vested in the Company. The Company shall
have all powers necessary to supervise the administration of the Plan and
control its operations.
(b) In addition to any powers and authority conferred on the
Company elsewhere in the Plan or by law, the Company shall have the following
powers and authority:
(i) To designate agents to carry out responsibilities relating
to the Plan;
(ii) To administer, interpret, construe and apply this Plan and
to answer all questions which may arise or which may be raised under
this Plan by a Participant, his beneficiary or any other person
whatsoever;
(iii) To establish rules and procedures from time to time for
the conduct of its business and for the administration and effectuation
of its responsibilities under the Plan; and
(iv) To perform or cause to be performed such further acts as
it may deem to be necessary, appropriate, or convenient for the
operation of the Plan.
(c) Any action taken in good faith by the Company in the exercise
of authority conferred upon it by this Plan shall be conclusive and binding upon
a Participant and his beneficiaries. All discretionary powers conferred upon the
Company shall be absolute.
8.2 LIMITATION ON LIABILITY. No Employee of the Company or member of
the Board of Directors for the Company shall be subject to any liability with
respect to his duties under the Plan unless the person acts fraudulently or in
bad faith. To the extent permitted by law, the Company shall indemnify each
member of the Board of Directors, and any other Employee of the Company with
duties under the Plan who was or is a party, or is threatened to be made a
party, to any threatened, pending or completed proceeding, whether civil,
criminal, administrative, or investigative, by reason of the person's conduct in
the performance of his duties under the Plan.
6
<PAGE> 7
ARTICLE IX
CHANGES IN CAPITAL STRUCTURE
----------------------------
9.1 CHANGES IN CAPITALIZATION OF THE COMPANY. Subject to any required
action by the stockholders of the Company, the number of shares of Company Stock
covered by each option under the Plan which has not yet been exercised and the
number of shares of Company Stock which have been authorized for issuance under
the Plan but have not yet been placed under option or which have been returned
to the Plan upon the cancellation of an option, as well as the option price per
share of Company Stock covered by each option under the Plan which has not yet
been exercised, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Company Stock resulting from a stock split,
stock dividend, spin-off, reorganization, recapitalization, merger,
consolidation, exchange of shares or the like. Such adjustment shall be made by
the Board of Directors for the Company, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issue by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Company
Stock subject to option.
9.2 MERGER OF COMPANY. In the event that the Company at any time
proposes to merge into, consolidate with or to enter into any other
reorganization (including the sale of substantially all of its assets or a
"reverse" merger in which the Company is the surviving entity pursuant to which
the ownership of the outstanding voting capital stock shall change by at least
fifty percent), the Plan and any unexercised Options granted under the Plan
shall terminate, unless provision is made in writing in connection with such
transaction for the continuance of the Plan and for the assumption of options
theretofore granted, or the substitution for such options of new options
covering the shares of a successor corporation, with appropriate adjustments as
to number and kind of shares and prices, in which event the Plan and the options
theretofore granted or the new options substituted therefor, shall continue in
the manner and under the terms so provided. If such provision is not made in
such transaction for the continuance of the Plan and the assumption of options
theretofore granted or the substitution for such options of new options covering
the shares of a successor corporation, then the Company shall cause written
notice of the proposed transaction to be given to the persons holding Options
not less than 10 days prior to the anticipated effective date of the proposed
transaction, and all Options shall be accelerated and, prior to the effective
date of the proposed transaction, each Optionee shall have the right to exercise
all Options held by him or her in respect of any or all shares of Company Stock
then subject thereto.
9.3 LIMITATION ON OPTION. The grant of an Option pursuant to the Plan
shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.
7
<PAGE> 8
ARTICLE X
SECURITIES LAW REQUIREMENTS
---------------------------
10.1 SECURITIES LAWS COMPLIANCE. Notwithstanding any other provisions
of the Plan or agreements made pursuant thereto, the Company shall not be
required to issue or deliver any certificate or certificates for shares of stock
upon the exercise of any Option prior to fulfillment of all of the following
conditions:
(a) The listing or approval for listing upon notice of issuance of
such shares on any securities exchange as may at the time be the market for the
Company Stock;
(b) Any registration or other qualification of such shares under
any state or federal law or regulation, or the maintaining in effect of any such
registration or other qualification which the Company shall, in its absolute
discretion upon the advice of counsel, deem necessary or advisable; and
(c) The obtaining of any other consent, approval or permit from any
state or federal governmental agency which the Company shall, in its absolute
discretion upon the advice of counsel, determine to be necessary or advisable.
ARTICLE XI
MISCELLANEOUS MATTERS
---------------------
11.1 AMENDMENT AND TERMINATION. Since future conditions affecting the
Company cannot be anticipated or foreseen, the Company reserves the right to
amend, modify, or terminate the Plan at any time. Notwithstanding the foregoing,
no such amendment or termination shall affect options previously granted, nor
may an amendment make any change in any option previously granted which
adversely affects the rights of any Participant. In addition, no amendment may
be made without prior approval of the stockholders of the Company if such
amendment would:
(a) Increase the number of shares of Company Stock that may be
issued under the Plan;
(b) Decrease the price at which Options may be granted;
(c) Amend this Section to defeat its purpose; or
(d) Amend the Plan more often than once in any six month period.
11.2 STOCKHOLDER APPROVAL. Continuance of the Plan and the
effectiveness of any option granted hereunder shall be subject to approval by
the affirmative vote or written consent of the holders of a majority of the
outstanding shares of stock of the Company present or represented and entitled
to vote thereon, within twelve months before or after the date the Plan is
adopted by the Board.
8
<PAGE> 9
11.3 BENEFITS NOT ALIENABLE. Other than as provided above, benefits
under the Plan may not be assigned or alienated, whether voluntarily or
involuntarily. Any attempt at assignment, transfer, pledge or other disposition
shall be without effect.
11.4 NO ENLARGEMENT OF DIRECTOR RIGHTS. This Plan is strictly a
voluntary undertaking on the part of the Company and shall not be deemed to
constitute a contract between the Company and any Optionee or to be
consideration for, or an inducement to, or a condition of, the employment of any
Optionee. Nothing contained in the Plan shall be deemed to give the right to any
Optionee to be retained as a director of the Company or to interfere with the
right of the Company to discharge any Optionee at any time.
11.5 GOVERNING LAW. To the extent not preempted by federal law, all
legal questions pertaining to the Plan shall be determined in accordance with
the laws of the State of California.
9
<PAGE> 1
EXHIBIT 10.10
KOFAX IMAGE PRODUCTS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
This 1997 EMPLOYEE STOCK PURCHASE PLAN (the "Plan") is hereby
established by KOFAX IMAGE PRODUCTS, INC., a Delaware corporation (the
"Company") effective August __, 1997 (the "Effective Date").
ARTICLE 1
PURPOSE OF THE PLAN
-------------------
1.1 PURPOSE. The Company has determined that it is in its best interest
to provide incentives to attract and retain employees and to increase employee
morale by providing a program through which employees of the Company, and of
such of the Company's subsidiaries as the Company's Board of Directors (the
"Board of Directors") may from time to time designate (each a "Designated
Subsidiary", and collectively, "Designated Subsidiaries"), may acquire a
proprietary interest in the Company through the purchase of shares of the common
stock of the Company ("Company Stock"). The Plan is hereby established by the
Company to permit employees to subscribe for and purchase directly from the
Company shares of the Company Stock at a discount from the market price, and to
pay the purchase price in installments by payroll deductions. The Plan is
intended to qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986, as amended from time to time (the "Code").
The provisions of the Plan are to be construed in a matter consistent with the
requirements of Section 423 of the Code. The Plan is not intended to be an
employee benefit plan under the Employee Retirement Income Security Act of 1974,
and therefore is not required to comply with that Act.
ARTICLE 2
DEFINITIONS
-----------
2.1 COMPENSATION. "Compensation" means the amount indicated on the Form
W-2, including any elective deferrals with respect to a plan of the Company
qualified under either Section 125 or Section 401(a) of the Code, issued to an
employee by the Company.
2.2 EMPLOYEE. "Employee" means each person currently employed by the
Company or any of its Designated Subsidiaries, any portion of whose income is
subject to withholding of income tax or for whom Social Security retirement
contributions are made by the Company or any Designated Subsidiary.
2.3 EFFECTIVE DATE. "Effective Date" means the effective date of the
Plan set forth above.
2.4 5% OWNER. "5% Owner" means an Employee who, immediately after the
grant of any rights under the Plan, would own Company Stock or hold outstanding
options to purchase Company Stock possessing 5% or more of the total combined
voting power of all classes of stock of the
<PAGE> 2
Company. For purposes of this Section, the ownership attribution rules of Code
Section 425(d) shall apply.
2.5 GRANT DATE. "Grant Date" means the first day of each Offering
Period (January 1, April 1, July 1 and October 1) under the Plan. However, for
the first Offering Period, the Grant Date shall be the Effective Date.
2.6 PARTICIPANT. "Participant" means an Employee who has satisfied the
eligibility requirements of Section 3.1 and has become a participant in the Plan
in accordance with Section 3.2.
2.7 OFFERING PERIOD. "Offering Period" means the quarterly periods from
January 1 through March 31, April 1 through June 30, July 1 through September 30
and October 1 through December 31 of each calendar year. However, the first
Offering Period shall commence on the Effective Date and end December 31, 1997
regardless of whether such initial Offering Period is more or less than three
months.
2.8 PURCHASE DATE. "Purchase Date" means the last day of each Offering
Period (March 31, June 30, September 30 or December 31).
ARTICLE 3
ELIGIBILITY AND PARTICIPATION
-----------------------------
3.1 ELIGIBILITY. Each Employee of the Company, or any Designated
Subsidiary, who, on the Grant Date, is customarily engaged on a
regularly-scheduled basis of more than twenty (20) hours per week and who has
been employed for at least ninety (90) days (or, for the initial Offering Period
only, such Employees who are employed on the Effective Date) in the rendition of
personal services to the Company, or any Designated Subsidiary, may become a
Participant in the Plan on the Grant Date coincident with or next following his
satisfaction of such requirements of employment with the Company or any
Designated Subsidiary.
3.2 PARTICIPATION. An Employee who has satisfied the eligibility
requirements of Section 3.1 may become a Participant in the Plan upon his
completion and delivery to the Human Resources Department of the Company of a
stock purchase agreement provided by the Company (the "Stock Purchase
Agreement") authorizing payroll deductions. Payroll deductions for a Participant
shall commence on the Grant Date coincident with or next following the filing of
the Participant's Stock Purchase Agreement and shall remain in effect until
revoked by the Participant by the filing of a notice of withdrawal from the Plan
under Article 8 or by the filing of a new Stock Purchase Agreement providing for
a change in the Participant's payroll deduction rate under Section 5.2.
3.3 SPECIAL RULES. Under no circumstances shall:
a. A 5% Owner be granted a right to purchase Company Stock under
the Plan;
2
<PAGE> 3
b. A Participant be entitled to purchase Company Stock under the
Plan which, when aggregated with all other employee stock purchase plans of the
Company, exceed an amount equal to the Aggregate Maximum. "Aggregate Maximum"
means an amount equal to $15,000 worth of Company Stock (determined using the
fair market value of such Company Stock at each applicable Grant Date) during
each calendar year; or
c. The number of shares of Company Stock purchasable by a
Participant on any Purchase Date shall not exceed 2,000 shares, subject to
periodic adjustments under Section 10.4.
ARTICLE 4
OFFERING PERIODS
----------------
4.1 OFFERING PERIODS. The initial grant of the right to purchase
Company Stock under the Plan shall occur on the Effective Date and terminate on
September 30, 1997. Thereafter, the Plan shall provide for Offering Periods
commencing on each Grant Date and terminating on the next following Purchase
Date.
ARTICLE 5
PAYROLL DEDUCTIONS
------------------
5.1 PARTICIPANT ELECTION. Upon completion of the Stock Purchase
Agreement, each Participant shall designate the amount of payroll deductions to
be made from his or her paycheck to purchase Company Stock under the Plan. The
amount of payroll deductions shall be designated in whole percentages of
Compensation, not to exceed 15%. The amount so designated upon the Stock
Purchase Agreement shall be effective as of the next Grant Date and shall
continue until terminated or altered in accordance with Section 5.2 below.
5.2 CHANGES IN ELECTION. A Participant may terminate participation in
the Plan at any time prior to the close of an Offering Period as provided in
Article 8. A Participant may decrease the rate of payroll deductions once during
each Offering Period by completing and delivering to the Human Resources
Department of the Company a new Stock Purchase Agreement setting forth the
desired change. A Participant may also terminate payroll deductions and have
accumulated deductions for the Offering Period applied to the purchase of
Company Stock as of the next Purchase Date by completing and delivering to the
Human Resources Department a new Stock Purchase Agreement setting forth the
desired change. Any change under this Section shall become effective on the next
payroll period (to the extent practical under the Company's payroll practices)
following the delivery of the new Stock Purchase Agreement.
5.3 PARTICIPANT ACCOUNTS. The Company shall establish and maintain a
separate account ("Account") for each Participant. The amount of each
Participant's payroll deductions shall be credited to his Account. No interest
will be paid or allowed on amounts credited to a Participant's Account. All
payroll deductions received by the Company under the Plan are general corporate
assets of the
3
<PAGE> 4
Company and may be used by the Company for any corporate purpose. The Company is
not obligated to segregate such payroll deductions.
ARTICLE 6
GRANT OF PURCHASE RIGHTS
------------------------
6.1 RIGHT TO PURCHASE SHARES. On each Grant Date, each Participant
shall be granted a right to purchase at the price determined under Section 6.2
that number of shares and partial shares of Company Stock that can be purchased
or issued by the Company based upon that price with the amounts held in his
Account, subject to the limits set forth in Section 3.3. In the event that there
are amounts held in a Participant's Account that are not used to purchase
Company Stock, such amounts shall remain in the Participant's Account and shall
be eligible to purchase Company Stock in any subsequent Offering Period.
6.2 PURCHASE PRICE. The purchase price for any Offering Period shall be
the lesser of:
a. 90% of the Fair Market Value of Company Stock on the Grant Date;
or
b. 90% of the Fair Market Value of Company Stock on the Purchase
Date.
6.3 FAIR MARKET VALUE. "Fair Market Value" means for the initial Grant
Date (which is the Effective Date), the price per share at which the Common
Stock is to be sold to the public in the initial public offering of the Common
Stock. For any subsequent date thereafter, "Fair Market Value" shall mean the
value of one share of Company Stock, determined as follows:
a. If the Company Stock is then listed or admitted to trading on
the Nasdaq National Market System or a stock exchange which reports closing sale
prices, the Fair Market Value shall be the closing sale price on the date of
valuation on the Nasdaq National Market System or principal stock exchange on
which the Company Stock is then listed or admitted to trading, or, if no closing
sale price is quoted or no sale takes place on such day, then the Fair Market
Value shall be the closing sale price of the Company Stock on the Nasdaq
National Market System or such exchange on the next preceding day on which a
sale occurred.
b. If the Company Stock is not then listed or admitted to trading
on the Nasdaq National Market System or a stock exchange which reports closing
sale prices, the Fair Market Value shall be the average of the closing bid and
asked prices of the Company Stock in the over-the-counter market on the date of
valuation.
c. If neither (a) nor (b) is applicable as of the date of
valuation, then the Fair Market Value shall be determined by the Administrator
in good faith using any reasonable method of valuation, which determination
shall be conclusive and binding on all interested parties.
4
<PAGE> 5
ARTICLE 7
PURCHASE OF STOCK
-----------------
7.1 PURCHASE OF COMPANY STOCK. Absent an election by the Participant to
terminate and have his or her Account returned, on each Purchase Date, the Plan
shall purchase on behalf of each Participant the maximum number of whole shares
of Company Stock at the purchase price determined under Section 6.2 above as can
be purchased with the amounts held in each Participant's Account. In the event
that there are amounts held in a Participant's Account that are not used to
purchase Company Stock, all such amounts shall be held in the Participant's
Account and carried forward to the next Offering Period.
7.2 DELIVERY OF COMPANY STOCK.
a. Company Stock acquired under the Plan shall be issued directly
to a contract administrator ("Administrator") engaged by the Company to
administer the Plan under Article 9. All Company Stock so issued ("Plan Held
Stock") shall be held in the name of the Administrator for the benefit of the
Plan. The Administrator shall maintain accounts for the benefit of the
Participants which shall reflect each Participant's interest in the Plan Held
Stock. Such accounts shall reflect the number of whole and partial shares of
Company Stock that are being held by the Administrator for the benefit of each
Participant.
b. Where Company Stock is issued under this paragraph, only full
shares of stock will be issued to a Participant. The time of issuance and
delivery of shares may be postponed for such period as may be necessary to
comply with the registration requirements under the Securities Act of 1933, as
amended, the listing requirements of any securities exchange on which the
Company Stock may then be listed, or the requirements under other laws or
regulations applicable to the issuance or sale of such shares.
ARTICLE 8
WITHDRAWAL
----------
8.1 IN SERVICE WITHDRAWALS. At any time prior to the Purchase Date of
an Offering Period, any Participant may withdraw the amounts held in his Account
by executing and delivering to the Human Resources Department for the Company
written notice of withdrawal on the form provided by the Company. In such a
case, the entire balance of the Participant's Account shall be paid to the
Participant, without interest, as soon as is practicable. Upon such
notification, the Participant shall cease to participate in the Plan for the
remainder of the Offering Period in which the notice is given. Any Employee who
has withdrawn under this Section shall be excluded from participation in the
Plan for the remainder of the Offering Period in which the withdrawal occurred
and the next succeeding Offering Period, but may then be reinstated as a
Participant thereafter by executing and delivering a new Stock Purchase
Agreement to the Human Resources Department of the Company.
5
<PAGE> 6
8.2 TERMINATION OF EMPLOYMENT.
a. In the event that a Participant's employment with the Company
terminates for any reason, the Participant shall cease to participate in the
Plan on the date of termination. As soon as is practical following the date of
termination, the entire balance of the Participant's Account shall be paid to
the Participant or his beneficiary, without interest.
b. A Participant may file a written designation of a beneficiary
who is to receive any shares of Company Stock purchased under the Plan or any
cash from the Participant's Account in the event of his or her death subsequent
to a Purchase Date, but prior to delivery of such shares and cash. In addition,
a Participant may file a written designation of a beneficiary who is to receive
any cash from the Participant's Account under the Plan in the event of his death
prior to a Purchase Date under paragraph (a) above.
c. Any beneficiary designation under paragraph (b) above may be
changed by the Participant at any time by written notice. In the event of the
death of a Participant, the Committee may rely upon the most recent beneficiary
designation it has on file as being the appropriate beneficiary. In the event of
the death of a Participant where no valid beneficiary designation exists or the
beneficiary has predeceased the Participant, the Committee shall deliver any
cash or shares of Company Stock to the executor or administrator of the estate
of the Participant, or if no such executor or administrator has been appointed
to the knowledge of the Committee, the Committee, in its sole discretion, may
deliver such shares of Company Stock or cash to the spouse or any one or more
dependents or relatives of the Participant, or if no spouse, dependent or
relative is known to the Committee, then to such other person as the Committee
may designate.
ARTICLE 9
PLAN ADMINISTRATION
-------------------
9.1 PLAN ADMINISTRATION.
a. Authority to control and manage the operation and administration
of the Plan shall be vested in the Board of Directors (the "Board") for the
Company, or a committee ("Committee") thereof. The Board or Committee shall have
all powers necessary to supervise the administration of the Plan and control its
operations.
b. In addition to any powers and authority conferred on the Board
or Committee elsewhere in the Plan or by law, the Board or the Committee shall
have the following powers and authority:
(i) To designate agents to carry out responsibilities relating
to the Plan;
(ii) To administer, interpret, construe and apply this Plan and
to answer all questions which may arise or which may be raised under this Plan
by a Participant, his beneficiary or any other person whatsoever;
6
<PAGE> 7
(iii) To establish rules and procedures from time to time for
the conduct of its business and for the administration and effectuation of its
responsibilities under the Plan; and
(iv) To perform or cause to be performed such further acts as it
may deem to be necessary, appropriate, or convenient for the operation of the
Plan.
c. Any action taken in good faith by the Board or Committee in the
exercise of authority conferred upon it by this Plan shall be conclusive and
binding upon a Participant and his beneficiaries. All discretionary powers
conferred upon the Board shall be absolute.
9.2 LIMITATION ON LIABILITY. No Employee of the Company nor member of
the Board or Committee shall be subject to any liability with respect to his
duties under the Plan unless the person acts fraudulently or in bad faith. To
the extent permitted by law, the Company shall indemnify each member of the
Board or Committee, and any other Employee of the Company with duties under the
Plan who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed proceeding, whether civil, criminal,
administrative, or investigative, by reason of the person's conduct in the
performance of his duties under the Plan.
ARTICLE 10
COMPANY STOCK
-------------
10.1 LIMITATIONS ON PURCHASE OF SHARES. The maximum number of shares of
Company Stock that shall be made available for sale under the Plan shall be
_______________ shares, subject to adjustment under Section 10.4 below. The
shares of Company Stock to be sold to Participants under the Plan will be issued
by the Company. If the total number of shares of Company Stock that would
otherwise be issuable pursuant to rights granted pursuant to Section 6.1 of the
Plan at the Purchase Date exceeds the number of shares then available under the
Plan, the Company shall make a pro rata allocation of the shares remaining
available in as uniform and equitable manner as is practicable. In such event,
the Company shall give written notice of such reduction of the number of shares
to each participant affected thereby and any unused payroll deductions shall be
returned to such participant if necessary.
10.2 VOTING COMPANY STOCK. The Participant will have no interest or
voting right in shares to be purchased under Section 6.1 of the Plan until such
shares have been purchased.
10.3 REGISTRATION OF COMPANY STOCK. Shares to be delivered to a
Participant under the Plan will be registered in the name of the Participant
unless designated otherwise by the Participant.
10.4 CHANGES IN CAPITALIZATION OF THE COMPANY. Subject to any required
action by the stockholders of the Company, the number of shares of Company Stock
covered by each right under the Plan which has not yet been exercised and the
number of shares of Company Stock which have been authorized for issuance under
the Plan but have not yet been placed under rights or which have been returned
to the Plan upon the cancellation of a right, as well as the Purchase Price per
share of Company Stock covered by each right under the Plan which has not yet
been exercised, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Company Stock
7
<PAGE> 8
resulting from a stock split, stock dividend, spin-off, reorganization,
recapitalization, merger, consolidation, exchange of shares or the like. Such
adjustment shall be made by the Board of Directors for the Company, whose
determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Company Stock subject to any right granted
hereunder.
10.5 MERGER OF COMPANY. In the event that the Company at any time
proposes to merge into, consolidate with or enter into any other reorganization
pursuant to which the Company is not the surviving entity (including the sale of
substantially all of its assets or a "reverse" merger in which the Company is
the surviving entity), the Plan shall terminate, unless provision is made in
writing in connection with such transaction for the continuance of the Plan and
for the assumption of rights theretofore granted, or the substitution for such
rights of new rights covering the shares of a successor corporation, with
appropriate adjustments as to number and kind of shares and prices, in which
event the Plan and the rights theretofore granted or the new rights substituted
therefor, shall continue in the manner and under the terms so provided. If such
provision is not made in such transaction for the continuance of the Plan and
the assumption of rights theretofore granted or the substitution for such rights
of new rights covering the shares of a successor corporation, then the Board of
Directors or its committee shall cause written notice of the proposed
transaction to be given to the persons holding rights not less than 10 days
prior to the anticipated effective date of the proposed transaction, and,
concurrent with the effective date of the proposed transaction, such rights
shall be exercised automatically in accordance with Section 7.1 as if such
effective date were a Purchase Date of the applicable Offering Period unless a
Participant withdraws from the Plan as provided in Section 8.1.
ARTICLE 11
MISCELLANEOUS MATTERS
---------------------
11.1 AMENDMENT AND TERMINATION. The Plan shall terminate on August ___,
2007. Since future conditions affecting the Company cannot be anticipated or
foreseen, the Company reserves the right to amend, modify, or terminate the Plan
at any time. Upon termination of the Plan, all benefits shall become payable
immediately. Notwithstanding the foregoing, no such amendment or termination
shall affect rights previously granted, nor may an amendment make any change in
any right previously granted which adversely affects the rights of any
Participant. In addition, no amendment may be made without prior approval of the
stockholders of the Company if such amendment would:
a. Increase the number of shares of Company Stock that may be
issued under the Plan;
b. Materially modify the requirements as to eligibility for
participation in the Plan; or
c. Materially increase the benefits which accrue to Participants
under the Plan.
8
<PAGE> 9
11.2 STOCKHOLDER APPROVAL. Continuance of the Plan and the
effectiveness of any right granted hereunder shall be subject to approval by the
stockholders of the Company, within twelve months before or after the date the
Plan is adopted by the Board.
11.3 BENEFITS NOT ALIENABLE. Benefits under the Plan may not be
assigned or alienated, whether voluntarily or involuntarily. Any attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Article 8.
11.4 NO ENLARGEMENT OF EMPLOYEE RIGHTS. This Plan is strictly a
voluntary undertaking on the part of the Company and shall not be deemed to
constitute a contract between the Company and any Employee or to be
consideration for, or an inducement to, or a condition of, the employment of any
Employee. Nothing contained in the Plan shall be deemed to give the right to any
Employee to be retained in the employ of the Company or to interfere with the
right of the Company to discharge any Employee at any time.
11.5 GOVERNING LAW. To the extent not preempted by Federal law, all
legal questions pertaining to the Plan shall be determined in accordance with
the laws of the State of California.
11.6 NON-BUSINESS DAYS. When any act under the Plan is required to be
performed on a day that falls on a Saturday, Sunday or legal holiday, that act
shall be performed on the next succeeding day which is not a Saturday, Sunday or
legal holiday. Notwithstanding the above, Fair Market Value shall be determined
in accordance with Section 6.3.
11.7 COMPLIANCE WITH SECURITIES LAWS. Notwithstanding any provision of
the Plan, the Committee shall administer the Plan in such a way to ensure that
the Plan at all times complies with any requirements of Federal Securities Laws.
For example, affiliates may be required to make irrevocable elections in
accordance with the rules set forth under Section 16b-3 of the Securities
Exchange Act of 1934.
9
<PAGE> 1
EXHIBIT 10.11
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (the "Agreement") is made on ___________,
19__, between KOFAX IMAGE PRODUCTS, INC., a Delaware corporation (the
"Company"), and (the "Indemnitee"), an officer and/or member of the Board of
Directors of the Company.
WHEREAS, the Company desires the benefits of having Indemnitee serve as an
officer and/or director secure in the knowledge that expenses, liability and
losses incurred by him in his good faith service to the Company will be borne by
the Company or its successors and assigns in accordance with applicable law; and
WHEREAS, the Company desires that Indemnitee resist and defend against
what Indemnitee may consider to be unjustified investigations, claims, actions,
suits and proceedings which have arisen or may arise in the future as a result
of Indernnitee's service to the Company notwithstanding that conditions in the
insurance markets may make directors' and officers' liability insurance coverage
unavailable or available only at premium levels which the Company may deem
inappropriate to pay; and
WHEREAS, the parties believe it appropriate to memorialize and reaffirm
the Company's indemnification obligations to Indemnitee and, in addition, set
forth the indemnification agreements contained herein;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties agree as follows:
1 . INDEMNIFICATION. Indemnitee shall be indemnified and held harmless by
the Company to the fullest extent permitted by its Certificate of Incorporation,
Bylaws and applicable law, as the same exists or may hereafter be amended,
against all expenses, liability and loss (including attorneys' fees, judgments,
fines, and amounts paid or to be paid in any settlement approved in advance by
the Company, such approval not to be unreasonably withheld) (collectively,
"Indemnifiable Expenses") actually reasonably incurred or suffered by Indemnitee
in connection with any present or future threatened, pending or contemplated
investigation, claim, action, suit or proceeding, whether civil, criminal,
administrative or investigative (collectively, "Indemnifiable Litigation"), (i)
to which Indemnitee is or was a party or is threatened to be made a party by
reason of any action or inaction in Indemnitee's capacity as a director or
officer of the Company, or (ii) with respect to which Indemnitee is otherwise
involved by reason of the fact that Indemnitee is or was serving as a director,
officer, employee or agent of the Company, or of any subsidiary or division, or
is or was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise. Notwithstanding the foregoing, Indemnitee shall have no right to
indemnification for expenses and the payment of profits arising from the
purchase and sale by Indemnitee of securities in violation of Section 16(b) of
the Securities and Exchange Act of 1934, as amended.
2. INTERIM EXPENSES. The Company agrees to pay Indemnifiable Expenses
incurred by Indemnitee in connection with any Indemnifiable Litigation in
advance of the final disposition thereof, provided that the Company has received
an undertaking by or on behalf of Indemnitee, substantially in the form attached
hereto as Exhibit A, to repay the amount so advanced to the
<PAGE> 2
extent that it is ultimately determined that Indemnitee is not entitled to be
indemnified by the Company under this Agreement or otherwise. The advances to be
made hereunder shall be paid by the Company to Indemnitee within twenty (20)
days following delivery of a written request therefor by Indemnitee to the
Company.
3. PROCEDURE FOR MAKING DEMAND. Indemnitee shall, as a condition precedent
to his right to be indemnified under this Agreement, give the Company notice in
writing as soon as practicable of any claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company at the
address set forth in Section 10 hereof (or such other address as the Company
shall designate in writing to Indemnitee). Notice shall be deemed received three
business days after the date postmarked and sent by certified or registered
mail, properly addressed; otherwise notice shall be deemed received when such
notice shall actually be received by the Company. In addition, Indemnitee shall
give the Company such information and cooperation as it may reasonably require
and as shall be within Indemnitee's power. Any indemnification provided for in
Section 1 shall be made no later than forty-five (45) days after receipt of the
written request of Indemnitee.
4. FAILURE TO INDEMNIFY.
(a) If a claim under this Agreement, or any statute, or under any
provision of the Company's Restated Certificate of Incorporation or Bylaws
providing for indemnification, is not paid in full by the Company, within
forty-five (45) days after a written request for payment thereof has been
received by the Company, Indemnitee may, but need not, at any time thereafter
bring an action against the Company to recover the unpaid amount of the claim
and, subject to Section 11 of this Agreement, if successful in whole or in
part, Indemnitee shall also be entitled to be paid for the expense (including
attorneys' fees) of bringing such action.
(b) It shall be a defense to such action (other than an action brought
to enforce a claim for expenses incurred in connection with any action, suit or
proceeding in advance of its final disposition) that Indemnitee has not met the
standard of conduct which make it permissible under applicable law for the
Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company and Indemnitee shall be entitled to
receive interim payments of interim expenses pursuant to Section 2 hereof unless
and until such defense may be finally adjudicated by court order or judgment
from which no further right of appeal exists. It is the parties' intention that
if the Company contests Indemnitee's right to indemnification, the question of
Indemnitee's right to indemnification shall be for the court to decide, and
neither the failure of the Company (including its board of directors,
independent legal counsel, or its stockholders) to have made a determination
that indemnification of Indemnitee is proper in the circumstances because
Indemnitee has met the applicable standard of conduct required by applicable
law, nor an actual determination by the Company (including its board of
directors, any committee or subgroup of the board of directors, independent
legal counsel, or its stockholders) that Indemnitee has not met such applicable
standard of conduct, shall create a presumption that Indemnitee has or has not
met the applicable standard of conduct.
5 . NOTICE TO INSURERS. If, at the time of the receipt of a notice of a
claim pursuant to Section 3 hereof, the Company has director and/or officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
2
<PAGE> 3
take all necessary or desirable action to cause such insurers to pay, on behalf
of the indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
6. RETENTION OF COUNSEL. In the event that the Company shall be obligated
to pay Indemnifiable Expenses as a result of any proceeding against Indemnitee,
the Company, if appropriate, shall be entitled to assume the defense of such
proceeding, with counsel approved by Indemnitee, which approval shall not be
unreasonably withheld, upon the delivery to Indemnitee of written notice of its
election to do so. After delivery of such notice, approval of such counsel by
Indemnitee and the retention of such counsel by the Company, the Company will
not be liable to Indemnitee under this Agreement for any fees of counsel
subsequently incurred by that Indemnitee with respect to that same proceeding,
provided that (i) Indemnitee shall have the right to employ his or her counsel
in any such proceeding at Indemnitee's expense, and (ii) if (A) the employment
of counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not, in fact, have employed counsel to assume defense
of such proceeding, then the fees and expenses of Indemnitee's counsel shall be
at the expense of the Company.
7. SUCCESSORS. This Agreement establishes contract rights which shall be
binding upon, and shall inure to the benefit of, the successors, assigns, heirs
and legal representatives of the parties hereto.
8. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge that
in certain instances, Federal law or applicable public policy may prohibit the
Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company may be
required in the future to undertake to the Securities and Exchange Commission to
submit the question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify
Indemnitee, and, in that event, the Indemnitee's rights and the Company's
obligations hereunder shall be subject to that determination.
9. CONTRACT RIGHTS NOT EXCLUSIVE. The contract rights conferred by this
Agreement shall be in addition to, but not exclusive of, any other right which
Indemnitee may have or may hereafter acquire under any statute, provision of the
Company's Certificate of Incorporation or Bylaws, agreement, vote of
shareholders or disinterested directors, or otherwise.
10. INDEMNITEE'S OBLIGATIONS. The Indemnitee shall promptly advise the
Company in writing of the institution of any investigation, claim, action, suit
or proceeding which is or may be subject to this Agreement and keep the Company
generally informed of, and consult with the Company with respect to, the status
of any such investigation, claim, action, suit or proceeding. Notices to the
Company shall be directed to Kofax Image Products, Inc., 3 Jenner Street,
Irvine, California 92718, Attn: Chief Executive Officer (or other such address
as the Company shall designate in writing to Indemnitee). Notice shall be deemed
received three days after the date postmarked if sent by certified or registered
mail, properly addressed. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power.
11. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid
3
<PAGE> 4
all court costs and expenses, including reasonable attorneys' fees, incurred by
Indemnitee with respect to such action, unless as a part of such action, a court
of competent jurisdiction determines that each of the material assertions made
by Indemnitee as a basis for such action were not made in good faith or were
frivolous. In the event of an action instituted by or in the name of the Company
under this Agreement, or to enforce or interpret any other terms of this
Agreement, Indemnitee shall be entitled to be paid all court costs and expenses,
including attorneys' fees, incurred by Indemnitee in defense of such action
(including with respect to Indemnitee's counterclaims and cross-claims made in
such action), unless as a part of such action the court determines that each of
Indemnitee's material defenses to such action were made in bad faith or were
frivolous.
12. SEVERABILITY. Should any provision of this Agreement, or any clause
hereof, be held to be invalid, illegal or unenforceable, in whole or in part,
the remaining provisions and clauses of this Agreement shall remain fully
enforceable and binding on the parties.
13. MODIFICATION AND WAIVER. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether of
not similar) nor shall such waiver constitute a continuing waiver.
14. CHOICE OF LAW. The validity, interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
Delaware.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
KOFAX IMAGE PRODUCTS, INC.
By:
---------------------------------------------
David S. Silver,
Chief Executive Officer
INDEMNITEE:
-------------------------------------------------
4
<PAGE> 5
EXHIBIT A
FORM OF
UNDERTAKING AGREEMENT
This UNDERTAKING AGREEMENT is made on __________, 19__ between KOFAX IMAGE
PRODUCTS, INC., a Delaware corporation (the "Company") and , a member of the
board of directors or an officer of the Company ("Indemnitee").
WHEREAS, Indemnitee may become involved in investigations, claims,
actions, suits or proceedings which have arisen or may arise in the future as a
result of Indemnitee's service to the Company; and
WHEREAS, Indemnitee desires that the Company pay any and all expenses
(including, but not limited to, attorneys' fees and court costs) actually and
reasonably incurred by Indemnitee or on Indemnitee's behalf in defending or
investigating any such suits or claims and that such payment be made in advance
of the final disposition of such investigations, claims, actions, suits or
proceedings to the extent that Indemnitee has not been previously reimbursed by
insurance; and
WHEREAS, the Company is willing to make such payments but, in accordance
with Section 145 of the General Corporation Law of the State of Delaware, the
Company may make such payments only if it receives an undertaking to repay from
Indemnitee; and
WHEREAS, Indemnitee is willing to give such an undertaking;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1 . In regard to any payments made by the Company to Indemnitee pursuant
to the terms of the Indemnification Agreement dated __________, 19__, between
the Company and Indemnitee, Indemnitee hereby undertakes and agrees to repay to
the Company any and all amounts so paid promptly and in any event within thirty
(30) days after the disposition, including any appeals, of any litigation or
threatened litigation on account of which payments were made, but only to the
extent that Indemnitee is ultimately found not entitled to be indemnified by the
Company under the Bylaws of the Company and Section 145 of the General
Corporation Law of the State of Delaware, or other applicable law.
2. This Agreement shall not affect in any manner rights which Indemnitee
may have against the Company, any insurer or any other person to seek
indemnification for or reimbursement of any expenses referred to herein or any
judgment which may be rendered in any litigation or proceeding.
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the date first above written.
KOFAX IMAGE PRODUCTS, INC.
By:
---------------------------------------
INDEMNITEE:
------------------------------------------
2
<PAGE> 1
EXHIBIT 10.12
[SILICON VALLEY BANK LETTERHEAD]
LOAN AND SECURITY AGREEMENT
BORROWER: KOFAX IMAGE PRODUCTS
ADDRESS: 3 JENNER STREET
IRVINE, CALIFORNIA 92718
DATE: FEBRUARY 28, 1992
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK ("Silicon"), whose address is 3000 Lakeside Drive, Santa
Clara, California 95054-2895 and the borrower named above (the "Borrower"),
whose chief executive office is located at the above address ("Borrower's
Address").
1. LOANS.
1.1 LOANS. Silicon will make loans to the Borrower (the "Loans") in amounts
determined by Silicon pursuant to the terms hereof, up to the amount (the
"Credit Limit") shown on the Schedule to this Agreement (the "Schedule"). The
Borrower is responsible for monitoring the total amount of Loans and other
Obligations outstanding from time to time, and Borrower shall not permit the
same, at any time, to exceed the Credit Limit. If at any time the total of all
outstanding Loans and all other Obligations exceeds the Credit Limit, the
Borrower shall immediately pay the amount of the excess to Silicon, without
notice or demand.
1.2 INTEREST. All Loans and all other monetary Obligations shall bear interest
at the rate shown on the Schedule hereto. Interest shall be payable monthly, on
the due date shown on the monthly billing from Silicon to the Borrower.
1.3 FEES. The Borrower shall pay to Silicon a loan origination fee in the
amount shown on the Schedule hereto concurrently herewith. This fee is in
addition to all interest and other sums payable to Silicon and is not
refundable.
2. GRANT OF SECURITY INTEREST.
2.1 OBLIGATIONS. The term "Obligations" as used in this Agreement means the
following: the obligation to pay all Loans and all interest thereon when due,
and to pay and perform when due all other present and future indebtedness,
liabilities, obligations, guarantees, covenants, agreements, warranties and
representations of the Borrower to Silicon, whether joint or several, monetary
or non-monetary, and whether created pursuant to this Agreement or any other
present or future agreement or otherwise. Silicon may, in its discretion,
require that Borrower pay monetary Obligations in cash to Silicon, or charge
them to Borrower's Loan account, in which event they will bear interest at the
same rate applicable to the Loans.
2.2 COLLATERAL. As security for all Obligations, the Borrower hereby grants
Silicon a continuing security interest in all of the Borrower's interest in the
types of property described below, whether now owned or hereafter acquired, and
wherever located (collectively, the "Collateral"): (a) All accounts, contract
rights, chattel paper, and all other obligations now or in the future owing to
the Borrower; (b) All inventory, materials used or consumed in Borrower's
business, raw materials, work in process, finished goods, packaging and
shipping materials, and all other tangible personal property which is held for
sale or lease or furnished under contracts of service or consumed in the
Borrower's business, and (c) All equipment acquired through Loans and all
equipment acquired through any other financing provided to Borrower, which
other financing has been refinanced by Loans (such equipment includes, without
limitation, all machinery, fixtures, trade fixtures, vehicles, furnishings,
furniture, materials, tools, machine tools, office equipment, computers and
peripheral devices, appliances, apparatus, parts, dies, and jigs);
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
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and (f) All substitutions, additions and accessions to any of the foregoing, and
all products, proceeds and insurance proceeds of the foregoing, and all
guaranties of and security for the foregoing; and all books and records relating
to any of the foregoing.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
The Borrower represents and warrants to Silicon as follows, and the Borrower
covenants that the following representations will continue to be true, and that
the Borrower will comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. The Borrower, if a corporation, is and
will continue to be, duly authorized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. The Borrower is and
will continue to be qualified and licensed to do business in all jurisdictions
in which any failure to do so would have a material adverse effect on the
Borrower. The execution, delivery and performance by the Borrower of this
Agreement, and all other documents contemplated hereby have been duly and
validly authorized, are enforceable against the Borrower in accordance with
their terms, and do not violate any law or any provision of, and are not grounds
for acceleration under, any agreement or instrument which is binding upon the
Borrower.
3.2 NAME; TRADE NAMES AND STYLES. The name of the Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule hereto are
all prior names of the Borrower and all of Borrower's present and prior trade
names. The Borrower shall give Silicon 15 days' prior written notice before
changing its name or doing business under any other name. The Borrower has
complied, and will in the future comply, with all laws relating to the conduct
of business under a fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in the
heading to this Agreement is the Borrower's chief executive office. In addition,
the Borrower has places of business and Collateral is located only at the
locations set forth on the Schedule to this Agreement. The Borrower will give
Silicon at least 15 days prior written notice before changing its chief
executive office or locating the Collateral at any other location.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. The Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of equipment which are leased by the Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for the following ("Permitted Liens"):
(i) purchase money security interests in specific items of equipment; (ii)
leases of specific items of equipment; (iii) liens for taxes not yet payable;
(iv) additional security interests and liens consented to in writing by Silicon
in its sole discretion, which consent shall not be unreasonably withheld; and
(v) security interests being terminated substantially concurrently with this
Agreement. Silicon will have the right to require, as a condition to its consent
under subparagraph (iv) above, that the holder of the additional security
interest or lien sign an intercreditor agreement on Silicon's then standard
form, acknowledge that the security interest is subordinate to the security
interest in favor of Silicon, and agree to give written notice of any default to
Silicon at least 60 days prior to taking any action to enforce its subordinate
security interest, and that the Borrower agree that any uncured default in any
obligation secured by the subordinate security interest shall also constitute an
Event of Default under this Agreement. Silicon now has, and will continue to
have, a perfected and enforceable security interest in all of the Collateral,
subject only to the Permitted Liens, and the Borrower will at all times defend
Silicon and the Collateral against all claims of others. None of the Collateral
now is or will be affixed to any real property in such a manner, or with such
intent, as to become a fixture.
3.5 MAINTENANCE OF COLLATERAL. The Borrower will maintain the Collateral in
good working condition, reasonable wear and tear excepted, and the Borrower will
not use the Collateral for any unlawful purpose. The Borrower will immediately
advise Silicon in writing of any material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. The Borrower has maintained and will maintain at the
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 FINANCIAL CONDITION AND STATEMENTS. All financial statements now or in the
future delivered to Silicon have been, and will be, prepared in conformity with
generally accepted accounting principles and now and in the future will
completely and accurately reflect in all material respects the financial
condition of the Borrower, at the times and for the periods therein stated.
Since the last date covered by any such statement, there has been no material
adverse change in the financial condition or business of the Borrower. The
Borrower is now and will continue to be solvent. The Borrower will provide
Silicon: (i) within 30 days after the end of each month, a monthly financial
statement prepared by the Borrower, and a Compliance Certificate in such form as
Silicon shall reasonably specify, signed by the Chief Financial Officer of the
Borrower, certifying that throughout such month the Borrower was in full
compliance with all of the terms and conditions of this Agreement, and setting
forth calculations showing compliance with the financial covenants set forth on
the Schedule and such other information as Silicon shall reasonably request; and
(ii) within 120 days following the end of the Borrower's fiscal year, complete
annual financial statements, certified by independent certified public
accountants reasonably acceptable to Silicon.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. The Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and the Borrower has timely paid, and will timely
pay, all foreign, federal, state and
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<PAGE> 3
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
- ------------------------------------------------------------------------------
local taxes, assessments, deposits and contributions now or in the future owed
by the Borrower. The Borrower may, however, defer payment of any contested
taxes, provided that the Borrower (i) in good faith contests the Borrower's
obligation to pay the taxes by appropriate proceedings promptly and diligently
instituted and conducted, (ii) notifies Silicon in writing of the commencement
of, and any material development in, the proceedings, and (iii) posts bonds or
takes any other steps required to keep the contested taxes from becoming a lien
upon any of the Collateral. The Borrower is unaware of any claims or adjustments
proposed for any of the Borrower's prior tax years which could result in
additional taxes becoming due and payable by the Borrower. The Borrower has
paid, and shall continue to pay all amounts necessary to fund all present and
future pension, profit sharing and deferred compensation plans in accordance
with their terms, and the Borrower has not and will not withdraw from
participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any material liability of the Borrower, including, without limitation, any
liability to the Pension Benefit Guaranty Corporation or its successors or any
other governmental agency.
3.9 COMPLIANCE WITH LAW. The Borrower has complied, and will comply, in all
material respects, with all provisions of all foreign, federal, state and local
laws and regulations relating to the Borrower, including, but not limited to,
those relating to the Borrower's ownership of real or personal property, conduct
and licensing of the Borrower's business, and environmental matters.
3.10 LITIGATION. Except as disclosed in the schedule, there is no claim, suit,
litigation, proceeding or investigation pending or (to best of the Borrower's
knowledge) threatened by or against or affecting the Borrower in any court or
before any governmental agency (or any basis therefor known to the Borrower)
which may result, either separately or in the aggregate, in any material adverse
change in the financial condition or business of the Borrower, or in any
material impairment in the ability of the Borrower to carry on its business in
substantially the same manner as it is now being conducted. The Borrower will
promptly inform Silicon in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted by or against the Borrower
involving amounts in excess of $500,000.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes.
4. ADDITIONAL DUTIES OF THE BORROWER.
4.1 FINANCIAL AND OTHER COVENANTS. The Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule to this Agreement.
4.2 OVERADVANCE; PROCEEDS OF ACCOUNTS. If for any reason the total of all
outstanding Loans and all other Obligations exceeds the Credit Limit, without
limiting Silicon's other remedies, and whether or not Silicon declares an Event
of Default, Borrower shall remit to Silicon all checks and other proceeds of
Borrower's accounts and general intangibles, in the same form as received by
Borrower, within one day after Borrower's receipt of the same, to be applied to
the Obligations in such order as Silicon shall determine in its discretion.
4.3 INSURANCE. The Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require. All such insurance policies shall name Silicon as an
additional loss payee to the extent of Silicon's interest therein, and shall
contain a lenders loss payee endorsement in form reasonably acceptable to
Silicon. Upon receipt of the proceeds of any such insurance relating to any of
the Collateral, Silicon shall apply such proceeds in reduction of the
Obligations as Silicon shall determine in its sole and absolute discretion,
except that, provided no Event of Default has occurred, Silicon shall release to
the Borrower insurance proceeds with respect to equipment totalling less than
$1,000,000, which shall be utilized by the Borrower for the replacement of the
equipment with respect to which the insurance proceeds were paid. Silicon may
require reasonable assurance that the insurance proceeds so released will be so
used. If the Borrower fails to provide or pay for any insurance, Silicon may,
but is not obligated to, obtain the same at the Borrower's expense. The Borrower
shall promptly deliver to Silicon copies of all reports made to insurance
companies.
4.4 REPORTS. The Borrower shall provide Silicon with such written reports with
respect to the Borrower, as Silicon shall from time to time reasonably specify.
4.5 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At all reasonable times, and upon
one business day notice, Silicon, or its agents, shall have the right to inspect
the Collateral, and the right to audit and copy the Borrower's accounting books
and records and Borrower's books and records relating to the Collateral. Silicon
shall take reasonable steps to keep confidential all information obtained in any
such inspection or audit, but Silicon shall have the right to disclose any such
information to its auditors, regulatory agencies, and attorneys, and pursuant to
any subpoena or other legal process. The foregoing audits shall be at Silicon's
expense, except that the Borrower shall reimburse Silicon for its reasonable out
of pocket costs for an annual accounts receivable audit within 60 days of
the first advance that Silicon makes to Borrower relating to Borrower's
accounts: such audit shall be conducted by third parties retained by Silicon,
and Silicon may debit Borrower's deposit accounts with Silicon for the cost of
such accounts receivable audit (in which event Silicon shall send
notification thereof to the Borrower). Notwithstanding the foregoing, after the
occurrence of an Event of Default all audits shall be at the Borrower's expense.
4.6 NEGATIVE COVENANTS. Except as may be permitted in the Schedule hereto, the
Borrower shall not, without Silicon's prior written consent, do any of the
following: (i) merge or consolidate with another corporation, except that the
Borrower may merge or consolidate with another corporation if the Borrower is
the surviving corporation in the merger and the aggregate value of the assets
acquired in the merger do not exceed 25% of Borrower's Tangible Net Worth (as
defined in the Schedule) as of the end of the month prior to the effective date
of the merger, and the assets of the corporation acquired in the merger are not
subject to any liens or encumbrances, except Permitted Liens; (ii) acquire any
assets outside the ordinary course of business for an aggregate purchase price
exceeding 25% of
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
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Borrower's Tangible Net Worth (as defined in the Schedule) as of the end of the
month prior to the effective date of the acquisition; (iii) enter into any other
transaction outside the ordinary course of business (except as permitted by the
other provisions of this Section); (iv) sell or transfer any Collateral, except
for the sale of inventory in the ordinary course of the Borrower's business, and
except for the sale of obsolete or unneeded equipment in the ordinary course of
business; (v) make any loans of any money or any other assets; (vi) incur any
debts, outside the ordinary course of business, which would have a material,
adverse effect on the Borrower or on the prospect of repayment of the
Obligations; (vii) guarantee or otherwise become liable with respect to the
obligations of another party or entity; (viii) pay or declare any dividends on
the Borrower's stock (except for dividends payable solely in stock of the
Borrower); (ix) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of the Borrower's stock; (x) make any change in the Borrower's
capital structure which has a material adverse effect on the Borrower or on the
prospect of repayment of the Obligations; or (xi) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this Section are only
permitted if no Event of Default and no event which (with notice or passage of
time or both) would constitute an Event of Default would occur as a result of
such transaction.
4.7 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or in any manner
relating to the Borrower, the Borrower shall, without expense to Silicon, make
reasonably available the Borrower and its officers, employees and agents and
the Borrower's books and records to the extent that Silicon may deem them
reasonably necessary in order to prosecute or defend any such suit or
proceeding.
4.8 VERIFICATION. Silicon may, from time to time, following prior notification
to, and reasonable approval by, Borrower, verify directly with the respective
account debtors the validity, amount and other matters relating to the
Borrower's accounts, by means of mail, telephone or otherwise, either in the
name of the Borrower or Silicon or such other name as Silicon may reasonably
choose, provided that no prior notification to Borrower shall be required
following an Event of Default.
4.9 EXECUTE ADDITIONAL DOCUMENTATION. The Borrower agrees, at its expense, on
request by Silicon, to execute all documents in form satisfactory to Silicon, as
Silicon, may deem reasonably necessary or useful in order to perfect and
maintain Silicon's perfected security interest in the Collateral, and in order
to fully consummate all of the transactions contemplated by this Agreement.
5. TERM.
5.1 MATURITY DATE. This Agreement shall continue in effect until the maturity
date set forth on the Schedule hereto (the "Maturity Date").
5.2 EARLY TERMINATION. This Agreement may be terminated, without penalty,
prior to the Maturity Date as follows: (i) by the Borrower, effective three
business days after written notice of termination is given to Silicon; or (ii)
by Silicon at any time after the occurrence of an Event of Default, and after
written notice thereof to the Borrower, which termination shall be effective
upon the date of the deposit of such notice in the United States mail, postage
prepaid, if so deposited in the United States mail, upon the date of delivery,
in the case of notices personally delivered, or upon the date of deposit with
the express mail courier service, if such notice is sent via express mail
service.
5.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier effective
date of termination, the Borrower shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable. Notwithstanding
any termination of this Agreement, all of Silicon's security interests in all of
the Collateral and all of the terms and provisions of this Agreement shall
continue in full force and effect until all Obligations have been paid and
performed in full; provided that, Silicon may, in its sole discretion, refuse to
make any further Loans after termination. No termination shall in any way affect
or impair any right or remedy of Silicon, nor shall any such termination relieve
the Borrower of any Obligation to Silicon, until all of the Obligations have
been paid and performed in full. Upon payment and performance in full of all the
Obligations, Silicon shall promptly deliver to the Borrower termination
statements, requests for reconveyances and such other documents as may be
required to fully terminate any of Silicon's security interests.
6. EVENTS OF DEFAULT AND REMEDIES.
6.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and the Borrower shall
give Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by the Borrower or
any of the Borrower's officers, employees or agents, now or in the future, shall
be untrue or misleading in any material respect; or (b) the Borrower shall fail
to pay when due any Loan or any interest thereon or any other monetary
Obligation; or (c) the total Loans and other Obligations outstanding at any time
exceed the Credit Limit; or (d) the Borrower shall fail to comply with any of
the financial covenants set forth in the Schedule or shall fail to perform any
other non-monetary Obligation which by its nature cannot be cured; or (e) the
Borrower shall fail to pay or perform any other non-monetary Obligation, which
failure is not cured within 30 business days after the date due; or (f) Any
levy, assessment, attachment, seizure, lien or encumbrance is made on all or any
part of the Collateral which is not cured within 30 days after the occurrence of
the same; or (g) Dissolution, termination of existence, insolvency or business
failure of the Borrower; or appointment of a receiver, trustee or custodian, for
all or any part of the property of, assignment for the benefit of creditors by,
or the commencement of any proceeding by the Borrower under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect;
or (h) the commencement of any proceeding against the Borrower or any guarantor
of any of the Obligations under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect, which is not cured by the
dismissal
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
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thereof within 60 days after the date commenced; (i) revocation or
termination of, or limitation of liability upon, any guaranty of the
Obligations; or commencement of proceedings by any guarantor of any of the
Obligations under any bankruptcy or insolvency law; or (j) the Borrower makes
any prohibited payment on account of any indebtedness or obligation which has
been subordinated to the Obligations or if any person who has subordinated such
indebtedness or obligations terminates or in any way limits his subordination
agreement; or (k) the Borrower shall generally not pay its debts as they become
due; or the Borrower shall conceal, remove or transfer any part of its property,
with intent to hinder, delay or defraud its creditors, or make or suffer any
transfer of any material amount of its property which may be fraudulent under
any bankruptcy, fraudulent conveyance or similar law. Silicon may cease making
any Loans hereunder during any of the above cure periods, and thereafter if an
Event of Default has occurred.
6.2 REMEDIES. Upon the occurrence of any Event of Default, and at any time
thereafter, Silicon, at its option, and after written notice thereof to the
Borrower, which shall be deemed effective upon the date of the deposit of such
notice in the United States mail, postage prepaid, if so deposited in the United
States mail, upon the date of delivery, in the case of personally delivered, or
upon the date of deposit of such notice with the express mail courier service,
if such notice is sent via express mail service, may do any one or more of the
following: (a) Cease making Loans or otherwise extending credit to the Borrower
under this Agreement or any other document or agreement; (b) Accelerate and
declare all or any part of the Obligations to be immediately due, payable, and
performable, notwithstanding any deferred or installment payments allowed by any
instrument evidencing or relating to any Obligation; (c) Take possession of any
or all of the Collateral wherever it may be found, and for that purpose the
Borrower hereby authorizes Silicon without judicial process to enter onto any of
the Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof without
charge for so long as Silicon deems it reasonably necessary in order to complete
the enforcement of its rights under this Agreement or any other agreement;
provided, however, that should Silicon seek to take possession of any or all of
the Collateral by Court process, the Borrower hereby irrevocably waives: (i) any
bond and any surety or security relating thereto required by any statute, court
rule or otherwise as an incident to such possession; (ii) any demand for
possession prior to the commencement of any suit or action to recover possession
thereof; and (iii) any requirement that Silicon retain possession of and not
dispose of any such Collateral until after trial or final judgment; (d) Require
the Borrower to assemble any or all of the Collateral and make it available to
Silicon at places designated by Silicon which are reasonably convenient to
Silicon and the Borrower, and to remove the Collateral to such locations as
Silicon may deem advisable; (e) Require Borrower to deliver to Silicon, in kind,
all checks and other payments received with respect to all accounts, together
with any necessary endorsements, within one day after the date received by the
Borrower; (f) Complete the processing, manufacturing or repair of any Collateral
prior to a disposition thereof and, for such purpose and for the purpose of
removal, Silicon shall have the right to reasonably use the Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge; (g) Sell, lease or otherwise dispose of any of the Collateral in its
condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at any one or more public and/or private
sales, in lots or in bulk, for cash, exchange or other property, or on credit,
and to adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Silicon shall have the right to
conduct such disposition on the Borrower's premises without charge, for such
time or times as Silicon deems reasonable, or on Silicon's premises, or
elsewhere and the Collateral need not be located at the place of disposition.
Silicon may directly or through any affiliated company purchase or lease any
Collateral at any such public disposition, and if permissible under applicable
law, at any private disposition. Any sale or other disposition of Collateral
shall not relieve the Borrower of any liability the Borrower may have if any
Collateral is defective as to title or physical condition or otherwise at the
time of sale; (h) Demand payment of, and collect any accounts comprising
Collateral and, in connection therewith, the Borrower irrevocably authorizes
Silicon to endorse or sign the Borrower's name on all collections, receipts,
instruments and other documents, to take possession of and open mail addressed
to the Borrower and remove therefrom payments made with respect to any item of
the Collateral or proceeds thereof, and, in Silicon sole discretion, to grant
extensions of time to pay, compromise claims and settle accounts and the like
for less than face value; (i) Offset against any sums in any of Borrower's
general, special or other deposit accounts with Silicon; and (j) Demand and
receive possession of any of the Borrower's federal and state income tax returns
and the books and records utilized in the preparation thereof or referring
thereto. All reasonable attorneys' fees, expenses, costs, liabilities and
obligations incurred by Silicon with respect to the foregoing shall be added to
and become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations. Without limiting any of Silicon's rights and remedies, from and
after the occurrence of any Event of Default, the interest rate applicable to
the Obligations shall be increased by an additional four percent per annum.
6.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. The Borrower and
Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to the
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 am. and 6:00 p.m; (v) Payment of the purchase price in
cash or by cashier's check or wire transfer is required; (vi) With respect to
any sale of any of the Collateral, Silicon may (but is not obligated to) direct
any prospective purchaser to ascertain directly from the Borrower any and all
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
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information concerning the same. Silicon may employ other methods of noticing
and selling the Collateral, in its discretion, if they are commercially
reasonable.
6.4 POWER OF ATTORNEY. Upon the occurrence of any Event of Default, without
limiting Silicon's other rights and remedies, the Borrower grants to Silicon an
irrevocable power of attorney coupled with an interest, authorizing and
permitting Silicon (acting through any of its employees, attorneys or agents) at
any time, at its option, but without obligation, with or without notice to the
Borrower, and at the Borrower's expense, to do any or all of the following, in
the Borrower's name or otherwise: (a) Execute on behalf of the Borrower any
documents that Silicon may, in its reasonable discretion, deem advisable in
order to perfect and maintain Silicon's security interest in the Collateral, or
in order to exercise a right of the Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all other
present and future agreements; (b) Execute on behalf of the Borrower any
document exercising, transferring or assigning any option to purchase, sell or
otherwise dispose of or to lease (as lessor or lessee) any real or personal
property which is part of Silicon's Collateral or in which Silicon has an
interest; (c) Execute on behalf of the Borrower, any invoices relating to any
account, any draft against any account debtor and any notice to any account
debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of
mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien; (d) Take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name of
the Borrower upon any instruments, or documents, evidence of payment or
Collateral that may come into Silicon's possession; (e) Endorse all checks and
other forms of remittances received by Silicon; (f) Pay, contest or settle any
lien, charge, encumbrance, security interest and adverse claim in or to any of
the Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; (g) Grant extensions of time to pay, compromise
claims and settle accounts for less than face value and execute all releases and
other documents in connection therewith; (h) Pay any sums required on account of
the Borrower's taxes or to secure the release of any liens therefor, or both;
(i) Settle and adjust, and give releases of, any insurance claim that relates to
any of the Collateral and obtain payment therefor, (j) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
the Borrower to give Silicon the same rights of access and other rights with
respect thereto as Silicon has under this Agreement; and (k) Take any action or
pay any sum required of the Borrower pursuant to this Agreement and any other
present or future agreements. Silicon shall exercise the foregoing powers in a
commercially reasonable manner. Any and all reasonable sums paid and any and all
reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be payable on demand, and shall bear interest at
a rate equal to the highest interest rate applicable to any of the Obligations.
In no event shall Silicon's rights under the foregoing power of attorney or any
of Silicon's other rights under this Agreement be deemed to indicate that
Silicon is in control of the business, management or properties of the Borrower.
6.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any sale
of the Collateral shall be applied by Silicon first to the costs, expenses,
liabilities, obligations and attorneys' fees incurred by Silicon in the exercise
of its rights under this Agreement, second to the interest due upon any of the
Obligations, and third to the principal of the Obligations, in such order as
Silicon shall determine in its sole discretion. Any surplus shall be paid to the
Borrower or other persons legally entitled thereto; the Borrower shall remain
liable to Silicon for any deficiency. If, Silicon, in its sole discretion,
directly or indirectly enters into a deferred payment or other credit
transaction with any purchaser at any sale or other disposition of Collateral,
Silicon shall have the option, exercisable at any time, in its sole discretion,
of either reducing the Obligations by the principal amount of purchase price or
deferring the reduction of the Obligations until the actual receipt by Silicon
of the cash therefor.
6.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth in
this Agreement, Silicon shall have all the other rights and remedies accorded a
secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and the Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.
7. GENERAL PROVISIONS.
7.1 NOTICES. All notices to be given under this Agreement shall be in writing
and shall be given either personally or by express or overnight courier mail
service, or certified mail return receipt requested, addressed to Silicon or the
Borrower at the addresses shown in the heading to this Agreement, or at any
other address designated in writing by one party to the other party. Unless
otherwise set forth herein, all notices shall be deemed to have been given upon
delivery in the case of notices personally delivered to the Borrower or to
Silicon, at the expiration of one business day following the deposit thereof
with the express mail courier, or at the expiration of two business days
following the deposit thereof in the United States mail, with postage prepaid.
7.2 SEVERABILITY. Should any provision of this Agreement be held by any court
of competent jurisdiction to be void or unenforceable, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.
7.3 INTEGRATION. This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire
and complete agreement between the Borrower and Silicon and supersede all prior
and contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
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Agreement or in other written agreements signed by the parties in connection
herewith.
7.4 WAIVERS. The failure of Silicon at any time or times to require the
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between the Borrower and Silicon shall not
waive or diminish any right of Silicon later to demand and receive strict
compliance therewith. Any waiver of any default shall not waive or affect any
other default, whether prior or subsequent thereto. None of the provisions of
this Agreement or any other agreement now or in the future executed by the
Borrower and delivered to Silicon shall be deemed to have been waived by any act
or knowledge of Silicon or its agents or employees, but only by a specific
written waiver signed by an officer of Silicon and delivered to the Borrower.
The Borrower waives demand, protest, notice of protest and notice of default or
dishonor, notice of payment and nonpayment, release, compromise, settlement,
extension or renewal of any commercial paper, instrument, account, general
intangible, document or guaranty at any time held by Silicon on which the
Borrower is or may in any way be liable, and notice of any action taken by
Silicon, unless expressly required by this Agreement or applicable law.
7.5 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by the
Borrower or any other party, except as a result of the gross negligence or
willful misconduct of Silicon, or any of its directors, officers, employees,
agents, attorneys or any other person affiliated with or representing Silicon.
7.6 AMENDMENT. The terms and provisions of this Agreement may not be waived or
amended, except in a writing executed by the Borrower and a duly authorized
officer of Silicon.
7.7 TIME OF ESSENCE. Time is of the essence in the performance by the Borrower
of each and every obligation under this Agreement.
7.8 ATTORNEYS FEES AND COSTS. The Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement and the documents relating
to this Agreement (whether or not a lawsuit is filed but other than for costs
and fees incurred to prepare and negotiate this Agreement), including, but not
limited to, any reasonable attorneys' fees and costs Silicon incurs in order to
do the following: obtain legal advice in connection with this Agreement;
enforce, or seek to enforce, any of its rights; prosecute actions against, or
defend actions by, account debtors; commence, intervene in, or defend any action
or proceeding; initiate any complaint to be relieved of the automatic stay in
bankruptcy; file or prosecute any probate claim, bankruptcy claim, third-party
claim, or other claim; examine, audit, copy, and inspect any of the Collateral
or any of the Borrower's books and records; protect, obtain possession of,
lease, dispose of, or otherwise enforce Silicon's security interest in, the
Collateral; and otherwise represent Silicon in any litigation relating to the
Borrower. In satisfying Borrower's obligation hereunder to reimburse Silicon for
attorneys fees, Borrower may, for convenience, issue checks directly to
Silicon's attorneys, Levy & Norminton, but Borrower acknowledges and agrees that
Levy & Norminton is representing only Silicon and not Borrower in connection
with this Agreement. If either Silicon or the Borrower files any lawsuit against
the other predicated on a breach of this Agreement, the prevailing party in such
action shall be entitled to recover its reasonable costs and attorneys' fees,
including (but not limited to) reasonable attorneys' fees and costs incurred in
the enforcement of, execution upon or defense of any order, decree, award or
judgment. All attorneys' fees and costs to which Silicon may be entitled
pursuant to this Paragraph shall immediately become part of the Borrower's
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations.
7.9 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of the parties hereto; provided, however, that
the Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Silicon, and any prohibited assignment
shall be void. No consent by Silicon to any assignment shall release the
Borrower from its liability for the Obligations.
7.10 JOINT AND SEVERAL LIABILITY. If the Borrower consists of more than one
person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
7.11 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used in
this Agreement for convenience. The Borrower acknowledges that the headings may
not describe completely the subject matter of the applicable paragraph, and the
headings shall not be used in any manner to construe, limit, define or interpret
any term or provision of this Agreement. This Agreement has been fully reviewed
and negotiated between the parties and no uncertainty or ambiguity in any term
or provision of this Agreement shall be construed strictly against Silicon or
the Borrower under any rule of construction or otherwise.
7.12 MUTUAL WAIVER OF JURY TRIAL. THE BORROWER AND SILICON EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY AMENDMENT OR SUPPLEMENT TO
THIS AGREEMENT, OR ANY CONDUCT, ACTS OR OMISSIONS OF SILICON OR THE BORROWER OR
ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER
PERSONS AFFILIATED WITH SILICON OR THE BORROWER, IN ALL OF THE FOREGOING CASES,
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
7.13 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and the
Borrower shall be governed by, and in accordance with, the laws of the State of
California. Any undefined term used in this Agreement that is defined in the
California Uniform Commercial Code shall have the meaning assigned to that term
in the California Uniform Commercial Code. As a material part
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
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of the consideration to Silicon to enter into this Agreement, the Borrower (i)
agrees that all actions and proceedings relating directly or indirectly hereto
shall, at Silicon's option, be litigated in courts located within California,
and that the exclusive venue therefor shall be Orange County; (ii) consents to
the jurisdiction and venue of any such court and consents to service of process
in any such action or proceeding by personal delivery or any other method
permitted by law; and (iii) waives any and all rights the Borrower may have to
object to the jurisdiction of any such court, or to transfer or change the venue
of any such action or proceeding.
BORROWER:
KOFAX IMAGE PRODUCTS
BY [SIG]
---------------------------------------
PRESIDENT OR VICE PRESIDENT
BY [SIG]
---------------------------------------
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY [SIG]
---------------------------------------
TITLE AVP
------------------------------------
22,
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<PAGE> 9
[SILICON VALLEY BANK LETTERHEAD]
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: KOFAX IMAGE PRODUCTS
ADDRESS: 3 JENNER STREET
IRVINE, CALIFORNIA 92718
DATE: FEBRUARY 28, 1992
CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of: (i) $2,000,000 at any one
time outstanding; or (ii) 80% of the Net Amount of Borrower's
accounts, which are eligible for borrowing. "Net Amount" of an
account means the gross amount of the account, minus all
applicable sales, use, excise and other similar taxes and minus
all discounts, credits and allowances of any nature granted or
claimed.
Without limiting the fact that the determination of which
accounts are eligible for borrowing is a matter of Silicon's
discretion, the following will not be deemed eligible for
borrowing: accounts outstanding for more than 90 days from the
invoice date, accounts subject to any contingencies, accounts
owing from an account debtor outside the United States (unless
pre-approved by Silicon, which approval shall not be
unreasonably withheld, or backed by a letter of credit
satisfactory to Silicon, or FCIA insured satisfactory to
Silicon), accounts owing from one account debtor to the extent
they exceed 25% of the total eligible accounts outstanding,
accounts owing from an affiliate of Borrower, and accounts owing
from an account debtor to whom Borrower is or may be liable for
goods purchased from such account debtor or otherwise. In
addition, if more than 50% of the accounts owing from an account
debtor are outstanding more than 90 days from the invoice date
or are otherwise not eligible accounts, then all accounts owing
from that account debtor will be deemed ineligible for
borrowing.
TERM LOANS (Section 1.1 A):
1.1A.1 TERM LOANS. In addition to the Loans provided for in
Section 1.1 above, provided no Event of Default has occurred,
Silicon will make term loans from time to time to the Borrower,
upon Borrower's request, (individually a "Term Loan" and
collectively the "Term Loans") in amounts up to the lesser of
the Term Loan Availability (as referred to below) or 100% of the
invoice price of the Equipment (as referred to below), plus
freight and taxes. The proceeds of the Term Loans shall be used
by the Borrower to purchase new equipment reasonably acceptable
to Silicon and evidenced by documentation reasonably acceptable
to Silicon (the "Equipment"). Additionally, the Borrower may
obtain a one-time Term Loan to satisfy all of its obligations to
Mitsui Manufacturers Bank ("Mitsui"),
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up to a maximum amount of $400,000, regarding its equipment
credit line with Mitsui (the "Mitsui Loan"), provided, however,
that Mitsui delivers to Silicon all documentation that Silicon
deems reasonably necessary or advisable, including, without
limitation, UCC-2 termination statements, to terminate Mitsui's
security interest in all Collateral and to evidence the payment
in full the Mitsui Loan.
Term Loans may be borrowed by the Borrower at any time prior to
February 15, 1993, and shall be disbursed by making payment to
Borrower for group purchases of Equipment having an aggregate
purchase price of $25,000 or more, or otherwise by making
payment directly to the supplier of the Equipment, or, in the
case of the Mitsui Loan, to Mitsui. A Term Loan shall constitute
a "Loan" for all purposes of the Loan Agreement, except that the
Term Loan shall bear interest at the rate set forth in Section
1.1 A.2, and the Term Loan shall not be subject to the Credit
Limit referred to in Section 1.1 above.
The term "Term Loan Availability" as used in this Agreement
means $700,000 minus the sum of the original principal amounts
of all Term Loans Silicon has made to Borrower.
The term "Obligations" as used in this Agreement shall include
without limitation the obligation to repay the Term Loans and
all interest thereon.
1.1A.2 INTEREST RATE AND REPAYMENT. Each Term Loan shall bear
interest at one of the following three alternative rates in
conjunction with a corresponding repayment period as set forth
herein, both as designated by Borrower by written notice to
Silicon at the time the Loan is disbursed. If the Borrower does
not designate an applicable interest rate and repayment period,
Silicon may do so by written notice to the Borrower. Regardless
of the repayment periods specified, all Term Loans with all
accrued and unpaid interest thereon shall be immediately due and
payable, upon written notice thereof to the Borrower in
accordance with the notice provisions set forth in Sections 5.2
and 6.2 of this Agreement,upon the occurrence of any Event of
Default. The one-time Term Loan relating to the Borrower's
obligations to Mitsui under the Mitsui Loan shall bear interest
in accordance with Option A below and shall be repaid with a 36
month term in accordance with subsection (ii)(a) hereof.
(i) Interest.
Option A: A rate equal to the "Prime Rate" in effect from
time to time, plus 1% per annum, calculated on the basis of
a 360-day year for the actual number of days elapsed.
"Prime Rate" means the rate announced from time to time by
Silicon as its "prime rate;" it is a base rate upon which
other rates charged by Silicon are based, and it is not
necessarily the best rate available at Silicon. The
interest rate applicable to the Term Loan based on the
Prime Rate shall change on each date there is a change in
the Prime Rate.
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<PAGE> 11
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
Option B: A rate equal to 10.5% per annum, fixed for the
term of the Term Loan and calculated on the basis of a 360-
day year for the actual number of days elapsed.
Option C: A rate equal to 11% per annum, fixed for the term
of the Term Loan and calculated on the basis of a 360-day
year for the actual number of days elapsed.
(ii) Repayment. Each Term Loan shall be repayable as follows:
(a) If interest pursuant to Option A above is selected, the
Term Loan shall be repayable in one of the two following
options: in equal monthly principal installments, with each
principal installment being in an amount equal to the
original principal amount of the Term Loan divided by 36 or
48, commencing 30 days after the date the Term Loan is
disbursed and continuing on the same day of each succeeding
month until the third anniversary (if 36 is selected as the
denominator above) or fourth anniversary (if 48 is selected
as the denominator above), of the date the Term Loan is
disbursed, on which date the entire unpaid principal balance
of the Term Loan and all accrued interest thereon shall be
due and payable; in addition to such principal payments,
accrued interest shall be payable monthly on the same date
principal payments are due.
(b) If interest pursuant to Option B above is selected, the
Term Loan shall be repayable in equal monthly installments
of principal and interest, utilizing an amortization period
of 36 months, commencing 30 days after the date the Term
Loan is disbursed and continuing on the same day of each
succeeding month until the third anniversary of the date the
Term Loan is disbursed, on which date the entire unpaid
principal balance of the Term Loan and all accrued interest
thereon shall be due and payable.
(c) If interest pursuant to Option C above is selected, the
Term Loan shall be repayable in equal monthly installments
of principal and interest, utilizing an amortization period
of 48 months, commencing 30 days after the date the Term
Loan is disbursed and continuing on the same day of each
succeeding month until the fourth anniversary of the date
the Term Loan is disbursed, on which date the entire unpaid
principal balance of the Term Loan and all accrued interest
thereon shall be due and payable.
1.1A.3 COLLATERAL. The Term Loans shall be secured by the
Equipment and by all other Collateral. Borrower represents and
warrants that Silicon shall have a first priority perfected
security interest in the Equipment.
INTEREST RATE (Section 1.2):
A rate equal to the "Prime Rate" in effect from time to time,
plus .50% per annum, provided, however, that the interest
charged relating to the Term Loans shall be in accordance with
-3-
<PAGE> 12
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
Section 1.1A above. Interest shall be calculated on the basis
of a 360-day year for the actual number of days elapsed. "Prime
Rate" means the rate announced from time to time by Silicon as
its "prime rate;" it is a base rate upon which other rates
charged by Silicon are based, and it is not necessarily the best
rate available at Silicon. The interest rate applicable to the
Obligations shall change on each date there is a change in the
Prime Rate.
LOAN ORIGINATION FEE
(Section 1.3):
$6,667. (Any Commitment Fee previously paid by the Borrower in
connection with this loan shall be credited against this Fee.)
MATURITY DATE
(Section 5.1):
February 15, 1993 relating to the advances made and obligations
incurred pursuant to the Section 1.1 Credit Limit; the Maturity
Date shall be considered to be the final scheduled repayment
date for the Term Loans, determined in accordance with Section
1.1 A.2.
PRIOR NAMES OF BORROWER
(Section 3.2):
NONE
TRADE NAMES OF BORROWER
(Section 3.2):
KOFAX
OTHER LOCATIONS AND ADDRESSES
(Section 3.3):
45 WINTONBURY AVENUE, SUITE 306, BLOOMFIELD, CT 06002;
620 HERNDON PARKWAY, SUITE 204, HERNDON, VA 22070;
MATERIAL ADVERSE LITIGATION
(Section 3.10):
NONE
NEGATIVE COVENANTS-EXCEPTIONS
(Section 4.6):
Without Silicon's prior written consent, Borrower may do the
following, provided that, after giving effect thereto, no Event
of Default has occurred and no event has occurred which, with
notice or passage of time or both, would constitute an Event of
Default, and provided that the following are done in compliance
with all applicable laws, rules and regulations: (i) repurchase
shares of Borrower's stock pursuant to any employee stock
purchase or benefit plan, provided that the total amount paid by
Borrower for such stock does not exceed $200,000 in any fiscal
year or (ii) make loans to, or enter into loan guaranties on
behalf of, employees in an aggregate amount not exceeding
$200,000 at any one time outstanding.
FINANCIAL COVENANTS
(Section 4.1):
Borrower shall comply with all of the following covenants.
Compliance shall be determined as of the end of each month,
except as otherwise specifically provided below:
WORKING CAPITAL:
Borrower shall maintain an excess of current assets over current
liabilities of not less than $2,500,000.
QUICK ASSET RATIO:
Borrower shall maintain a ratio of "Quick Assets" to current
liabilities of not less than 1.0 to 1.
TANGIBLE NET WORTH:
Borrower shall maintain a tangible net worth of not less than
$3,000,000.
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<PAGE> 13
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
DEBT TO TANGIBLE
NET WORTH RATIO:
Borrower shall maintain a ratio of total liabilities to tangible
net worth of not more than 1.0 to 1.
PROFITABILITY:
Borrower shall not incur a loss (after taxes) for any fiscal
quarter in excess of $500,000.
DEFINITIONS:
"Current assets," and "current liabilities" shall have the
meanings ascribed to them in accordance with generally accepted
accounting principles.
"Tangible net worth" means the excess of total assets over total
liabilities, determined in accordance with generally accepted
accounting principles, excluding however all assets which would
be classified as intangible assets under generally accepted
accounting principles, including without limitation goodwill,
licenses, patents, trademarks, trade names, copyrights, and
franchises.
"Quick Assets" means cash on hand or on deposit in banks,
readily marketable securities issued by the United States,
readily marketable commercial paper rated "A-l" by Standard &
Poor's Corporation (or a similar rating by a similar rating
organization), certificates of deposit and banker's acceptances,
and accounts receivable (net of allowance for doubtful
accounts).
SUBORDINATED DEBT:
"Liabilities" for purposes of the foregoing covenants do not
include indebtedness which is subordinated to the indebtedness
to Silicon under a subordination agreement in form reasonably
specified by Silicon or by language in the instrument evidencing
the indebtedness which is reasonably acceptable to Silicon.
OTHER COVENANTS
(Section 4.1): Borrower shall at all times comply with all of the following
additional covenants:
1. BANKING RELATIONSHIP. Borrower shall at all times maintain
its primary banking relationship with Silicon while any
Obligations remain outstanding.
2. MONTHLY BORROWING BASE CERTIFICATE AND LISTING. Within 20
days after the end of each month while any Obligations remain
outstanding, Borrower shall provide Silicon with a Borrowing
Base Certificate in such form as Silicon shall reasonably
specify, and an aged listing of Borrower's accounts receivable.
3. INDEBTEDNESS. Without limiting any of the foregoing terms or
provisions of this Agreement, Borrower shall not in the future
incur indebtedness for borrowed money, except for (i)
indebtedness to Silicon, and (ii) indebtedness incurred in the
future for the purchase price of or lease of equipment in an
aggregate amount not exceeding $700,000 at any time outstanding;
such indebtedness refers to obligations owing to parties other
than Silicon.
-5-
<PAGE> 14
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
4. OTHER INFORMATION REQUIREMENTS. The Borrower shall promptly
provide to Silicon such budgets, sales projections, operating
plans and other financial documentation relating to the Borrower
that Silicon reasonably requires.
5. INITIAL AUDIT. The audit referred to in Section 4.5 of this
Agreement shall be completed within 60 days of the first advance
relating to the Borrower's accounts receivable made to Borrower
pursuant to Section 1.1.
BORROWER:
KOFAX IMAGE PRODUCTS
BY [SIG]
--------------------------------------
PRESIDENT OR VICE PRESIDENT
BY [SIG]
--------------------------------------
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY [SIG]
--------------------------------------
TITLE AVP
--------------------------------------
-6-
<PAGE> 15
[SILICON VALLEY BANK LETTERHEAD]
AMENDMENT TO LOAN AGREEMENT
BORROWER: KOFAX IMAGE PRODUCTS
ADDRESS: 3 JENNER STREET
IRVINE, CALIFORNIA 92718
DATE: MARCH 9, 1993
THIS AMENDMENT TO LOAN AGREEMENT is entered into between SILICON
VALLEY BANK ("Silicon") and the borrower named above (the "Borrower"). The
Parties agree to amend the Loan and Security Agreement between them, dated
February 28, 1992 (the "Loan Agreement"), as follows, effective on the date
hereof. (Capitalized terms used but not defined in this Amendment, shall
have the meanings set forth in the Loan Agreement.)
1. MODIFICATION OF CREDIT LIMIT. The section of the Schedule to Loan
Agreement entitled "Credit Limit (Section 1.1)" is hereby deleted and
replaced with the following:
"CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of: (i) $2,000,000 at any one
time outstanding; or (ii) 80% of the Net Amount of Borrower's
accounts, which are eligible for borrowing. "Net Amount" of an
account means the gross amount of the account, minus all
applicable sales, use, excise and other similar taxes and minus
all discounts, credits and allowances of any nature granted or
claimed.
Without limiting the fact that the determination of which
accounts are eligible for borrowing is a matter of Silicon's
discretion, the following will not be deemed eligible for
borrowing: accounts outstanding for more than 90 days from the
invoice date, accounts subject to any contingencies, accounts
owing from an account debtor outside the United States (unless
pre-approved by Silicon which approval shall not be unreasonably
withheld, or backed by a letter of credit satisfactory to
Silicon, or FCIA insured satisfactory to Silicon), accounts
owing from one account debtor to the extent they exceed 25% of
the total eligible accounts outstanding, accounts owing from an
affiliate of Borrower, and accounts owing from an account debtor
to whom Borrower is or may be liable for goods purchased from
such account debtor or otherwise. In addition, if more than 50%
of the accounts owing from an account debtor are outstanding
more than 90 days from the invoice date or are otherwise not
eligible accounts, then all accounts owing from that account
debtor will be deemed ineligible for borrowing.
-1-
<PAGE> 16
SILICON VALLEY BANK AMENDMENT TO LOAN AGREEMENT
- --------------------------------------------------------------------------------
Silicon, in its reasonable discretion, will from time to time
during the term of this Agreement issue letters of credit for
the account of the Borrower ("Letters of Credit"), in an
aggregate amount at any one time outstanding not to exceed
$100,000, upon the request of the Borrower and upon execution
and delivery by the Borrower of Applications for Letters of
Credit and such other documentation as Silicon shall specify
(the "Letter of Credit Documentation"). Fees for the Letters of
Credit shall be as provided in the Letter of Credit
Documentation.
The Credit Limit set forth above and the Loans available under
this Agreement at any time shall be reduced by the face amount
of Letters of Credit from time to time outstanding.
TERM LOANS (Section 1.1A):
1.1A.1 TERM LOANS. In addition to the Loans provided for in
Section 1.1 above, provided no Event of Default has occurred,
Silicon will make term loans from time to time to the Borrower,
upon Borrower's request, (individually a "Term Loan" and
collectively the "Term Loans") in amounts up to the lesser of
the Term Loan Availability (as referred to below) or 100% of the
invoice price of the Equipment (as referred to below), plus
freight and taxes. The proceeds of the Term Loans shall be used
by the Borrower to purchase new equipment reasonably acceptable
to Silicon and evidenced by documentation reasonably acceptable
to Silicon (the "Equipment").
Term Loans may be borrowed by the Borrower at any time prior to
March 9, 1994, and shall be disbursed by making payment to
Borrower for group purchases of Equipment having an aggregate
purchase price of $25,000 or more, or otherwise by making
payment directly to the supplier of the Equipment. A Term Loan
shall constitute a "Loan" for all purposes of the Loan
Agreement, except that the Term Loan shall bear interest at the
rate set forth in Section 1.1A.2, and the Term Loan shall not be
subject to the Credit Limit referred to in Section 1.1 above.
Silicon has previously made a term loan Borrower to satisfy
Borrower's prior obligations to Mitsui Manufacturers Bank (the
"Mitsui Loan"), the principal balance of which, as of February
28, 1993, is $195,151.83 and which shall be repaid to Silicon in
equal monthly installments of principal until March 9, 1995, on
which date the unpaid principal and accrued interest thereon
shall be paid in full. Interest shall be payable in accordance
with Option A below. The phrase "Term Loans" shall include,
without limitation, the Mitsui Loan.
The term "Term Loan Availability" as used in this Agreement
means $400,000 minus the sum of the original principal
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<PAGE> 17
SILICON VALLEY BANK AMENDMENT TO LOAN AGREEMENT
- --------------------------------------------------------------------------------
amounts of all Term Loans Silicon has made to Borrower, other
than the Mitsui Loan.
The term "Obligations" as used in this Agreement shall include
without limitation the obligation to repay the Term Loans,
including, without limitation, the Mitsui Loan, and all interest
thereon.
1.1A.2 INTEREST RATE AND REPAYMENT. Each Term Loan shall bear
interest at one of the following two alternative rates, as
designated by Borrower by written notice to Silicon at the time
the Term Loan is disbursed. If the Borrower does not designate
an applicable interest rate, Silicon may do so by written notice
to the Borrower. All Term Loans with all accrued and unpaid
interest thereon shall be immediately due and payable, upon
written notice thereof to the Borrower in accordance with the
notice provisions set forth in Sections 5.2 and 6.2 of this
Agreement, upon the occurrence of any Event of Default. The
Mitsui Loan shall bear interest in accordance with Option A
below and shall be repaid as set forth above.
(i) Interest. Interest shall be payable monthly on all
outstanding Term Loans, including, without limitation, at all
times prior to any Start Amortization Date (as referred to
below) based on the following interest rate options:
Option A: A rate equal to the "Prime Rate" in effect from
time to time, plus 1% per annum, calculated on the basis of
a 360-day year for the actual number of days elapsed. "Prime
Rate" means the rate announced from time to time by Silicon
as its "prime rate"; it is a base rate upon which other
rates charged by Silicon are based, and it is not
necessarily the best rate available at Silicon. The interest
rate applicable to the Term Loan based on the Prime Rate
shall change on each date there is a change in the Prime
Rate.
Option B: A rate equal to 9% per annum, fixed for the term
of the Term Loan and calculated on the basis of a 360-day
year for the actual number of days elapsed.
(ii) Repayment. Term Loans shall be repayable as follows: On the
date (the "Start Amortization Date") when the aggregate
outstanding principal amount of Term Loans, other than those
Term Loans already comprising Amortizing Term Loans (as referred
to below) and the Mitsui Loan, reaches or exceeds $100,000, the
Borrower shall repay each of such Term Loans (referred to as
"Amortizing Term Loans") as follows in accordance with the
interest option originally specified by the Borrower:
(a) If interest pursuant to Option A above has been
selected, then such Term Loan shall be repayable as
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<PAGE> 18
SILICON VALLEY BANK AMENDMENT TO LOAN AGREEMENT
- -------------------------------------------------------------------------------
follows: in equal monthly principal installments, with each
principal installment being in an amount equal to the
original principal amount of the Term Loan divided by 36,
commencing 30 days after the respective Start Amortization
Date, and continuing on the same day of each succeeding
month until the third anniversary of such Start Amortization
Date, on which date the entire unpaid principal balance of
such Term Loan and all accrued interest thereon shall be due
and payable; in addition to such principal payments, accrued
interest shall be payable monthly on the same date principal
payments are due; or
b) If interest pursuant to Option B above has been selected,
then such Term Loan shall be repayable as follows: in equal
monthly installments of principal and interest, utilizing an
amortization period of 36 months, commencing 30 days after
the respective Start Amortization Date and continuing on the
same day of each succeeding month until the third
anniversary of such Start Amortization Date, on which date
the entire unpaid principal balance of such Term Loan and
all accrued interest thereon shall be due and payable;
provided, however, that the date that is the earlier to occur
of (a) March 9, 1994 and (b) the date when there remains no
further Term Loan Availability, shall also constitute a Start
Amortization Date and the outstanding Term Loans, other than
those Term Loans already comprising Amortizing Term Loans and
the Mitsui Loan, shall be repaid as set forth above.
1.1A.3 COLLATERAL. The Term Loans shall be secured by the
Equipment and by all other Collateral. Borrower represents and
warrants that Silicon shall have a first priority perfected
security interest in the Equipment."
2. REVISED MATURITY DATE. The Maturity Date as set forth in the
section in the Schedule to Loan Agreement entitled "Maturity Date (Section 5.1)"
is hereby deleted and replaced with the following:
"MATURITY DATE
(Section 5.1):
October 5, 1994, relating to the advances made and obligations
incurred pursuant to the Section 1.1 Credit Limit; the Maturity
Date shall be considered to be the final scheduled repayment
date for the Term Loans, determined in accordance with Section
1.1A.2."
-4-
<PAGE> 19
SILICON VALLEY BANK AMENDMENT TO LOAN AGREEMENT
- -------------------------------------------------------------------------------
3. REVISED FINANCIAL COVENANTS. The section of the Schedule to Loan
Agreement entitled "Financial Covenants (Section 4.1)" is hereby deleted and
replaced with the following:
"FINANCIAL COVENANTS
(Section 4.1): Borrower shall comply with all of the following covenants.
Compliance shall be determined as of as of the end of each
month, except as otherwise specifically provided below:
WORKING CAPITAL: Borrower shall maintain an excess of current assets over
current liabilities of not less than $3,000,000.
QUICK ASSET RATIO: Borrower shall maintain a ratio of "Quick Assets" to
current liabilities of not less than 1.25 to 1.
TANGIBLE NET Borrower shall maintain a tangible net worth of not less
WORTH: than $4,000,000.
DEBT TO TANGIBLE Borrower shall maintain a ratio of total liabilities to
NET WORTH RATIO: tangible net worth of not more than 1.0 to 1.
PROFITABILITY Borrower shall not incur a loss (after taxes) for any
fiscal quarter in excess of $500,000, provided that
Borrower shall not incur any loss (after taxes) for the
fiscal years of 1993 and 1994.
DEFINITIONS: "Current assets," and "current liabilities" shall have the
meanings ascribed to them in accordance with generally
accepted accounting principles.
"Tangible net worth" means the excess of total assets over
total liabilities, determined in accordance with generally
accepted accounting principles, excluding however all
assets which would be classified as intangible assets
under generally accepted accounting principles, including
without limitation goodwill, licenses, patents,
trademarks, trade names, copyrights, and franchises.
"Quick Assets" means cash on hand or on deposit in banks,
readily marketable securities issued by the United States,
readily marketable commercial paper rated "A-1" by
Standard & Poor's Corporation (or a similar rating by a
similar rating organization), certificates of deposit and
banker's acceptances, and accounts receivable (net of
allowance for doubtful accounts).
SUBORDINATED DEBT: "Liabilities" for purposes of the foregoing covenants do
not include indebtedness which is subordinated to the
indebtedness to Silicon under a subordination agreement in
form specified by Silicon or by language in the instrument
evidencing the indebtedness which is acceptable to
Silicon."
4. FACILITY FEE. The Borrower shall pay Silicon concurrently herewith
a facility fee of $6,667. Said facility fee shall be in addition to all interest
and other sums payable to Silicon, and shall not be refundable.
5. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and the Borrower, and
the other written documents and agreements between Silicon and the Borrower set
forth in full all of the
-5-
<PAGE> 20
SILICON VALLEY BANK AMENDMENT TO LOAN AGREEMENT
- --------------------------------------------------------------------------------
representations and agreements of the parties with respect to the subject matter
hereof and supersede all prior discussions, representations, agreements and
understandings between the parties with respect to the subject hereof. Except as
herein expressly amended, all of the terms and provisions of the Loan Agreement,
and all other documents and agreements between Silicon and the Borrower shall
continue in full force and effect and the same are hereby ratified and
confirmed.
BORROWER: SILICON:
KOFAX IMAGE PRODUCTS SILICON VALLEY BANK
BY [SIG] BY [SIG]
------------------------ --------------------------
PRESIDENT OR VICE PRESIDENT TITLE VICE PRESIDENT
------------------------
BY [SIG]
------------------------
SECRETARY OR ASS'T SECRETARY
-6-
<PAGE> 21
[SILICON VALLEY BANK LETTERHEAD]
AMENDMENT TO LOAN AND SECURITY
AGREEMENT
BORROWER: KOFAX IMAGE PRODUCTS
ADDRESS: 3 JENNER STREET
IRVINE, CALIFORNIA 92718
DATE: OCTOBER 10, 1994
THIS AMENDMENT TO LOAN AGREEMENT is entered into between SILICON
VALLEY BANK ("Silicon") and the borrower named above (the "Borrower"). The
Parties agree to amend the Loan and Security Agreement between them, dated
February 28, 1992, as amended by that certain Amendment to Loan Agreement dated
May 9, 1993 (as amended, the "Loan Agreement"), as follows, effective on the
date hereof. (Capitalized terms used but not defined in this Amendment, shall
have the meanings set forth in the Loan Agreement.)
1. AMENDED SCHEDULE. The Schedule to Loan and Security Agreement is
amended effective as of the date hereof, to read as set forth on the Amended
Schedule to Loan and Security Agreement attached hereto.
2. REVISED REPORTING OF FINANCIAL STATEMENTS AND COMPLIANCE
CERTIFICATES AND SUBMISSION OF LETTER FROM CERTIFIED PUBLIC ACCOUNTANTS. Section
3.7 of the Loan Agreement is hereby deleted in its entirety and replaced with
the following:
"3.7 FINANCIAL CONDITION AND STATEMENTS. All financial statements now
or in the future delivered to Silicon have been, and will be,
prepared in conformity with generally accepted accounting principles
and now and in the future will completely and accurately reflect in
all material respects the financial condition of the Borrower, at the
times and for the periods therein stated. Since the last date covered
by any such statement, there has been no material adverse change in
the financial condition or business of the Borrower. The Borrower is
now and will continue to be solvent. The Borrower will provide
Silicon: (i) within 30 days after the end of each fiscal quarter, a
quarterly financial statement prepared by the Borrower, and a
Compliance Certificate in such form as Silicon shall reasonably
specify, signed by the Chief Financial Officer of the Borrower,
certifying that throughout such quarter the Borrower was in full
compliance with all of the terms and conditions of this Agreement,
and setting forth calculations showing compliance with the financial
covenants set forth on the Schedule and such other information as
Silicon shall reasonably request; and (ii) within 120 days following
the end of the Borrower's fiscal year, complete annual financial
statements, certified by independent certified public accountants
reasonably acceptable to Silicon together with a letter and/or report
to management of the Borrower from such certified public accountant."
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<PAGE> 22
SILICON VALLEY BANK AMENDMENT TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
3. REVISED TIME PERIOD FOR COMPLETION OF ACCOUNTS RECEIVABLE AUDIT.
Section 4.5 of the Loan Agreement is hereby deleted in its entirety and replaced
with the following:
"4.5 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At all reasonable
times, and upon one business day notice, Silicon, or its agents,
shall have the right to inspect the Collateral, and the right to
audit and copy the Borrower's accounting books and records and
Borrower's books and records relating to the Collateral. Silicon
shall take reasonable steps to keep confidential all information
obtained in any such inspection or audit, but Silicon shall have the
right to disclose any such information to its auditors, regulatory
agencies, and attorneys, and pursuant to any subpoena or other legal
process. The foregoing audits shall be at Silicon's expense, except
that while any Obligations remain outstanding, the Borrower shall
reimburse Silicon for its reasonable out of pocket costs for annual
accounts receivable audits, the first such audit to be completed
within 90 days of the first advance that Silicon makes to Borrower
relating to Borrower's accounts; such audit shall be conducted by
third parties retained by Silicon, and Silicon may debit Borrower's
deposit accounts with Silicon for the cost of such accounts
receivable audit (in which event Silicon shall send notification
thereof to the Borrower). Notwithstanding the foregoing, after the
occurrence of an Event of Default all audits shall be at the
Borrower's expense."
4. FACILITY FEE. The Borrower shall pay Silicon concurrently herewith
a facility fee in the amount of $6,667, which shall be in addition to all
interest and all other fees payable to Silicon and shall be non-refundable.
5. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon
that all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct as of the date hereof.
6. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and the Borrower, and
the other written documents and agreements between Silicon and the Borrower set
forth in full all of the representations and agreements of the parties with
respect to the subject matter hereof and supersede all prior discussions,
representations, agreements and understandings between the parties with respect
to the subject hereof. Except as herein expressly amended, all of the terms and
provisions of the Loan Agreement, and all other documents and agreements between
Silicon and the Borrower shall continue in full force and effect and the same
are hereby ratified and confirmed.
BORROWER: SILICON:
KOFAX IMAGE PRODUCTS SILICON VALLEY BANK
BY [SIG] BY [SIG]
--------------------------- -------------------------------
PRESIDENT OR VICE PRESIDENT TITLE VP
----------------------------
BY [SIG]
---------------------------
SECRETARY OR ASS'T SECRETARY
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<PAGE> 23
[SILICON VALLEY BANK LETTERHEAD]
AMENDED SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: KOFAX IMAGE PRODUCTS
ADDRESS: 3 JENNER STREET
IRVINE, CALIFORNIA 92718
DATE: OCTOBER 10, 1994
CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of: (i) $2,000,000 at any
one time outstanding; or (ii) 80% of the Net Amount of
Borrower's accounts, which are eligible for borrowing. "Net
Amount" of an account means the gross amount of the account,
minus all applicable sales, use, excise and other similar
taxes and minus all discounts, credits and allowances of any
nature granted or claimed.
Without limiting the fact that the determination of which
accounts are eligible for borrowing is a matter of Silicon's
discretion, the following will not be deemed eligible for
borrowing: accounts outstanding for more than 90 days from
the invoice date, accounts subject to any contingencies,
accounts owing from an account debtor outside the United
States (unless pre-approved by Silicon, which approval shall
not be unreasonably withheld, or backed by a letter of
credit satisfactory to Silicon, or FCIA insured satisfactory
to Silicon), accounts owing from one account debtor to the
extent they exceed 25% of the total eligible accounts
outstanding, accounts owing from an affiliate of Borrower,
and accounts owing from an account debtor to whom Borrower
is or may be liable for goods purchased from such account
debtor or otherwise. In addition, if more than 50% of the
accounts owing from an account debtor are outstanding more
than 90 days from the invoice date or are otherwise not
eligible accounts, then all accounts owing from that account
debtor will be deemed ineligible for borrowing.
Silicon, in its reasonable discretion, will from time to
time during the term of this Agreement issue letters of
credit for the account of the Borrower ("Letters of
Credit"), in an aggregate amount at any one time outstanding
not to exceed $100,000, upon the request of the Borrower and
upon execution and delivery by the Borrower of Applications
for Letters of Credit and such other documentation as
Silicon shall specify (the "Letter of Credit
Documentation"). Fees for the Letters of Credit shall be as
provided in the Letter of Credit Documentation.
The Credit Limit set forth above and the Loans available
under this Agreement at any time shall be reduced by the
face amount of Letters of Credit from time to time
outstanding.
-1-
<PAGE> 24
SILICON VALLEY BANK AMENDED SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
TERM LOANS (Section 1.1A):
1.1A.1 TERM LOANS. In addition to the Loans provided for in
Section 1.1 above, provided no Event of Default has
occurred, Silicon will make term loans from time to time to
the Borrower, upon Borrower's request, (individually a "Term
Loan" and collectively the "Term Loans") in amounts up to
the lesser of the Term Loan Availability (as referred to
below) or 100% of the invoice price of the Equipment (as
referred to below), plus freight and taxes. The proceeds of
the Term Loans shall be used by the Borrower to purchase new
equipment reasonably acceptable to Silicon and evidenced by
documentation reasonably acceptable to Silicon (the
"Equipment").
Term Loans may be borrowed by the Borrower at any time prior
to March 9, 1994, and shall be disbursed by making payment
to Borrower for group purchases of Equipment having an
aggregate purchase price of $25,000 or more, or otherwise by
making payment directly to the supplier of the Equipment. A
Term Loan shall constitute a "Loan" for all purposes of the
Loan Agreement, except that the Term Loan shall bear
interest at the rate set forth in Section 1.1A.2, and the
Term Loan shall not be subject to the Credit Limit referred
to in Section 1.1 above.
Silicon has previously made a term loan Borrower to satisfy
Borrower's prior obligations to Mitsui Manufacturers Bank
(the "Mitsui Loan"), the principal balance of which, as of
February 28, 1993, is $195,151.83 and which shall be repaid
to Silicon in equal monthly installments of principal until
March 9, 1995, on which date the unpaid principal and
accrued interest thereon shall be paid in full. Interest
shall be payable in accordance with Option A below. The
phrase "Term Loans" shall include, without limitation, the
Mitsui Loan.
The term "Term Loan Availability" as used in this Agreement
means $400,000 minus the sum of the original principal
amounts of all Term Loans Silicon has made to Borrower,
other than the Mitsui Loan.
The term "Obligations" as used in this Agreement shall
include without limitation the obligation to repay the Term
Loans, including, without limitation, the Mitsui Loan, and
all interest thereon.
1.1A.2 INTEREST RATE AND REPAYMENT. Each Term Loan shall
bear interest at one of the following two alternative rates,
as designated by Borrower by written notice to Silicon at
the time the Term Loan is disbursed. If the Borrower does
not designate an applicable interest rate, Silicon may do so
by written notice to the Borrower. All Term Loans with all
accrued and unpaid interest thereon shall be immediately due
and payable, upon written notice thereof to the Borrower in
accordance with the notice provisions set forth in Sections
5.2 and 6.2 of this Agreement, upon the occurrence of any
Event of Default. The Mitsui Loan shall bear interest in
accordance with Option A below and shall be repaid as set
forth above.
(i) Interest. Interest shall be payable monthly on all
outstanding Term Loans, including, without limitation, at
all times prior to any Start Amortization Date (as referred
to below) based on the following interest rate options:
-2-
<PAGE> 25
Option A: A rate equal to the "Prime Rate" in effect from
time to time, plus 1% per annum, calculated on the basis of
a 360-day year for the actual number of days elapsed. "Prime
Rate" means the rate announced from time to time by Silicon
as its "prime rate"; it is a base rate upon which other
rates charged by Silicon are based, and it is not
necessarily the best rate available at Silicon. The interest
rate applicable to the Term Loan based on the Prime Rate
shall change on each date there is a change in the Prime
Rate.
Option B: A rate equal to 9% per annum, fixed for the term
of the Term Loan and calculated on the basis of a 360-day
year for the actual number of days elapsed.
(ii) Repayment. Term Loans shall be repayable as follows: On the
date (the "Start Amortization Date") when the aggregate
outstanding principal amount of Term Loans, other than those
Term Loans already comprising Amortizing Term Loans (as referred
to below) and the Mitsui Loan, reaches or exceeds $100,000, the
Borrower shall repay each of such Term Loans (referred to as
"Amortizing Term Loans") as follows in accordance with the
interest option originally specified by the Borrower:
(a) If interest pursuant to Option A above has been
selected, then such Term Loan shall be repayable as follows:
in equal monthly principal installments, with each principal
installment being in an amount equal to the original
principal amount of the Term Loan divided by 36, commencing
30 days after the respective Start Amortization Date, and
continuing on the same day of each succeeding month until
the third anniversary of such Start Amortization Date, on
which date the entire unpaid principal balance of such Term
Loan and all accrued interest thereon shall be due and
payable; in addition to such principal payments, accrued
interest shall be payable monthly on the same date principal
payments are due; or
(b) If interest pursuant to Option B above has been
selected, then such Term Loan shall be repayable as follows:
in equal monthly installments of principal and interest,
utilizing an amortization period of 36 months, commencing 30
days after the respective Start Amortization Date and
continuing on the same day of each succeeding month until
the third anniversary of such Start Amortization Date, on
which date the entire unpaid principal balance of such Term
Loan and all accrued interest thereon shall be due and
payable;
provided, however, that the date that is the earlier to occur of
(a) March 9, 1994 and (b) the date when there remains no further
Term Loan Availability, shall also constitute a Start
Amortization Date and the outstanding Term Loans, other than
those Term Loans already comprising Amortizing Term Loans and
the Mitsui Loan, shall be repaid as set forth above.
1.1A.3 COLLATERAL. The Term Loans shall be secured by the
Equipment and by all other Collateral. Borrower represents and
-3-
<PAGE> 26
warrants that Silicon shall have a first priority perfected
security interest in the Equipment.
INTEREST RATE
(Section 1.2): A rate equal to the "Prime Rate" in effect from time to time,
plus .50% per annum, provided, however, that the interest
charged relating to the Term Loans shall be in accordance with
Section 1.1A above. Interest shall be calculated on the basis of
a 360-day year for the actual number of days elapsed. "Prime
Rate" means the rate announced from time to time by Silicon as
its "prime rate;" it is a base rate upon which other rates
charged by Silicon are based, and it is not necessarily the best
rate available at Silicon. The interest rate applicable to the
Obligations shall change on each date there is a change in the
Prime Rate.
LOAN ORIGINATION FEE
(Section 1.3): As per Amendment to Loan and Security Agreement of even date.
MATURITY DATE
(Section 5. 1): October 5, 1995, relating to the advances made and obligations
incurred pursuant to the Section 1.1 Credit Limit.
PRIOR NAMES OF BORROWER
(Section 3.2): None
TRADE NAMES OF BORROWER
(Section 3.2): KOFAX
OTHER LOCATIONS AND ADDRESSES
(Section 3.3): 1280 BLUE HILLS AVENUE, SUITE 4, BLOOMFIELD, CT 06002; 620
HERNDON PARKWAY, SUITE 200, HERNDON, VA 22070; 1850 PARKWAY
PLACE, SUITE 420, MARIETTA, GA 30067; RUE CAPOUILLET 19, 1060
BRUSSELS, BELGIUM
MATERIAL ADVERSE LITIGATION
(Section 3.10): NONE
NEGATIVE COVENANTS-EXCEPTIONS
(Section 4.6): Without Silicon's prior written consent, Borrower may do the
following, provided that, after giving effect thereto, no Event
of Default has occurred and no event has occurred which, with
notice or passage of time or both, would constitute an Event of
Default, and provided that the following are done in compliance
with all applicable laws, rules and regulations: (i) repurchase
shares of Borrower's stock pursuant to any employee stock
purchase or benefit plan, provided that the total amount paid by
Borrower for such stock does not exceed $200,000 in any fiscal
year or (ii) make loans to, or enter into loan guaranties on
behalf of, employees in an aggregate amount not exceeding
$200,000 at any one time outstanding.
FINANCIAL COVENANTS
(Section 4. 1): Borrower shall comply with all of the following covenants.
Compliance shall be determined as of the end of each quarter,
except as otherwise specifically provided below:
QUICK ASSET RATIO:
Borrower shall maintain a ratio of "Quick Assets" to current
liabilities of not less than 1.25 to 1.
-4-
<PAGE> 27
TANGIBLE NET WORTH:
Borrower shall maintain a tangible net worth of not less than
$4,000,000.
DEBT TO TANGIBLE
NET WORTH RATIO:
Borrower shall maintain a ratio of total liabilities to tangible
net worth of not more than 1.0 to 1.
PROFITABILITY Borrower shall not incur a loss (after taxes) for any fiscal
quarter; except that Borrower may incur a loss (after taxes) for
a single fiscal quarter not to exceed $500,000. Borrower shall
not incur a loss (after taxes) for the fiscal year 1995.
DEFINITIONS: "Current assets," and "current liabilities" shall have the
meanings ascribed to them in accordance with generally accepted
accounting principles.
"Tangible net worth" means the excess of total assets over total
liabilities, determined in accordance with generally accepted
accounting principles, excluding however all assets which would
be classified as intangible assets under generally accepted
accounting principles, including without limitation goodwill,
licenses, patents, trademarks, trade names, copyrights, and
franchises.
"Quick Assets" means cash on hand or on deposit in banks,
readily marketable securities issued by the United States,
readily marketable commercial paper rated "A-1" by Standard &
Poor's Corporation (or a similar rating by a similar rating
organization), certificates of deposit and banker's acceptances,
and accounts receivable (net of allowance for doubtful
accounts).
SUBORDINATED DEBT:
"Liabilities" for purposes of the foregoing covenants do not
include indebtedness which is subordinated to the indebtedness
to Silicon under a subordination agreement in form specified by
Silicon or by language in the instrument evidencing the
indebtedness which is acceptable to Silicon.
OTHER COVENANTS
(Section 4. 1): Borrower shall at all times comply with all of the following
additional covenants:
1. BANKING RELATIONSHIP. Borrower shall at all times maintain
its primary banking relationship with Silicon while any
Obligations remain outstanding.
2. MONTHLY BORROWING BASE CERTIFICATE AND LISTING. Within 20
days after the end of each month while any Obligations remain
outstanding, Borrower shall provide Silicon with a Borrowing
Base Certificate in such form as Silicon shall reasonably
specify, and an aged listing of Borrower's accounts receivable.
At all other times, within 20 days after the end of each fiscal
quarter, Borrower shall provide Silicon with a Borrowing Base
Certificate in such form as Silicon shall reasonably specify,
and an aged listing of Borrower's accounts receivable.
3. INDEBTEDNESS. Without limiting any of the foregoing terms or
provisions of this Agreement, Borrower shall not in the future
incur indebtedness for borrowed money, except for (i)
indebtedness to Silicon, and (ii) indebtedness incurred in the
future for the purchase price of or lease of equipment in an
aggregate amount not exceeding
-5-
<PAGE> 28
$700,000 at any time outstanding; such indebtedness refers to
obligations owing to parties other than Silicon.
4. OTHER INFORMATION REQUIREMENTS. The Borrower shall promptly
provide to Silicon such budgets, sales projections, operating
plans and other financial documentation relating to the Borrower
that Silicon reasonably requires.
5. INITIAL AUDIT. The audit referred to in Section 4.5 of this
Agreement shall be completed within 90 days of the first advance
relating to the Borrower's accounts receivable made to Borrower
pursuant to Section 1.1.
Borrower:
KOFAX IMAGE PRODUCTS
By [SIG]
-----------------------------------------------
President or Vice President
By [SIG]
-----------------------------------------------
Secretary or Ass't Secretary
Silicon:
SILICON VALLEY BANK
By [SIG]
-----------------------------------------------
Title VP
--------------------------------------------
-6-
<PAGE> 29
[SILICON VALLEY BANK LETTERHEAD
CERTIFIED RESOLUTION
BORROWER: KOFAX IMAGE PRODUCTS, A
CORPORATION ORGANIZED UNDER THE
LAWS OF THE STATE OF CALIFORNIA
ADDRESS: 3 JENNER STREET
IRVINE, CALIFORNIA 92718
DATE: OCTOBER 10, 1994
I, the undersigned, Secretary or Assistant Secretary of the
above-named borrower, a corporation organized under the laws of the state set
forth above, do hereby certify that the following is a full, true and correct
copy of resolutions duly and regularly adopted by the Board of Directors of said
corporation as required by law, and by the by-laws of said corporation, and that
said resolutions are still in full force and effect and have not been in any way
modified, repealed, rescinded, amended or revoked.
RESOLVED, that this corporation borrow from Silicon Valley Bank
("Silicon"), from time to time, such sum or sums of money as, in the
judgment of the officer or officers hereinafter authorized hereby, this
corporation may require, provided, however, that such sum or sums shall
not exceed $2,700,000.
RESOLVED FURTHER, that each of the President, the Chief Financial
Officer and the Secretary of this corporation be, and each of such
officers hereby is, authorized, directed and empowered, in the name of
this corporation, to execute and deliver to Silicon, and Silicon is
requested to accept, the loan agreements, security agreements, notes,
financing statements, and other documents and instruments providing for
such loans and evidencing and/or securing such loans, with interest
thereon, and said authorized officers are authorized from time to time
to execute renewals, extensions and/or amendments of said loan
agreements, security agreements, and other documents and instruments.
RESOLVED FURTHER, that said authorized officers be and they are hereby
authorized, directed and empowered, as security for any and all
indebtedness of this corporation to Silicon, whether arising pursuant to
this resolution or otherwise, to grant, transfer, pledge, mortgage,
assign, or otherwise hypothecate to Silicon, or deed in trust for its
benefit, any property of any and every kind, belonging to this
corporation, including, but not limited to, any and all real property,
accounts, inventory, equipment, general intangibles, instruments,
documents, chattel paper, notes, money, deposit accounts, furniture,
fixtures, goods, and other property of every kind, and to execute and
deliver to Silicon any and all grants, transfers, trust receipts, loan
or credit agreements, pledge agreements, mortgages, deeds of trust,
financing statements, security agreements and other hypothecation
agreements, which said instruments and the note or notes and other
instruments referred to in the preceding paragraph may contain such
provisions, covenants, recitals and agreements as Silicon may require
and said authorized officers may approve, and the execution thereof by
said authorized officers shall be conclusive evidence of such approval.
The undersigned further hereby certifies that the following persons are
the duly elected and acting officers of the corporation named above as borrower
and that the following are their actual signatures:
<PAGE> 30
NAMES OFFICE(S) ACTUAL SIGNATURES
- ----- --------- -----------------
DAVID S. SILVER President and CEO x [SIG]
- ----------------------- ---------------------- -------------------------
DEAN A. HOUGH Vice President x [SIG]
- ----------------------- ---------------------- -------------------------
RONALD S. FIKERT Vice President, CEO x [SIG]
- ----------------------- ---------------------- -------------------------
and Secretary
RICHARD MURPHY Vice President-Sales x [SIG]
- ----------------------- ---------------------- -------------------------
DENNIS JOYCE Vice President-Operatios x [SIG]
- ----------------------- ---------------------- -------------------------
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary or
Assistant Secretary on the date set forth above.
[SIG]
-----------------------------------------
Secretary or Assistant Secretary
-2-
<PAGE> 31
[SILICON VALLEY BANK LETTERHEAD]
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: KOFAX IMAGE PRODUCTS
ADDRESS: 3 JENNER STREET
IRVINE, CALIFORNIA 92718
DATE: OCTOBER 7,1994
<TABLE>
<CAPTION>
Charges: Bank Legal
<S> <C> <C>
Loan Facility Fee $6,667.00
Legal Fee $675.00
Legal Costs (courier, duplicating, etc.) $50.00
--------- -------
Total $6,667.00 $725.00
Previously Paid
Balance Due $6,667.00 $725.00
--------- -------
</TABLE>
<TABLE>
<S> <C>
Please Issue Checks Payable as Follows:
Silicon Valley Bank $6,667.00
Levy, Small & Lallas, Attorneys $725.00
Please send BOTH checks to Silicon Valley Bank
</TABLE>
Acknowledged:
Kofax Image Products
By: [SIG]
-------------------------------
Title: Vice President & CEO
----------------------------
Note: The amounts shown in this Pro Forma Invoice are estimates only, and do not
include services after the date hereof. At the time of funding the amounts shown
on this Invoice will be updated.
<PAGE> 32
[LOGO] SILICON VALLEY BANK
AMENDMENT TO LOAN AND SECURITY AGREEMENT
BORROWER. KOFAX IMAGE PRODUCTS
ADDRESS: 3 JENNER STREET
IRVINE, CALIFORNIA 92718
DATE: OCTOBER 5, 1995
THIS AMENDMENT TO LOAN AGREEMENT is entered into between SILICON VALLEY
BANK ("Silicon") and the borrower named above (the "Borrower"). The Parties
agree to amend the Loan and Security Agreement between them, dated February 28,
1992, as amended by that certain Amendment to Loan Agreement dated May 9, 1993,
and as amended by that certain Amendment to Loan Agreement dated October 10,
1995 (as amended, the "Loan Agreement"), as follows, effective on the date
hereof. (Capitalized terms used but not defined in this Amendment, shall have
the meanings set forth in the Loan Agreement.)
1. Amended Schedule. The Schedule to Loan and Security Agreement is
amended effective as of the date hereof, to read as set forth on the Amended
Schedule to Loan and Security Agreement attached hereto.
2. Modification to Section 2.2. Section 2.2 of the Loan Agreement is
hereby replaced in its entirety with the following Section 2.2 and a new Section
2.2A is hereby added that is to follow after Section 2.2:
"2.2 Grant of Security Interest in Collateral. The Borrower grants
Silicon a continuing security interest in all of the Borrower's
interest in the Collateral (as defined below in Section 2.2A) as
security for all Obligations. The provisions of this section 2.2 shall
be considered fully effective until the IPO Consummation (as defined
below), and upon the occurrence of IPO Consummation the provisions of
this section 2.2 shall be deemed to be of no force and effect. As used
herein the term "IPO Consummation" means the consummation of an
underwritten initial public offering of the Borrower's common stock
from which the Borrower receives net proceeds in a minimum amount of
$9,000,000, which transaction is otherwise satisfactory to Silicon, and
relating to which Borrower has provided to Silicon documentation and
other information satisfactory to Silicon evidencing the consummation
thereof.
2.2A Collateral. This section 2.2A shall be considered to be effective
at all times during the effectiveness of this Loan Agreement regardless
of the status of the IPO Consummation. The term "Collateral" as used
herein shall mean all of the Borrower's interest in the types of
property described below, whether now owned or hereafter acquired, and
wherever located: (a) All accounts, contract rights, chattel paper,
letters
-1-
<PAGE> 33
SILICON VALLEY BANK AMENDMENT TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
of credit, documents, securities, money, and instruments, and all other
obligations now or in the future owing to the Borrower; (b) All
inventory, goods, merchandise, materials, raw materials, work in
process, finished goods, farm products, advertising, packaging and
shipping materials, supplies, and all other tangible personal property
which is held for sale or lease or furnished under contracts of service
or consumed in the Borrower's business, and all warehouse receipts and
other documents; and (c) All equipment, including without limitation
all machinery, fixtures, trade fixtures, vehicles, furnishings,
furniture, materials, tools, machine tools, office equipment, computers
and peripheral devices, appliances, apparatus, parts, dies, and jigs;
(d) All general intangibles including, but not limited to, deposit
accounts, goodwill, names, trade names, trademarks and the goodwill of
the business symbolized thereby, trade secrets, drawings, blueprints,
customer lists, patents, patent applications, copyrights, security
deposits, loan commitment fees, federal, state and local tax refunds
and claims, all rights in all litigation presently or hereafter pending
for any cause or claim (whether in contract, tort or otherwise), and
all judgments now or hereafter arising therefrom, all claims of
Borrower against Silicon, all rights to purchase or sell real or
personal property, all rights as a licensor or licensee of any kind,
all royalties, licenses, processes, telephone numbers, proprietary
information, purchase orders, and all insurance policies and claims
(including without limitation credit, liability, property and other
insurance), and all other rights, privileges and franchises of every
kind; (e) All books and records, whether stored on computers or
otherwise maintained; and (f) All substitutions, additions and
accessions to any of the foregoing, and all products, proceeds and
insurance proceeds of the foregoing, and all guaranties of and security
for the foregoing; and all books and records relating to any of the
foregoing. Silicon's security interest in any present or future
technology (including patents, trade secrets, and other technology)
shall be subject to any licenses or rights now or in the future granted
by the Borrower to any third parties in the ordinary course of
Borrower's business; provided that if the Borrower proposes to sell,
license or grant any other rights with respect to any technology in a
transaction that, in substance, conveys a major part of the economic
value of that technology, Silicon shall first be requested to release
its security interest in the same, and Silicon may withhold such
release in its discretion."
3. REVISED SECTION 3.7. Section 3.7 of the Loan Agreement is hereby
deleted in its entirety and replaced with the following:
"3.7 FINANCIAL CONDITION AND STATEMENTS. All financial statements now
or in the future delivered to Silicon have been, and will be, prepared
in conformity with generally accepted accounting principles and now and
in the future will completely and accurately reflect in all material
respects the financial condition of the Borrower, at the times and for
the periods therein stated. Since the last date covered by any such
statement, there has been no material adverse change in the financial
condition or business of the Borrower. The Borrower is now and will
continue to be solvent. The Borrower will provide Silicon: (i) within
30 days after the end of each fiscal quarter, a quarterly financial
statement prepared by the Borrower, and a Compliance Certificate in
such form as Silicon shall reasonably specify, signed by the Chief
Financial Officer of the Borrower, certifying that throughout such
quarter the Borrower was in full compliance with all of the terms and
conditions of this Agreement, and setting forth calculations showing
compliance with the financial covenants set forth on the Schedule and
such other information as Silicon shall reasonably request; and (ii)
within 120 days following the end of the Borrower's fiscal year,
complete annual financial statements, certified by independent
certified public
-2-
<PAGE> 34
SILICON VALLEY BANK AMENDMENT TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
accountants reasonably acceptable to Silicon together with a letter
and/or report to management of the Borrower from such certified public
accountant.*
* UPON THE IPO CONSUMMATION, THE BORROWER PROVIDE TO SILICON THE
FOLLOWING FINANCIAL REPORTS TO REPLACE THE REPORTING REQUIREMENTS SET
FORTH ABOVE: (I) WITHIN 5 DAYS AFTER THE EARLIER OF THE DATE THE REPORT
10-Q IS RILED OR IS REQUIRED TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION WITH RESPECT TO BORROWER, SUCH 10-Q REPORT, A
QUARTERLY FINANCIAL STATEMENT PREPARED BY BORROWER, AND A COMPLIANCE
CERTIFICATE IN SUCH FORM AS SILICON SHALL REASONABLY SPECIFY, SIGNED BY
THE CHIEF FINANCIAL OFFICER OF THE BORROWER, CERTIFYING THAT THROUGHOUT
SUCH QUARTER THE BORROWER WAS IN FULL COMPLIANCE WITH ALL OF THE TERMS
AND CONDITIONS OF THIS AGREEMENT, AND SETTING FORTH CALCULATIONS SHOWING
COMPLIANCE WITH THE FINANCIAL COVENANTS SET FORTH ON THE SCHEDULE AND
SUCH OTHER INFORMATION AS SILICON SHALL REASONABLY REQUEST (THE
"COMPLIANCE CERTIFICATE"); (III) WITHIN 5 DAYS AFTER THE EARLIER OF THE
DATE THE REPORT 10-K IS FILED OR IS REQUIRED TO BE RILED WITH THE
SECURITIES EXCHANGE COMMISSION WITH RESPECT TO BORROWER, SUCH 10-K
REPORT, COMPLETE ANNUAL FINANCIAL STATEMENTS, CERTIFIED BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS ACCEPTABLE TO SILICON, AND A COMPLIANCE
CERTIFICATE FOR THE QUARTER THEN ENDED."
4. REVISED TIME PERIOD FOR COMPLETION OF ACCOUNTS RECEIVABLE AUDIT.
Section 4.5 of the Loan Agreement is hereby deleted in its entirety and replaced
with the following:
"4.5 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At all reasonable times,
and upon one business day notice, Silicon, or its agents, shall have
the right to inspect the Collateral, and the right to audit and copy
the Borrower's accounting books and records and Borrower's books and
records relating to the Collateral. Silicon shall TAKE reasonable steps
to keep confidential all information obtained in any such inspection or
audit, but Silicon shall have the right to disclose any such
information to its auditors, regulatory agencies, and attorneys, and
pursuant to any subpoena or other legal process. The foregoing audits
shall be at Silicon's expense, except that while any Obligations remain
outstanding prior to the IPO Consummation, the Borrower shall reimburse
Silicon for its reasonable out of pocket costs for annual accounts
receivable audits, the first such audit to be completed within 90 days
of the first advance that Silicon makes to Borrower relating to
Borrower's accounts; such audit shall be conducted by third parties
retained by Silicon, and Silicon may debit Borrower's deposit accounts
with Silicon for the cost of such accounts receivable audit (in which
event Silicon shall send notification thereof to the Borrower).
Notwithstanding the foregoing, after the occurrence of an Event of
Default all audits shall be at the Borrower's expense."
5. FACILITY FEE. The Borrower shall pay Silicon concurrently herewith a
facility FEE in the amount of $6,667, which shall be in addition to all interest
and all other fees payable TO Silicon and shall be non-refundable.
6. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon
that all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct as of the date hereof.
7. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and the Borrower, and
the other written documents and agreements between Silicon and the Borrower set
forth in full all of the
-3-
<PAGE> 35
SILICON VALLEY BANK AMENDMENT TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
representations and agreements of the parties with respect to the subject matter
hereof and supersede all prior discussions, representations, agreements and
understandings between the parties with respect to the subject hereof. Except as
herein expressly amended, all of the terms and provisions of the Loan Agreement,
and all other documents and agreements between Silicon and the Borrower shall
continue in full force and effect and the same are hereby ratified and
confirmed.
BORROWER: SILICON:
KOFAXIMAGE PRODUCTS SILICON VALLEY BANK
BY [SIG] BY
---------------------------------- -----------------------------
PRESIDENT OR VICE PRESIDENT TITLE
--------------------------
BY [SIG]
---------------------------------
SECRETARY OR ASS'T SERETARY
-4-
<PAGE> 36
[LOGO] SILICON VALLEY BANK
AMENDED SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER. KOFAX IMAGE PRODUCTS
ADDRESS: 3 JENNER STREET
IRVINE, CALIFORNIA 92718
DATE: OCTOBER 5, 1995
CREDIT LIMIT
(Section 1.1): A. Prior to IPO Consummation: IPO Default. The following
shall apply prior to the IPO Consummation: An amount not
to exceed the lesser of: (i) $2,000,000 at any one time
outstanding; or (ii) 80% of the Net Amount of Borrower's
accounts, which Silicon in its discretion deems eligible
for borrowing. "Net Amount" of an account means the
gross amount of the account, minus all applicable sales,
use, excise and other similar taxes and minus all
discounts, credits and allowances of any nature granted
or claimed.
B After IPO Consummation. The following shall apply
after the IPO Consummation: An amount not to exceed
$2,000,000 at any one time outstanding.
Without limiting the fact that the determination of
which accounts are eligible for borrowing is a matter of
Silicon's discretion, the following will not be deemed
eligible for borrowing: accounts outstanding for more
than 90 days from the invoice date, accounts subject to
any contingencies, accounts owing from an account debtor
outside the United States (unless pre-approved by
Silicon, which approval shall not be unreasonably
withheld, or backed by a letter of credit satisfactory
to Silicon, or FCIA insured satisfactory to Silicon),
accounts owing from one account debtor to the extent
they exceed 25% of the total eligible accounts
outstanding, accounts owing from an affiliate of
Borrower, and accounts owing from an account debtor to
whom Borrower is or may be liable for goods purchased
from such account debtor or otherwise. In addition, if
more than 50% of the accounts owing from an account
debtor are outstanding more than 90 days from the
invoice date or are otherwise not eligible accounts,
then all accounts owing from that account debtor will be
deemed ineligible for borrowing.
LETTERS OF CREDIT Silicon, in its reasonable discretion, will from time to
time during the term of this Agreement issue letters of
credit for the account of the Borrower ("Letters of
Credit"), in an aggregate amount at any one time
outstanding not to exceed $100,000, upon the request of
the Borrower and upon execution and delivery by the
Borrower of Applications for Letters of Credit and such
other documentation as Silicon shall specify (the
"Letter of Credit Documentation"). Fees for
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<PAGE> 37
SILICON VALLEY BANK AMENDED SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
the Letters of Credit shall be as provided in the Letter
of Credit Documentation.
CREDIT CARD SUBLIMIT Up to $50,000 of the Credit Limit (the "Credit Card
Sublimit") may be used by the Borrower in connection
with Silicon's issuance of corporate credit cards (the
"Credit Cards") for OFFICERS of the Borrower as the
Borrower designates from time to time, with the
aggregate credit limit for all such Credit Cards not to
exceed $50,000 at any time. All Credit Cards and
underlying agreements relating thereto shall be in form
and substance satisfactory to Silicon in its sole
discretion.
The Credit Limit set forth above and the Loans available
under this Agreement at any time shall be reduced by the
face amount of Letters of Credit from time to time
outstanding and the amount of the Credit Card Sublimit
set forth above.
INTEREST RATE
(Section 1.2): A rate equal to the "Prime Rate" in effect from time to
time, plus .50% per annum; provided, however, that upon
the IPO Consummation, the interest rate shall be a rate
equal to the "Prime Rate" in effect from time to time.
Interest shall be calculated on the basis of a 360-day
year for the actual number of days elapsed. "Prime Rate"
means the rate announced from time to time by Silicon as
its " prime rate;" it is a base rate upon which other
rates charged by Silicon are based, and it is not
necessarily the best rate available at Silicon. The
interest rate applicable to the Obligations shall change
on each date there is a change in the Prime Rate.
LOAN ORIGINATION FEE
(Section 1.3): As per Amendment to Loan and Security Agreement of even
date.
MATURITY DATE
(Section 5.1): OCTOBER 5, 1996.
PRIOR NAMES OF BORROWER
(Section 3.2): NONE
TRADE NAMES OF BORROWER
(Section 3.2): KOFAX
OTHER LOCATIONS AND ADDRESSES
(Section 3.3): 74 BEDFORD STREET, LEXINGTON, MA 02173
620 HERNDON PARKWAY, SUITE 200, HERNDON, VA 22070;
1850 PARKWAY PLACE, SUITE 420, MARIETTA, GA 30067;
RUE CAPOUILLET 19, 1060 BRUSSELS, BELGIUM
20 CLOTDESDALE RD., LONDON W17 8ES UNITED KINGDOM
MATERIAL ADVERSE LITIGATION
(Section 3.10): NONE
NEGATIVE COVENANTS-EXCEPTIONS
(Section 4.6): Without Silicon's prior written consent, Borrower may do
the following, provided that, after giving effect
thereto, no Event of Default has occurred and no event
has occurred which, with notice or passage of time or
both, would constitute an Event of Default, and provided
that the following are done in compliance with all
applicable laws, rules and regulations: (i) repurchase
shares of Borrower's stock
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<PAGE> 38
SILICON VALLEY BANK AMENDED SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
pursuant to any employee stock purchase or benefit plan,
provided that the total amount paid by Borrower for such
stock does not exceed $200,000 in any fiscal year or
(ii) make loans to, or enter into loan guaranties on
behalf of, employees in an aggregate amount not
exceeding $200,000 at any one time outstanding; provided
that, in addition to the foregoing, make loans to
employees in connection with computer purchases
("Employee Computer Loans") provided that the Employee
Computer Loans shall not exceed $300,000 in the
aggregate at any one time outstanding.
FINANCIAL COVENANTS
(Section 4.1): Borrower shall comply with all of the following
covenants. Compliance shall be determined as of the end
of each quarter, except as otherwise specifically
provided below:
QUICK ASSET RATIO: Borrower shall maintain a ratio of "Quick Assets" to
current liabilities of not less than 1.25 to 1, provided
that on and after the IPO Consummation, Borrower shall
maintain a ratio of "Quick Assets" to current
liabilities of not less than 2.0 to 1.
TANGIBLE NET WORTH: Borrower shall maintain a tangible net worth of not less
than $4,000,000, provided that on and after the IPO
Consummation, Borrower shall maintain a tangible net
worth of not less than $10,600,000 plus 80% of the
amount of the net proceeds received by the Borrower upon
the IPO Consummation relating thereto.
DEBT TO TANGIBLE
NET WORTH RATIO: Borrower shall maintain a ratio of total liabilities to
tangible net worth of not more than 1.0 to 1, provided
that on and after the IPO Consummation, Borrower shall
maintain a ratio of total liabilities to tangible net
worth of not more than .50 to 1.
PROFITABILITY: Borrower shall not incur a loss (after taxes) for any
fiscal quarter; except that Borrower may incur a loss
(after taxes) for a single fiscal quarter during the
term hereof not to exceed $500,000. Borrower shall not
incur a loss (after taxes) for the 1996 fiscal year.
DEFINITIONS: "Current assets," and "current liabilities" shall have
the meanings ascribed to them in accordance with
generally accepted accounting principles.
"Tangible net worth" means the excess of total assets
over total liabilities, determined in accordance with
generally accepted accounting principles, excluding
however all assets which would be classified as
intangible assets under generally accepted accounting
principles, including without limitation goodwill,
licenses, patents, trademarks, trade names, copyrights,
and franchises.
"Quick Assets" means cash on hand or on deposit in
banks, readily marketable securities issued by the
United States, readily marketable commercial paper rated
"A-1" by Standard & Poor's Corporation (or a similar
rating by a similar rating organization), certificates
of deposit and banker's acceptances, and accounts
receivable (net of allowance for doubtful accounts).
SUBORDINATED DEBT: "Liabilities" for purposes of the foregoing covenants do
not include indebtedness which is subordinated to the
indebtedness to Silicon under a subordination agreement
in form specified by Silicon or by
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<PAGE> 39
SILICON VALLEY BANK AMENDED SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
language in the instrument evidencing the indebtedness
which is acceptable to Silicon.
OTHER COVENANTS
(Section 4.1): Borrower shall at all times comply with all of the
following additional covenants:
1. BANKING RELATIONSHIP. Borrower shall at all times
maintain its primary banking relationship with Silicon
while any Obligations remain outstanding.
2. MONTHLY BORROWING BASE CERTIFICATE AND LISTING.
Within 20 days after the end of each month while any
Obligations remain outstanding, Borrower shall provide
Silicon with a Borrowing Base Certificate (the
"Borrowing Certificate") in such form as Silicon shall
reasonably specify, and an aged listing of Borrower's
accounts receivable and accounts payable (collectively,
the "Listing"). At all other times, within 20 days after
the end of each fiscal quarter, Borrower shall provide
Silicon with a Borrowing Base Certificate in such form
as Silicon shall reasonably specify, and an aged listing
of Borrower's accounts receivable and accounts payable.
After the IPO Consummation, and notwithstanding the
foregoing, Borrower shall not be obligated to provide
Silicon with the Borrowing Certificate or the Listing.
3. INDEBTEDNESS. Without limiting any of the foregoing
terms or provisions of this Agreement, Borrower shall
not in the future incur indebtedness for borrowed money,
except for (i) indebtedness to Silicon, and (ii)
indebtedness incurred in the future for the purchase
price of or lease of equipment in an aggregate amount
not exceeding $700,000 at any time outstanding; such
indebtedness refers to obligations owing to parties
other than Silicon.
4. OTHER INFORMATION REQUIREMENTS. The Borrower shall
promptly provide to Silicon such budgets, sales
projections, operating plans and other financial
documentation relating to the Borrower that Silicon
reasonably requires.
5. INITIAL AUDIT. The audit referred to in Section 4.5
of this Agreement shall be completed within 90 days of
the first Loan relating to the Borrower's accounts
receivable made to Borrower pursuant to Section 1.1.
6. NEGATIVE PLEDGE. Except as otherwise permitted
hereunder, Borrower shall not hereafter grant a security
interest in any of its present or future Collateral.
7. ANNUAL THIRTY-DAY CLEAN-UP PERIOD. Effective upon the
IPO Consummation, Borrower agrees that during the period
of October 6, 1995 to October 5, 1996, there shall be a
period of at least 30 days when no Loans are
outstanding.
8. MATERIAL ADVERSE CHANGE EVENT OF DEFAULT. In addition
to and without limitation of the Events of Defaults
under this Agreement, any
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<PAGE> 40
SILICON VALLEY BANK AMENDED SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
material adverse change in the business, assets or condition
(financial or otherwise) of Borrower from the date hereof shall
constitute an Event of Default hereunder.
BORROWER:
KOFAX IMAGE PRODUCTS
BY [SIG]
------------------------------
PRESIDENT OR VICE PRESIDENT
BY [SIG]
------------------------------
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY [SIG]
------------------------------
TITLE VICE PRESIDENT
----------------------------
-5-
<PAGE> 41
[LOGO] SILICON VALLEY BANK
AMENDMENT TO LOAN AND SECURITY
AGREEMENT
BORROWER: KOFAX IMAGE PRODUCTS
ADDRESS: 3 JENNER STREET
IRVINE, CALIFORNIA 92718
DATE: JANUARY 20, 1996
THIS AMENDMENT TO LOAN AGREEMENT is entered into between SILICON
VALLEY BANK ("Silicon") and the borrower named above (the "Borrower"). The
Parties agree to amend the Loan and Security Agreement between them, dated
February 28, 1992, as amended by that certain Amendment to Loan Agreement dated
March 9, 1993, as amended by that certain Amendment to Loan Agreement dated
October 10, 1994, and as amended by that certain Amendment to Loan Agreement
dated October 5, 1995 (as amended, the "Loan Agreement"), as follows, effective
on the date hereof. (Capitalized terms used but not defined in this Amendment,
shall have the meanings set forth in the Loan Agreement.)
1. AMENDED SCHEDULE. The Schedule to Loan and Security Agreement is
amended effective as of the date hereof, to read as set forth on the Amended
Schedule to Loan and Security Agreement attached hereto.
2. MODIFICATION TO SECTION 2.2. Section 2.2 of the Loan Agreement is
hereby replaced in its entirety with the following Section 2.2 and a new
Section 2.2A is hereby added that is to follow after Section 2.2:
"2.2 GRANT of SECURITY INTEREST IN COLLATERAL. The Borrower grants
Silicon a continuing security interest in all of the Borrower's
interest in the Collateral (as defined below in Section 2.2A) as
security for all Obligations (collectively referred to as the
"Grant"). The Grant shall be considered fully effective until the
occurrence of both (A) the IPO Consummation (as defined below) and
(B) the repayment in full of the Term Loan (as defined in the
Schedule to Loan Agreement) in immediately funds (collectively, the
occurrence of both (A) and (B) are referred to as the "Unsecured
Conditions"). Upon the satisfaction of and compliance with the
Unsecured Conditions, the Grant shall be deemed to be of no force
and effect.
As used herein the term IPO Consummation" means the consummation of
an underwritten initial public offering of the Borrower's common
stock from which the Borrower receives net proceeds in a minimum
amount of $9,000,000, which transaction is otherwise satisfactory to
Silicon, and relating to which Borrower has provided to Silicon
documentation and other information satisfactory to Silicon
evidencing the consummation thereof.
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<PAGE> 42
SILICON VALLEY BANK AMENDMENT TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
2.2A COLLATERAL. This section 2.2A shall be considered to be
effective at all times during the effectiveness of this Loan
Agreement regardless of the status of the satisfaction of the
Unsecured Conditions. The term "Collateral" as used herein shall
mean all of the Borrower's interest in the types of property
described below, whether now owned or hereafter acquired, and
wherever located: (a) All accounts, contract rights, chattel paper,
and all other obligations now or in the future owing to the
Borrower; (b) All inventory, materials used or consumed in
Borrower's business, raw materials, work in process, finished goods,
packaging and shipping materials, and all other tangible personal
property which is held for sale or lease or furnished under
contracts of service or consumed in the Borrower's business, and (c)
All equipment acquired through Loans and all equipment acquired
through any other financing provided to Borrower, which other
financing has been refinanced by Loans (such equipment includes,
without limitation, all machinery, fixtures, trade fixtures,
vehicles, furnishings, furniture, materials, tools, machine tools,
office equipment, computers and peripheral devices, appliances,
apparatus, parts, dies, and jigs); and (f) All substitutions,
additions and accessions to any of the foregoing, and all products,
proceeds and insurance proceeds of the foregoing, and all guaranties
of and security for the foregoing; and all books and records
relating to any of the foregoing.
3. REINCORPORATION. Borrower has informed Silicon that it desires to
change the state of its incorporation from California to Delaware by effecting a
merger (the "Merger") of Borrower with and into Kofax Image Products, Inc., a
Delaware corporation ("Kofax-Delaware"), a wholly-owned subsidiary of Borrower.
Silicon consents to the Merger, provided that Kofax-Delaware enter into an
assumption agreement and execute such additional documents and take such
additional actions as Silicon determines are reasonably necessary or desirable
to protect its rights and interests under the Loan Agreement.
4. FACILITY FEE. The Borrower shall pay Silicon concurrently
herewith a facility fee in the amount of $9,000, which shall be in addition to
all interest and all other fees payable to Silicon and shall be non-refundable.
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<PAGE> 43
SILICON VALLEY BANK AMENDMENT TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
5. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon
that all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct as of the date hereof.
6. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and the Borrower, and
the other written documents and agreements between Silicon and the Borrower set
forth in full all of the representations and agreements of the parties with
respect to the subject matter hereof and supersede all prior discussions,
representations, agreements and understandings between the parties with respect
to the subject hereof. Except as herein expressly amended, all of the terms and
provisions of the Loan Agreement, and all other documents and agreements between
Silicon and the Borrower shall continue in full force and effect and the same
are hereby ratified and confirmed.
BORROWER: SILICON:
KOFAXIMAGE PRODUCTS SILICON VALLEY BANK
BY [SIG] BY [SIG]
---------------------------------- ------------------------------
PRESIDENT OR VICE PRESIDENT TITLE VICE PRESIDENT
---------------------------
By [SIG]
---------------------------------
SECRETARY OR ASS'T SECRETARY
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<PAGE> 44
[LOGO] Silicon Valley Bank
AMENDED SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: KOFAX IMAGE PRODUCTS
ADDRESS: 3 JENNER STREET
IRVINE, CALIFORNIA 92718
DATE: JANUARY 20, 1996
CREDIT LIMIT
(Section 1.1): A. BEFORE THE IPO CONSUMMATION. The following shall
apply at all times prior to the IPO Consummation:
An amount not to exceed the lesser of: (i) $2,000,000 at
any one time outstanding; or (ii) 80% of the Net Amount
of Borrower's accounts, which Silicon in its discretion
deems eligible for borrowing;
PLUS the amount of the Term Loan Facility (as defined
below).
"Net Amount" of an account means the gross amount of the
account, minus all applicable sales, use, excise and
other similar taxes and minus all discounts, credits and
allowances of any nature granted or claimed.
Without limiting the fact that the determination of
which accounts are eligible for borrowing is a matter of
Silicon's discretion, the following will not be deemed
eligible for borrowing: accounts outstanding for more
than 90 days from the invoice date, accounts subject to
any contingencies, accounts owing from an account debtor
outside the United States (unless pre-approved by
Silicon, which approval shall not be unreasonably
withheld, or backed by a letter of credit satisfactory
to Silicon, or FCIA insured satisfactory to Silicon),
accounts owing from one account debtor to the extent
they exceed 25% of the total eligible accounts
outstanding, accounts owing from an affiliate of
Borrower, and accounts owing from an account debtor to
whom Borrower is or may be liable for goods purchased
from such account debtor or otherwise. In addition, if
more than 50% of the accounts owing from an account
debtor are outstanding more than 90 days from the
invoice date or are otherwise not eligible accounts,
then all accounts owing from that account debtor will be
deemed ineligible for borrowing.
B. AFTER THE IPO CONSUMMATION. The following shall apply
at all times on and after the IPO Consummation:
An amount not to exceed $2,000,000 at any one time
outstanding;
PLUS the amount of the Term Loan Facility (as defined
below).
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<PAGE> 45
SILICON VALLEY BANK AMENDED SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
LETTERS OF CREDIT: Silicon, in its reasonable discretion, will from time to
time during the term of this Agreement issue letters of
credit for the account of the Borrower ("Letters of
Credit"), in an aggregate amount at any one time
outstanding not to exceed $100,000, upon the request of
the Borrower and upon execution and delivery by the
Borrower of Applications for Letters of Credit and such
other documentation as Silicon shall specify (the
"Letter of Credit Documentation"). Fees for the Letters
of Credit shall be as provided in the Letter of Credit
Documentation.
CREDIT CARD SUBLIMIT: Up to $100,000 of the Credit Limit (the "Credit Card
Sublimit") may be used by the Borrower in connection
with Silicon's issuance of corporate credit cards (the
"Credit Cards") for officers of the Borrower as the
Borrower designates from time to time, with the
aggregate credit limit for all such Credit Cards not to
exceed $100,000 at any time. All Credit Cards and
underlying agreements relating thereto shall be in form
and substance satisfactory to Silicon in its sole
discretion.
The Credit Limit set forth above and the Loans available
under this Agreement at any time shall be reduced by the
face amount of Letters of Credit from time to time
outstanding and the amount of the Credit Card Sublimit
set forth above.
TERM LOAN FACILITY: An amount up to $1,800,000 (the "Term Loan Facility") to
be utilized by the Borrower on or before July 5, 1996
(the "Amortization Date") to assist Borrower's purchase
of certain assets of LaserData, Inc. (referred to as the
"Purchase"), provided that (i) the agreements and
documentation relating to the Purchase are acceptable to
Silicon, (ii) the assets purchased relating to the
Purchase are free of liens and encumbrances (other than
the lien of Silicon), (iii) Silicon will have a
perfected, first priority security interest in such
assets, (iv) the Purchase is consummated in a manner
satisfactory to Silicon and (v) the Purchase is
otherwise acceptable to Silicon in its discretion;
provided, further that the amount of an advance under
the Term Loan Facility (a "Term Loan") shall not be less
than $50,000.
The amount available under the Term Loan Facility shall
be permanently reduced by the original principal amount
of each Term Loan at the time that such Term Loan is
made. The date that a Term Loan is made is referred to
as the "Term Loan Date."
Interest shall be payable monthly on the aggregate
outstanding principal amount of the Term Loans
commencing February 5, 1996, and interest payments shall
continue on the same day of each month thereafter until
the Term Loans and related Obligations have been repaid
in full, subject to the required complete repayment of
the Term Loans and related Obligations as set forth in
the next sentence. Borrower shall repay to Silicon the
outstanding aggregate amount of Term Loans in 36 equal
monthly payments of principal, commencing one month
after the Amortization Date and continuing on the same
day of each month thereafter until July 5, 1999, on
which date the entire unpaid aggregate principal balance
of the Term Loans, all accrued and unpaid interest
thereon and all related Obligations shall be due and
payable.
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<PAGE> 46
SILICON VALLEY BANK AMENDED SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
The Term Loans shall bear interest at the rate set forth
below in Section 1.2 hereof. The Term Loans together
with all accrued and unpaid interest thereon shall be
immediately due and payable upon written notice thereof
to the Borrower in accordance with the notice provisions
set forth in Sections 5.2 and 6.2 of this Agreement upon
the occurrence of any Event of Default and is otherwise
due and payable as set forth under the terms and
conditions of this Agreement.
Each Term Loan shall constitute a "Loan" for all
purposes of the Loan Agreement. The term "Obligations"
as used in this Agreement shall include without
limitation the obligation to repay the Term Loans, and
all interest thereon. The Term Loans shall be secured by
all Collateral.
INTEREST RATE
(Section 1.2): Other than with respect to the Term Loans, the interest
rate shall be equal to the "Prime Rate" in effect from
time to time, plus .50% per annum; provided, however,
that upon the IPO Consummation, the interest rate shall
be a rate equal to the "Prime Rate" in effect from time
to time.
With respect to the Term Loans, the interest rate shall
be equal to the "Prime Rate" in effect from time to
time, plus 1.00% per annum.
Interest shall be calculated on the basis of a 360-day
year for the actual number of days elapsed. "Prime Rate"
means the rate announced from time to time by Silicon as
its "prime rate;" it is a base rate upon which other
rates charged by Silicon are based, and it is not
necessarily the best rate available at Silicon. The
interest rate applicable to the Obligations shall change
on each date there is a change in the Prime Rate.
LOAN ORIGINATION FEE
(Section 1.3): As per Amendment to Loan and Security Agreement of even
date.
MATURITY DATE
(Section 5.1): OCTOBER 5, 1996, other than with respect to the Term
Loan Facility. The Term Loan Facility shall be due and
payable in accordance with the provisions set forth in
Section 1. 1 above.
PRIOR NAMES OF BORROWER
(Section 3.2): NONE
TRADE NAMES OF BORROWER
(Section 3.2): KOFAX
OTHER LOCATIONS AND ADDRESSES
(Section 3.3): 1280 BLUE HILLS AVENUE, SUITE 4, BLOOMFIELD, CT 06002;
620 HERNDON PARKWAY, SUITE 200, HERNDON, VA 22070;
1850 PARKWAY PLACE, SUITE 420, MARIETTA, GA 30067;
RUE CAPOUILLET 19, 1060 BRUSSELS, BELGIUM;
300 VESPER PARK, TYNGSBORO, MA 01879;
6701 DEMOCRACY BLVD., SUITE 300, BETHESDA, MD (SALES
OFFICE ONLY)
MATERIAL ADVERSE LITIGATION
(Section 3.10): NONE
NEGATIVE COVENANTS-EXCEPTIONS
(Section 4.6): Without Silicon's prior written consent, Borrower may do
the following, provided that, after giving effect
thereto, no Event of
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<PAGE> 47
SILICON VALLEY BANK AMENDED SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
Default has occurred and no event has occurred which,
with notice or passage of time or both, would constitute
an Event of Default, and provided that the following are
done in compliance with all applicable laws, rules and
regulations: (i) repurchase shares of Borrower's stock
pursuant to any employee stock purchase or benefit plan,
provided that the total amount paid by Borrower for such
stock does not exceed $200,000 in any fiscal year; (ii)
make loans to, or enter into loan guaranties on behalf
of, employees in an aggregate amount not exceeding
$200,000 at any one time outstanding; and (iii) make
loans to employees in connection with computer purchases
("Employee Computer Loans") provided that the Employee
Computer Loans shall not exceed $300,000 in the
aggregate at any one time outstanding.
FINANCIAL COVENANTS
(Section 4.1): Borrower shall comply with all of the following
covenants, Compliance shall be determined as of the end
of each quarter, except as otherwise specifically
provided below:
QUICK ASSET RATIO: Borrower shall maintain a ratio of "Quick Assets" to
current liabilities of not less than 1.25 to 1, provided
that on and after the IPO Consummation, Borrower shall
maintain a ratio of "Quick Assets" to current
liabilities of not less than 2.0 to 1.
TANGIBLE NET WORTH: Borrower shall maintain a tangible net worth of not less
than $4,000,000, provided that on and after the IPO
Consummation, Borrower shall maintain a tangible net
worth of not less than $6,000,000 plus 80% of the amount
of the net proceeds received by the Borrower upon the
IPO Consummation relating thereto.
DEBT TO TANGIBLE
NET WORTH RATIO: Borrower shall maintain a ratio of total liabilities to
tangible net worth of not more than 1.0 to 1, provided
that on and after the IPO Consummation, Borrower shall
maintain a ratio of total liabilities to tangible net
worth of not more than .50 to 1.
PROFITABILITY: Borrower shall not incur a loss (after taxes) for any
fiscal quarter; except that Borrower may incur a loss
(after taxes) for a single fiscal quarter during the
term hereof not to exceed $500,000, and Borrower shall
not incur a loss (after taxes) for the 1996 fiscal year;
PROVIDED that if the Purchase has been consummated the
following profitability covenant shall apply: Borrower
shall not incur a loss (after taxes) for any fiscal
quarter, except that (i) Borrower may incur a loss
(after taxes) for the single fiscal quarter during the
term hereof in which the Purchase has been consummated,
which loss may not exceed $4,000,000 and (ii) in
addition to the foregoing, Borrower may incur a loss
(after taxes) for a fiscal quarter during the term
hereof not to exceed $500,000; further, Borrower shall
not incur a loss (after taxes) for the 1996 fiscal year
in excess of $1,800,000.
DEBT SERVICE RATIO: Borrower shall maintain a Debt Service Ratio (as
referred to below) as of the end of each quarter of not
less than 1.75 to 1, excluding, however, the one-time
charges associated with the Purchase.
DEFINITIONS: "Current assets," and "current liabilities" shall have
the meanings ascribed to them in accordance with
generally accepted accounting principles.
-4-
<PAGE> 48
SILICON VALLEY BANK AMENDED SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
"Tangible net worth" means the excess of total assets
over total liabilities, determined in accordance with
generally accepted accounting principles, excluding
however all assets which would be classified as
intangible assets under generally accepted accounting
principles, including without limitation goodwill,
licenses, patents, trademarks, trade names, copyrights,
and franchises.
"Quick Assets" means cash on hand or on deposit in
banks, readily marketable securities issued by the
United States, readily marketable commercial paper rated
"A-1" by Standard & Poor's Corporation (or a similar
rating by a similar rating organization), certificates
of deposit and banker's acceptances, and accounts
receivable (net of allowance for doubtful accounts).
"Debt Service Ratio" means, for any period, the ratio of
(a) net income of Borrower (relating to the period of
the then immediately preceding 12 months) before
interest, taxes, depreciation and other non-cash
amortization expenses and other non-cash expenses of the
Borrower, determined in accordance with generally
accepted accounting principles, consistently applied, to
(b) the amount of Borrower's obligations relating to
payment of interest and current maturities of principal
on Borrower's outstanding long term indebtedness,
determined in accordance with generally accepted
accounting principles, consistently applied.
SUBORDINATED DEBT: "Liabilities" for purposes of the foregoing covenants do
not include indebtedness which is subordinated to the
indebtedness to Silicon under a subordination agreement
in form specified by Silicon or by language in the
instrument evidencing the indebtedness which is
acceptable to Silicon.
OTHER COVENANTS
(Section 4.1): Borrower shall at all times comply with all of the
following additional covenants:
1. BANKING RELATIONSHIP. Borrower shall at all times
maintain its primary banking relationship with Silicon
while any Obligations remain outstanding.
2. MONTHLY BORROWING BASE CERTIFICATE AND LISTING.
Within 20 days after the end of each month while any
Obligations remain outstanding, Borrower shall provide
Silicon with a Borrowing Base Certificate (the
"Borrowing Certificate") in such form as Silicon shall
reasonably specify, and an aged listing of Borrower's
accounts receivable and accounts payable (collectively,
the "Listing"). At all other times, within 20 days after
the end of each fiscal quarter, Borrower shall provide
Silicon with a Borrowing Base Certificate in such form
as Silicon shall reasonably specify, and an aged listing
of Borrower's accounts receivable and accounts payable.
After the IPO Consummation, and notwithstanding the
foregoing, Borrower shall not be obligated to provide
Silicon with the Borrowing Certificate or the Listing.
3. INDEBTEDNESS. Without limiting any of the foregoing
terms or provisions of this Agreement, Borrower shall
not in the future incur indebtedness for borrowed money,
except for (i) indebtedness to Silicon, and (ii)
indebtedness incurred in the future for the purchase
price of or lease of equipment in an aggregate amount
not exceeding
-5-
<PAGE> 49
SILICON VALLEY BANK AMENDED SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
$700,000 at any time outstanding; such indebtedness
refers to obligations owing to parties other than
Silicon.
4. OTHER INFORMATION REQUIREMENTS. The Borrower shall
promptly provide to Silicon such budgets, sales
projections, operating plans and other financial
documentation relating to the Borrower that Silicon
reasonably requires.
5. INITIAL AUDIT. The audit referred to in Section 4.5
of this Agreement shall be completed within 90 days of
the first Loan relating to the Borrower's accounts
receivable made to Borrower pursuant to Section 1.1.
6. NEGATIVE PLEDGE. Except as otherwise permitted
hereunder, including, without limitation, security
interests granted in connection with the purchase, or
lease of equipment as set forth in paragraph 3(ii)
hereof, Borrower shall not hereafter grant a security
interest in any of its present or future Collateral.
7. ANNUAL THIRTY-DAY CLEAN-UP PERIOD. Effective upon the
IPO Consummation, Borrower agrees that during the period
of October 6, 1995 to October 5, 1996, there shall be a
period of at least 30 days when no Loans (other than the
Term Loans) are outstanding.
8. MATERIAL ADVERSE CHANGE EVENT OF DEFAULT. In addition
to and without limitation of the Events of Defaults
under this Agreement, any material adverse change in the
business, assets or condition (financial or otherwise)
of Borrower from the date hereof shall constitute an
Event of Default hereunder.
BORROWER:
KOFAX IMAGE PRODUCTS
By [SIG]
---------------------------------
PRESIDENT OR VICE PRESIDENT
BY [SIG]
---------------------------------
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY
---------------------------------
TITLE VICE PRESIDENT
-----------------------------
-6-
<PAGE> 50
[LOGO] SILICON VALLEY BANK
AMENDMENT TO LOAN AND SECURITY
AGREEMENT
BORROWER. KOFAX IMAGE PRODUCTS, INC.
ADDRESS: 3 JENNER STREET
IRVINE, CALIFORNIA 92718
DATE: OCTOBER 31, 1996
THIS AMENDMENT TO LOAN AGREEMENT is entered into between SILICON
VALLEY BANK ("Silicon") and the borrower named above (the "Borrower"). The
Parties agree to amend the Loan and Security Agreement between them, dated
February 28, 1992, as amended by that certain Amendment to Loan Agreement dated
March 9, 1993, as amended by that certain Amendment to Loan Agreement dated
October 10, 1994, as amended by that certain Amendment to Loan Agreement dated
October 5, 1995, as amended by that certain Amendment to Loan Agreement dated
January 20, 1996 (as amended, the "Loan Agreement"), as follows, effective on
the date hereof. (Capitalized terms used but not defined in this Amendment,
shall have the meanings set forth in the Loan Agreement.)
1. Amended Schedule. The Schedule to Loan and Security Agreement is
amended effective as of the date hereof, to read as set forth on the Amended
Schedule to Loan and Security Agreement attached hereto.
2. Modification to Section 2.2. Section 2.2 of the Loan Agreement is
hereby replaced in its entirety with the following Section 2.2:
2.2 Collateral. The term "Collateral" as used herein shall mean all
of the Borrower's interest in the types of property described below,
whether now owned or hereafter acquired, and wherever located: (a)
All accounts, contract rights, chattel paper, and all other
obligations now or in the future owing to the Borrower; (b) All
inventory, materials used or consumed in Borrower's business, raw
materials, work in process, finished goods, packaging and shipping
materials, and all other tangible personal property which is held
for sale or lease or furnished under contracts of service or
consumed in the Borrower's business, and (c) All equipment acquired
through Loans and all equipment acquired through any other financing
provided to Borrower, which other financing has been refinanced by
Loans (such equipment includes, without limitation, all machinery,
fixtures, trade fixtures, vehicles, furnishings, furniture,
materials, tools, machine tools, office equipment, computers and
peripheral devices, appliances, apparatus, parts, dies, and jigs);
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<PAGE> 51
SILICON VALLEY BANK AMENDMENT TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
and (f) All substitutions, additions and accessions to any of the
foregoing, and all products, proceeds and insurance proceeds of the
foregoing, and all guaranties of and security for the foregoing; and
all books and records relating to any of the foregoing. The
inclusion of the definition of Collateral does not mean or imply
that such items of property constitute security for the
Obligations."
3. FACILITY FEE. The Borrower shall pay Silicon concurrently
herewith a facility fee in the amount of $5,000, which shall be in addition to
all interest and all other fees payable to Silicon and shall be non-refundable.
4. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon
that all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct as of the date hereof.
5. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and the Borrower, and
the other written documents and agreements between Silicon and the Borrower set
forth in full all of the representations and agreements of the parties with
respect to the subject matter hereof and supersede all prior discussions,
representations, agreements and understandings between the parties with respect
to the subject hereof. Except as herein expressly amended, all of the terms and
provisions of the Loan Agreement, and all other documents and agreements between
Silicon and the Borrower shall continue in full force and effect and the same
are hereby ratified and confirmed.
BORROWER: SILICON:
KOFAXIMAGE PRODUCTS, INC. SILICON VALLEY BANK
BY [SIG] BY /S/ RAQUEL SIDLO
----------------------------- -----------------------------
PRESIDENT OR VICE PRESIDENT TITLE ASSISTANT VICE PRESIDENT
---------------------------
BY [SIG]
------------------------------
SECRETARY OR ASS'T SECRETARY
-2-
<PAGE> 52
[LOGO] Silicon Valley Bank
AMENDED SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER. KOFAX IMAGE PRODUCTS, INC.
ADDRESS: 3 JENNER STREET
IRVINE, CALIFORNIA 92718
DATE: OCTOBER 31, 1996
CREDIT LIMIT
(Section 1.1): An amount not to exceed $2,000,000 at any one time
outstanding; PLUS the amount of the Term Loan Facility
(as defined below).
"IPO Consummation" means the consummation of an
underwritten initial public offering of the Borrower's
common stock, which transaction is satisfactory to
Silicon, and relating to which Borrower has provided to
Silicon documentation and other information satisfactory
to Silicon evidencing the consummation thereof.
LETTERS OF CREDIT Silicon, in its reasonable discretion, will from time to
time during the term of this Agreement issue letters of
credit for the account of the Borrower ("Letters of
Credit"), in an aggregate amount at any one time
outstanding not to exceed $100,000, upon the request of
the Borrower and upon execution and delivery by the
Borrower of Applications for Letters of Credit and such
other documentation as Silicon shall specify (the
"Letter of Credit Documentation"). Fees for the Letters
of Credit shall be as provided in the Letter of Credit
Documentation.
The Loans available under this Agreement at any time
shall be reduced by the face amount of Letters of Credit
from time to time outstanding.
TERM LOAN FACILITY An amount up to $1,800,000 (the "Term Loan Facility") to
be utilized by the Borrower on or before July 5, 1996
(the "Amortization Date") to assist Borrower's purchase
of certain assets of LaserData, Inc. (referred to as the
"Purchase"), provided that (i) the agreements and
documentation relating to the Purchase are acceptable to
Silicon, (ii) the assets purchased relating to the
Purchase are free of liens and encumbrances (other than
the lien of Silicon), (iii) Silicon will have a
perfected, first priority security interest in such
assets, (iv) the Purchase is consummated in a manner
satisfactory to Silicon and (v) the Purchase is
otherwise acceptable to Silicon in its discretion;
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<PAGE> 53
SILICON VALLEY BANK AMENDED SCHEDULE TO LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
provided, further, that the amount of an advance under
the Term Loan Facility (a "Term Loan") shall not be less
than $50,000.
The amount available under the Term Loan Facility shall
be permanently reduced by the original principal amount
of each Term Loan at the time that such Term Loan is
made. The date that a Term Loan is made is referred to
as the "Term Loan Date."
Interest shall be payable monthly on the aggregate
outstanding principal amount of the Term Loans
commencing February 5, 1996, and interest payments shall
continue on the same day of each month thereafter until
the Term Loans and related Obligations have been repaid
in full, subject to the required complete repayment of
the Term Loans and related Obligations as set forth in
the next sentence. Borrower shall repay to Silicon the
outstanding aggregate amount of Term Loans in 36 equal
monthly payments of principal, commencing one month
after the Amortization Date and continuing on the same
day of each month thereafter until July 5, 1999, on
which date the entire unpaid aggregate principal balance
of the Term Loans, all accrued and unpaid interest
thereon and all related Obligations shall be due and
payable.
The Term Loans shall bear interest at the rate set forth
below in Section 1.2 hereof. The Term Loans together
with all accrued and unpaid interest thereon shall be
immediately due and payable upon written notice thereof
to the Borrower in accordance with the notice provisions
set forth in Sections 5.2 and 6.2 of this Agreement upon
the occurrence of any Event of Default and is otherwise
due and payable as set forth under the terms and
conditions of this Agreement.
Each Term Loan shall constitute a "Loan" for all
purposes of the Loan Agreement. The term "Obligations"
as used in this Agreement shall include without
limitation the obligation to repay the Term Loans, and
all interest thereon. The Term Loans shall be secured by
all Collateral.
INTEREST RATE
(Section 1.2): Other than with respect to the Term Loans, the interest
rate shall be equal to the "Prime Rate" in effect from
time to time.
With respect to the Term Loans, the interest rate shall
be equal to the "Prime Rate" in effect from time to
time, plus 1.00% per annum.
Interest shall be calculated on the basis of a 360-day
year for the actual number of days elapsed. "Prime Rate"
means the rate announced from time to time by Silicon as
its "prime rate;" it is a base rate upon which other
rates charged by Silicon are based, and it is not
necessarily the best rate available at Silicon. The
interest rate applicable to the Obligations shall change
on each date there is a change in the Prime Rate.
LOAN ORIGINATION FEE
(Section 1.3): As per Amendment to Loan and Security Agreement of even
date.
MATURITY DATE
(Section 5.1): OCTOBER 5, 1997, other than with respect to the Term
Loan Facility. The Term Loan Facility shall be due and
payable in accordance with the provisions set forth in
Section 1.1 above.
-2-
<PAGE> 54
SILICON VALLEY BANK AMENDED SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
PRIOR NAMES OF BORROWER
(Section 3.2): NONE
TRADE NAMES OF BORROWER
(Section 3.2): KOFAX
OTHER LOCATIONS AND ADDRESSES
(Section 3.3): 74 BEDFORD STREET, LEXINGTON, MA 02173;
620 HERNDON PARKWAY, SUITE 200, HERNDON, VA 22070;
1850 PARKWAY PLACE, SUITE 420, MARIETTA, GA 30067;
RUE CAPOUILLET 19,1060 BRUSSELS, BELGIUM;
300 VESPER PARK, TYNGSBORO, MA 01879;
KRANENBERG 6, 1731 ZELLIK, BRUSSELS, BELGIUM;
1 BATTERSEA BRIDGE ROAD, LONDON, SW11 3BA, UNITED
KINGDOM
MATERIAL ADVERSE LITIGATION
(Section 3.10): NONE
NEGATIVE COVENANTS-EXCEPTIONS
(Section 4.6): Without Silicon's prior written consent, Borrower may do
the following, provided that, after giving effect
thereto, no Event of Default has occurred and no event
has occurred which, with notice or passage of time or
both, would constitute an Event of Default, and provided
that the following are done in compliance with all
applicable laws, rules and regulations: (i) repurchase
shares of Borrower's stock pursuant to any employee
stock purchase or benefit plan, provided that the total
amount paid by Borrower for such stock does not exceed
$200,000 in any fiscal year; (ii) make loans to, or
enter into loan guaranties on behalf of, employees in an
aggregate amount not exceeding $200,000 at any one time
outstanding; and (iii) make loans to employees in
connection with computer purchases ("Employee Computer
Loans") provided that the Employee Computer Loans shall
not exceed $300,000 in the aggregate at any one time
outstanding.
FINANCIAL COVENANTS
(Section 4.1): Borrower shall comply with all of the following
covenants. Compliance shall be determined as of the end
of each quarter, except as otherwise specifically
provided below:
QUICK ASSET RATIO: Borrower shall maintain a ratio of "Quick Assets" to
current liabilities of not less than 1.75 to 1, provided
that on and after the IPO Consummation, Borrower shall
maintain a ratio of "Quick Assets" to current
liabilities of not less than 2.0 to 1.
TANGIBLE NET WORTH: Borrower shall maintain a tangible net worth of not less
than $8,000,000, provided that on and after the IPO
Consummation, Borrower shall maintain a tangible net
worth of not less than $8,000,000 plus 80% of the amount
of the net proceeds received by the Borrower upon the
IPO Consummation relating thereto.
DEBT TO TANGIBLE
NET WORTH RATIO: Borrower shall maintain a ratio of total liabilities to
tangible net worth of not more than 1.0 to 1, provided
that on and after the IPO Consummation, Borrower shall
maintain a ratio of total liabilities to tangible net
worth of not more than .50 to 1.
PROFITABILITY: Borrower shall not incur a loss (after taxes) for any
fiscal quarter.
-3-
<PAGE> 55
SILICON VALLEY BANK AMENDED SCHEDULE TO LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
DEBT SERVICE RATIO: Borrower shall maintain a Debt Service Ratio (as
referred to below) as of the end of each quarter of not
less than 1.75 to 1.
DEFINITIONS: "Current assets," and "current liabilities" shall have
the meanings ascribed to them in accordance with
generally accepted accounting principles.
"Tangible net worth" means the excess of total assets
over total liabilities, determined in accordance with
generally accepted accounting principles, excluding
however all assets which would be classified as
intangible assets under generally accepted accounting
principles, including without limitation goodwill,
licenses, patents, trademarks, trade names, copyrights,
and franchises.
"Quick Assets" means cash on hand or on deposit in
banks, readily marketable securities issued by the
United States, readily marketable commercial paper rated
"A-1" by Standard & Poor's Corporation (or a similar
rating by a similar rating organization), certificates
of deposit and banker's acceptances, and accounts
receivable (net of allowance for doubtful accounts).
"Debt Service Ratio" means, for any period, the ratio of
(a) net income of Borrower (relating to the period of
the then immediately preceding 12 months) before
interest, taxes, depreciation and other non-cash
amortization expenses and other non-cash expenses of the
Borrower, determined in accordance with generally
accepted accounting principles, consistently applied, to
(b) the amount of Borrower's obligations relating to
payment of interest and current maturities of principal
on Borrower's outstanding long term indebtedness,
determined in accordance with generally accepted
accounting principles, consistently applied.
SUBORDINATED DEBT: "Liabilities" for purposes of the foregoing covenants do
not include indebtedness which is subordinated to the
indebtedness to Silicon under a subordination agreement
in form specified by Silicon or by language in the
instrument evidencing the indebtedness which is
acceptable to Silicon.
OTHER COVENANTS
(Section 4.1): Borrower shall at all times comply with all of the
following additional covenants:
1. BANKING RELATIONSHIP. Borrower shall at all times
maintain its primary banking relationship with Silicon
while any Obligations remain outstanding.
2. [RESERVED]
3. INDEBTEDNESS. Without limiting any of the foregoing
terms or provisions of this Agreement, Borrower shall
not in the future incur indebtedness for borrowed money,
except for (i) indebtedness to Silicon, and (ii)
indebtedness incurred in the future for the purchase
price of or lease of equipment in an aggregate amount
not exceeding $700,000 at any time outstanding; such
indebtedness refers to obligations owing to parties
other than Silicon.
4. OTHER INFORMATION REQUIREMENTS. The Borrower shall
promptly provide to Silicon such budgets, sales
projections, operating plans and other financial
documentation relating to the Borrower that Silicon
reasonably requires.
-4-
<PAGE> 56
SILICON VALLEY BANK AMENDED SCHEDULE TO LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
5. [RESERVED]
6. NEGATIVE PLEDGE. Except as otherwise permitted
hereunder, including, without limitation, security
interests granted in connection with the purchase or
lease of equipment as set forth in paragraph 3(ii)
hereof, Borrower shall not hereafter grant a security
interest in any of its present or future Collateral.
7. ANNUAL THIRTY-DAY CLEAN-UP PERIOD. Borrower agrees
that during the period of October 6, 1996 to October 5,
1997, there shall be a period of at least 30 days when
no Loans (other than the Term Loans) are outstanding.
8. MATERIAL ADVERSE CHANGE EVENT OF DEFAULT. In addition
to and without limitation of the Events of Defaults
under this Agreement, any material adverse change in the
business, assets or condition (financial or otherwise)
of Borrower from the date hereof shall constitute an
Event of Default hereunder.
BORROWER:
KOFAXIMAGE PRODUCTS, INC.
BY
-------------------------------------
PRESIDENT OR VICE PRESIDENT
BY
-------------------------------------
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY /S/ RAQUEL SIDLO
-------------------------------------
TITLE ASSISTANT VICE PRESIDENT
-5-
<PAGE> 1
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
1.
<PAGE> 2
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:
2.
<PAGE> 3
(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
3.
<PAGE> 4
(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.
4.
<PAGE> 5
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
5.
<PAGE> 6
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
6.
<PAGE> 7
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
7.
<PAGE> 8
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
8.
<PAGE> 9
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
9.
<PAGE> 10
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
10.
<PAGE> 11
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:
11.
<PAGE> 12
(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
12.
<PAGE> 13
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.
13.
<PAGE> 14
(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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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 David S. Silver
and Dean A. Hough 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 Hough 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.
<PAGE> 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 David S. Silver and
Dean A. Hough. 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.
<PAGE> 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:
----------------------------- -------------------------------
- -----------------------------------
David S. Silver
- -----------------------------------
Dean A. Hough
19.
<PAGE> 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: CLIFFORD L. HAAS
-------------------------------- ----------------------------------
Title: President Clifford L. Haas
---------------------------- Title: General Partner
-------------------------------
DAVID S. SILVER
- -----------------------------------
David S. Silver
DEAN A. HOUGH
- -----------------------------------
Dean A. Hough
20.
<PAGE> 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: CLIFFORD L. HAAS
-------------------------------- ----------------------------------
Clifford L. Haas
Title: PRESIDENT Title: General Partner
----------------------------- -------------------------------
DAVID S. SILVER
- -----------------------------------
David S. Silver
DEAN A. HOUGH
- -----------------------------------
Dean A. Hough
20.
<PAGE> 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.
DAVID S. SILVER
- -----------------------------------
David S. Silver
DEAN A. HOUGH
- -----------------------------------
Dean A. Hough
20.
<PAGE> 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
----------------------------- -------------------------------
DAVID S. SILVER
- -----------------------------------
David S. Silver
DEAN A. HOUGH
- -----------------------------------
Dean A. Hough
20.
<PAGE> 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
----------------------------- -------------------------------
DAVID S. SILVER
- -----------------------------------
David S. Silver
DEAN A. HOUGH
- -----------------------------------
Dean A. Hough
20.
<PAGE> 25
EXHIBIT 1
I. SERIES A PURCHASERS
<TABLE>
<CAPTION>
Number
Name/Address of Shares
------------ ---------
<S> <C>
Southern California Ventures 315,225
9920 La Cienega Boulevard, Suite 510
Inglewood, CA 90301
3i Securities Corporation 315,225
450 Newport Center Dr., Suite 250
Newport Beach, CA 92660
Herbert A. Axenroth 3,750
1555 Mesa Verde Drive East, Apt. 51F
Costa Mesa, CA 92626
Donald E. Calkins 3,750
c/o Petroware, Inc.
Two Energy Square
4849 Greenville Avenue, Suite 220
Dallas, Texas 75206
Michael A. Chernoy 7,500
c/o Radionics
1800 Abbott Street
Salinas, CA 93901
George R. Halpin and Shirley A. Halpin 7,500
1644 Mountain View
Fullerton, CA 92631
Michael J. Halpin 9,000
1644 Mountain View
Fullerton, CA 92631
Robert K. Lowry 75,000
2102 Heliotrope Drive
Santa Ana, CA 92706
Joseph Marinello 7,500
40 W. 775 Elodie Drive
Elburn, IL 60119
Thomas L. Sherman 1,800
c/o Zycad
3500 Zycad Drive
St. Paul, MN 55109
Julian Vazquez, III 3,750
244 Paradise Road
Anaheim, CA 92806
</TABLE>
1.
<PAGE> 26
II. SERIES B PURCHASERS
<TABLE>
<CAPTION>
Number
Name/address of Shares
-------------- ---------
<S> <C>
Sigma Partners, A California 465,200
Limited Partnership
2099 Gateway Place, Suite 310
San Jose, CA 95110
Sigma Associates, A California 34,800
Limited Partnership
2099 Gateway Place, Suite 310
San Jose, CA 95110
3i Securities Corporation 345,834
450 Newport Center Drive, Suite 250
Newport Beach, CA 92660
Southern California Ventures 179,167
9920 La Cienega Boulevard, Suite 510
Inglewood, CA 90301
William E. Drobish 66,667
and Susan K. Drobish, Trustees,
Drobish Family Trust Dated 11/12/80
18192 Pamela Place
Villa Park, CA 92667
Michael J. Halpin 3,667
1644 Mountain View
Fullerton, CA 92631
Robert K. Lowry 15,000
2102 Heliotrope Drive
Santa Ana, CA 92706
K.C. Schaaf
c/o Stradling, Yocca, Carlson & Rauth 6,667
660 Newport Center Deive
Suite 1600
Newport Beach, CA 92660
</TABLE>
2.
<PAGE> 27
III. SERIES C PURCHASERS
<TABLE>
<CAPTION>
Number
Name/Address of Shares
------------ ---------
<S> <C>
Sigma Partners, A California 184,000
Limited Partnership
2099 Gateway Place, Suite 310
San Jose, CA 95110
Sigma Associates, A California 16,000
Limited Partnership
2099 Gateway Place, Suite 310
San Jose, CA 95110
3i Securities Corporation 400,000
450 Newport Center Drive, Suite 250
Newport Beach, CA 92660
Southern California Ventures 120,000
9920 La Cienega Boulevard, Suite 510
Inglewood, CA 90301
William E. Drobish and 80,000
Susan K. Drobish, Trustees,
Drobish Family Trust Dated 11/12/80
18192 Pamela Place
Villa Park, CA 92667
</TABLE>
3.
<PAGE> 1
EXHIBIT 10.14
L E A S E
Between
THE IRVINE COMPANY
A Michigan Corporation
as Landlord
and
KoFAX IMAGE PRODUCTS, INC.
A California Corporation
as Tenant
for
3 JENNER STREET, SUITE 100
IRVINE, CALIFORNIA 92718
DUPLICATE
ORIGINAL
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. PARTIES.......................................................................... 1
2. PREMISES......................................................................... 1
3 DEFINITIONS...................................................................... 1
4 LEASE TERM....................................................................... 1
5. RENT............................................................................. 3
6 LATE PAYMENT CHARGES............................................................. 3
7. SECURITY DEPOSIT................................................................. 3
8 HOLDING OVER..................................................................... 3
9. CONDITION OF PREMISES............................................................ 3
10. USE OF THE PREMISES.............................................................. 3
11. QUIET ENJOYMENT.................................................................. 4
12. ALTERATIONS...................................................................... 4
13. SURRENDER OF THE PREMISES........................................................ 4
14. REAL AND PERSONAL PROPERTY TAXES................................................. 4
15. UTILITIES AND SERVICES........................................................... 5
16. OPERATING EXPENSES, REPAIRS, AND MAINTENANCE..................................... 5
17. FIXTURES......................................................................... 6
18. LANDLORD'S RIGHT TO ENTER THE PREMISES........................................... 6
19. SIGNS............................................................................ 6
20. INDEMNITY; INSURANCE............................................................. 6
21. WAIVER OF SUBROGATION............................................................ 7
22. DAMAGE OR DESTRUCTION............................................................ 7
23. CONDEMNATION..................................................................... 7
24. ASSIGNMENT AND SUBLETTING........................................................ 8
25. CONSTRUCTION OF TENANT IMPROVEMENTS.............................................. 8
26. DEFAULT.......................................................................... 9
27. SUBORDINATION.................................................................... 9
28. NOTICES.......................................................................... 9
29 ATTORNEY'S FEES.................................................................. 10
30. ESTOPPEL CERTIFICATE............................................................. 10
31. TRANSFER OF THE PREMISES BY LANDLORD............................................. 10
32. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS................................... 10
33. TENANT'S REMEDY.................................................................. 10
34. MORTGAGEE PROTECTION............................................................. 10
35. BROKERS.......................................................................... 10
36. EXAMINATION OF LEASE............................................................. 10
37. RECORDING........................................................................ 10
38. QUITCLAIM........................................................................ 10
39. MODIFICATIONS FOR LENDER......................................................... 10
40. PARKING AND USE OF COMMON AREAS AND FACILITIES................................... 10
41. GENERAL.......................................................................... 11
Exhibit A DESCRIPTION OF PREMISES......................................... 13
Exhibit B DESCRIPTION OF PROJECT.......................................... 14
Exhibit C SPACE PLAN...................................................... 15
Exhibit D COMMENCEMENT-DATE MEMORANDUM.................................... 16
Exhibit E RENT ADJUSTMENTS................................................ 17
Exhibit F COVENANTS, CONDITIONS, AND RESTRICTIONS......................... 18
Exhibit G RULES AND REGULATIONS........................................... 19
Rider No. 1 RENT WAIVER AGREEMENT........................................... 22
Rider No. 2 PROSPECTIVE EASEMENT, ACCESS, AND MAINTENANCE AGREEMENT......... 23
Rider No. 3 PARKING......................................................... 24
Rider No. 4 SIGNAGE......................................................... 25
Rider No. 5 PHASED USE OF PREMISES.......................................... 26
</TABLE>
<PAGE> 3
STANDARD FORM LEASE
(MULTI-TENANT)
THE IRVINE COMPANY LANDLORD
KOFAX IMAGE PRODUCTS, INC. TENANT
Lease Summary:
(a) Lease Date: March 31, 1988
(b) Landlord: THE IRVINE COMPANY, A Michigan Corporation
(c) Address of Landlord: c/o THE SAMMIS COMPANY
17922 Fitch Ave., Irvine, CA 92714
(d) Tenant: KOFAX IMAGE PRODUCTS, INC.
(e) Address of Tenant: 3 Jenner Street, Suite 100, Irvine, CA 92718
(f) Contact: David Silver Telephone: (714) 474-1933
(g) Premises Square Footage: Approximately 19,635
(h) Building Address: 3 Jenner Street, Suite 100, Irvine, CA 92718
(i) Building Square Footage: Approximately 33,075 Square Feet
(j) Anticipated Commencement Date: July 1, 1988
(k) Term: Three (3) years and Two (2) months
(l) Monthly Rent: $16,174 (15,544 sq.ft.), $4,257 (4,091 sq.ft)/month
$245,172/year (subject to adjustment per Exhibit "E").
(m) Security Deposit: $22,474
(n) Permitted Uses: Administrative offices, light assembly, storage and other
lawful uses consistent with uses under the Rules and
Regulations (Exhibit G) and within the adjacent areas.
(o) Brokers: Richard Meyer - Daum Johnstown American
(p) Insuring Party: Landlord
(q) Tenant's Percentage: 13.51% of the 145,300 Sq. Ft. Project
Exhibit(s):
"A" Description of Premises
"B" Description of Project
"C" Tenant Improvements Preliminary Plans
"D" Commencement Date Memorandum
"E" Rent Adjustments
"F" Covenants, Conditions & Restrictions
"G" Rules and Regulations
Addendum
Rider No. 1 - Rent Waiver Agreement
Rider No. 2 - Prospective Reciprocal Easement, Access, and Maintenance
Agreement
Rider No. 3 - Parking
Rider No. 4 - Signage
Rider No. 5 - Phased Use of Premises
LEASE
1. PARTIES. THIS LEASE ("Lease"), is dated for reference purposes only as
of the date set forth in Paragraph (a) of the Lease Summary and is entered into
by and between the Landlord identified in Paragraph (b) of the Lease Summary
("Landlord"), whose address is set forth in Paragraph (c) of the Lease Summary
and the Tenant identified in Paragraph (d) of the Lease Summary ("Tenant"),
whose address is set forth in Paragraph (e) of the Lease Summary.
2. PREMISES. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord those certain premises ("Premises") within that certain building
located at the address set forth in Paragraph (h) of the Lease Summary, which
Premises are shown on Exhibit "A" attached hereto, together with the property
appurtenant thereto, if any, for the exclusive use of Tenant as shown on said
Exhibit "A".
3. DEFINITIONS. The following terms shall have the following meanings in
this Lease:
(a) "Alterations" shall mean any alterations, decorations, additions or
improvements made in, on or about, under or continuous to the Premises after the
Commencement Date, including, but not limited to, lighting, HVAC and electrical
fixtures, pipes and conduits, aboveground and below ground tanks, hazardous
transfer, storage and disposal facilities, partitioning, drapery, wall
coverings, cabinetry, carpeting and/or other floor covering, ceiling tile,
fixtures and carpentry installations.
(b) "Building" shall mean that certain building, identified in Paragraph
(h) of the Lease Summary, within which the Premises are located.
SEE EXHIBIT F
(d) "City" shall mean the city in which the Premises are located.
(e) "Commencement Date" shall mean the first day of the Term of this
Lease as described in Paragraph 4(a).
1
<PAGE> 4
(f) "Common Area" shall mean all areas and facilities within the
Project exclusive of the Premises and other portions of the Project leased (or
to be leased) exclusively to other tenants. The Common Area includes, but is not
limited to, striped parking areas, access and perimeter roads, sidewalks,
landscaped areas and similar areas and facilities. Tenant's use of the Common
Area, and its rights and obligations with respect thereto, are more
particularly described in Paragraph 40 hereof.
(g) "County" shall mean the county in which the Premises are located.
(h) "HVAC" shall mean the heating, ventilating and air conditioning
system serving the Building.
(i) "Interest Rate" shall mean the greater of ten percent (10%) per
annum or five percent (5%) in excess of the discount rates of the Federal
Reserve Bank of San Francisco in effect on the twenty-fifth (25th) day of the
calendar month immediately prior to the event giving rise to the Interest Rate
Imposition.
(j) "Landlord's Agents" shall mean Landlord's authorized agents,
contractors, partners, subsidiaries, directors, officers and employees.
(k) "Lease Summary" shall mean the above summary of Lease information
which is hereby made a part of this Lease.
(l) "Monthly Rent" shall mean the rent payable pursuant to Paragraph
5(a), as adjusted from time to time pursuant to the terms of this Lease.
(m) "Operating Expenses" shall mean all costs and expenses for the
maintenance and operation of the Project as more particularly described in
Paragraph 16(b) below.
(n) "Premises" shall mean the property leased hereby within the
Building, and all areas appurtenant thereto for the exclusive use of Tenant, as
shown on Exhibit "A" hereto.
(o) "Project" shall mean that certain real property, and all
improvements thereon, including the Building and other buildings, if any,
located within the boundaries of the property shown on the Project Site Plan
attached to the Lease as Exhibit "B".
(p) "REA" shall mean that certain Reciprocal Easement Agreement
executed by Landlord as Declarant on _________________________ and recorded in
the Official Records of Orange County, State of California on
__________________ as Instrument No. ________________, as the same may be
amended from time to time, a true, complete and correct copy of which has been
supplied by Landlord to Tenant. (SEE RIDER NO. 2).
(q) "Real Property Taxes" shall mean any form of tax, assessment,
license, fee, rent tax, levy, penalty (if a result of Tenant's delinquency),
real property or other tax (other than Landlord's net income, estate,
succession inheritance, or franchise taxes), now or hereafter imposed with
respect to the Premises, this Lease or any rent payable hereunder by any
authority having the direct or indirect power to tax, or by any city, county,
state or federal government or any improvement district or other district or
division thereof, whether such tax or any portion thereof: (i) is determined
by the area of the Premises or any part thereof or the rent and other sums
payable hereunder by Tenant including, but not limited to, any gross income or
excise tax levied by any of the foregoing authorities with respect to receipt of
such rent or other sums due under this Lease: (ii) is levied or assessed in
lieu of, in substitution for, or in addition to, existing or additional taxes
with respect to the Premises whether or not now customary or within the
contemplation of the parties: or (iii) is based upon any legal or equitable
interest of Landlord in the Premises or any part thereof.
(r) "Rent" shall mean Monthly Rent plus the Additional Rent defined in
Paragraph 5(c).
(s) "Security Deposit" shall mean that amount paid by Tenant pursuant
to Paragraph 7.
(t) "SLURS" shall mean that certain standards Declaration of Special
Land Use Restrictions [Any further reference herein to the SLURS shall be
deleted.]
(u) "Tenant Improvements" shall mean those certain improvements to the
Premises, if any, to be constructed pursuant to Paragraph 25 hereof.
(v) "Tenant's Personal Property" shall mean Tenant's removable trade
fixtures, furniture, equipment and other personal property in the Premises.
(w) "Term" shall mean that period of years and/or months as set forth
in Paragraph (k) of the Lease Summary, as said Term may be extended pursuant to
the proper exercise of any option or options to extend the Term as may be
granted herein or as may be sooner terminated pursuant to any provision hereof.
4. Lease Term.
(a) Term. The Term of this Lease shall be for that period of years
and months set forth in paragraph (k) of the Lease Summary commencing on the
Commencement Date, unless extended in accordance with any option or options to
extend the Term granted herein, or unless sooner terminated pursuant to any
provision hereof. Landlord and Tenant anticipate that the Term will commence
on the "Anticipated Commencement Date" set forth in Paragraph (j) of the Lease
Summary, however, notwithstanding the foregoing, the actual Commencement Date of
this Lease ("Commencement Date") shall be the earlier of: (i) the date upon
which the City has approved the Tenant Improvements (as defined in Paragraph 25
hereof) in accordance with its building code, as evidenced by its written
approval thereof in accordance with the building permits issued for such Tenant
Improvements; or (ii) the date Landlord's architect supervising the
construction of the Tenant Improvements has certified in writing that the
Tenant Improvements are substantially completed in accordance with the plans
and specifications therefore; or (iii) the date tenant commences occupancy of
the Premises. The Tenant Improvements shall be deemed "substantially complete"
when they have been completed except for minor details of construction,
mechanical adjustments or decorations which do not materially interfere with
Tenant's use and enjoyment of the Premises (items normally referred to as
"punch list" items). If the Commencement Date is based on the date established
by the provisions of Paragraph 4(a)(ii) above, Landlord shall deliver to Tenant
a certificate of occupancy from the City for the Premises within five (5)
business days of such date. When the actual Commencement Date has occurred,
Landlord and Tenant shall execute a Commencement Date Memorandum in the form
shown in Exhibit "D" attached to the Lease.
(b) Early Entry. Landlord hereby agrees that upon prior written notice
to Landlord, Tenant and its authorized agents, contractors, subcontractors and
employees may, during ordinary business hours prior to the Commencement Date,
at Tenant's sole risk, enter upon the Premises for the sole purpose of
installing Tenant's trade fixtures and equipment in the Premises; provided,
however, that (i) the provisions of this Lease, other than with respect to the
payment of Monthly Rent and items payable by Tenant and Additional Rent (other
than Tenant's insurance obligations as set forth in Paragraph 20 of the Lease),
shall apply during such early entry, specifically including, but not limited
to, the provisions of Paragraph 20(a) relating to the indemnification of
Landlord; (ii) Tenant shall pay for and provide evidence of the Insurance to be
provided by Tenant pursuant to the provisions of Paragraph 20 of the Lease;
(iii) Tenant shall pay all utility charges for the Premises attributable to
Tenant's early entry and use of the Premises as reasonably determined by
Landlord; and (iv) Tenant will not unreasonably interfere, delay or hinder
Landlord, its agents, contractors or subcontractors in the construction of the
Tenant improvements in accordance with the provisions of this Lease. Tenant
shall not use the Premises for the storage of inventory or otherwise commence
the operation of business during the period of such early entry. Early entry
under this Paragraph 4(b) shall not constitute occupancy of the Premises for
purposes of establishing the Commencement Date.
(c) Delay in Possession. Notwithstanding the Anticipated Commencement
Date, if for any reason Landlord cannot deliver possession of the Premises to
Tenant with the Tenant Improvements "substantially completed" (as such term is
defined in Paragraph 4(a)(iii) above) and ready for Tenant to commence the
installation of its trade fixtures and Tenant's Personal Property, on or before
said date, Landlord shall not be subject to any liability therefor, nor shall
such failure affect the validity of this Lease or the obligations of Tenant
hereunder, but in such case, Tenant shall not be obligated to pay Monthly Rent
or any items of Additional Rent other than as provided in Paragraph 4(b) above,
until possession of the Premises is tendered to Tenant as provided hereinabove;
provided, however, if Landlord shall not have delivered possession of the
Premises as provided hereinabove within one hundred twenty (120) days following
the Anticipated Commencement Date plus periods occurring as a result of delays
caused in whole or in part by Tenant or any delays which are beyond Landlord's,
reasonable control, including but not limited to, inclement weather, delays due
to strikes, acts of God, inability to obtain labor or materials, inability to
secure governmental approvals or permits, governmental restrictions, civil
commotion, fire or similar causes, Tenant may, at its option, by notice in
writing given to Landlord within fifteen (15) days thereafter, cancel this
Lease, in which event the parties shall be discharged from all obligations
hereunder; provided further, however, that if such written notice of Tenant is
not given to Landlord within said fifteen (15) day period, Tenant's rights to
cancel the Lease under this Paragraph 4(c) shall terminate and be on no further
force or effect.
2
<PAGE> 5
(d) TENANT DELAYS. The Commencement Date shall not be delayed or postponed
due to the fault of Tenant and the Term hereof and Tenant's obligation to pay
Monthly Rent and Additional Rent under the Lease shall commence upon the date
which would have been the Commencement Date but for the delay due to the fault
of Tenant, as said date is determined by Landlord. Delays "due to the fault" of
Tenant shall include, without limitation, delays caused by: (i) Tenant's failure
to timely approve the preliminary and working plans and specifications for the
Tenant Improvements; (ii) Tenant's request for or use of special materials,
finishes or installations which are not readily available or which otherwise
require additional time to obtain; (iii) Tenant's request for changes in the
plans and/or working drawings after Landlord has prepared the working plans and
specifications; or (iv) unreasonable interference with Landlord's work, if any,
caused by Tenant or by Tenant's agents, employees, contractors or
subcontractors.
5. RENT.
(a) Monthly Rent. Tenant shall pay to Landlord, in lawful money of the
United States, for each calendar month of the Term, the Monthly Rent set forth
in Paragraph (1) of the Lease Summary, subject to adjustment as provided in
Paragraph 5(b) below, in advance, on the first (1st) day of each calendar month,
without abatement, deduction, claim, offset, prior notice or demand. Landlord
hereby acknowledges receipt of Tenant's payment of Monthly Rent for the first
(1st) month of the Term.
(b) ADJUSTMENTS. The Monthly Rent as set forth hereinabove shall be
adjusted as provided in Exhibit "E" attached to this Lease.
(c) ADDITIONAL RENT. All monies required to be paid by Tenant under this
Lease, including, without limitation, Real Property Taxes payable pursuant to
Paragraph 14 hereof, repair and maintenance charges payable pursuant to
Paragraph 16 hereof and insurance premiums payable pursuant to Paragraph 20
hereof shall constitute Additional Rent. Landlord shall have the right to
reasonably estimate and collect from Tenant in advance on a quarterly or monthly
basis any and all such Additional Rent. Tenant shall be provided with a
reasonably detailed itemization of the Operating Expenses included within [text
missing]
(d) PRORATIONS. If the Commencement Date is not the first(1st) day of a
month, or if the expiration of the Term of this Lease is not the last day of a
month, a prorated Installment of Monthly Rent based on a thirty (30) day month
shall be paid for the fractional month during which the Term commences or
terminates.
6. LATE PAYMENT CHARGES. Tenant acknowledges that late payment by Tenant to
Landlord of Rent and other charges provided for under this Lease will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of such
costs being extremely difficult or impracticable to fix. Such costs include, but
are not limited to, processing and accounting charges, and late charges that may
be imposed on Landlord by the terms of any encumbrance and notes secured by any
encumbrance covering the Premises, or late charges and penalties due to late
payment of Real Property Taxes due on the Premises. Therefore, if any
installment of Rent or any other charge due from Tenant is not received by
Landlord within ten (10) days following the applicable due date, Tenant shall
pay to Landlord an additional sum equal to the greater of One Hundred Dollars
($100.00) or five percent (5%) of the amount overdue as a late charge for every
month or portion thereof that the Rent or other charges remain unpaid. The
parties agree that this late charge represents a fair and reasonable estimate of
the costs that Landlord will incur by reason of the late payment by Tenant.
Acceptance of any late charge shall not constitute a waiver by Landlord of
Tenant's default with respect to the overdue amount, and shall not prevent
Landlord from exercising any of the other rights and remedies available to
Landlord for any other breach of Tenant under this Lease. Notwithstanding the
foregoing, upon the third (3rd) occurrence during the Term of this Lease of
Tenant's failure to pay Monthly Rent or Additional Rent when due, Landlord may
condition its acceptance of future Rent upon a requirement that Tenant
concurrently execute an amendment to this Lease which provides that Monthly Rent
for the balance of the Term of this Lease shall be made in quarterly
installments, in advance, in an amount equal to the sum of the Monthly Rent
amounts payable during such three (3) month period.
7. SECURITY DEPOSIT. Tenant has deposited with Landlord the sum set forth in
Paragraph (m) of the Lease Summary as a Security Deposit for the full and
faithful performance of every provision of this Lease to be performed by Tenant.
If Tenant defaults with respect to any provision of this Lease, Landlord may
apply all or any part of the Security Deposit for the payment of any Rent or
other sum in default, the repair of such damage to the Premises or the payment
of any other amount which Landlord may spend or become obligated to spend by
reason of Tenant's default or to compensate Landlord for any other loss or
damage which Landlord may suffer by reason of Tenant's default to the full
extent permitted by law. If any portion of the Security Deposit is to applied,
Tenant shall, within ten (10) days after written demand therefor, deposit cash
with Landlord in an amount sufficient to restore the Security Deposit to its
original amount, and Tenant's failure to do so shall be a default under this
Lease. Upon any Increase in the Monthly Rent during the Term, Tenant shall
deposit with Landlord additional funds such that the amount of the Security
Deposit held by Landlord shall at all times bear the same proportion to the then
current Monthly Rent as the original Security Deposit bears to the initial
Monthly Rent. Landlord shall not be required to keep the Security Deposit
separate from its general funds, and Tenant shall not be entitled to interest on
the Security Deposit. If Tenant is not otherwise in default, the Security
Deposit or any balance thereof shall be returned to Tenant within thirty (30)
days of the Termination Date.
8. HOLDING OVER. If Tenant remains in possession of all or any part of the
Premises after the expiration of the Term hereof with the prior written consent
of Landlord, such possession shall constitute a month-to-month tenancy only and
shall not constitute a renewal or extension for any further term. In such event,
Monthly Rent shall be increased to an amount equal to one hundred ten percent
(110%) of the Monthly Rent payable during the last month of the Term, and any
other sums due hereunder shall be payable in the amount and at the times
specified in this Lease. Such month-to-month tenancy shall be subject to every
other term, condition, and covenant contained herein.
9. CONDITION OF PREMISES.
(a) Landlord's sole construction obligations regarding Tenant Improvements
for the Premises will be as set forth in Paragraph 25 hereof. Subject to the
following provisions, Tenant, by taking possession of the Premises, acknowledges
having inspected the Premises and accepts them as being in good and sanitary
order, condition and repair and as having been constructed in accordance with
the Plans. Tenant will have a period of thirty (30) days after taking possession
of the Premises in which to advise Landlord of construction deficiencies or
defects, in addition to the punch list items referred to in Paragraph 4(a)
above, by written notice to Landlord. Except as hereafter provided, Landlord
will repair, replace or complete at its expense all items both on Tenant's punch
list and referenced on the 30-day notice referred to above, within thirty (30)
days after receipt of notice or as soon as Landlord, acting in good faith, can
complete thereafter. If Landlord reasonably contends that a particular punch
list or notice item is not justified, the parties will refer the issue to
Landlord's architect for resolution. If Tenant does not accept the opinion of
Landlord's architect, the parties will select an independent architect of
recognized standing to make a final determination.
(b) Tenant acknowledges that neither Landlord nor Landlord's Agents has
made any representations or warranties as to the suitability or fitness of the
Premises for the conduct of Tenant's business or for any other purpose, and that
neither Landlord nor Landlord's Agents has agreed to undertake any alterations
or construct any Tenant Improvements to the Premises except as expressly
provided in this Lease.
10. USE OF THE PREMISES.
(a) TENANT'S USE. Tenant shall use the Premises solely for the purposes
set forth in Paragraph (n) of the Lease Summary and shall not use the Premises
for any other purpose without obtaining the prior written consent of Landlord.
Tenant's use of the Premises shall be subject to all of the terms and conditions
of this Lease, including without limitation, the provisions of Paragraph 10(b)
hereof.
(b) COMPLIANCE.
(i) Tenant shall not use the Premises or suffer or permit anything to
be done in or about the Premises which will in any way conflict with any law,
statute, zoning restriction, ordinance or governmental law, rule, regulation or
requirement of any duly constituted public authority having jurisdiction over
the Premises now in force or which may hereafter be in force, or the
requirements of the Board of Fire Underwriters or other similar body now or
hereafter constituted relating to or affecting the condition, use or occupancy
of the Premises or any covenants, conditions, easements or restrictions now or
hereafter encumbering the Premises. Tenant shall not commit any public or
private nuisance or any other act or thing which might or would disturb the
quiet enjoyment of any other tenant of Landlord or any occupant of nearby
property. Tenant shall place no loads upon the floors, walls or callings in
excess of the maximum designed load specified by Landlord or which may damage
the Building or outside areas; nor place any harmful liquids in the drainage
systems, nor dump or store waste materials, refuse or other materials or allow
such to remain outside the Building proper, except in the enclosed trash areas
provided.
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(ii) In no event shall Tenant cause or permit any "Toxic Materials" (as
herein defined) to be brought upon, stored, used, released into the environment
or disposed of on or about the Premises except in compliance. As used herein,
"Toxic Materials" shall mean any hazardous, toxic or radioactive matter,
including those materials identified in Sections 66680 through 66685 of Title
22 of the California Administrative Code, Division 4, Chapter 30 ("Title 22")
as amended from time to time. If Tenant breaches the obligation in the
preceding sentence, or if the presence of Toxic Materials on the Premises
caused or permitted by Tenant results in the contamination of the Premises,
Tenant shall be solely responsible for and shall defend, indemnify and hold
Landlord and Landlord's Agents harmless from and against all claims, costs and
liabilities, including attorneys' fees and costs, arising out of or in
connection with such breach or contamination. Tenant shall further be solely
responsible for and shall defend, indemnify and hold Landlord, Landlord's
Agents and the Premises harmless from and against all claims, costs, and
liabilities, including attorneys' fees and costs, arising out of or in
connection with the removal, clean-up and restoration work and materials
necessary to return the Premises and any other property of whatever nature to
their condition existing prior to the appearance of the Toxic Materials on the
Premises. Tenant's obligations hereunder shall survive the termination of this
Lease. Tenant shall notify Landlord of and provide to Landlord copies of any
of the following environmental entitlements or inquiries relating to the
Premises which may be filed or served on Tenant: notices of violation, notices
to comply, citations, inquiries, reports filed pursuant to self-reporting
requirements, reports filed pursuant to any governmental law or regulation
relating to underground or aboveground tanks, permit applications, permits and
other reports or documents including those which may be characterized as
confidential. Landlord may, at any time, require that Tenant conduct
monitoring activities on the Premises satisfactory to Landlord with respect to
the release or potential release of Toxic Materials on or from the Premises.
In the event of a release of any Toxic Materials to the environment, Tenant
will furnish to Landlord copies of any and all reports and/or correspondence
with any governmental agencies relating to such release.
(iii) Tenant acknowledges that it has read the CC&R's, the REA and the
SLURS (as those items are defined in Paragraph 3 hereof), and knows the
contents thereof. Tenant agrees that this Lease is subject and subordinate to
the CC&R's, the SLURS and the REA, as the same may now or hereafter exist, and
that it will execute and deliver to Landlord within fifteen (15) days of
Landlord's request therefor, any further documentation or instruments which
Landlord deems necessary or desirable to evidence or effect such subordination;
provided, that, any future amendments to the CC&R's, the SLURS or the REA shall
not substantially interfere with Tenant's use and enjoyment of the Premises.
Throughout the Term Tenant shall timely comply with all of the terms,
provisions and restrictions of the REA, the SLURS and the CC&R's and any
modifications or amendments thereof which pertain, restrict or affect the
Premises, or Tenant's use of any other area of the Project as permitted
hereunder, including the payment by Tenant of Tenant's Percentage of any
periodic or special dues or assessments charged against the Project, the
Building (or against the Landlord as the owner thereof), in accordance with the
provisions of the REA, the SLURS or the CC&R's. Tenant shall hold Landlord,
Landlord's Agents and the Premises harmless and indemnify Landlord and
Landlord's Agents against any loss, expense, damage, attorneys' fees and costs
or liability arising out of or in connection with the failure of Tenant to so
perform or comply with the CC&R's, the SLURS and the REA. The failure of
Tenant to so comply with the requirements of the CC&R's, the SLURS or the REA
shall constitute a material default hereunder. Tenant agrees that it will
subordinate the Lease to any other covenants, conditions and restrictions and
any reciprocal easement agreements or any similar agreements which Landlord may
hereafter record against the Premises or any portion thereof, provided that
such subordination does not unreasonably interfere with Tenant's use and
enjoyment of the Premises.
11. QUIET ENJOYMENT. Subject to the right of any lender of record,
Landlord covenants that Tenant, upon performing the terms, conditions and
convenants of the Lease, shall have quiet and peaceful possession of the
Premises as against any person claiming the same by, through or under Landlord.
12. ALTERATIONS.
(a) PERMITTED ALTERNATIONS. After the Commencement Date, Tenant shall
not make or permit any Alterations in, on or about the Premises, except for
non-structural Alterations not exceeding Five Thousand Dollars ($5,000.00) in
aggregate cost over the Term of the Lease, without the prior written consent of
Landlord, which consent will not be unreasonably withheld. All Alterations
shall be constructed pursuant to plans and specifications approved in writing
by Landlord. Notwithstanding the foregoing, Tenant shall not, without the
prior written consent of Landlord, which consent may be withheld in Landlord's
sole discretion, make any: (i) Alterations to the exterior of the Building or
the outside areas: (ii) Alterations to or penetrations of the structural
portions of the Building including, without limitation, the roof, or which will
interfere with the proper functioning of any HVAC, electrical or mechanical
facilities or equipment located in the Building, or (iii) Alterations visible
from outside the Building to which Landlord may withhold its consent based on
wholly aesthetic grounds.
All Alterations shall be installed by a licensed contractor at Tenant's
sole expense in compliance with all applicable laws and covenants, conditions
and restrictions of record. The work shall be done in a good and workmanlike
manner conforming in quality and design with the Premises existing as of the
Commencement Date, and shall not diminish the value of the Premises. Tenant
shall, if required by Landlord, obtain and pay for, at its own expense, a
completion and indemnity bond, the form and amount of which shall be subject to
the approval of Landlord. All Alterations made by Tenant, which cannot be
removed without damage or defacing of the premises, shall be and become the
property of Landlord upon the installation thereof and shall not be deemed
Tenant's Personal Property; provided, however, that Landlord may, at its
option, require that Tenant, upon the termination of this Lease, at Tenant's
expense, remove any or all non-structural Alternations installed by Tenant and
return the Premises to its condition as of the Commencement Date of this Lease,
normal wear and tear excepted. Notwithstanding any other provisions of this
Lease, Tenant shall be solely responsible for the maintenance, repair and
replacement of any and all Alterations made by it to the Premises. Further, in
the event the Alterations include any aboveground or underground tanks,
concrete sumps, non-vaulted buried tanks, earthen-walled pits, ponds or
lagoons or other underground containers, Tenant shall prepare a risk assessment
which addresses any and all concerns of Landlord. The adequacy of the risk
assessment shall be determined in Landlord's sole discretion.
(b) NOTICE. Tenant shall give Landlord written notice of Tenant's
intention to perform work on the Premises which might result in any claim of
lien at least twenty (20) days prior to the commencement of such work to enable
Landlord to post and record a notice of nonresponsibility or other notice
Landlord deems proper prior to the commencement of any such work. Tenant shall
not permit any mechanic's, materialmen's or other liens to be filed against the
property of which the Premises are a part, nor against Tenant's leasehold
interest in the Premises. If Tenant fails to remove or bond any lien(s) filed
against the Premises or its leasehold estate therein in connection with any work
performed or any work claimed to have been performed by or at the direction of
Tenant within thirty (30) days from the date of the lien filing(s), then
Landlord may remove such lien(s) at Tenant's expense and Tenant shall reimburse
Landlord for all costs incurred by Landlord in connection with the removal of
the lien(s), which amount shall be deemed Additional Rent, and shall include,
without limitation, all sums disbursed, incurred or deposited by Landlord,
including Landlord's costs, expenses and actual attorneys' fees with interest
thereon at the Interest Rate from the date of expenditure.
13. SURRENDER OF THE PREMISES. Upon the expiration or earlier termination
of this Lease, Tenant shall surrender the Premises to Landlord in its condition
existing as of the Commencement Date, normal wear and tear and acts of God
excepted, with all interior walls in good repair, plumbing, electrical and other
mechanical installations in good operating order, and all floors cleaned and
waxed, all to the reasonable satisfaction of Landlord. Tenant shall remove from
the Premises all of Tenant's Alterations which Landlord requires Tenant to
remove pursuant to Paragraph 12 and all Tenant's Personal Property, and shall
repair any damage and perform any restoration work caused by such removal,
provided, however, if Tenant is then in default, Tenant shall not be entitled
to remove Tenant's Personal Property except as specified by written notice
delivered by Landlord to Tenant. If Tenant fails to remove such Alterations and
Tenant's Personal Property which Tenant is authorized and obligated to remove
pursuant to the above, and such failure continues after the termination of this
Lease, Landlord may retain such property and all rights of Tenant with respect
to it shall cease, or Landlord may place all or any portion of such property in
public storage for Tenant's account. Tenant shall pay to Landlord, upon demand,
the costs of removal of any such Alterations and Tenant's Personal Property and
storage and transportation costs of same, and the cost of repairing and
restoring the Premises, together with attorneys' fees and interest on said
amounts at the Interest Rate from the date of expenditure by Landlord. If the
Premises are not so surrendered at the termination of this Lease, Tenant hereby
agrees to indemnify Landlord and its Agents against all loss or liability
resulting from delay by Tenant in so surrendering the Premises, including,
without limitation, any claims made by any succeeding tenant, losses to Landlord
due to lost opportunities to lease to succeeding tenants, and actual attorneys'
fees and costs.
14. REAL AND PERSONAL PROPERTY TAXES.
(a) PAYMENT BY TENANT. Tenant shall pay, as Additional Rent, all
personal property taxes now or hereafter levied against Tenant's Personal
Property, and Tenant's Percentage of all Real Property Taxes levied against the
Project, during the Term as the same become due and payable. Landlord agrees to
forward to Tenant copies of all notices and tax bills pertaining to the Premises
upon receipt.
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Tenant shall pay to Landlord the full amount of such Real Property Taxes as
shown on said notices and bills in monthly installments as an Operating Expense
pursuant to Paragraph 16(a) below. If Tenant shall fail to timely pay any Real
Property Taxes or personal property taxes, Landlord shall have the right but not
the obligation to: (i) pay the same, in which case Tenant shall immediately
repay such amount to Landlord including interest at the Interest Rate from the
date paid by Landlord until the date of payment by Tenant; and (ii) exercise any
and all remedies available to Landlord pursuant to Paragraph 26. Tenant may
contest the amount or validity of any Real Property Taxes by appropriate
proceedings; provided that Tenant shall promptly pay such taxes unless such
proceedings shall operate to prevent or stay the collection of the tax so
contested. Landlord shall join in any such proceedings if any law shall so
require, providing that Tenant shall indemnify Landlord against any liability,
cost or expense in connection therewith, including, without limitation, actual
attorneys' fees and costs.
(b) APPORTIONMENT. If the Premises or the Project are not assessed as a
separate parcel, then Landlord shall equitably apportion the Real Property Taxes
assessed against the real property which includes the Premises based upon the
ratio of the square footage of the Premises to the total square footage of all
leasable space within the buildings on the assessed parcel, and Tenant shall pay
the amount of Real Property Taxes so apportioned to the Premises.
(c) TAX ON IMPROVEMENTS. Tenant shall pay any increase in Real Property
Taxes attributable to any and all Alterations and Tenant Improvements of any
kind whatsoever placed in, on or about the Premises for the benefit of, at the
request of, or by Tenant.
(d) PRORATION. Tenant's liability to pay Real Property Taxes shall be
prorated on the basis of a three hundred sixty-five (365) day year to account
for any fractional portion of a fiscal tax year included at the commencement or
expiration of the Term. With respect to any assessments which may be levied
against or upon the Premises, or which under the laws then in force may be
evidenced by improvements or other bonds or may be paid in annual installments,
only the amount of such annual installment (with appropriate proration for any
partial year) and interest due thereon shall be included within the computation
of the annual Real Property Taxes levied against the Premises.
(e) PAYMENT ON EXPIRATION OF TERM. If this Lease terminates on a date
earlier than the end of a fiscal tax year, Landlord shall deliver to Tenant a
statement setting forth the amount of Real Property Taxes to be paid by Tenant
prorated to the date of termination. Tenant shall pay to Landlord such prorated
amount within five (5) days of Tenant's receipt of the statement.
(f) PERSONAL PROPERTY TAXES. Tenant shall pay prior to delinquency all
taxes assessed or levied against Tenant's Personal Property in, on or about the
Premises. When possible, Tenant shall cause its Personal property to be assessed
and billed separately from the real or personal property of Landlord.
(g) FAILURE TO PAY. Tenant's failure to timely pay any of the charges
which are not included in Operating Expenses; required to be paid under this
Paragraph shall constitute a material default under this Lease.
15. UTILITIES AND SERVICES. Tenant shall be responsible for and shall pay
promptly all charges for water, gas, electricity, sewer, heat, light, power,
telephone, refuse pickup, janitorial service and all other utilities, materials
and services furnished directly to or used by Tenant in, on or about the
Premises during the Term, which are not included in Operating Expenses; together
with any taxes thereon. Landlord shall not be liable in damages or otherwise for
any failure or interruption of any utility or other service furnished to the
Premises. No such failure or interruption shall entitle Tenant to terminate this
Lease or withhold or abate Rent or other sums due hereunder.
16. OPERATING EXPENSES, REPAIRS AND MAINTENANCE.
(a) TENANT TO BEAR SHARE OF OPERATING EXPENSES.
(i) Tenant shall pay to Landlord as hereinafter provided,
Tenant's percentage of "Operating Expenses", as defined in Paragraph 16(b)
below. "Tenant's Percentage", as set forth in Paragraph (q) of the Lease
Summary, is that percentage that the gross square feet of the floor area of the
Premises bears to that total gross square footage of the floor area of leasable
space within the Building.
(ii) Prior to the commencement of each calendar year, Landlord
shall give Tenant a written estimate of Tenant's Percentage of Operating
Expenses for the ensuing calendar year. Tenant shall pay its estimated share of
Operating Expenses in equal monthly installments in advance, on or before the
first (1st) day of each month. Within ninety (90) days after the end of each
calendar year (or such shorter interval as Landlord shall select), Landlord
shall furnish Tenant a statement showing in reasonable detail, the actual
Operating Expenses for the Building incurred for the period in question and the
parties shall within thirty (30) days thereafter, make payment or allowance
necessary to adjust Tenant's estimated payments to the actual Tenant's
Percentage of Operating Expenses as shown by the applicable periodic statements
submitted to Tenant by Landlord.
(iii) If Landlord shall determine at any time or from time to
time that the estimate of Tenant's Percentage of Operating Expenses for the
current calendar year is, or will become inadequate to meet Tenant's share of
such Operating Expenses for any reason, Landlord shall immediately determine the
approximate amount of such inadequacy and issue a supplemental estimate as to
Tenant's Percentage of Operating Expenses, and Tenant shall pay said increase in
the estimated Tenant's Percentage of Operating Expenses as reflected by such
supplemental estimate.
(iv) Landlord shall keep or cause to be kept separate and
complete books of accounting covering costs and expenses of operating and
maintaining the Common Area and other portions of the Project which Landlord is
required to maintain and repair showing the method of calculating Tenant's
Percentage of Operating Expenses, and shall preserve for at least twenty-four
(24) months after the close of each fiscal year all vouchers, invoices,
statements or payroll records, and other papers evidencing said costs and
expenses for that calendar year. Tenant, at its sole cost and expense through
any certified public accountant designated by it, shall have the right to
examine and/or audit the books and other documents mentioned above evidencing
such costs and expenses for the previous two (2) calendar years, during
reasonable business hours and not more frequently than once during any calendar
year.
(b) DEFINITION OF THE OPERATING EXPENSES. The term "Operating
Expenses" as used herein shall mean Real Property Taxes for the Project, all
costs and expenses incurred in connection with the maintenance and operation of
the Project, which costs shall include, without limitation, repair and
maintenance to the roof and the exterior walls of the buildings in the Project,
periodic painting of the buildings in the Project, landscaping services, HVAC
maintenance contracts and normal maintenance of the HVAC, sweeping, maintenance
services, repairs to and replacement of asphalt paving, bumpers, striping, light
bulbs, light standards, guard and directional signs and lighting systems,
perimeter walls, retaining walls, sidewalks, planters, landscaping and sprinkler
system in planting area, any and all assessments levied against the Project
pursuant to the CC&R's, water, electrical and other utility services thereto,
removal of trash, rubbish and other refuse from the Project, cleaning of and
replacement of signs of the Project, including relamping and repairs made as
required; maintenance of all of the Common Area from any obstructions not
reasonably required for the Common Area uses, including the prohibition of the
sale or display of merchandise or the storing of materials and/or equipment in
the Common Area, payment of all electrical, water and other utility charges or
fees for services furnished to Common Area; obtaining and maintaining public
liability, property damage and other forms of insurance which Landlord may or is
required to maintain in connection with the Project (including the payment of
any deductibles thereunder); establishment of reasonable reserves for
replacements and/or repair of Common Area improvements, equipment and supplies;
employment of such personnel as Landlord may deem reasonably necessary, if any,
to direct parking and police the Common Area and facilities; employment of
personnel used in connection with the operation, maintenance and repair of the
Common Area including payment or provision for unemployment insurance, workers'
compensation insurance and other employee costs;* the cost of bookkeeping and
accounting and legal services provided in connection with the operation and
maintenance of the Common Area by Landlord;* any other items reasonably
necessary from time to time to properly repair, replace, maintain and operate
the Common Area within the Project and any interest paid in connection
therewith, and a management fee to cover Landlord's management, overhead and
administrative expenses. Notwithstanding the foregoing, if Landlord elects to
delegate its duties hereunder to a professional property manager, then Landlord
shall not be entitled to receive any management fee (except for any costs and/or
administrative and overhead expenses reasonably incurred by Landlord in
"monitoring" and "auditing" the performance delegated to the professional
property manager as contemplated herein which costs and/or expenses shall be
reimbursed to Landlord as incurred and billed) but under such circumstances any
reasonable amounts paid to the professional property manager shall be added to
and deemed a part of the Operating Expenses.
* If the foregoing personnel are used in connection with projects other than the
Project, a prorata cost of such personnel shall be charged to the Project as
an Operating Expense.
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(c) Repairs and Maintenance
(i) Tenant shall, subject to Landlord's obligations as hereunder
provided, at all times during the Term of this Lease or any extension thereof,
and at Tenant's sole cost and expense, keep, maintain and repair the Premises
and every portion thereof and every improvement therein, in good and sanitary
order and condition (usual wear and tear excepted), including without limitation
all necessary maintenance and repairs to all portions of the Premises, and all
exterior entrances, all glass, window casements, show window mouldings, all
partitions, doors, doorjams, door closers, or hardware, fixtures, equipment,
electrical lighting and systems, plumbing and plumbing fixtures, ducts, pipes,
wiring, conduits and all required air conditioning and healing systems repairs,
exclusive of normal maintenance services. Tenant agrees that it will not, nor
will it authorize any person to go onto the roof of the Building without the
prior written consent of Landlord.
(ii) Landlord shall, subject to receiving Tenant's Percentage of
Operating Expenses, maintain in good and sanitary condition and repair the roof
of the Building in which the premises are located and the normal maintenance
services for the HVAC for the Premises, if any, and paint the exterior of the
Building within which the Premises are located as and when such painting
becomes reasonably necessary in Landlord's sole discretion. Landlord shall not
be required to make any repairs to the roof unless and until Tenant has
notified Landlord in writing of the need for such repair and Landlord shall
have a reasonable period of time hereafter to commence and complete said repair.
(iii) The cost of any maintenance and repairs on the part of
Landlord provided for in this Paragraph 16 shall be considered Operating
Expenses as herein defined.
(d) Waiver. Tenant hereby waives all rights provided for by the
provisions of Sections 1941 and 1942 of the California Civil Code and any
similar or successor law regarding Tenant's right to make repairs at the
expense of Landlord.
(e) Compliance with Governmental Regulations. Tenant shall, at its
own cost and expense, promptly and properly observe and comply with, including
the making by Tenant of any Alteration to the Premises, all present and future
orders, regulations, directions, rules, laws, ordinances, and requirements of
all governmental authorities (including, without limitation, state, municipal,
county and federal governments and their departments, bureaus, boards and
officials) arising from the use or occupancy of, or applicable to, the Premises
or privileges appurtenant to or in connection with the enjoyment of the
Premises.
(f) Tenant's Failure to Pay. Tenant's failure to timely pay any of
the charges in connection with the performance of its maintenance and repair
obligations to be paid under this Paragraph shall constitute a material default
under this Lease.
17. Fixtures. Tenant shall, at its own expense, provide, install and
maintain in good condition all Tenant's Personal Property required in the
conduct of its business in the Premises.
18. Landlord's Right to Enter the Premises. Tenant shall permit Landlord
and Landlord's Agents to enter the Premises at all reasonable times upon
reasonable notice, except for emergencies in which case no notice shall be
required, to inspect the same, to post notices of nonresponsibility and similar
notices and signs indicating the availability of Premises for sale, to show the
Premises to interested parties such as prospective lenders and purchasers, to
make necessary Alterations or repairs, to discharge Tenant's obligations
hereunder when Tenant has failed to do so within a reasonable time after written
notice from Landlord, and at any reasonable time after one hundred eighty (180)
days prior to the expiration of the Term, to place upon the Premises such
reasonable signs indicating availability of Premises for lease and to show the
Premises to prospective tenants. The above rights are subject to reasonable
security regulations of Tenant and to the requirement that Landlord shall at all
times act in a manner to cause the least possible interference with Tenant's
business. Notwithstanding anything contained herein to the contrary, in the
event a release of Toxic Materials occurs on or affects the Premises, Tenant
shall permit Landlord or Landlord's Agents to enter the Premises at any time
without prior notice, to inspect, monitor, take emergency or longterm remedial
action, discharge Tenant's obligations hereunder if Tenant has failed to do so,
or take any other action to restore the Premises to its original condition.
19. Signs. Landlord shall designate the location on the Premises, if any,
for one (1) or more exterior Tenant identification sign(s). Tenant shall have
no right to maintain Tenant identification signs in any other location in, on
or about the Premises and shall not display or erect any other signs, displays
or other advertising materials that are visible from the exterior of the
Building. The size, design, color and other physical aspects of permitted
sign(s) shall be subject to the Landlord's written approval prior to
installation, which approval may be withheld in Landlord's discretion, any
covenants, conditions or restrictions encumbering the Premises and any
applicable municipal or other governmental permits and approvals. The cost of
the sign(s), including the installation, maintenance and removal thereof shall
be at Tenant's sole cost and expense. If Tenant fails to maintain its sign(s),
or if Tenant fails to remove same upon termination of this Lease and repair any
damage caused by such removal (including, without limitation, repainting the
Building, if required by Landlord), Landlord may do so at Tenant's
expense. Tenant shall reimburse Landlord for all costs incurred by Landlord to
effect such removal, which amounts shall be deemed Additional Rent, and shall
include, without limitation, all sums disbursed, incurred or deposited by
Landlord including Landlord's costs, expenses and actual attorneys' fees with
interest thereof at the Interest Rate. (SEE RIDER NO. 4)
20. Indemnity; Insurance.
(a) Indemnification. Tenant hereby agrees to defend (with attorneys
reasonably acceptable to Landlord), indemnify and hold harmless Landlord and
Landlord's Agents from and against any and all damage, loss, liability and
expense including, without limitation, actual attorneys' fees and legal costs,
incurred directly or indirectly by reason of any claim, suit or judgment brought
by or on behalf of any person or persons for damage, loss or expense due to,
but not limited to, bodily injury or property damage sustained by such person
or persons which arise out of, are occasioned by, or are in any way
attributable to the use or occupancy of the Premises, the acts or omissions of
the Tenant, its agents, employees or contractors, except to the extent caused
by the sole negligence or willful misconduct of Landlord. Tenant agrees that
the obligations of Tenant herein shall survive the expiration or earlier
termination of this Lease.
(b) Insuring Party. As used in this Paragraph the term "Insuring
Party" shall mean the party designated in Paragraph (p) of the Lease Summary
who has the obligation to obtain the property insurance required hereunder. If
Landlord is the Insuring Party, Landlord shall not be required to name Tenant
as an additional insured under any such policy.
(c) Tenant's Insurance. Tenant agrees to maintain in full force and
effect at all times during the Term, at its own expense, for the protection of
Tenant and Landlord, as their interests may appear, policies of insurance
issued by a carrier or carriers acceptable to Landlord and its lender(s) of
record which afford the following coverages: (i) statutory workers'
compensation (ii) employer's liability with minimum limits of not less than One
Hundred Thousand Dollars ($100,000); (iii) comprehensive general liability
insurance including, but not limited to, blanket contractual liability, broad
form property damage, personal injury, independent contractors, and owned,
non-owned and hired vehicles, of not less than Two Million Dollars ($2,000,000)
combined single limit bodily injury and property damage (or current limit
carried, whichever is greater), naming Landlord and Landlord's mortgagees as
additional insureds; (iv)______________ (v) and such other insurance, in such
form and amounts as may be required by Landlord or its lender(s) from time to
time.
(d) Property Insurance. The Insuring Party shall obtain and keep in force
during the Term of this Lease a policy or policies of insurance (with
replacement cost endorsement) covering loss or damage to the Premises in the
amount of the full replacement cost thereof, but in no event less than the total
amount required by lender(s) having lien(s) on the Premises, against all perils
included within the classification of fire, extended coverage, vandalism,
malicious mischief, and special extended perils ("all risk" as such term is used
in the insurance industry). Tenant shall, in addition, obtain and keep in force
during the Term of this Lease a policy of business interruption and/or loss of
income insurance covering a period of one (1) year, with loss payable to
Landlord, which insurance shall also cover all real estate taxes and insurance
costs for said period of one (1) year, with loss payable to Landlord, which
insurance shall also cover all real estate taxes and insurance costs for said
period. A stipulated value or agreed amount endorsement deleting the
coinsurance provision of the policy shall be procured with said insurance. If
the Premises are part of a larger building, or if the Premises are part of a
group of buildings owned by Landlord which are adjacent to the Premises, then
Tenant shall pay for any increase in the property insurance of the Building or
such other building or buildings if said increase is caused by Tenant's acts,
omissions, use or occupancy of the Premises. If the Landlord is the insuring
Party, Landlord will not insure Tenant's fixtures, contents, equipment and
tenant improvements. Tenant shall obtain and keep in force, at its expense, an
"all risk" property damage policy in the amount of the full replacement cost
covering Tenant's fixtures, contents, equipment and tenant improvements.
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(e) DEDUCTIBLES. Any policy of insurance required of Tenant pursuant
to this Lease containing a deductible exceeding Twenty-Five Thousand Dollars
($25,000) must be approved in writing by Landlord prior to the issuance of such
policies; it being understood and agreed that Tenant shall be solely
responsible for the payment of any such deductible.
(f) CERTIFICATES. Tenant shall deliver to Landlord at least thirty
(30) days prior to the time such insurance is first required to be carried by
Tenant, and thereafter prior to expiration of each such policy, certificates of
insurance evidencing the above coverage with limits not less than those
specified above. The certificates shall expressly provide that the interest of
Landlord therein shall not be affected by any breach of Tenant of any policy
provision for which such certificates evidence coverage.
(g) INCREASED COVERAGE. Upon demand, Tenant shall provide Landlord,
at Tenant's expense, with such increased amount of existing insurance, and such
other insurance as Landlord or Landlord's lender(s) may reasonably require.
(h) CO-INSURER. If, on account of the failure of Tenant to comply
with the foregoing provisions, Landlord is adjudged a co-insurer by its
insurance carrier, then, any loss or damage Landlord shall sustain by reason
thereof, including attorneys' fees and costs, shall be borne by Tenant and
shall be immediately paid by Tenant upon receipt of a bill therefor and
evidence of such loss.
(i) SUFFICIENCY OF COVERAGE. Neither Landlord nor Landlord's Agents
makes any representation that the limits of liability specified to be carried
by Tenant under this Lease are adequate to protect Tenant. If Tenant believes
that any such insurance coverage is insufficient, Tenant shall provide, at its
own expense, such additional insurance as Tenant deems adequate.
(j) INSURANCE REQUIREMENTS. All such insurance: (i) shall be in a
form satisfactory to Landlord and its lender(s) and shall be carried with
companies that have a general policyholder's rating of not less than "A" and a
financial rating of not less than Class "X" in the most current edition of
Best's Insurance Reports; (ii) shall provide that such policies shall not be
subject to material alteration or cancellation except after at least thirty
(30) days' prior written notice to Landlord; and (iii) shall be primary, and
any insurance carried by Landlord shall be noncontributing. The policy or
policies, or duly executed certificates for them, shall be deposited with
Landlord prior to the Commencement Date, and upon renewal of such policies. If
Tenant fails to procure and maintain the insurance required to be procured by
Tenant hereunder, Landlord may, but shall not be required to, order such
insurance at Tenant's expense and Tenant shall reimburse Landlord for all costs
reasonably incurred by Landlord with respect thereto. Tenant's reimbursement
to Landlord for such amounts shall be deemed Additional Rent, and shall include
all reasonable sums disbursed, incurred or deposited by Landlord including
Landlord's costs, expenses and actual attorneys' fees, with interest thereon at
the Interest Rate.
(k) LANDLORD'S DISCLAIMER. Landlord and Landlord's Agents shall not
be liable for any loss or damage to persons or property resulting from fire,
explosion, falling materials, glass, tile or sheetrock, steam, gas,
electricity, water or rain which may leak from any part of the Premises, or
from the pipes, appliances or plumbing works therein or from the roof, street
or subsurface or whatsoever, unless caused by or due to the active negligence
or willful acts of Landlord. Landlord and Landlord's Agents shall not be
liable for interference with light or air, or for any latent defect in the
Premises. Tenant shall give prompt written notice to Landlord in case of a
casualty, accident or repair needed to the Premises.
(l) FAILURE TO PAY. The failure of Tenant to obtain and pay for any
insurance required to be obtained and paid for by it hereunder shall constitute
a material default under this Lease.
21. WAIVER OF SUBROGATION. Landlord and Tenant each hereby waive all
rights of recovery against the other on account of loss and damage occasioned
to such waiving party for its property or the property of others under its
control to the extent that such loss or damage is insured against under any
property insurance policies in force at the time of such loss or damage.
Tenant and Landlord shall, upon obtaining policies of insurance required
hereunder, give notice to the insurance carrier that the foregoing mutual
waiver of subrogation is contained in this Lease and Tenant and Landlord shall
cause each insurance policy obtained by such party to provide that the
insurance company waives all right of recovery by way of subrogation against
either Landlord or Tenant in connection with any damage covered by such policy.
22. DAMAGE OR DESTRUCTION.
(a) LANDLORD'S OBLIGATION TO REBUILD. If the Premises are damaged or
destroyed, Landlord shall promptly and diligently repair the Premises unless it
has the right to terminate this Lease as provided in Paragraph 22(b) below and
it elects to so terminate.
(b) LANDLORD'S RIGHT TO TERMINATE. Landlord shall have the right to
terminate this Lease following damage to or destruction of the Premises if any
of the following occurs: (i) insurance proceeds together with additional
amounts Tenant agrees to contribute are not available to Landlord to pay one
hundred percent (100%) of the cost to fully repair the damaged Premises,
excluding the deductible for which Tenant shall also be responsible; (ii) the
Premises cannot, with reasonable diligence, be fully repaired by Landlord
within one hundred twenty (120) days after the date of the damage or
destruction; (iii) the Premises cannot be safely repaired because of the
presence of hazardous factors, including, but not limited to, earthquake
faults, radiation, chemical waste and other similar dangers; (iv) the Premises
are destroyed or damaged during the last twelve (12) months of the Term; or (v)
Tenant is in default under the terms of this Lease at the time of such damage
or destruction.
If Landlord elects to terminate this Lease, Landlord may give Tenant
written notice of its election to terminate within thirty (30) days after it
has knowledge of such damage or destruction, and this Lease shall terminate
fifteen (15) days after the date Tenant receives such notice. If this Lease is
terminated, Landlord shall, subject to the rights of its lender(s), be entitled
to receive and retain all the insurance proceeds resulting from such damage,
except for those proceeds payable under policies obtained by Tenant which
specifically insure Tenant's Personal Property. If Landlord elects not to
terminate the Lease, Landlord shall, promptly following the date of such damage
or destruction and receipt of amounts required of Tenant pursuant to Paragraph
22(b)(i) above, commence the process of obtaining necessary permits and
approvals, and shall commence repair of the Premises as soon as practicable and
thereafter prosecute the same diligently to completion, in which event this
Lease will continue in full force and effect.
(c) LIMITED OBLIGATION TO REPAIR. Landlord's obligation, should it
elect or be obligated to repair or rebuild, shall be limited to the basic
Building and Tenant Improvements and Tenant shall, at its expense, replace or
fully repair all Tenant's Personal Property and any Alterations installed by
Tenant existing at the time of such damage or destruction. If the Premises are
to be repaired in accordance with the foregoing, Landlord shall make available
to Tenant any portion of insurance proceeds it receives which are allocable to
the Alterations constructed by Tenant pursuant to this Lease provided Tenant is
not then in default.
(d) ABATEMENT OF RENT. Rent shall be temporarily abated
proportionately, during any period when, by reason of such damage or
destruction, Landlord reasonably determines that there is substantial
interference with Tenant's use of the Building. Such abatement shall commence
upon such damage or destruction and end upon substantial completion by Landlord
of the repair or reconstruction which landlord is obligated or undertakes to
do. Tenant shall not be entitled to any compensation or damages from Landlord
for loss of the use of the Premises, damage to Tenant's Personal Property or
any inconvenience occasioned by such damage, repair or restoration. Tenant
hereby waives the provisions of Section 1932(2) and Section 1933(4) of the
California Civil Code, and the provisions of any similar law hereinafter
enacted.
(e) REPLACEMENT COST. The determination in good faith by Landlord of
the estimated cost of repair of any damage, of the replacement cost, or of the
time period required for repair shall be conclusive for purposes of this
Paragraph.
23. CONDEMNATION.
(a) TOTAL TAKING -- TERMINATION. If title to all of the Premises or
so much thereof is taken for any public or quasi-public use under any statute
or by right of eminent domain so that reconstruction of the Premises will not
result in the Premises being reasonably suitable for Tenant's continued
occupancy for the uses and purposes permitted by this Lease, this Lease shall
terminate as of the date possession of the Premises or part thereof be taken.
(b) PARTIAL TAKING. If any part of the Premises is taken and the
remaining part is reasonably suitable for Tenant's continued occupancy for the
purposes and uses permitted by this Lease, without unreasonable disruption or
interference of the Tenant, this Lease shall, as to the part so taken, terminate
as of the date that possession of such part of the Premises is taken and the
Monthly Rent shall be reduced in the same proportion that the floor area of the
portion of the Building so taken (less any addition thereto by reason of any
reconstruction) bears to the original floor area of the Building. Landlord
shall, at its own cost and expense, make all necessary repairs or alterations to
the Building so as to make the portion of the Building not taken a complete
architectural unit. Such work shall not, however, exceed the scope of the work
done by Landlord in originally constructing the Building. Monthly Rent due and
payable hereunder shall be temporarily abated during such restoration period in
proportion to the degree to which Tenant's use of Premises is impaired. Each
party hereby waives the provisions of Section 1265.130 of the California Code of
Civil Procedure allowing either party to petition the Superior Court to
terminate in the event of a partial taking of the Building or Premises.
7
<PAGE> 10
PAGE 7A
(22. Destruction or Damage - Continued)
Anything in this Lease to the contrary notwithstanding:
In the event the Premises are damaged or destroyed by fire or other
casualty and if this Lease is not terminated, then Landlord shall promptly
repair and restore the same to substantially the condition which said Premises
were in immediately prior to the happening of such casualty, and if same are not
so restored or repaired within one hundred twenty (120) days of such casualty,
then Tenant at Tenant's option may terminate this Lease by written notice to
Landlord within thirty (30) days thereafter, Tenant's right of termination,
however, shall not be applicable if Landlord is able to relocate Tenant as
provided below, or if such damage or destruction is caused by Tenant's
negligence or willful misconduct.
From the date of such casualty until the Premises are repaired and
restored, the Rent and Additional Rent and other charges payable under this
Lease shall abate in such proportion as the part of the Premises destroyed,
damaged or rendered untenantable bears to the total Premises; however, if
Tenant is unable to conduct business in the Premises as a result of such fire or
casualty, then Rent and all additional rent and other charges shall abate
totally until Landlord's repairs are completed and Tenant can resume business in
the Premises.
Provided Tenant is not then in default of its obligations with this Lease;
within thirty (30) days of such casualty and until the Premises are restored,
Landlord will assist Tenant in relocating into temporary space within the
Irvine/Sammis Bio-Tech Park or any other Irvine Company property that is vacant
and available. Rent and all Additional Rent and other charges payable under this
Lease, shall not be abated while Tenant is in possession of such temporary
space.
If this Lease is terminated as herein provided, then the effective date of
said termination shall be the date of such damage or destruction, and rent shall
be adjusted as of said date.
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(c) NO APPORTIONMENT OF AWARD. No award for any partial or entire taking
shall be apportioned, it being agreed and understood that Landlord shall be
entitled to the entire award for any partial or entire taking. Tenant assigns to
Landlord its interest in any award which may be made in such taking or
condemnation, together with any and all rights of Tenant arising in or to the
same or any part thereof. Nothing contained herein shall be deemed to give
Landlord any interest in or require Tenant to assign to Landlord any separate
award made to Tenant for the taking of Tenant's Personal Property for the
interruption of Tenant's business, or its moving costs, or for the loss of its
goodwill.
(d) TEMPORARY TAKING. No temporary taking of the Premises shall
terminate this Lease or give Tenant any right to any abatement of Rent. Any
award made to Tenant by reason of such temporary taking shall belong entirely to
Tenant and Landlord shall not be entitled to share therein. Each party agrees to
execute and deliver to the other all instruments that may be required to
effectuate the provisions of this Paragraph.
(e) SALE UNDER THREAT OF CONDEMNATION. A sale made in good faith by
Landlord to any authority having the power of eminent domain, either under
threat of condemnation or while condemnation proceedings are pending, shall be
deemed a taking under the power of eminent domain for all purposes of this
Paragraph.
24. ASSIGNMENT AND SUBLETTING.
(a) PROHIBITION. Tenant shall not assign, mortgage, hypothecate,
encumber, grant any license or concession, pledge or otherwise transfer
(collectively, "assignment") this Lease, in whole or in part, nor sublet or
permit occupancy by any person other than Tenant of all or any part of the
Premises, without the prior written consent of Landlord in each instance, which
consent shall not be unreasonably withheld. Any purported assignment or
subletting contrary to the provisions hereof without consent shall be void. The
consent by Landlord to any assignment or subletting shall not constitute a
waiver of the necessity for such consent to any subsequent assignment or
subletting. As Additional Rent hereunder, Tenant shall reimburse Landlord for
actual legal and other expenses reasonably incurred by Landlord in connection
with any request by Tenant for consent to assignment or subletting. In
connection with any proposed assignment or sublease, Tenant shall submit to
Landlord in writing (i) the name of the proposed assignee or sublessee, (ii)
such information as to such assignee's or sublessee's financial responsibility
and standing as Landlord may reasonably require; (iii) the proposed use of
Premises by such assignee or sublessee (iv) all of the terms and conditions upon
which the proposed assignment or subletting is to be made and (v) an instrument
of assignment or sublease wherein such assignee or sublessee assumes all of
Tenant's obligations hereunder and agrees to be bound by the terms hereof.
(b) EXCESS SUBLEASE RENTAL OR ASSIGNMENT CONSIDERATION. If for any
sublease or assignment, Tenant receives rent or other consideration either
initially or over the term of the sublease or assignment, in excess of (i) the
Monthly Rent called for hereunder, plus (ii) Tenant's direct out-of-pocket costs
which Tenant certifies to Landlord to have been incurred in providing
occupancy-related services to any such subtenant of a nature commonly provided
by landlords of similar space (or in case of the sublease of a portion of the
Premises, in excess of such Monthly Rent fairly allocable to such portion), then
promptly following its receipt thereof, Tenant shall pay to Landlord as
Additional Rent hereunder, fifty percent (50%) of such excess as and when
received. By initialling these provisions, Landlord and Tenant acknowledge and
agree that the provisions of this Paragraph are agreed to after negotiation:
/s/ RW /s/ DAVID S. SILVER
- --------------------------- ----------------------------------
LANDLORD TENANT
(c) SCOPE. The prohibition against assigning or subletting contained in
this Paragraph shall be construed to include a prohibition against any
assignment or subletting by operation of law, whether voluntary or involuntary.
If this Lease be assigned, or if the underlying beneficial interest of Tenant be
transferred, or if the Premises or any part thereof be sublet or occupied by
anybody other than Tenant, Landlord may collect rent from the assignee,
subtenant or occupant and apply the net amount collected to the Monthly Rent
herein reserved and apportion any excess rent so collected in accordance with
the terms of Paragraph 24(b) above, but no such assignment, subletting,
occupancy or collection shall be deemed a waiver of this covenant or the
acceptance of the assignee, subtenant or occupant as tenant, or a release of
Tenant from the further performance by Tenant of covenants on the part of Tenant
herein contained. No assignment or subletting shall affect the continuing
primary liability of Tenant (which, following assignment, shall be joint and
several with the assignee), and Tenant shall not be released from performing any
of the terms, covenants and conditions of this Lease. No consent of Landlord
shall be required, however in connection with the merger or consolidation of
Tenant or the sale of substantially all of the assets or [MISSING TEXT].
(d) WAIVER. Notwithstanding any assignment or sublease, or any
indulgences, waivers or extensions of time granted by Landlord to any assignee
or sublessee, or failure by Landlord to take action against any assignee or
sublessee, Tenant waives notice of any default of any assignee or sublessee and
agrees that Landlord may at its option, proceed against Tenant without having
taken action against or joined such assignee or sublessee, except that Tenant
shall have the benefit of any indulgences, waivers and extensions of time
granted to any such assignee or sublessee and except that Landlord shall give
Tenant all notices of default given to the assignee or sublessee and Tenant
shall [MISSING TEXT].
25. CONSTRUCTION OF TENANT IMPROVEMENTS.
(a) PRELIMINARY PLANS/WORKING PLANS. Landlord has retained Donald W.
Mueller, A.I.A. to prepare preliminary space plans ("Preliminary Plans") to be
utilized in the preparation of final working drawings and specifications for
tenant improvements to the Premises ("Tenant Improvements"). The Preliminary
Plans have been completed and delivered to Landlord and are attached hereto as
"Exhibit C." Within five (5) days after execution of the Lease, Landlord shall
return same to Tenant marked and accompanied by comments and such required
revisions as are reasonable under the circumstances. Within five (5) days
thereafter, Tenant shall submit two (2) sets of revised Preliminary Plans,
revised to reflect review and approval. Promptly following Landlord's approval
of the Preliminary Plans, Landlord shall cause its architect to prepare and
submit two (2) copies of working drawings and specifications ("Working Plans")
to Tenant for its review and approval. Tenant shall advise Landlord within five
(5) days of Tenant's receipt of the Working Plans of any requested revisions.
Immediately upon receipt of said comments, Landlord shall make all approved
revisions to the Working Plans and submit two (2) copies thereof to Tenant for
its final review and approval. Concurrently with the above review and approval
process, Landlord shall submit all plans and specifications to the City and
other applicable governmental agencies in an attempt to expedite City approval
and issuance of all necessary permits and licenses to construct the Tenant
Improvements as shown on the Working Plans.
(b) CONSTRUCTION OF TENANT IMPROVEMENTS. Landlord at its own cost
(except as otherwise provided in Paragraphs 25(c) and (d) below) shall, through
a guaranteed maximum cost construction contract ("Construction Contract") with a
reputable, licensed contractor ("Contractor"), cause the construction of the
Tenant Improvements to be carried out in substantial conformance with the
Working Plans in a good and workmanlike manner and will use only first-class
materials. Tenant shall have the right to review and approve the construction
cost breakdown, including any and all fees, contained in the Construction
Contract. Landlord shall see that the construction complies with all applicable
building, fire, health and sanitary codes and regulations, the satisfaction of
which shall be evidenced by a certificate of occupancy for the Premises.
Landlord shall use best efforts to obtain all necessary construction and
building permits and licenses necessary for the construction of the Tenant
Improvements.
(c) ALLOWANCE. Landlord agrees to provide Tenant a tenant improvement
allowance in the amount of Three Hundred Eighty Thousand Five Hundred and 00/100
Dollars ($380,500) (the "Allowance") for the construction of the Tenant
Improvements for the entire Premises (which costs shall include, without
limitation, any and all fees, charges, costs or expenses of any kind or nature
reasonably incurred by Landlord in connection with the construction and
completion of the Tenant Improvements but excluding the costs of construction or
completion of the shell building. Upon finalization of the Construction Contract
with Contractor, if the sum of the guaranteed maximum cost of the Construction
Contract and other costs and expenses for the Tenant Improvements which are
chargeable against the Allowance exceed the Allowance ("Excess Cost"), Tenant
shall elect to either: (i) concurrent with Landlord's payment of funds form the
Allowance, pay to Landlord an amount equal to the product of the amount due the
Contractor times the ratio that the Excess Cost bears to the guaranteed maximum
contract amount; SEE PAGE 8-A.
(d) CHANGE ORDERS. Tenant may from time to time request and obtain
change orders during the course of construction provided that: (i) each such
request shall be reasonable; (ii) each such request shall be in writing and
signed by or on behalf of Tenant; (iii) each such request shall not result in
any structural change in the Building as reasonably determined by Landlord; (iv)
all additional charges and costs, including without limitation architectural and
engineering costs, construction and materials costs, and City processing costs,
shall be the sole and exclusive obligation of Tenant; and (v) any resulting
delay in the completion of the Tenant Improvements shall in no event extend the
Commencement Date of the Lease. Upon Tenant's request for a change order,
Landlord shall as soon as reasonably possible submit to Tenant a written
estimate of the increased (or decreased) cost and anticipated delay, if any,
attributable to the requested change. Within three (3) days of the date such
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<PAGE> 12
Page 8-A
The following is added to the end of Paragraph 25 Section (c) Allowance, where
indicated:
... or (ii) agree that Monthly Rent shall be increased so as to fully amortize
the Excess Cost over the Initial Term of the Lease at a rate of twelve percent
(12%) per annum, compounded annually; provided that any Excess Costs exceeding
$60,000 shall not be amortized but instead shall be paid to Landlord at the
Commencement Date.
Landlord agrees to begin construction on the 15,544 square feet of the
Designated Premises as noted in Exhibit A upon execution of the Lease. Landlord
further agrees to begin construction on the 4,091 square feet of the Designated
Premises as noted in Exhibit A within nine (9) months of the Lease Commencement
Date.
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<PAGE> 13
estimated cost adjustment and delay are delivered to Tenant, Tenant shall
advise Landlord whether or not it wishes to proceed with the change order.
Unless Tenant includes in its initial change order request that work in process
at the time such request is made be halted pending approval and execution of a
change order, Landlord shall not be obligated to stop construction of the
Tenant Improvements, whether or not the change order relates to work then in
process or about to be started.
(e) Tenant Delays. In no event shall the Commencement Date be extended
due to a delay due to the fault of Tenant. Delays "due to the fault" of Tenant
shall include, without limitation, delays caused by: (i) Tenant's failure to
timely prepare, submit and revise the Preliminary Plans and to review and
approve the Working Plans or to furnish information to Landlord for the
preparation by Landlord of the Working Plans; (ii) Tenant's request for or use
of special materials, finishes or installments which are not readily available,
provided that Landlord shall notify Tenant in writing that the particular
material, finish, or installation was not readily available promptly upon
Landlord's discovery of same; (iii) Tenant's failure to reasonably approve the
Working Plans in accordance with this Addendum; (iv) change orders requested by
Tenant; or (v) interference with Landlord's construction activities, caused by
Tenant or by Tenant's agents, employees, contractors or subcontractors.
Landlord shall give Tenant written notice within a reasonable time of any
circumstances that Landlord believes constitute delay caused by Tenant.
26. Default.
(a) Tenant's Default. At the option of Landlord, a default under this
Lease by Tenant shall exist if any of the following events shall occur: (i) if
Tenant shall have failed to pay Monthly Rent or any other sum required to be
paid hereunder within ten (10) days when due and within three (3) days of
written notice from landlord; (ii) if Tenant shall have failed to perform any
term, covenant or condition of this Lease other than those requiring the payment
of money, and Tenant shall have failed to cure such failure within fifteen (15)
days after written notice from Landlord where such failure could reasonably be
cured within such fifteen (15) day period; provided, however, that where such
failure could not reasonably be cured within the fifteen (15) day period, that
Tenant shall not be in default if it has commenced such cure within the fifteen
(15) day period and diligently thereafter prosecutes the same to completion
which in all events must occur within sixty (60) days thereafter; (iii) if
Tenant shall have assigned its assets for the benefit of its creditors; (iv) if
the sequestrian or attachment of or execution on any material part of Tenant's
Personal Property essential to the conduct of Tenant's business shall have
occurred, and Tenant shall have failed to obtain a return or release of Tenant's
Personal Property within thirty (30) days thereafter, or prior to sale pursuant
to such sequestration, attachment or levy, whichever is earlier; (v) if Tenant
shall have failed to continuously or uninterruptedly conduct its business in the
Premises, or shall have abandoned or vacated the Premises; (vi) if a court shall
have made or entered any decree or order other than under the bankruptcy laws of
the United States or any state adjudging Tenant to be insolvent; or approving as
properly filed a petition seeking reorganization of Tenant; or directing the
winding up or liquidation of Tenant and such decree or order shall have
continued for a period of thirty (30) days; (vii) the filing of a voluntary
petition in bankruptcy by Tenant, a voluntary petition for arrangement, a
voluntary or involuntary petition for reorganization, or the filing of an
involuntary petition by Tenant's creditors, immediately (unless involuntary, in
which case when the petition remains undischarged for a period of sixty (60)
days); (viii) if Tenant shall have failed to timely comply with the provisions
of Paragraphs 27 or 30 of this Lease.
(b) Remedies. Upon a default, Landlord shall have the following
remedies, in addition to all other rights and remedies provided by law in
equity or otherwise provided in this Lease, to which Landlord may resort
cumulatively or in the alternative; (i) Landlord may continue this Lease in
full force and effect and this Lease shall continue in full force and effect
as long as Landlord does not terminate this Lease, and Landlord shall have the
right to collect Rent when due; (ii) Landlord may, with or without terminating
this Lease, re-enter the Premises and remove all persons and property from the
Premises; such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of tenant. No re-entry or taking
possession of the Premises by Landlord pursuant to this Paragraph shall be
construed as an election to terminate this Lease unless a written notice of
such intention is given to Tenant; (iii) Landlord may terminate Tenant's right
to possession of the Premises at any time by giving written notice to that
effect, and relet the Premises or any part thereof. Tenant shall be liable
immediately to Landlord for all costs Landlord incurs in reletting the Premises
or any part thereof, including, without limitation, brokers' commissions which
Landlord would not otherwise be required to pay, expenses of cleaning,
redecorating, and further improving the Premises and like costs. Reletting may
be for a period shorter or longer than the remaining Term of this Lease. No
act by Landlord other than giving written notice to Tenant shall terminate this
Lease. Acts of maintenance efforts to relet the Premises or the appointment of
a receiver on Landlord's initiative to protect Landlord's interest under this
Lease shall not constitute a termination of Tenants right to possession. Upon
termination, Landlord shall have the right to remove all of Tenant's Personal
Property and store same at Tenant's cost and to recover from Tenant as damages
(A) the worth at the time of award of any unpaid Rent and other sums due and
payable which had been earned at the time of termination, plus (B) the worth at
the time of award of the amount by which the unpaid Rent and other sums which
would have been payable after termination until the time of award exceeds the
amount of such Rent loss that Tenant proves could have been reasonably avoided,
plus (C) the worth at the time of award of the amount by which the unpaid Rent
and other sums due for the balance of the Term after the time of award exceeds
the amount of such Rent loss that Tenant proves could be reasonably avoided,
plus (D) any other amounts to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform Tenant's obligations under
this Lease, or which in the ordinary course of things, would be likely to
result therefrom, including, without limitation, any costs or expenses
incurred by Landlord, (i) in retaking possession of the Premises; (ii) in
maintaining, repairing, preserving, restoring, replacing, cleaning, altering or
rehabilitating the Premises or any portion thereof, including such acts for
reletting to a new tenant or tenants; (iii) for leasing commissions; or (iv)
for any other costs necessary or appropriate to relet the Premises; plus (E) at
Landlord's election, such other amounts and remedies in addition to or in lieu
of the foregoing as may be permitted from time to time by the laws of the State
of California including, without limitation, the remedies provided by
California Civil Code Section 1951.4, as amended from time to time.
The "worth at the time of award" of the amounts referred to in
Paragraphs 26(b)(iii)(A) and 26(b)(iii)(B) above is computed by allowing
interest at the interest Rate on the unpaid Rent and other sums due and payable
from the termination date through the date of award. The "worth at the time of
award" of the amount referred to in Paragraph 26(b)(iii)(C) is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%). Tenant waives redemption
or relief from forfeiture under California Code of Civil Procedure Sections
1174 and 1179, or under any other present or future law, in the event Tenant
is evicted or Landlord takes possession of the Premises by reason of any
default of Tenant hereunder.
(c) Landlord's Default. Landlord shall not be deemed to be in default
in the performance of any obligation required to be performed by it hereunder
unless and until it has failed to perform such obligation within thirty (30)
days after receipt of written notice by Tenant to Landlord (and its lender(s)
of record who have provided Tenant with notice) specifying the nature of such
default; provided, however, that if the nature of Landlord's obligation is such
that more than thirty (30) days are required for its performance, then Landlord
shall not be deemed to be in default if it shall commence such performance
within such thirty (30) day period and thereafter diligently prosecute the
same to completion.
27. Subordination. Without the necessity of any additional document being
executed by Tenant for the purpose of effecting a subordination, and at the
election of Landlord or any bona fide mortgage or deed of trust beneficiary
with a lien on all or any portion of the Premises or any ground lessor with
respect to the land or which the Premises are a part, this Lease shall be
subject and subordinate at all times to; (i) all ground leases or underlying
leases which may now exist or hereafter be executed affecting the Building or
the land upon which the Building is situated or both, and (ii) the lien of any
mortgage or deed of trust which may now exist or hereafter be executed in any
amount for which the Building, land, ground leases or underlying leases, or
Landlord's interest or estate in any of said items is specified as security.
Notwithstanding the foregoing, Landlord or any such ground lessor, mortgagee,
any beneficiary shall have the right to subordinate or cause to be subordinated
any such ground leases or underlying leases or any such liens to this Lease.
If any ground lease or underlying lease terminates for any reason or any
mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure
is made for any reason, Tenant shall, notwithstanding any subordination and
upon the request of such successor in interest to Landlord, attorn to and
become the Tenant of the successor in interest to Landlord. Tenant covenants
and agrees to execute and deliver, within ten (10) days of demand by Landlord
and in the form requested by Landlord, ground lessor, mortgage or beneficiary,
any additional documents evidencing the priority or subordination of this Lease
with respect to any such ground leases or underlying leases or the lien of any
such mortgage or deed of trust. Tenant's failure to timely execute and deliver
such additional documents shall, at Landlord's option, constitute an additional
default hereunder. Tenant hereby irrevocably appoints Landlord as
attorney-in-fact of Tenant, which appointment is coupled with an interest, to
execute, deliver and record any such documents in the name and on behalf of
Tenant.
28. Notices. Any notice or demand required or desired to be given under
this Lease shall be in writing and shall be personally served or in lieu of
personal service may be given by mail, if given by mail, such notice shall be
deemed to have been given when seventy-two (72) hours have elapsed from the
time when such notice was deposited in the United States mail, registered or
certified, postage prepaid, return receipt requested, addressed to the party
to be served. At the date of execution of this Lease, the addresses of
Landlord and Tenant are as set forth in Paragraph 1. After the Commencement
Date, the address of tenant shall be the address of the Premises. Either party
may change its address by giving notice of same in accordance with this
Paragraph.
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29. ATTORNEYS' FEES. If either party brings any action or legal proceeding
for damages for an alleged breach of any provision of this Lease, to recover
Rent or other sums due, to terminate this Lease or to enforce, protect or
establish any term, condition or covenant of this Lease or the right of either
party hereunder or at law, the prevailing party shall be entitled to recover as
a part of such action or proceedings, or in a separate action brought for that
purpose, actual attorneys' fees and costs.
30. ESTOPPEL CERTIFICATE. Tenant shall within ten (10) days following
written request by Landlord:
(a) TENANT OBLIGATIONS. Execute and deliver to Landlord any documents,
including estoppel certificates, in a form prepared by Landlord (i) certifying
that this Lease is unmodified and in full force and effect or, if modified,
stating the nature of such modification and certifying that this Lease, as so
modified, is in full force and effect and the date to which the Rent and other
charges are paid in advance, if any; (ii) acknowledging that there are not, to
Tenant's knowledge, any uncured defaults on the part of the Landlord or stating
the nature of any uncured defaults; (iii) evidencing the status of the Lease as
may be required by a lender making a loan to Landlord to be secured by deed of
trust or mortgage covering the Premises or a purchaser of the Premises from
Landlord; (iv) certifying the current Monthly Rent amount and the amount and
form of Security Deposit on deposit with Landlord; and (v) certifying to such
other information as Landlord, Landlord's Agents, mortgagees, prospective
mortgagees and purchasers may reasonably request.
Tenant's failure to deliver an estoppel certificate within ten (10) days
after delivery of Landlord's written request therefor shall be conclusive upon
Tenant (i) that this Lease is in full force and effect, without modification
except as may be represented by Landlord; (ii) that there are now no uncured
defaults in Landlord's performance; (iii) that not more than one (1) month's
Monthly Rent has been paid in advance; and (iv) that the other information
requested by Landlord is correct as stated in the form presented by Landlord.
Tenant hereby irrevocably appoints Landlord as Tenant's attorney-
in-fact, which appointment is coupled with an interest, to act in Tenant's name,
place and stead to execute such estoppel certificate on Tenant's behalf.
(b) FINANCIAL INFORMATION. Deliver to Landlord the current financial
statements of Tenant, and financial statements of the two (2) years prior to the
current financial statement's year, certified to be true, accurate and completed
by the chief financial officer of Tenant, including a balance sheet and profit
and loss statement for the most recent prior year, which statements shall be
prepared on an accrual basis and accurately and completely reflect the financial
condition of Tenant. Landlord agrees that it will keep such financial statements
confidential and will use its best efforts to request confidentiality of
Tenant's financial statements when delivered to any proposed purchaser of the
Premises, the Project or any portion thereof and to the mortgagees or
beneficiaries of Landlord or such purchaser.
31. TRANSFER OF THE PREMISES BY LANDLORD. Upon any conveyance of the
Premises and assignment by Landlord of this Lease, Landlord shall be and is
hereby entirely released from all liability under any and all of its covenants
and obligations contained in or derived from this Lease occurring after the date
of such conveyance and assignment, and Tenant agrees to attorn to any entity
purchasing or otherwise acquiring the Premises.
32. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS. If Tenant shall at any
time fail to make any payment or perform any other act on its part to be made or
performed under this Lease, Landlord may, but shall not be obligated to and
without waiving or releasing Tenant from any obligation of Tenant under this
Lease, make such payment or perform such other act to the extent Landlord may
deem desirable, and in connection therewith, pay expenses and employ counsel.
All sums so paid by Landlord and all penalties, interest and costs in connection
therewith shall be due and payable by Tenant to Landlord on the next day after
such payment by Landlord, plus collection costs and attorneys' fees. Landlord
shall have the same rights and remedies for the nonpayment thereof as in the
case of default in the payment of Rent.
33. TENANT'S REMEDY. The obligations of Landlord do not constitute the
personal obligation of the individual partners, trustees, directors, officers or
shareholders of Landlord or its constituent partners. If Landlord shall fail to
perform any covenant, term, or condition of this Lease upon Landlord's part to
be performed, Tenant shall be required to deliver to Landlord written notice of
the same. if, as a consequence of such default, Tenant shall recover a money
judgment against Landlord, such judgment shall be satisfied only out of the
proceeds of sale received upon execution of such judgment and levied thereon
against the right, title and interest of Landlord in the Premises and out of
Rent or other income from such property receivable by Landlord or out of
consideration received by Landlord from the sale or other disposition of all or
any part of Landlord's right, title or interest in the Premises, and no action
for any deficiency may be sought or obtained by Tenant.
34. MORTGAGEE PROTECTION. Upon any default on the part of Landlord, Tenant
will give notice by registered or certified mail to any beneficiary of a deed of
trust or mortgagee of a mortgage covering the Premises who has provided Tenant
with notice of their interest together with an address for receiving notice, and
shall offer such beneficiary or mortgagee a reasonable opportunity to cure the
default (which, in no event shall be less than ninety (90) days), including time
to obtain possession of the Premises by power of sale or a judicial foreclosure,
if such should prove necessary, to effect a cure. Tenant agrees that each lender
to whom this Lease has been assigned by Landlord is an express third party
beneficiary hereof. Tenant shall not make any prepayment of Monthly Rent more
than one (1) month in advance without the prior written consent of each such
lender. Tenant waives the collection of any deposit from such lender(s) or any
purchaser at a foreclosure sale of such lender(s)' deed of trust unless the
lender(s) or such purchaser shall have actually received and not refunded the
deposit. Tenant agrees to make all payments under the Lease to the lender with
the most senior encumbrance upon receiving direction, in writing, to pay said
amounts to such lender. Tenant shall comply with such written direction to pay
without determining whether an event of default exists under such lender's loan
to Landlord.
35. BROKERS. Landlord and Tenant each warrant and represent to the other
that neither has had any dealings with any real estate broker, agent or finder
in connection with the negotiation of this Lease or the introduction of the
parties to this transaction, except for the brokers identified in Paragraph (o)
of the Lease Summary, and that it knows of no other real estate broker, agent or
finder who is or might be entitled to a commission or fee in connection with
this Lease. In the event of any such additional claims for brokers' or finders'
fees with respect to this Lease, then Tenant shall indemnify, save harmless and
defend Landlord from and against such claims if they shall be based upon any
statement or representation or agreement by Tenant, and Landlord shall
indemnify, save harmless and defend Tenant if such claims shall be based upon
any statement, representation or agreement made by Landlord.
36. EXAMINATION OF LEASE. Submission of this Lease for examination or
signature by Tenant does not create a reservation of or option to Lease. This
Lease shall only become effective and binding upon full execution hereof by both
Landlord and Tenant.
37. RECORDING. Tenant shall not record this Lease nor a short form
memorandum thereof without Landlord's prior written consent.
38. QUITCLAIM. Upon any termination of this Lease, Tenant shall, at
Landlord's request, execute, have acknowledged and deliver to Landlord a
quitclaim deed of the Premises.
39. MODIFICATIONS FOR LENDER. If in connection with obtaining financing for
the Premises or any portion thereof, Landlord's lender shall request reasonable
modification to this Lease as a condition to such financing. Tenant shall not
unreasonably withhold, delay or defer its consent thereto, provided such
modifications do not materially adversely affect Tenant's rights hereunder.
40. PARKING AND USE OF COMMON AREAS AND FACILITIES.
(a) GRANT OF NONEXCLUSIVE COMMON AREA LICENSE AND RIGHT. Landlord hereby
grants to Tenant and its successors and assigns, a nonexclusive license and
right for Tenant and its permitted subtenants, in common with Landlord and all
persons, firms and corporations conducting business in the Project and their
respective customers, guests, licensees, invitees, subtenants, employees and
agents, to use the Common Area within the Project for vehicular parking, for
pedestrian and vehicular ingress, egress, egress and travel, and for such other
purposes and for doing such other things as may be provided for, authorized
and/or permitted by the CC&R's and the REA, such nonexclusive license and right
to be appurtenant to Tenant's leasehold estate in and to the leased Premises
created by this Lease. The nonexclusive license and right granted pursuant to
the provisions of this Paragraph shall be subject to the CC&R's and the REA,
which pertain in any way to the Common Area covered by such encumbrances, and
the provisions of this Lease.
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<PAGE> 15
(b) USE OF COMMON AREA. Notwithstanding anything to the contrary herein,
Tenant agrees for itself and for its successors, assigns, employees and agents
that it and they shall use the Common Area within the Project only for the
purposes permitted hereby and by the CC&R's and the REA. It is understood that
all uses permitted within the Common Area shall be undertaken with reason and
judgment so as not to interfere with the primary use of said Common Area which
is to provide parking and vehicular and pedestrian access throughout the Common
Area within the Project and to adjacent public streets for the Landlord, its
tenants, subtenants and all persons, firms and corporations conducting business
within the Project and their respective customers, guests, and licensees. In no
event shall Tenant erect or cause to be erected any structure, building,
trailer, fence, wall, signs or other obstructions on the Common Area within the
Project except as otherwise permitted herein or by the CC&R's or by the REA, nor
shall Tenant store or sell any merchandise, equipment and/or materials on the
Common Area within the Project.
(c) CONTROL AND MAINTENANCE OF COMMON AREA.
(i) Subject to provisions of the CC&R's and the REA, it is
understood and agreed that all Common Area within the Project and all
improvements located from time to time within such Common Area are for the
general use, in common, of the Landlord and its tenants and subtenants and all
persons, firms and corporations conducting business in the Project and their
respective customers, guests, licensees, invitees, employees and agents, and
shall at all times be subject to the exclusive control and management of the
Landlord.
(ii) Landlord shall have the right to construct, maintain and
operate lighting facilities within the Common Area; to police the Common Area
from time to time; to change the area, level, location and arrangement of the
parking areas and other improvements within the Common Area; to restrict
parking by tenants, their officers, agents and employees to employee parking
areas; to enforce parking charges (by operation of meters or otherwise); to
close all or any portion of the Common Area or improvements therein to such
extent as may, in the opinion of counsel for Landlord, be legally sufficient to
prevent a dedication thereof or the accrual of any rights to any person or to
the public therein; to close temporarily all or any portion of the Common Area
and/or the improvements thereon; to discourage noncustomer parking; and to do
and perform such other acts in and to said Common Area and improvements thereon
as, in the use of good business judgment, Landlord shall determine to be
advisable. (See Rider No. 3)
(iii) Subject to the provisions of the CC&R's and the REA,
Landlord shall operate and maintain or cause to be operated and maintained, the
Common Area within the Project in such a manner as Landlord in its sole
discretion shall reasonably determine from time to time. Without limiting the
scope of such discretion, Landlord shall have the full right and authority to
employ or cause to be employed all personnel and to make or cause to be made
all rules and regulations pertaining to or necessary for the proper operation
and maintenance of the Common Area and the improvements located thereon.
(iv) It is hereby further agreed that the use of the Common
Area by Tenant, its permitted subtenants, if any, and their respective
customers, guests, licensees, invitees, employees and agents may and shall be
restricted such that no part of the Common Area may be used for the storage of
any items, including without limitation, vehicles, materials, inventory and/or
equipment. All trash and other refuse shall be placed in designated
receptacles. There shall be no continued overnight parking of any vehicles of
any kind, and vehicles which have been abandoned or parked in violation of the
terms hereof may be towed away at the owner's expense. No work of any kind,
including, without limitation, painting, drying, cleaning, repairing,
manufacturing, assembling, cutting, merchandising and/or displaying shall be
permitted. Parking within the Common Area shall be limited to striped parking
stalls, and no parking shall be permitted in any driveways, accessways and/or
in any area which would prohibit or impede the free flow of traffic within the
Common Area.
(v) Any use of the Common Area in violation of the restrictions
set forth hereinabove shall constitute a material default under this Lease.
(d) REVOCATION OF LICENSE. All Common Area and improvements located
therein which Tenant is permitted to use and occupy pursuant to the provisions
of this Lease are to be used and occupied under a revocable license and right,
and if any such license be revoked, or if the amount of such areas be
diminished, Landlord shall not be subject to any liability nor shall Tenant be
entitled to compensation or diminution or abatement of rent, nor shall such
revocation or diminution of such areas be deemed constructive or actual
eviction. It is understood and agreed that the condemnation or other taking or
appropriation by any public or quasi-public authority, or sale in lieu of
condemnation, of all or any portion of the Common Area within the Project,
shall not constitute a violation of Landlord's agreements hereunder, nor shall
Tenant be entitled to participate in or make any claim for any award or other
condemnation proceeds arising from any such taking or appropriation of the
Common Area.
(e) LANDLORD'S RESERVED RIGHTS. Provided Landlord does not unreasonably
interfere with Tenant's use of the Premises, Landlord reserves the right to
install, use, maintain, repair, relocate and replace pipes, ducts, conduits,
wires and appurtenant meters and equipment included in the Premises or outside
the Premises; change the boundary lines of the Project and install, use,
maintain, repair, alter or relocate, expand and replace any Common Area. Such
right of Landlord shall include, without limitation, designating from time to
time certain portion of the Common Area as exclusively for the benefit of
certain tenants in the Project.
41. GENERAL.
(a) CAPTIONS. The captions and headings used in this Lease are for the
purpose of convenience only and shall not be construed to limit or extend the
meaning of any part of this Lease.
(b) EXECUTED COPY. Any fully executed copy of this Lease shall be
deemed an original for all purposes.
(c) TIME. Time is of the essence for the performance of each term,
condition and covenant of this Lease.
(d) SEVERABILITY. If any one (1) or more of the provisions contained
herein shall for any reason be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality, or unenforceability shall not affect
any other provision of this Lease, but this Lease shall be construed as if such
invalid, illegal or unenforceable provision had not been contained herein.
(e) CHOICE OF LAW. This Lease shall be construed and enforced in
accordance with the laws of the State of California. The language in all parts
of this Lease shall in all cases be construed as a whole according to its fair
meaning and not strictly for or against either Landlord or Tenant.
(f) GENDER; SINGULAR, PLURAL. When the context of this Lease requires,
the neuter gender includes the masculine, the feminine, a partnership or
corporation or joint venture, and the singular includes the plural.
(g) BINDING EFFECT. The covenants and agreements contained in this
Lease shall be binding on the parties hereto and on their respective successors
and assigns to the extent this Lease is assignable.
(h) WAIVER. The waiver by Landlord of any breach of any term, condition
or covenant, of this Lease shall not be deemed to be a waiver of such provision
or any subsequent breach of the same or any other term, condition or covenant of
this Lease. The subsequent acceptance of Rent hereunder by Landlord shall not be
deemed to be a waiver of any preceding breach at the time of acceptance of such
payment. No covenant, term or condition of this Lease shall be deemed to have
been waived by Landlord unless such waiver is in writing signed by Landlord.
(i) ENTIRE AGREEMENT. This Lease is the entire agreement between the
parties, and supersedes and prior agreements, representations, negotiations or
correspondence between the parties except as expressed herein. Except as
otherwise provided herein no subsequent charge or addition to this Lease shall
be binding unless in writing and signed by the parties hereto.
(j) AUTHORITY. If Tenant is a corporation or a partnership, each
individual executing this Lease on behalf of said corporation or partnership,
as the case may be, represents and warrants that he is duly authorized to
execute and deliver this Lease on behalf of said entity in accordance with its
corporate bylaws, statement of partnership or certificate of limited
partnership, as the case may be, and that this Lease is binding upon said
entity in accordance with its terms. Landlord, at its option, may require a
copy of such written authorization to enter into this Lease. The failure of
Tenant to deliver the same to Landlord within seven (7) days of Landlord's
request therefor shall be deemed a default under this Lease.
(k) EXHIBITS. All exhibits, amendments riders and addenda attached
hereto are hereby incorporated herein and made a part hereof.
(l) LEASE SUMMARY. The Lease Summary at the beginning of this Lease is
intended to provide general information only. In the event of any inconsistency
between the Lease Summary and the specific provisions of this Lease, the
specific provisions of this Lease shall prevail.
- ----------------------
* "continued" means: not more than four (4) nights in a row without
interruption.
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<PAGE> 16
(m) Approved Truck Route. Tenant understands and agrees to comply with
certain restrictions imposed by the Orange County Board of Supervisors on
vehicles with gross vehicle weight equal to or greater than seven (7) tons
whereby trucks entering and leaving the Premises from the Lake Forest
Interchange of the San Diego Freeway shall utilize only the following truck
route: Lake Forest to Rockfield to Bake Parkway to Muirlands to Alton to Toledo
to Parker. Tenant also agrees to cause its employees and use best efforts to
cause agents to comply with this restriction and to advise its contractors,
vendors and customers of this restriction.
THIS LEASE is effective as of the date the last signatory necessary to
execute the Lease shall have executed this Lease.
"LANDLORD" THE IRVINE COMPANY
--------------------------------------------
a Michigan corporation
--------------------------------------------
--------------------------------------------
By /s/ RICHARD G. SIM
--------------------------------------
Richard G. Sim
Its Vice President
--------------------------------------
By /s/ ROBERT E. WILLAMS, JR.
--------------------------------------
Robert E. Williams, Jr.
Its Assistant Secretary
--------------------------------------
"TENANT" KOFAX IMAGE PRODUCTS, INC.
--------------------------------------------
a California corporation
--------------------------------------------
--------------------------------------------
By /s/ DAVID SILVER 5/10/88
--------------------------------------
David Silver
Its President
--------------------------------------
By /s/ DEAN A. HOUGH 5/10/88
--------------------------------------
Dean A. Hough
Its Secretary
--------------------------------------
(n) Consents and Approvals. In the event any term or provision of this Lease
requires the consent, approval or determination by either party hereto,
unless otherwise specifically provided within specific provisions of this
Lease, such consent approval shall not be unreasonably withheld and such
determination shall be reasonably made,
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<PAGE> 17
EXHIBIT A
DESCRIPTION OF PREMISES
This Exhibit is hereby attached to and made a part of the Lease dated:
March 31, 1988 by and between THE IRVINE COMPANY, a Michigan corporation, as
Landlord and KoFAX IMAGE PRODUCTS, INC., a California corporation, as Tenant for
the Premises known as 3 Jenner Street, Suite 100, Irvine, California.
[DIAGRAM]
13
<PAGE> 18
EXHIBIT B
DESCRIPTION OF PROJECT
This Exhibit is hereby attached to and made a part of the Lease dated:
March 31, 1988, by and between THE IRVINE COMPANY, a Michigan corporation, as
Landlord and KoFAX IMAGE PRODUCTS, INC., a California corporation, as Tenant for
the Premises known as 3 Jenner Street, Suite 100, Irvine, California.
[DIAGRAM]
14
<PAGE> 19
EXHIBIT C
TENANT IMPROVEMENTS PRELIMINARY PLANS
This Exhibit is hereby attached to and made a part of the Lease dated:
March 31, 1988, by and between THE IRVINE COMPANY, a Michigan corporation, as
Landlord and KoFAX IMAGE PRODUCTS, INC., a California corporation, as Tenant for
the Premises known as 3 Jenner Street, Suite 100, Irvine, California.
[DIAGRAM]
15
<PAGE> 20
EXHIBIT D
COMMENCEMENT DATE MEMORANDUM
To.:______________________________________________ Date: _____________________
RE: Lease dated March 31, 1988, by and between THE IRVINE COMPANY, a
Michigan corporation, as Landlord and KoFAX IMAGE PRODUCTS, INC., a
California corporation, as Tenant concerning Premises located at 3 Jenner
Street, Suite 100, Irvine California.
Gentlemen:
In accordance with the subject Lease, the undersigned hereby agree:
1. That the Improvements to the Premises have been substantially completed
in accordance with the subject Lease, subject to the punch list items
agreed to by the parties pursuant to the terms and provisions of the
Lease.
2. Under the provisions of the subject Lease, the Commencement Date of
said Lease is ________________________________________________________.
3. That in accordance with the subject Lease, Monthly Rent commences to
accrue on ____________________________________________________________.
4. Rent in the amount of ________________________________________________
Dollars ($___________), subject to adjustment in accordance with the
terms of the subject Lease, is due and payable in advance on the first
day of each and every month during the Term of said Lease. Rent checks
should be made payable to _____________________________________________
at ___________________________________________________________________.
LANDLORD: THE IRVINE COMPANY
a Michigan corporation
By:
--------------------------------------
Richard G. Sim
Its Vice President
--------------------------------------
By:
--------------------------------------
Robert E. Williams, Jr.
Its Assistant Secretary
--------------------------------------
TENANT: KoFAX IMAGE PRODUCTS, INC.
a California corporation
By:
--------------------------------------
David Silver
Its President
--------------------------------------
By:
--------------------------------------
Dean A. Hough
Its Secretary
--------------------------------------
16
<PAGE> 21
EXHIBIT E
RENT ADJUSTMENTS
This Exhibit is hereby attached to and made a part of the Lease dated:
March 31, 1988, by and between THE IRVINE COMPANY, a Michigan corporation, as
Landlord and KoFAX IMAGE PRODUCTS, INC., a California corporation, as Tenant for
the Premises known as 3 Jenner Street, Suite 100, Irvine, California.
<TABLE>
<CAPTION>
YEAR MONTHS FROM COMMENCEMENT DATE MONTHLY RENTAL RATE
---- ----------------------------- -------------------
<S> <C> <C>
1 Month 1 through 12 $20,431 per month
2 Months 13 through 24 $20,431 per month
3 Months 25 through 36 $22,002 per month
4 Months 37 and 38 $22,002 per month
</TABLE>
(See Rider No. 1)
17
<PAGE> 22
EXHIBIT G
RULES AND REGULATIONS
This Exhibit is hereby attached to and made a part of the Lease dated:
March 31, 1988, by and between THE IRVINE COMPANY, a Michigan corporation, as
Landlord and KoFAX IMAGE PRODUCTS, INC., a California corporation, as Tenant for
the Premises known as 3 Jenner Street, Suite 100, Irvine, California.
1. No sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors, or halls shall be obstructed or encumbered by Tenant or
used for any purpose other than ingress and egress to and from Demised Premises
of the Building and if Demised Premises is situated on the ground floor of the
Building, Tenant shall further, at Tenant's own expense, keep the sidewalks and
curb directly in front of Demised Premises clean and free from rubbish.
2. No awning or other projection shall be attached to the outside walls
or windows of the Building without the prior written consent of Landlord. No
curtains, blinds, shades, drapes, or screens shall be attached to or hung in, or
used in connection with any window or door of Demised Premises, without the
prior written consent of Landlord. Such awnings, projections, curtains, blinds,
shades, drapes, screens, and other fixtures must be of a quality, type, design,
color, material, and general appearance approved by Landlord, and shall be
attached in the manner approved by Landlord. All electrical fixtures hung in
offices or spaces along the perimeter of Demised Premises must be fluorescent,
of a quality, type, design, bulb color, size, and general appearance approved by
Landlord.
3. No sign, advertisement, notice, or other lettering shall be
exhibited, inscribed, painted, or affixed by Tenant on any part of the outside
or inside of Demised Premises or of the Building without the prior written
consent of Landlord. In the event of the violation of the foregoing by Tenant,
Landlord may remove same without any liability, and may charge the expense
incurred by such removal to Tenant. Interior signs on doors and directory
tablet shall be inscribed, painted, or affixed for Tenant by Landlord at the
expense of Tenant, and shall be of a quality, quantity, type, design, color,
size, style, composition, material, location, and general appearance acceptable
to Landlord.
4. The sashes, sash doors, skylights, windows, and doors that reflect or
admit light or air into the halls, passageways, or other public places in the
Building shall not be covered or obstructed by Tenant, nor shall any bottles,
parcels, or other articles be placed on the window sills, or in the public
portions of the Building.
5. No showcases or other articles shall be put in front of or affixed to
any part of the exterior of the Building, nor placed in public portions thereof
without the prior written consent of Landlord.
6. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures shall be borne by Tenant to
the extent that Tenant or Tenant's agents, servants, employees, contractors,
visitors, or licensees shall have caused the same.
7. Tenant shall not mark, paint, drill into, or in any way deface any
part of Demised Premises or the Building. No boring, cutting, or stringing of
wires shall be permitted, except with the prior written consent of Landlord, and
as Landlord may direct.
8. No animal or bird of any kind shall be brought into or kept in or
about Demised Premises or the Building.
19
<PAGE> 23
9. Tenant shall not make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with occupants of the Building or
neighboring buildings or premises or those having business with them. Tenant
shall not throw anything out of the doors, windows, or skylights or down the
passageways.
10. Neither Tenant nor any of Tenant's agents, servants, employees,
contractors, visitors, or licensees shall at any time bring or keep upon Demised
Premises any flammable, combustible, or explosive fluid, chemical, or substance.
11. No additional locks, bolts, or mail slots of any kind shall be
placed upon any of the doors or windows by Tenant, nor shall any change be made
in existing locks or the mechanism, thereof. Tenant must, upon the termination
of the tenancy, restore to Landlord all keys of stores, offices, and toilet
rooms, either furnished to, or otherwise procured by Tenant, and in the event of
the loss of any keys so furnished, Tenant shall pay to Landlord the cost
thereof.
12. All removals, or the carrying in or out of any safes, freights,
furniture, fixtures, bulky matter, or heavy equipment of any description must
take place during the hours which Landlord or its agent may determine from time
to time. Landlord reserves the right to prescribe the weight and position of all
safes, which must be placed upon two-inch thick plank strips to distribute the
weight. The moving of safes, freight, furniture, fixtures, bulky matter, or
heavy equipment of any kind must be made upon previous notice to the
Superintendent of the Building and in a manner and at times prescribed by him,
and the persons employed by Tenant for such work are subject to Landlord's prior
approval. Landlord reserves the right to inspect all safes, freight, or other
bulky articles to be brought into the Building and to exclude from the Building
all safes, freight, or other bulky articles which violate any of these Rules and
Regulations or the Lease of which these Rules and Regulations are a part.
13. Tenant shall not occupy or permit any portion of Demised Premises to
be occupied as an office that is not generally consistent with the character and
nature of an ordinary desk-type office. Nor shall Tenant permit any portion of
the Demised Premises to be used (a) for an employment agency, a public
stenographer or typist, a labor union office, a physician's or dentist's office,
a dance or music studio, a school, a beauty salon or barber shop, the business
of photographic or multilith reproductions or offset printing (not precluding
using any part of Demised Premises for photographic, multilith, or multigraph
reproductions solely in connection with Tenant's own business and/or
activities), a restaurant or bar, an establishment for the sale of confectionery
or soda or beverages or sandwiches or ice cream or baked goods, an establishment
for the preparation or dispensing or consumption of food or beverages (of any
kind) in any manner whatsoever, or as a news or cigar stand, or as a radio or
television or recording studio, theatre, or exhibition hall, for manufacturing,
for the storage of merchandise, or for the sale of merchandise, goods, or
property of any kind at auction, or for lodging, sleeping, or for any immoral
purpose, or for any business which would tend to generate a large amount of foot
traffic in or about the Building or the land upon which it is located, or any of
the areas used in the operation of the Building, including but not limited to
any use (i) for a banking, trust company, depository, guarantee, or safe deposit
business, (ii) as a savings bank, or a savings and loan association, or as a
loan company, (iii) for the sale of travelers checks, money orders, drafts,
foreign exchange, or letters of credit or for the receipt of money for
transmission, (iv) as a stock broker's or dealer's office or for the
underwriting of securities, or (v) a government office or foreign embassy or
consulate, or (vi) tourist or travel bureau, or (b) a use which conflicts with
any so-called "exclusive" then in favor of, or is for any use the same as that
stated in any percentage lease to, another tenant of the Building or the Park,
or (c) a use which would be prohibited by any other portion of this Lease
(including but not limited to any Rules and Regulations then in effect) or in
violation of law. Tenant shall not engage or pay any employees on Demised
Premises, except those actually working for Tenant on Demised Premises nor shall
Tenant advertise for laborers giving any address at Demised Premises.
14. Landlord shall have the right to prohibit any advertising or
business conducted by Tenant referring to the Building or the Park which, in
Landlord's opinion, tends to impair the reputation of the Building or its
desirability as a first-class building for offices, or the Park, and upon notice
from Landlord, Tenant shall refrain from or discontinue such advertising.
20
<PAGE> 24
15. Tenant's contractors shall, while in the Building or elsewhere in
the Park, be subject to and under the control and direction of the
Superintendent of the Building (but not as agent or servant of said
Superintendent or of Landlord).
16. If Demised Premises is or becomes infested with vermin as a result
of the use or any misuse or neglect of Demised Premises by Tenant, its agents,
servants, employees, contractors, visitors, or licensees, Tenant shall forthwith
at Tenant's expense cause the same to be exterminated from time to time to the
satisfaction of Landlord and shall employ such licensed exterminators as shall
be approved in writing in advance by Landlord,
17. The requirements of Tenant shall be attended to only upon
application at the office of the Building. Building personnel shall not perform
any work or do anything outside of their regular duties, unless under special
instructions from the office of the Landlord.
18. Canvassing, soliciting, and peddling in the Building or in the Park
are prohibited and Tenant shall cooperate to prevent the same.
19. No water cooler, air conditioning unit or system, or other apparatus
shall be installed or used by Tenant without the written consent of Landlord.
20. Tenant, Tenant's agents, servants, employees, contractors,
licensees, or visitors shall not park any vehicles in any driveways, service
entrances, or areas posted "No Parking."
21. Tenant shall install and maintain, at Tenant's sole cost and
expense, an adequate visibly marked (at all times properly operational) fire
extinguisher next to any duplicating or photocopying machine or similar heat
producing equipment, which may or many not contain combustible material, in
Demised Premises.
22. Tenant shall not use the name of the Building for any purpose other
than as the address of the business to be conducted by Tenant in Demised
Premises, nor shall Tenant use any picture of the Building in its advertising,
stationery, or in any other manner without the prior written permission of
Landlord. Landlord expressly reserves the right at any time to change said name
without in any manner being liable to Tenant therefor.
21
<PAGE> 25
RIDER NO. 1
RENT WAIVER AGREEMENT
Reference is made to that certain Lease, dated March 31, 19889 by and between
THE IRVINE COMPANY, a Michigan corporation, as Landlord and KoFAX IMAGE
PRODUCTS, INC., a California corporation, as Tenant for 3 Jenner Street, Suite
100, Irvine, California,
Notwithstanding the Rent provision of the Lease, Landlord waives the Monthly
Rent for 15,544 square feet of the designated Premises in Exhibit A for a period
of four (4) consecutive months beginning thirty (30) days after the Lease
Commencement Date. However, Additional Rent, including but not limited to any
amortized tenant improvement costs, Tenant's prorata share of Operating
Expenses, and Real Property Taxes, will not be abated.
Notwithstanding the Rent provision of-the Lease, Landlord waives the Monthly
Rent and the Tenant's prorata share of Operating Expenses, and Real Property
Taxes for 4,091 square feet of the designated Premises in Exhibit A for a period
of twelve (12) consecutive months beginning on the Lease Commencement Date.
However, Additional Rent, including but not limited to any amortized Tenant
improvement costs, will not be abated.
Provided, however, that the Monthly Rent payable during the period set forth
above ("Rent Waiver Period") shall be payable if any event of default under the
Lease occurs at any time during the Term of the Lease, in which event on the
occurrence of such event of default, all such Monthly Rent for the Rent Waiver
Period shall become immediately due and payable by Tenant to Landlord, unless
such default is cured.
Tenant and Landlord agree that all terms and conditions of the above-referenced
Lease shall be in full force and effect (except the obligation to pay Monthly
Rent) during the Term of the Lease,
22
<PAGE> 26
RIDER NO. 2
PROSPECTIVE RECIPROCAL EASEMENT, ACCESS, AND MAINTENANCE AGREEMENT
This Rider is hereby attached to and made a part of the Lease dated:
March 31, by and between THE IRVINE COMPANY, a Michigan corporation, as Landlord
and KoFAX IMAGE PRODUCTS, INC., a California corporation, as Tenant for the
Premises known as 3 Jenner Street, Suite 100, Irvine, California.
Tenant understands that the Building in which the Premises are located is a part
of the multi-building Project ("Project") which covers the area shown on Exhibit
B attached to this Lease and which has not yet been fully developed, It is
anticipated that a Reciprocal Easement, Access, and Maintenance Agreement or
like instrument ("REA") may be recorded against all of the Project or a portion
of the Project which includes the Building In which the Premises are located for
the mutual benefit of all owners of property within the Project encumbered by
the REA and their tenants, imposing certain restrictions, covenants, easements,
and obligations upon the Premises, Landlord, and Tenant in order to obtain such
benefit. Such REA may or may not be established in connection with a possible
subdivision of Lot 18 of the Project into three (3) separate legal parcels, The
REA will likely contain, without limitation, the following:
(1) reciprocal easements for vehicular and pedestrian access and
circulation over certain portions of the Project designed for reciprocal
access and circulation;
(2) covenants for the maintenance and repair (or reimbursement
for the costs thereof if done by an "Operator" designated in the REA) of
the exterior of all buildings, landscaping, and parking areas;
(3) assessment provisions for the reimbursement of costs
incurred by an "Operator" designated in the REA and who is authorized to
enforce the REA and/or perform certain maintenance and repair functions
specified therein. Such assessments will be allocated by either a
separate charge attributable directly to work or services provided for
the Premises, or on an in-common basis for the whole Project, in which
event Tenant shall only be responsible for Tenant's Percentage of such
assessment.
Tenant agrees to this Lease and Tenant's occupancy of the Premises hereunder
shall, upon the recordation of the REA in the Official Records of Orange County,
be subject to the REA and Tenant agrees to abide thereby. Landlord shall deliver
a copy of the REA to Tenant concurrently with or promptly following its
recordation. To the extent the obligations imposed by, or services provided by
the Operator under, the REA are the same obligations imposed upon Landlord under
the Lease, they shall be performed by Landlord or the Operator under the REA and
the cost thereof shall be paid by Tenant to the Operator as provided in the REA
or to Landlord as Additional Rent in accordance with the provisions of Paragraph
5(c) of the Lease; to the extent such obligations are the same obligations
imposed upon Tenant under the Lease, such obligations shall be performed by
Tenant at Tenant's cost.
23
<PAGE> 27
RIDER NO. 3
PARKING
This Rider is hereby attached to and made a part of the Lease dated: March 31,
1988, by and between THE IRVINE COMPANY, a Michigan corporation, as Landlord and
KoFAX IMAGE PRODUCTS, INC., a California corporation, as Tenant for the Premises
known as 3 Jenner Street, Suite 100, Irvine, California.
During the Term of this Lease, Tenant shall have the right to use four (4)
parking spaces per 1,000 square feet of the "Premises". Such parking rights
shall be subject to the provisions of Paragraph 40 of the Lease, shall be at no
additional charge to Tenant (subject to Tenant's obligations under Paragraph 16
of the Lease), and shall be on a non-exclusive basis in common with other
tenants of the Project.
24
<PAGE> 28
RIDER NO. 4
SIGNAGE
This Rider is hereby attached to and made a part of the Lease dated: March 31,
1988, by and between THE IRVINE COMPANY, a Michigan corporation, as Landlord and
KoFAX IMAGE PRODUCTS, INC., a California corporation, as Tenant for the Premises
known as 3 Jenner Street, Suite 100, Irvine, California,
Landlord grants Tenant, subject to Landlord's Signage Program developed for the
Project, the exclusive right, at Tenant's sole cost and expense to erect one (1)
"Major Tenant Identification Sign" setting forth its trademark or the name under
which it conducts business; provided that Tenant shall submit to Landlord for
its approval, which approval shall not be unreasonably withheld, conditioned or
delayed, detailed plans and specifications for the sign Tenant proposes to erect
showing the size, exact location, color and materials of such sign. The cost of
planning, engineering, construction, maintenance and removal of any such sign
shall be the sole and exclusive obligation of Tenant. In the construction and
maintenance of such sign, Tenant shall comply with all applicable governmental
laws, rules, regulations, ordinances, orders and requirements and any private
covenants, conditions and restrictions affecting the Building or the Demised
Premises of which Landlord has provided notice to Tenant. The sign rights herein
granted to Tenant are personal and may not be assigned, sublet, transferred,
conveyed or otherwise alienated in any fashion, without Landlord's prior written
consent, which consent shall not be unreasonably withheld, conditioned or
delayed. Upon expiration or earlier termination of this Lease or any assignment
or subletting by Tenant of all or substantially all of the Premises, Tenant at
its sole cost and expense shall remove any such sign and repair any damage to
the Building caused by such removal,
25
<PAGE> 29
RIDER NO. 5
Phased Use of Premises
This Rider is hereby attached to and made a part of the Lease dated:
March 31, 1988 by and between THE IRVINE COMPANY, a Michigan corporation, as
Landlord and KoFAX IMAGE PRODUCTS, INC., a California corporation, as Tenant for
the Premises known as 3 Jenner Street, Suite 100, Irvine, California
Notwithstanding any other provision contained in the Lease, Tenant shall
take possession of the Premises in two (2) phases, the first phase ("Phase I
Premises") to consist of 15,544 square feet of the Premises as shown on Exhibit
"A" to the Lease, with possession to commence in accordance with Paragraph 4 of
the Lease, and the second phase ("Phase II Premises") to consist of the
remaining 4,091 square feet of the Premises. Tenant anticipates taking
possession of the Phase II Premises on or about July 1, 1989, however, the
Tenant's Lease payment obligations with respect to the Phase II Premises shall
commence ("Phase II Commencement") upon the earlier of (i) the date Tenant
commences occupancy of the Phase II Premises (if Tenant takes occupancy prior to
July 1, 1989), or (ii) the date upon which the Tenant Improvements for the Phase
II Premises are completed, as evidenced by the first to occur of City approval
of said Tenant Improvements or the certification of substantial completion of
the Tenant improvements by Landlord's architect supervising construction of said
Tenant Improvements (if later than July 1, 1989). Notwithstanding the third
paragraph of the Rent Waiver Agreement set forth in Rider No. 1 of the Lease,
Tenant shall begin paying Monthly Rent and Tenant's pro rata share of Operating
Expenses and Real Property Taxes for the Phase II Premises upon the Phase II
Commencement.
Tenant's phased use of the Premises shall in no event (a) extend the
Term of the Lease beyond what is set forth in Paragraph 4(a) of the Lease, or
(b) limit or diminish any of the Tenant's other duties, obligations or
responsibilities under the Lease except as specifically set forth in this Rider
No. 5.
26
<PAGE> 30
Schedule III
Quality of Construction Material Letter
(The following is intended as an example only)
REFERENCE: Building(s) 2,3,4 & 5 Jenner and 8 & 10 Pasteur Industrial
DESCRIPTION OF ITEMS
The following listed items represent the quality of materials to be provided in
the Preliminary Cost Estimate provided by Landlord for the Tenant Improvements.
The Preliminary Cost Estimate will also include an allowance for building permit
and space planning costs.
1. DEMISING PARTITION
3-5/8", 25 gauge steel studs at 24" O.C. with 5/8" type "x"
gypsum board each side. Installed from slab to structure above,
R-11 batt installation in wall cavity.
2. INTERIOR PARTITION
2-1/2" 25 gauge steel studs at 24" O.C. with 5/8" type "x"
gypsum board each side installed from slab to underside of
ceiling grid with seismic bracing per City of Irvine Building
Code.
3. DOORS AND FRAMES
Solid core doors 3' - 0" x 8' - 0" high, Mendocino Oak.
4. ACOUSTICAL CEILING
2' x 4' white enameled steel grid, 800 series by Chicago
Metallic.
5. LIGHT FIXTURES
2' x 4' recessed fluorescent light fixture with 3 lamps, energy
saving ballast, and acrylic prismatic lens. Lithonia #GT 440 RW
A-12 277ES.
6. LIGHT SWITCHES
Two (2) gang switches with white plastic cover plate.
7. DUPLEX OUTLETS
120 volt - 15 amp receptacle with white cover plate.
8. TELEPHONE OUTLET
Standard mudring with standard cover plate with conduit to 6"
above ceiling.
9. EXIT SIGN
Exit signs as required by City.
<PAGE> 31
10. HEATING VENTILATION & AIR CONDITIONING
Water source heat pump system. Distribution through 2 x 2 louver
face adjustable grill supply and perforated face diffusers.
11. FIRE EXTINGUISHER
Sampson model 99 fire cabinet with 2A 10BC minimum rated fire
extinguisher or equal.
12. SPRINKLER HEADS
Semi-recessed chrome heads in improved office area of buildings
1 & 2. Standard heads all other areas.
13. FLOORCOVERING
Office: 30 oz. cut pile carpet. Installed over 5/16" Nova
cushion pad, carpet shall be by Designweave, Pattern: Danapoint,
or vinyl composition tile throughout improved office area.
14. BASE
2" rubber base by Roppe, color per building standard.
15. PAINT
Standard paint Frazee "Vinyl-Lux" latex paint with Eggshell
finish or equivalent. One coat to cover all walls.
16. WINDOW COVERINGS
White miniblinds.
<PAGE> 32
1st AMENDMENT TO LEASE
I. PARTIES AND DATE.
This First Amendment to Lease (this "Amendment") dated as of March 7, 1990,
is entered into by and between The Irvine Company, a Michigan Corporation
("Landlord"), and Kofax Image Products, ("Tenant").
II. RECITALS.
Landlord and Tenant entered into [are successors in interest to) that
certain Standard Form Lease [between The Irvine Company and Kofax Image
Products] dated as of March 31, 1988, as amended by amendments dated
_________________ (as amended, the "Lease"), concerning certain premises
("Premises") located at 3 Jenner Street, Suite 100, Irvine, California.
Landlord and Tenant desire to modify the Lease as set forth in this
Amendment, which modifications shall be deemed effective as of the date of this
Amendment as indicated above.
III. MODIFICATIONS.
Landlord and Tenant hereby agree that the Lease shall be modified and/or
supplemented as follows:
A. Rent Adjustments. Exhibit "E" to the Lease is hereby deleted and
replaced in full by the Exhibit "E" which is attached hereto as
Exhibit "A" to this Amendment and incorporated herein by this
reference.
IV. GENERAL.
A. Effect of Amendments. Except to the extent the Lease is modified by
this Amendment, the remaining terms and provisions of the Lease shall remain
unmodified and in full force and effect. In the event of conflict between the
terms of the Lease and the terms of this Amendment, the terms of this Amendment
shall prevail.
B. Entire Agreement. This Amendment embodies the entire understanding
between Landlord and Tenant with respect to its subject matter and can be
changed only by an instrument in writing signed by Landlord and Tenant.
C. Counterparts. If this Amendment is executed in counterparts, each
counterpart shall be deemed an original.
Initials _____
<PAGE> 33
D. Defined Terms. All capitalized terms used and not otherwise defined in
this Amendment, but defined in the Lease, shall have the same meaning in this
Amendment as in the Lease.
E. Corporate and Partnership Authority. If Tenant is a corporation or
partnership, or is comprised of either or both of them, each individual
executing this Amendment for the corporation or partnership represents that he
or she is duly authorized to execute and deliver this Amendment for the
corporation or partnership and that this Amendment is binding upon the
corporation or partnership in accordance with its terms.
F. Attorneys' Fees. The provisions of the Lease respecting payment of
attorney's fees shall also apply to this Amendment.
"Landlord"
The Irvine Company
a Michigan Corporation
By: /s/ ROBERT E. WILLIAMS, JR.
------------------------------------------
Robert E. Williams, Jr.
Its: Senior Director
------------------------------------------
By: /s/ RICHARD A. JONES
------------------------------------------
Richard A. Jones
Its: Assistant Secretary
------------------------------------------
"Tenant"
Kofax Image Products Inc.
a California Corporation
By: /s/ DAVID SILVER
------------------------------------------
David Silver
Its: President
------------------------------------------
By: /s/ DEAN A. HOUGH
------------------------------------------
Dean A. Hough
Its: Secretary
------------------------------------------
Initials _____
<PAGE> 34
EXHIBIT A
RENT ADJUSTMENTS
This Exhibit is hereby attached to and made a part of the Lease dated: March 31,
1988, by and between THE IRVINE COMPANY, a Michigan corporation, as Landlord and
KOFAX IMAGE PRODUCTS, INC., a California corporation, as Tenant for the Premises
known as 3 Jenner Street, Suite 100, Irvine, California.
<TABLE>
<CAPTION>
BASE RENT MONTHLY RENTAL RATE
--------- -------------------
<S> <C>
09/16/88 - 10/15/88 $16,174.00
10/16/88 - 02/15/89 0
02/16/89 - 09/15/89 $16,174.00
09/16/89 - 09/30/89 $18,302.50
10/01/89 - 03/31/90 $20,431.00
04/01/90 - 08/31/90 $25,950.27
09/01/90 - 09/30/90 $26,735.77
10/01/90 - 10/31/91 $27,521.27
11/01/91 - 11/15/91 $11,001.00
</TABLE>
(See Rider No. 1 of Lease dated March 31, 1988)
<PAGE> 35
SECOND AMENDMENT TO LEASE
I. PARTIES AND DATE.
This Second Amendment to Lease (this "Amendment") dated as of May 4, 1990,
is entered into by and between THE IRVINE COMPANY, A Michigan Corporation,
("Landlord"), and KOFAX IMAGE PRODUCTS, a California Corporation ("Tenant").
II. RECITALS.
Landlord and Tenant entered into that certain Standard Form Lease dated as
of March 31,1988, as amended by an amendment dated March 7, 1990 (as amended,
the "Lease"), concerning certain premises ("Premises") located at 3 Jenner
Street, Suite 150, Irvine, California.
Landlord and Tenant now desire to expand the "Premises" to include the
additional 5,735 gross square feet of space, more particularly shown on Exhibit
"A" attached hereto and incorporated herein by reference ("Additional Space").
III. MODIFICATIONS,
Landlord and Tenant hereby agree that the Lease shall be modified and / or
supplemented as follows:
A. Expanded Premises. Landlord hereby leases the Additional Space to
Tenant, and Tenant hereby leases the Additional Space from Landlord, on the
terms and conditions herein provided. From and after the date hereof, the
"Premises" under the Lease shall consist of the Premises described on Exhibit
"A" to the Lease together with the Additional Space described on Exhibit "A" to
this Amendment.
B. ADDITIONAL SPACE IMPROVEMENTS. Landlord shall construct, at its expense,
the following improvements to the Additional Space: Refer to the attached
Exhibit "B".
<PAGE> 36
C. ADDITIONAL RENT. Commencing on the earlier of: (i) July 1, 1990, or (ii)
the date Tenant commences occupancy of the Additional Space (the "Additional
Space Commencement Date"), Tenant shall pay to Landlord Monthly Rent (in
addition to the Monthly Rent payable as now provided in the Lease) for the
Additional Premises, in advance on the first day of the month, as follows:
<TABLE>
<CAPTION>
SCHEDULE MONTHLY RENT
-------- ------------
<S> <C>
July and August, 1990 $5,964.40
September, 1990 $6,423.20
October, 1990 through
October, 1991 $6,423.20
November, 1991 through
November 15, 1991 $3,211.60
</TABLE>
If the Additional Space Commencement Date is not the first (1st) day of the
month, a prorated installment of Monthly Rental for the Additional Space based
on a thirty (30) day month shall be paid for the fractional month during which
Additional Space Commencement Date occurs.
D. REVISED TENANT'S PERCENTAGE. Commencing on the Additional Space
Commencement Date, the "Tenant's Percentage" (as set forth in Paragraph Q of the
Lease Summary) for purposes of calculating Tenant's prorata obligation for
Operating Expenses, shall be revised to 17.46%.
IV. GENERAL.
A. Effect of Amendments. Except to the extent the Lease is modified by this
Amendment, the remaining terms and provisions of the Lease shall remain
unmodified and in full force and effect. In the event of conflict between the
terms of the Lease and the terms of this Amendment, the terms of this Amendment
shall prevail.
B. Entire Agreement. This Amendment embodies the entire understanding
between Landlord and Tenant with respect to its subject matter and can be
changed only by an instrument in writing signed by Landlord and Tenant.
<PAGE> 37
C. Counterparts. If this Amendment is executed in counterparts, each
counterpart shall be deemed an original.
D. Defined Terms. All capitalized terms used and not otherwise defined in
this Amendment, but defined in the Lease, shall have the same meaning in this
Amendment as in the Lease.
E. Corporate and Partnership Authority. If Tenant is a corporation or a
partnership, or is comprised of either or both of them, each individual
executing this Amendment for the corporation or partnership represents that he
or she is duly authorized to execute and deliver this Amendment for the
corporation or partnership and that this Amendment is binding upon the
corporation or partnership in accordance with its terms.
F. Attorney's Fees. The provisions of the Lease respecting payment of
attorney's fees shall also apply to this Amendment.
"Landlord"
THE IRVINE COMPANY
a Michigan Corporation
By: /s/ ROBERT E. WILLIAMS, JR.
------------------------------------------
Robert E. Williams, Jr.
Senior Director
By: /s/ RICHARD A. JONES
------------------------------------------
Richard A. Jones
Assistant Secretary
"Tenant"
KOFAX IMAGE PRODUCTS
a California Corporation
By: /s/ DAVID SILVER
------------------------------------------
David Silver
President
By: /s/ DEAN A. HOUGH
------------------------------------------
Dean A. Hough
Secretary
<PAGE> 38
EXHIBIT A
Suite 1500
<PAGE> 39
Exhibit B
WORK LETTER
(Tenant Improvement Allowance)
Industrial
In connection with the Lease (the "Lease") to which this Exhibit B (this
"Work Letter") is attached, and in consideration of the mutual covenants
contained in the Lease and in this Work Letter, Landlord and Tenant agree as
follows:
1. APPLICATION OF EXHIBIT
Capitalized terms used and not otherwise defined herein shall have the same
definitions as set forth in the Lease. The provisions of this Work Letter shall
apply to the planning and completion of leasehold improvements requested by
Tenant (the "Tenant Improvements") for the fitting out of the Initial Premises,
as more fully set forth herein.
2. LANDLORD AND TENANT PRE-CONSTRUCTION OBLIGATIONS
(a) PRELIMINARY PLANS. Attached to this Work Letter as Schedule I are
preliminary space plans for the Tenant Improvements (the "Preliminary Plans"),
which include, without limitation, sketches and/or drawings showing locations of
doors, partitioning, electrical fixtures, outlets and switches, plumbing
fixtures, floor loads and other requirements. Tenant acknowledges that the
Preliminary Plans have been prepared by Landlord's Architect after consultation
and cooperation between Tenant and Landlord's Architect regarding the proposed
Tenant Improvements and preparation of the Preliminary Plans for same. Landlord
and Landlord's Architect shall be entitled, in all respects, to rely upon all
information supplied by Tenant regarding the Tenant Improvements, and in all
cases the Preliminary Plans (i) shall be subject to Landlord's final approval,
which approval shall not be unreasonably withheld, (ii) shall not be in conflict
with building codes for the City of Irvine or with insurance regulations for a
fire resistive Class A building, and (iii) shall be in a form satisfactory to
appropriate governmental authorities responsible for issuing permits and
licenses required for construction. The costs associated with preparation of the
Preliminary Plans shall be borne by Tenant and paid as set forth in Section 5
and Section 6 of this Work Letter.
(b) PRELIMINARY PRICE ESTIMATE. Attached to this Work Letter as Schedule II
is an estimated breakdown of the construction costs for the Tenant Improvement
Costs (as hereinafter defined) based on the Preliminary Plans (the "Preliminary
Price Estimate"), including the cost of the Preliminary Plans and Working
Drawings and any and all fees, prepared by Landlord in conjunction with the
Contractor (as hereinafter defined). The Preliminary price estimate will be
updated and revised as necessary.
(c) APPROVAL OF PRELIMINARY PLANS AND PRELIMINARY PRICE ESTIMATE. Tenant
acknowledges that Tenant's execution of the Lease shall be conclusive evidence
that Tenant has reviewed and approved the Preliminary Plans and the Preliminary
Price Estimate.
(d) WORKING DRAWINGS. Within fourteen (14) days following full execution of
this Lease by both Landlord and Tenant, Landlord's Architect shall prepare
working drawings (the "Working Drawings") for the Tenant Improvements based upon
the approved Preliminary Plans. The Working Drawings shall include
architectural, mechanical and electrical construction drawings for the Tenant
Improvements based on the Preliminary Plans. The costs associated with
preparation of the Working Drawings shall be borne by Tenant and paid as set
forth in Section 5 and Section 6 of this Work Letter.
(e) APPROVAL OF WORKING DRAWINGS. Landlord or Landlord's Architect shall
submit the Working Drawings to Tenant for Tenant's review, and Tenant shall
notify Landlord and Landlord's Architect within five (5) days after delivery
thereof of any requested revisions. Within five (5) days after receipt of
Tenant's notice, Landlord's Architect shall make all approved revisions to the
Working Drawings and submit two (2) copies thereof to Tenant for its final
review and approval, which approval shall be given within three (3) days
thereafter. Concurrently with the above review and approval process, Landlord
may submit all plans and specifications to City and other applicable
governmental agencies in an attempt to expedite City approval and issuance of
all necessary permits and licenses to construct the Tenant Improvements as shown
on the Working Drawings. Any changes which are required by City or other
governmental entity shall be immediately submitted to Landlord for Landlord's
review and reasonable approval, and Landlord shall promptly notify Tenant of
such changes.
(f) SCHEDULE OF CRITICAL DATES. Set forth below is a schedule of certain
critical dates relating to Landlord's and Tenant's respective obligations with
respect to the design and construction of Tenant's Improvements for the
Premises. Such dates and the respective obligations of Landlord and Tenant are
more fully described elsewhere in this Work Letter. The purpose of the following
schedule is to provide a reference for Landlord and Tenant and to make certain
the Final Approval Date occurs as set forth herein. Following the Final Approval
Date, Tenant shall be deemed to have released Landlord to commence construction
of the Tenant Improvements as set forth in Section 4 below.
<TABLE>
<CAPTION>
REFERENCE DATE DUE RESPONSIBLE PARTY
--------- -------- -----------------
<S> <C> <C> <C>
A. "Preliminary Plan Approval" The date of execution of Lease Tenant and
Landlord
B. "Preliminary Price The date of execution of Lease Tenant
Estimate Approval"
C. "Working Drawings Completion" Fourteen (14) days after full Landlord
execution of Lease
D. "Working Drawings Review" Five (5) days after Landlord submits
the Working Drawings to Tenant Tenant
E. "Working Drawings Revision" Five (5) days after Tenant returns
the Working Drawings to Landlord Landlord
F. "Final Approval Date" Three (3) days attar Landlord submits
the revised Working Drawings to Tenant Tenant
</TABLE>
3. BUILDING PERMIT
After the Final Approval Date has occurred, Landlord shall, if Landlord has
not already done so, submit the Working Drawings to the appropriate governmental
body or bodies for final plan checking and a building permit. Landlord, with
Tenant's cooperation, shall cause to be made any change in the Working Drawings
necessary to obtain the building permit; provided, however, after the Final
Approval Date, no changes shall be made to the Working Drawings without the
prior written approval of both Landlord and Tenant, and then only after
agreement by Tenant to pay any excess costs resulting from such changes.
4. CONSTRUCTION OF TENANT IMPROVEMENTS
After the Final Approval Date has occurred and a building permit for the
work has been issued, Landlord shall, through a guaranteed maximum cost
construction contract ("Construction Contract") with a reputable, licensed
contractor selected by Landlord ("Contractor"), cause the construction of the
Tenant Improvements to be carried out in substantial conformance with the
Working Drawings in a good
C-1
<PAGE> 40
and workmanlike manner using first-class materials. The costs associated with
the construction of the Tenant Improvements shall be paid as set forth in
Section 5 and Section 6 of this Work Letter. Landlord shall see that the
construction complies with all applicable building, fire, health and sanitary
codes and regulations, the satisfaction of which shall be evidenced by a
certificate of occupancy for the Promises.
5. TENANT IMPROVEMENT ALLOWANCE
(a) TENANT IMPROVEMENTS. Landlord shall provide Tenant with a Tenant
Improvement Allowance in the amount of $100,799 $17.58 S/F towards the cost of
the design, purchase and construction of the Tenant Improvements, including
without limitation design, engineering and consulting fees (collectively, the
"Tenant Improvement Costs"). The Tenant Improvement Allowance shall be used for
payment of the following Tenant Improvement Costs:
(i) Preparation by Landlord's Architect of the Preliminary Plans and
the Working Drawings as provided in Section 2 of this Work Letter,
including without limitation all fees charged by City (including without
limitation fees for building permits and plan checks) in connection with
the Tenant Improvements work in the Premises;
(ii) Construction work for completion of the Tenant Improvements as
reflected in the Construction Contract, including without limitation the
costs for materials listed in the Quality of Construction Material Letter
attached to this Work Letter as Schedule III;
(iii) all contractors' charges, general conditions and construction
fees; and
(iv) an additional fifteen percent (15.0%) of the total of all costs
to defray Landlord's overhead and indirect costs with respect to the Tenant
Improvements.
6. COSTS IN EXCESS OF TENANT IMPROVEMENT ALLOWANCE AT TENANT'S EXPENSE
(a) COST APPROVAL. Tenant shall pay the excess of the Tenant Improvement
Costs over the amount of the Tenant Improvement Allowance available to defray
such costs. Concurrent with the plan checking referred to in Section 3 of this
Work Letter, Landlord shall prepare and submit to Tenant a written estimate of
the amount of the remaining Tenant Improvement Costs and the cost of the Tenant
Improvement Allowance still available to defray such costs (after preparation of
the Preliminary Plans and Working Drawings). Tenant shall approve or disapprove
any such estimate by written notice to Landlord within three (3) days after
receipt thereof. If Tenant fails to notify Landlord of its disapproval within
such three (3) day period, Tenant shall be deemed to have approved such
estimate. If such estimate exceeds the Tenant Improvement Allowance then still
available and Tenant approves such estimate, Tenant's notice of approval shall
include payment to Landlord for the full amount of such excess. If Tenant
disapproves such estimate within the three (3) day period, Landlord shall not
proceed with the Tenant Improvements, but Landlord and Tenant shall thereafter
meet and cooperate to amend the Working Drawings for the Premises as necessary
to obtain Tenant's approval of the cost thereof, provided that Tenant shall pay
any costs resulting from such changes and Tenant shall be liable for the delay
in completing the Tenant Improvements and the increased costs, if any, resulting
from such delay.
(b) FINAL COSTS. Upon completion by Landlord of the Tenant Improvements,
Landlord shall determine the actual final Tenant Improvements Costs and shall
submit a written statement of such amount to Tenant. If any estimate previously
paid by Tenant exceeds the amount due hereunder from Tenant for such work, such
excess shall be refunded to Tenant. On the other hand, if any amount is still
due from Tenant for such work, then Tenant shall pay such amount in full
within ten (10) days of receipt of Landlord's statement.
7. CHANGE ORDERS
Tenant may from time to time request and obtain change orders during the
course of construction provided that (i) each such request shall be reasonable,
shall be in writing and signed by or on behalf of Tenant, and shall not result
in any structural change in the Building, as reasonably determined by Landlord,
(ii) all additional charges and costs, including without limitation
architectural and engineering costs, construction and materials costs, and
processing costs of any governmental entity shall be the sole and exclusive
obligation of Tenant, and (iii) any resulting delay in the completion of the
Tenant Improvements shall be deemed a Tenant Delay and in no event shall extend
the Commencement Date of this Lease. Upon Tenant's request for a change order,
Landlord shall as soon as reasonably possible submit to Tenant a written
estimate of the increased or decreased cost and anticipated delay, if any,
attributable to such requested change. Within three (3) days of the date such
estimated cost adjustment and delay are delivered to Tenant, Tenant shall advise
Landlord whether it wishes to proceed with the change order, and if Tenant
elects to proceed with the change order. Tenant shall remit, concurrently with
Tenant's notice to proceed, the amount of the increased cost, if any,
attributable to such change order. Unless Tenant includes in its initial change
order request that the work in process at the time such request is made be
halted pending approval and execution of a change order, Landlord shall not be
obligated to stop construction of the Tenant Improvements, whether or not the
change order relates to the work then in process or about to be started.
8. TENANT DELAYS
In no event shall the Commencement Date of the Lease be extended or delayed
due or attributable to delays due to the fault of Tenant ("Tenant Delays").
Tenant Delays shall include. but are not limited to, delays caused by or
resulting from any one or more of the following:
(a) Tenant's failure to timely review and reasonably approve the Working
Drawings or to furnish information to Landlord for the preparation by Landlord
of the Working Drawings;
(b) Tenant's request for or use of special materials, finishes or
installments which are not readily available, provided that Landlord shall
notify Tenant in writing that the particular material, finish, or installation
is not readily available promptly upon Landlord's discovery of same;
(c) Delays of any nature, whether or not within Tenant's control, resulting
from Tenant's decision to use any materials, finishes or installations other
than "building standard" materials, finishes or installations.
(d) Change orders requested by Tenant;
(e) interference by Tenant or by Tenant's agents, employees, contractors or
subcontractors with Landlord's construction activities;
(f) Tenant's failure to approve any other item or perform any other
obligation in accordance with and by the data specified herein or in the
Construction Contract;
(g) Tenant's requested changes in the Preliminary Plans, Working Drawings
or any other plans and specifications after the approval thereof by Tenant or
submission thereof by Tenant to Landlord;
(h) Tenant's failure to approve written estimates of costs in accordance
with this Work Letter; and
(i) Tenant's obtaining or failure to obtain any necessary governmental
approvals or permits for Tenant's intended use of the Premises.
If the Commencement Date of the Lease is delayed by any Tenant Delays, whether
or not within the control of Tenant, then the Commencement Date of the Lease and
the payment of Rent shall be accelerated by the number of days of such delay,
Landlord shall give Tenant written notice within a reasonable time of any
circumstance that Landlord believes constitutes a Tenant Delay.
C-2
<PAGE> 41
9. TRADE FIXTURES AND EQUIPMENT
Tenant acknowledges and agrees that Tenant is solely responsible for
obtaining, delivering and installing in the Premises all necessary and desired
furniture, trade fixtures, equipment and other similar items, and that Landlord
shall have no responsibility whatsoever with regard thereto. Tenant further
acknowledges and agrees that neither the Commencement Date of the Lease nor the
payment of Rent shall be delayed for any period of time whatsoever due to any
delay in the furnishing of the Premises with such items.
10. FAILURE OF TENANT To COMPLY
Any failure of Tenant to comply with any of the provisions contained in
this Work Letter within the times for compliance herein set forth shall be
deemed a default under the Lease. In addition to the remedies provided to
Landlord in this Work Letter upon the occurrence of such a default by Tenant,
Landlord shall have all remedies available at law or equity to a landlord
against a defaulting tenant pursuant to a written lease, including but not
limited to those set forth in the Lease.
C-3
<PAGE> 42
SCHEDULE I
[ARCHITECTURAL DRAWING]
<PAGE> 43
SCHEDULE II
IRVINE/SAMMIS VENTURE
CONSTRUCTION COST SUMMARY
KOFAX ADDITION
3 Jenner Street, Suite 150
<TABLE>
<CAPTION>
Activity Company Name Amount
- -------- ------------ ------
<S> <C> <C>
Insulation Sierra Insulation $ 367.00
Framing/Susp. Ceiling Orange Coast Drywall 6,710.00
Electrical Bayside Electric 6,069.00
Mechanical Select Heating & Air 5,435.00
Fire Sprinklers Advanced Fire Protect 2,060.00
Doors/Windows 3-D Door, Inc. 2,100.00
Floor Covering Brian Nickens Flooring 3,944.00
Glass Services Mission Viejo Glass 2,535.00
Painting Mike Shill Painting 969.00
Locksmith Kustom Lock & Safe 280.00
Fire Extinguishers Newport Fire Extinguisher 140.00
Plan Reproduction OCB Reprographics, Inc. 100.00
Architectural Fees Donald Mueller, A.I.A. 2,925.00
Permit & Plancheck City of Irvine 1,400.00
Contingency 525.00
Contractor's Fee @ 5% 1,778.00
General Conditions 2,955.00
TOTAL CONSTRUCTION COST $40,292.00
</TABLE>
Page 1
<PAGE> 44
THE SAMMIS COMPANY
Construction Information Form DATE: 12/15/89
--------
TENANT: JOB NO.: 912009 PREPARED BY: LISA
SPEC SUITE 150 ------ --------
- -----------------------------
APPROVED BY: LISA
--------
PROJECT NAME: SUITE NO.: BLDG 3, SUITE 150
IRVINE/SAMMIS VENTURE -----------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CHANGE ORDERS TOTAL TOTAL
CONTRACT --------------- REVISED AMOUNT PERCENT
ITEM AMOUNT PRIOR CURRENT CONTRACT COMPLETE COMPLETE
No. TRADE ITEM DESCRIPTION (NO. 1) (NO. 2 THRU 8) AMOUNT TO DATE TO DATE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 60501 Temporary 0 0.00%
- -------------------------------------------------------------------------------------------------------------
2 52211 Site Grading 0 0.00%
- -------------------------------------------------------------------------------------------------------------
3 61101 Concrete Work 650 650 650 100.00%
- -------------------------------------------------------------------------------------------------------------
4 61105 Cement Work 0 0.00%
- -------------------------------------------------------------------------------------------------------------
5 52051 Demolition 0 0.00%
- -------------------------------------------------------------------------------------------------------------
6 62101 Masonry 0 0.00%
- -------------------------------------------------------------------------------------------------------------
7 62213 Structural Steel 0 0.00%
- -------------------------------------------------------------------------------------------------------------
8 62703 Ornamental Iron 0 0.00%
- -------------------------------------------------------------------------------------------------------------
9 62211 Reinforced Steel 0 0.00%
- -------------------------------------------------------------------------------------------------------------
10 66261 Drywall 12874 12874 12874 100.00%
- -------------------------------------------------------------------------------------------------------------
11 66263 Drywall Ceiling 0 0.00%
- -------------------------------------------------------------------------------------------------------------
12 63107 Rough Carpentry Hardware 0 0.00%
- -------------------------------------------------------------------------------------------------------------
13 64101 Roof Structure 0 0.00%
- -------------------------------------------------------------------------------------------------------------
14 62231 Sheet Metal 0 0.00%
- -------------------------------------------------------------------------------------------------------------
15 64107 Roofing & Waterproofing 450 -124 326 200 61.35%
- -------------------------------------------------------------------------------------------------------------
16 61323 Cellular Concrete 0 0.00%
- -------------------------------------------------------------------------------------------------------------
17 64201 Insulation 0 0.00%
- -------------------------------------------------------------------------------------------------------------
18 65501 Windows & Sliding Doors 0 0.00%
- -------------------------------------------------------------------------------------------------------------
19 65101 Hollow Doors & Frames 0 0.00%
- -------------------------------------------------------------------------------------------------------------
20 65971 Demising Walls 0 0.00%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PERCENT OF UNPAID TOTAL TOTAL
CONTRACT CONTRACT COMPLETE PAID ON NET DUE
ITEM PAID FOR RETENTION LESS PREVIOUS THIS
No. TRADE ITEM DESCRIPTION TO DATE TO DATE RETENTION APPLICATION APPLICATION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 60501 Temporary 0.00% 0 0
- -------------------------------------------------------------------------------------------------------------
2 52211 Site Grading 0.00% 0 0
- -------------------------------------------------------------------------------------------------------------
3 61101 Concrete Work 100.00% 650 650 0
- -------------------------------------------------------------------------------------------------------------
4 61105 Cement Work 0.00% 0 0
- -------------------------------------------------------------------------------------------------------------
5 52051 Demolition 0.00% 0 0
- -------------------------------------------------------------------------------------------------------------
6 62101 Masonry 0.00% 0 0
- -------------------------------------------------------------------------------------------------------------
7 62213 Structural Steel 0.00% 0 0
- -------------------------------------------------------------------------------------------------------------
8 62703 Ornamental Iron 0.00% 0 0
- -------------------------------------------------------------------------------------------------------------
9 62211 Reinforced Steel 0.00% 0 0
- -------------------------------------------------------------------------------------------------------------
10 66261 Drywall 100.00% 12874 12874 0
- -------------------------------------------------------------------------------------------------------------
11 66263 Drywall Ceiling 0.00% 0 0
- -------------------------------------------------------------------------------------------------------------
12 63107 Rough Carpentry Hardware 0.00% 0 0
- -------------------------------------------------------------------------------------------------------------
13 64101 Roof Structure 0.00% 0 0
- -------------------------------------------------------------------------------------------------------------
14 62231 Sheet Metal 0.00% 0 0
- -------------------------------------------------------------------------------------------------------------
15 64107 Roofing & Waterproofing 0.00% 200 200
- -------------------------------------------------------------------------------------------------------------
16 61323 Cellular Concrete 0.00% 0 0
- -------------------------------------------------------------------------------------------------------------
17 64201 Insulation 0.00% 0 0
- -------------------------------------------------------------------------------------------------------------
18 65501 Windows & Sliding Doors 0.00% 0 0
- -------------------------------------------------------------------------------------------------------------
19 65101 Hollow Doors & Frames 0.00% 0 0
- -------------------------------------------------------------------------------------------------------------
20 65971 Demising Walls 0.00% 0 0
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE> 45
- -------------------------------------------------------------------------------
THE SAMMIS COMPANY
Construction Information Form DATE: 12/15/89
--------
TENANT: JOB NO.: 912009 PREPARED BY: LISA
SPEC SUITE 150 ------ ----
- --------------
APPROVED BY: LISA
PROJECT NAME: SUITE NO.: BLDG 3, SUITE 150 ----
IRVINE/SAMMIS VENTURE -----------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGE ORDERS TOTAL TOTAL
CONTRACT ---------------- REVISED AMOUNT PERCENT
ITEM AMOUNT PRIOR CURRENT CONTRACT COMPLETE COMPLETE
NO TRADE ITEM DESCRIPTION (NO. 1) (NO. 2 THRU 8) AMOUNT TO DATE TO DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
21 67601 Partitions 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
22 67631 Marlite 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
23 65811 Glass & Glazing 370 370 370 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
24 63201 Finish Carpentry 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
25 63222 Millwork - Doors & Frames 1475 1475 1475 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
26 63228 Millwork - Wardrobes 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
27 63223 Millwork - Cabinets 1060 1060 1060 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
28 63224 Millwork - Formica 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
29 63225 Millwork - Paneling 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
30 63227 Millwork - Trim 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
31 63207 Finish Carpentry Hardware 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
32 66513 Acoustic Tile & Ceiling 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
33 67811 Shower Doors - Tab Enclosures 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
34 67815 Toilet Partitions 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
35 65361 Overhead Doors 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
36 68501 Passenger Elevators 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
37 69101 Plumbing 5443 5443 5100 93.70%
- ------------------------------------------------------------------------------------------------------------------------------------
38 52722 Sewer, Water & Storm Drains 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
39 69211 Electrical 17999 124 18123 18123 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PERCENT OF UNPAID TOTAL TOTAL
CONTRACT CONTRACT COMPLETE PAID ON NET DUE
ITEM PAID FOR RETENTION LESS PREVIOUS THIS
NO TRADE ITEM DESCRIPTION TO DATE TO DATE RETENTION APPLICATION APPLICATION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
21 67601 Partitions 0.00% 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
22 67631 Marlite 0.00% 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
23 65811 Glass & Glazing 100.00% 370 370 0
- ------------------------------------------------------------------------------------------------------------------------------------
24 63201 Finish Carpentry 0.00% 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
25 63222 Millwork - Doors & Frames 100.00% 1475 1475 0
- ------------------------------------------------------------------------------------------------------------------------------------
26 63228 Millwork - Wardrobes 0.00% 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
27 63223 Millwork - Cabinets 100.00% 1060 1060 0
- ------------------------------------------------------------------------------------------------------------------------------------
28 63224 Millwork - Formica 0.00% 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
29 63225 Millwork - Paneling 0.00% 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
30 63227 Millwork - Trim 0.00% 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
31 63207 Finish Carpentry Hardware 0.00% 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
32 66513 Acoustic Tile & Ceiling 0.00% 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
33 67811 Shower Doors - Tab Enclosures 0.00% 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
34 67815 Toilet Partitions 0.00% 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
35 65361 Overhead Doors 0.00% 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
36 68501 Passenger Elevators 0.00% 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
37 69101 Plumbing 93.70% 5100 5100 0
- ------------------------------------------------------------------------------------------------------------------------------------
38 52722 Sewer, Water & Storm Drains 0.00% 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
39 69211 Electrical 100.00% 18123 18123 0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE> 46
- -------------------------------------------------------------------------------
THE SAMMIS COMPANY
Construction Information Form DATE: 12/15/89
--------
TENANT: JOB NO.: 912009 PREPARED BY: LISA
SPEC SUITE 150 ------ ----
- --------------
APPROVED BY: LISA
PROJECT NAME: SUITE NO.: BLDG 3, SUITE 150 ----
IRVINE/SAMMIS VENTURE -----------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGE ORDERS TOTAL TOTAL
CONTRACT ---------------- REVISED AMOUNT PERCENT
ITEM AMOUNT PRIOR CURRENT CONTRACT COMPLETE COMPLETE
NO TRADE ITEM DESCRIPTION (NO. 1) (NO. 2 THRU 8) AMOUNT TO DATE TO DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
40 69131 Fixture - Inventory 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
41 69175 Heating 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
42 69171 HVAC 9150 9150 9150 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
43 60591 Project ID & Signs 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
44 67801 Toilet & Bath Accessories 285 285 284 99.72%
- ------------------------------------------------------------------------------------------------------------------------------------
45 66952 Vinyl Wall Covering & Base 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
46 66901 Painting 507 507 507 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
47 66703 Floor Covering 4706 4706 4706 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
48 66701 Carpeting 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
49 66981 Drapes / Blinds 1275 1275 1275 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
50 65102 Locksmith 95 95 95 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
51 66311 Ceramic Tile 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
52 69911 Common Area 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
53 52503 Striping & Bumpers 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
54 52481 Landscaping & Irrigation 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
55 67511 Fire Sprinklers 3125 3125 3124 99.98%
- ------------------------------------------------------------------------------------------------------------------------------------
56 67521 Fire Extinguishers 160 160 135 84.43%
- ------------------------------------------------------------------------------------------------------------------------------------
57 SUBTOTAL 59624 0 0 59624 59129 99.17%
- ------------------------------------------------------------------------------------------------------------------------------------
58 60879 Miscellaneous 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
59 SUBTOTAL 59624 0 0 59624 59129 99.17%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PERCENT OF UNPAID TOTAL TOTAL
CONTRACT CONTRACT COMPLETE PAID ON NET DUE
ITEM PAID FOR RETENTION LESS PREVIOUS THIS
NO TRADE ITEM DESCRIPTION TO DATE TO DATE RETENTION APPLICATION APPLICATION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <S> <C> <C> <C> <C>
40 69131 Fixture - Inventory 0.00% 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
41 69175 Heating 0.00% 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
42 69171 HVAC 100.00% 9150 9150 0
- -----------------------------------------------------------------------------------------------------------------------------------
43 60591 Project ID & Signs 0.00% 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
44 67801 Toilet & Bath Accessories 99.65% 284 284 0
- -----------------------------------------------------------------------------------------------------------------------------------
45 66952 Vinyl Wall Covering & Base 0.00% 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
46 66901 Painting 100.00% 507 507 0
- -----------------------------------------------------------------------------------------------------------------------------------
47 66703 Floor Covering 100.00% 4706 4706 0
- -----------------------------------------------------------------------------------------------------------------------------------
48 66701 Carpeting 0.00% 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
49 66981 Drapes / Blinds 100.00% 1275 1275 0
- -----------------------------------------------------------------------------------------------------------------------------------
50 65102 Locksmith 100.00% 95 95 0
- -----------------------------------------------------------------------------------------------------------------------------------
51 66311 Ceramic Tile 0.00% 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
52 69911 Common Area 0.00% 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
53 52503 Striping & Bumpers 0.00% 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
54 52481 Landscaping & Irrigation 0.00% 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
55 67511 Fire Sprinklers 99.98% 3124 3124 0
- -----------------------------------------------------------------------------------------------------------------------------------
56 67521 Fire Extinguishers 84.38% 135 135 0
- -----------------------------------------------------------------------------------------------------------------------------------
57 SUBTOTAL 98.83% 0 59129 58928 200
- -----------------------------------------------------------------------------------------------------------------------------------
58 60879 Miscellaneous 0.00% 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
59 SUBTOTAL 98.83% 0 59129 58928 200
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 4
<PAGE> 47
- -------------------------------------------------------------------------------
THE SAMMIS COMPANY
Construction Information Form DATE: 12/15/89
--------
TENANT: JOB NO.: 912009 PREPARED BY: LISA
SPEC SUITE 150 ------ ----
- --------------
APPROVED BY: LISA
PROJECT NAME: SUITE NO.: BLDG 3, SUITE 150 ----
IRVINE/SAMMIS VENTURE -----------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGE ORDERS TOTAL TOTAL
CONTRACT ---------------- REVISED AMOUNT PERCENT
ITEM AMOUNT PRIOR CURRENT CONTRACT COMPLETE COMPLETE
NO TRADE ITEM DESCRIPTION (NO. 1) (NO. 2 THRU 8) AMOUNT TO DATE TO DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
60 60781 Architectural Engineering 888 888 887 99.89%
- ------------------------------------------------------------------------------------------------------------------------------------
61 60021 Build Permit & Plan Check 466 466 446 99.93%
- ------------------------------------------------------------------------------------------------------------------------------------
62 60831 Electrical Engineering 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
63 60091 Plan & Spec (blueprints) 50 50 47 93.24%
- ------------------------------------------------------------------------------------------------------------------------------------
64 60833 Mechanical Engineering 0 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
65 SUBTOTAL 61028 0 0 61028 60528 99.18%
- ------------------------------------------------------------------------------------------------------------------------------------
66 60971 CONTINGENCY 500 213 713 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
67 SUBTOTAL 61528 213 0 61741 61241 99.19%
- ------------------------------------------------------------------------------------------------------------------------------------
68 60981 CONTRACTORS FEES @ 5% 3076 11 0 3087 3062 99.19%
- ------------------------------------------------------------------------------------------------------------------------------------
69 SUBTOTAL 64604 224 0 64828 64303 99.19%
- ------------------------------------------------------------------------------------------------------------------------------------
70 60991 GENERAL CONDITIONS 300 -213 87 153 175.86%
- ------------------------------------------------------------------------------------------------------------------------------------
71 60103 Cleanup 450 450 325 72.22%
- ------------------------------------------------------------------------------------------------------------------------------------
72 60191 Project Supervision 1500 1500 1488 99.18%
- ------------------------------------------------------------------------------------------------------------------------------------
73 60321 Insurance & Benefits 256 256 254 99.18%
- ------------------------------------------------------------------------------------------------------------------------------------
74 TOTAL CONSTRUCTION COSTS 67110 11 0 67121 66523 99.11%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PERCENT OF UNPAID TOTAL TOTAL
CONTRACT CONTRACT COMPLETE PAID ON NET DUE
ITEM PAID FOR RETENTION LESS PREVIOUS THIS
NO TRADE ITEM DESCRIPTION TO DATE TO DATE RETENTION APPLICATION APPLICATION
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <S> <C> <C> <C> <C>
60 60781 Architectural Engineering 99.89% 887 887 0
- ----------------------------------------------------------------------------------------------------------------------------------
61 60021 Build Permit & Plan Check 100.00% 466 466 0
- ----------------------------------------------------------------------------------------------------------------------------------
62 60831 Electrical Engineering 0.00% 0 0
----------------------------------------------------------------------------------------------------------------------------------
63 60091 Plan & Spec (blueprints) 94.00% 47 47 0
- ----------------------------------------------------------------------------------------------------------------------------------
64 60833 Mechanical Engineering 0.00% 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
65 SUBTOTAL 98.85% 0 60528 60328 200
- ----------------------------------------------------------------------------------------------------------------------------------
66 60971 CONTINGENCY 100.00% 713 713 0
- ----------------------------------------------------------------------------------------------------------------------------------
67 SUBTOTAL 98.87% 0 61241 61041 200
- ----------------------------------------------------------------------------------------------------------------------------------
68 60981 CONTRACTORS FEES @ 5% 98.87% 0 3062 3052 10
- ----------------------------------------------------------------------------------------------------------------------------------
69 SUBTOTAL 98.87% 0 64303 64094 210
- ----------------------------------------------------------------------------------------------------------------------------------
70 60991 GENERAL CONDITIONS 175.86% 153 153 0
- ----------------------------------------------------------------------------------------------------------------------------------
71 60103 Cleanup 72.22% 325 325 0
- ----------------------------------------------------------------------------------------------------------------------------------
72 60191 Project Supervision 98.59% 1488 1479 9
- ----------------------------------------------------------------------------------------------------------------------------------
73 60321 Insurance & Benefits 98.63% 254 252 1
- ----------------------------------------------------------------------------------------------------------------------------------
74 TOTAL CONSTRUCTION COSTS 98.78% 0 66523 66303 220
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 5
<PAGE> 48
THIRD AMENDMENT TO LEASE
I. PARTIES AND DATE.
This Third Amendment to Lease ("Amendment") dated as of August 22,
1991 (the "Execution Date"), is entered into by and between THE IRVINE COMPANY,
a Michigan corporation ("Landlord"), and KOFAX IMAGE PRODUCTS, a California
corporation ("Tenant").
II. RECITALS.
Landlord and Tenant have entered into that certain Standard Form Lease
(Multi-Tenant) dated as of March 31, 1988, as amended by that certain First
Amendment to Lease, dated March 7, 1990 as further amended by that certain
Second Amendment to Lease, dated May 4, 1990 (as amended, the "Lease"),
concerning certain premises ("Premises") located at 3 Jenner Street, Suite 100
and 150, Irvine, California 92718.
Landlord and Tenant now desire to modify the Lease to extend the Term
of the Lease, to expand the Premises to include an additional Seven Thousand
Seven Hundred and Five (7,705) gross square feet of space more particularly
shown on Exhibit "1" attached hereto and incorporated herein by reference
("Additional Space"), to establish the Monthly Rent to be paid by Tenant and as
otherwise herein provided, all as more fully set forth in this Amendment.
III. MODIFICATIONS.
Landlord and Tenant hereby agree that the Lease shall be modified
and/or supplemented as follows, which modifications and supplements shall be
effective as of the date of this Amendment and except as otherwise specifically
provided herein.
A. Expanded Premises. Landlord hereby leases the Additional Space to
Tenant, and Tenant hereby leases the Additional Space from Landlord, on the same
terms and conditions as set forth in the Lease, as supplemented hereby. From and
after the "Extension Commencement Date" (as hereinafter defined), the "Premises"
(as defined in the Lease) shall consist of the Premises described in the Lease
as amended, together with the Additional Space described in Exhibit "1" to this
Amendment.
B. Term. As set forth in Paragraph (k) of the Lease Summary, the Term
is currently contemplated to expire on November 15, 1991. Landlord and Tenant
hereby agree to extend the Term for thirty-six (36) months, commencing on
November 16, 1991 (the "Extension Commencement Date") and expiring on November
15, 1994, unless sooner terminated as provided in the Lease.
C. Additional Space Improvements. Landlord shall construct the Tenant
Improvements for the Additional Space (the "Additional Space Improvements") in
accordance with the Work Letter attached hereto as Exhibit "2" and incorporated
herein by reference. Tenant shall have the right of early entry on and within
the Additional Space on and after October 15, 1991, subject to the provisions of
Section 4(b) of the Lease, for purposes of installing Tenant's fixtures and
equipment.
1.
<PAGE> 49
D. Square Footage of Premises. From and after the Extension
Commencement Date, the definition of "Premises Square Footage" in Paragraph 3 of
the Second Amendment to Lease is hereby amended to mean an aggregate of 33,075
square feet.
E. Monthly Rent For Additional Space. Commencing on the Extension
Commencement Date, Tenant shall pay to Landlord Monthly Rent (as provided in
Paragraph 5(a) of the Lease) during the Term (as herein extended) as follows:
<TABLE>
<CAPTION>
MONTHS FROM EXTENSION
COMMENCEMENT DATE MONTHLY RENT
----------------- ------------
<S> <C>
Months 1-36 $21,829.50
</TABLE>
Monthly Rent for the partial month in which the Extension Commencement Date
occurs shall be prorated as set forth in Paragraph 5(d) of the Lease. Further,
if the Additional Space Improvements are not "substantially completed" (as
defined in Section 4(a) of the Lease) on or before the Extension Commencement
Date, except for Tenant Delays as defined in the Work Letter, then Tenant shall
pay Monthly Rent only for the original Premises (at the rate of $.66 per square
foot per month) until the Additional Space Improvements are substantially
completed.
F. Tenant's Percentage. The Tenant's Percentage (as set forth in
Paragraph (q) of the Lease Summary) shall be increased to 22.79%. Such increase
shall take effect as of the Extension Commencement Date.
G. Vehicle Parking Spaces. The number of vehicle parking spaces shall
be increased to One Hundred Thirty-Two (132). Such increase shall take effect as
of the Extension Commencement Date.
H. Security Deposit. The Security Deposit shall not be increased as
the result of this Amendment.
I. Option to Lease Additional Vacant Space. Provided that no Event of
Default has occurred and is continuing, Tenant shall have the option to lease
the option space in accordance with Exhibit "3" to this Amendment.
J. Option to Terminate. Provided that no Event of Default has occurred
and is continuing, Tenant shall have the option to terminate the Lease in
accordance with Exhibit "4" to this Amendment.
K. Option to Extend. Provided that no Event of Default has occurred and
is continuing, Tenant shall have the option to extend the Term of this Lease in
accordance with Exhibit "5" to this Amendment.
L. Environmental Questionnaire; Disclosure. Paragraph 10(b) of the
Lease shall be supplemented as follows:
(iv) Prior to the execution of this Amendment, Tenant shall
complete, execute and deliver to Landlord an Environmental Questionnaire and
Disclosure Statement (the "Environmental Questionnaire") in the form of Exhibit
"6" to this Amendment and Tenant shall certify to Landlord all information
contained in the Environmental Questionnaire as true and correct to the best of
Tenant's knowledge and belief. The completed Environmental Questionnaire shall
be deemed incorporated into the Lease for all purposes, and Landlord shall be
entitled to rely
2.
<PAGE> 50
fully on the information contained therein. On each anniversary of the Extension
Commencement Date (each such date is hereinafter referred to as a "Disclosure
Date"), until and including the first Disclosure Date occurring after the
expiration or sooner termination of this Lease, Tenant shall disclose to
Landlord in writing the names and amounts of all Hazardous Materials, or any
combination thereof, which were stored, generated, used or disposed of on, under
or about the Premises by Tenant, its agents, employees, contractors or invitees
for the twelve-month period prior to and after each Disclosure Date, or which
Tenant intends to store, generate, use or dispose of on, under or about the
Premises. At Landlord's option, Tenant's disclosure obligations under this
Paragraph 10(b)(iv) shall include a requirement that Tenant update, execute and
deliver to Landlord the Environmental Questionnaire, as the same may be modified
by Landlord from time to time.
M. TCE Notification. Landlord has been informed by certain local and
state agencies that the Marine Corps Air Station at El Toro has discharged
trichloroethylene (TCE), a commonly used solvent, into the groundwater
underlying the Air Station and that this substance may have migrated into the
groundwater underlying the Premises. The Environmental Protection Agency, the
Santa Ana Region of the Regional Water Quality Control Board and the Orange
County Health Care Agency are overseeing the cleanup of this contamination. The
groundwater in this area currently is used for irrigation purposes only.
Therefore no practical impediment to the use or occupancy of the Premises is
anticipated to result from this discharge.
IV. GENERAL.
A. Effect of Amendments. Except to the extent the Lease is modified by
this Amendment, the remaining terms and provisions of the Lease shall remain
unmodified and in full force and effect. In the event of conflict between the
terms of the Lease and the terms of this Amendment, the terms of this Amendment
shall prevail.
B. Entire Agreement. This Amendment embodies the entire understanding
between Landlord and Tenant with respect to its subject matter and can be
changed only by an instrument in writing signed by Landlord and Tenant.
C. Counterparts. If this Amendment is executed in counterparts, each
counterpart shall be deemed an original.
D. Defined Terms. All capitalized terms used and not otherwise defined
in this Amendment, but defined in the Lease, shall have the same meaning in this
Amendment as in the Lease.
E. Corporate and Partnership Authority. If Tenant is a corporation or
partnership, or is comprised of either or both of them, each individual
executing this Amendment for the corporation or partnership represents that he
or she is duly authorized to execute and deliver this Amendment for the
corporation or partnership in accordance with its terms.
3.
<PAGE> 51
F. Attorneys' Fees. In the event any action is instituted for breach of
or to enforce any provision of the Lease or this Amendment, the prevailing party
in said action shall be entitled to its reasonable attorney's fees and court
costs incurred in such action. Each party shall bear its own attorney's fees, if
any, incurred in connection with the negotiation and preparation of this
Amendment.
"Landlord":
THE IRVINE COMPANY,
a Michigan Corporation
By: ROBERT E. WILLIAMS, JR.
---------------------------------------
Name: Robert E. Williams, Jr.
Its: Vice President
[SEAL]
By: JEFFREY L. DEIS
---------------------------------------
Name: Jeffrey L. Deis
Its: Assistant Secretary
"Tenant":
KOFAX IMAGE PRODUCTS,
a California Corporation
By: DAVID SILVER
---------------------------------------
Name: David Silver
Its: President
By: RONALD J. FIKERT
----------------------------------------
Name: Ronald J. Fikert
Its: Secretary
4.
<PAGE> 52
EXHIBIT 1
ADDITIONAL SPACE
3 JENNER SUITE 160
7,705 S.F.
[GRAPH]
<PAGE> 53
EXHIBIT 2
WORK LETTER
(TENANT IMPROVEMENT ALLOWANCE)
INDUSTRIAL
In connection with that certain Third Amendment to Lease (the
"Amendment") to which this EXHIBIT 2 (this "Work Letter") is attached, and in
consideration of the mutual covenants contained in the Amendment and in this
Work Letter, Landlord and Tenant agree as follows:
1. APPLICATION OF EXHIBIT
Capitalized terms used and not otherwise defined herein shall have the
same definitions as set forth in the Amendment. The provisions of this Work
Letter shall apply to the planning and completion of leasehold improvements
requested by Tenant (the "Additional Space Improvements") for the fitting out
of the initial Premises and Additional Space, as more fully set forth herein.
2. LANDLORD AND TENANT PRE-CONSTRUCTION OBLIGATIONS
(a) PRELIMINARY PLANS. Attached to this Work Letter as Schedule I are
preliminary space plans for the Additional Space Improvements (the "Preliminary
Plans"), which include, without limitation, sketches and/or drawings showing
locations of doors, partitioning, electrical fixtures, outlets and switches,
plumbing fixtures, floor loads and other requirements. Tenant acknowledges that
the Preliminary Plans have been prepared by Landlord's Architect after
consultation and cooperation between Tenant and Landlord's Architect regarding
the proposed Tenant Improvements and preparation of the Preliminary Plans for
same. Landlord and Landlord's Architect shall be entitled, in all respects, to
rely upon all information supplied by Tenant regarding the Additional Space
Improvements, and in all cases the Preliminary Plans (i) shall be subject to
Landlord's final approval, which approval shall not be unreasonably withheld,
(ii) shall not be in conflict with building codes for the City of Irvine or
with insurance regulations for a fire resistive Class A building, and (iii)
shall be in a form satisfactory to appropriate governmental authorities
responsible for issuing permits and licenses required for construction. The
costs associated with preparation of the Preliminary Plans shall be borne by
Tenant and paid as set forth in Section 5 and Section 6 of this Work Letter.
(b) PRELIMINARY PRICE ESTIMATE. Attached to this Work Letter as
Schedule II is an estimated breakdown of the construction costs for the Tenant
Improvement Costs (as hereinafter defined) based on the Preliminary Plans (the
"Preliminary Price Estimate"), including the cost of the Preliminary Plans and
Working Drawings and any and all fees, prepared by Landlord in conjunction with
the Contractor (as hereinafter defined). The Preliminary Price Estimate will be
updated and revised as necessary.
(c) APPROVAL OF PRELIMINARY PLANS AND PRELIMINARY PRICE ESTIMATE.
Tenant acknowledges that Tenant's execution of the Amendment shall be conclusive
evidence that Tenant has reviewed and approved the Preliminary Plans and the
Preliminary Price Estimate.
(d) WORKING DRAWINGS. Within fourteen (14) days following full
execution of this Amendment by both Landlord and Tenant, Landlord's Architect
shall prepare working drawings (the "Working Drawings") for the Additional
Space Improvements based upon the approved Preliminary Plans. The Working
Drawings shall include architectural, mechanical and electrical construction
drawings for the Additional Space Improvements based on the Preliminary Plans.
The costs associated with preparation of the Working Drawings shall be borne by
Tenant and paid as set forth in Section 5 and Section 6 of this Work Letter.
(e) APPROVAL OF WORKING DRAWINGS. Landlord or Landlord's Architect
shall submit the Working Drawings to Tenant for Tenant's review, and Tenant
shall notify Landlord and Landlord's Architect within five (5) days after
delivery thereof of any requested revisions. Within five (5) days after receipt
of Tenant's notice, Landlord's Architect shall make all approved revisions to
the Working Drawings and submit two (2) copies thereof to Tenant for its final
review and approval, which approval shall be given within three (3) days
thereafter. Concurrently with the above review and approval process, Landlord
may submit all plans and specifications to City and other applicable
governmental agencies in an attempt to expedite City approval and issuance of
all necessary permits and licenses to construct the Additional Space
Improvements as shown on the Working Drawings. Any changes which are required by
City or other governmental entity shall be immediately submitted to Landlord for
Landlord's review and reasonable approval, and Landlord shall promptly notify
Tenant of such changes.
(f) SCHEDULE OF CRITICAL DATES. Set forth below is a schedule of
certain critical dates relating to Landlord's and Tenant's respective
obligations with respect to the design and construction of Tenant's
Improvements for the Premises and the Additional Space. Such dates and the
respective obligations of Landlord and Tenant are more fully described
elsewhere in this Work Letter. The purpose of the following schedule is to
provide a reference for Landlord and Tenant and to make certain the Final
Approval Date occurs as set forth herein. Following the Final Approval Date,
Tenant shall be deemed to have released Landlord to commence construction of
the Additional Space Improvements as set forth in Section 4 below.
<TABLE>
<CAPTION>
REFERENCE DATE DUE RESPONSIBLE PARTY
--------- -------- -----------------
<S> <C> <C> <C>
A. "Preliminary Plan Approval" The date of execution of Amendment. Tenant and
Landlord
B. "Preliminary Price Estimate Approval" The date of execution of Amendment. Tenant
C. "Working Drawings Completion" Fourteen (14) days after full execution of Amendment Landlord
D. "Working Drawings Review" Five (5) days after Landlord submits the Working Draw-
ings to Tenant Tenant
E. "Working Drawings Revision" Five (5) days after Tenant returns the Working Drawings
to Landlord Landlord
F. "Final Approval Date" Three (3) days after Landlord submits the revised Work-
ing Drawings to Tenant Tenant
</TABLE>
3. BUILDING PERMIT
After the Final Approval Date has occurred, Landlord shall, if Landlord
has not already done so, submit the Working Drawings to the appropriate
governmental body or bodies for final plan checking and a building permit.
Landlord, with Tenant's cooperation, shall cause to be made any change in the
Working Drawings necessary to obtain the building permit; provided, however,
after the Final Approval Date, no changes shall be made to the Working Drawings
without he prior written approval of both Landlord and Tenant, and then only
after agreement by Tenant to pay any excess costs resulting from such changes.
4. CONSTRUCTION OF TENANT IMPROVEMENTS
After the Final Approval Date has occurred and a building permit for
the work has been issued, Landlord shall, through a guaranteed maximum cost
construction contract ("Construction Contract")* with a reputable, licensed
contractor selected by Landlord ("Contractor"), (and reasonably acceptable to
Tenant), cause the construction of the Additional Space Improvements to be
carried out in substantial conformance with the Working Drawings in a good
C-1
* Landlord agrees to rebid the Additional Space Improvements and shall make a
good faith effort to come as close as possible to the June 12, 1991 bid of
J-Mar Construction for the cost of such Improvements.
<PAGE> 54
and workmanlike manner using first-class materials. The costs associated with
the construction of the Additional Space Improvements shall be paid as set forth
in Section 5 and Section 6 of this Work Letter. Landlord shall see that the
construction complies with all applicable building, fire, health and sanitary
codes and regulations, the satisfaction of which shall be evidenced by a
certificate of occupancy for the Additional Space.
5. TENANT IMPROVEMENT ALLOWANCE
(a) Tenant Improvements. Landlord shall provide Tenant with a Tenant
Improvement Allowance in the amount of sixty-thousand ($60,000) towards the cost
of the design, purchase and construction of the Additional Space Improvements,
including without limitation design, engineering and consulting fees
(collectively, the "Tenant Improvement Costs"). The Tenant Improvement Allowance
shall be used for payment of the following Tenant Improvement Costs:
(i) Preparation by Landlord's Architect of the Preliminary
Plans and the Working Drawings as provided in Section 2 of this Work
Letter, including without limitation all fees charged by City (including
without limitation fees for building permits and plan checks) in
connection with the Tenant Improvements work in the Premises;*
(ii) Construction work for completion of the Tenant
Improvements as reflected in the Construction Contract, including
without limitation the costs for materials listed in the Quality of
Construction Material Letter attached to this Work Letter as SCHEDULE
III;
(iii) all contractors' charges, general conditions and
construction fees; and
(iv)
6. COSTS IN EXCESS OF TENANT IMPROVEMENT ALLOWANCE AT TENANT'S EXPENSE
(a) Cost Approval. Tenant shall pay the excess of the Tenant
Improvement Costs over the amount of the Tenant Improvement Allowance available
to defray such costs. Concurrent with the plan checking referred to in Section
3 of this Work Letter, Landlord shall prepare and submit to Tenant a written
estimate of the amount of the remaining Tenant Improvement Costs and the cost
of the Tenant Improvement Allowance still available to defray such costs (after
preparation of the Preliminary Plans and Working Drawings). Tenant shall
approve or disapprove any such estimate by written notice to Landlord within
three (3) days after receipt thereof. If Tenant fails to notify Landlord of its
disapproval within such three (3) day period, Tenant shall be deemed to
have approved such estimate. If such estimate exceeds the Tenant Improvement
Allowance then still available and Tenant approves such estimate, Tenant's
notice of approval shall include payment to Landlord for the full amount of
such excess. If Tenant disapproves such estimate within the three (3) day
period, Landlord shall not proceed with the Tenant Improvements, but Landlord
and Tenant shall thereafter meet and cooperate to amend the Working Drawings
for the Premises as necessary to obtain Tenant's approval of the cost thereof,
provided that Tenant shall pay any costs resulting from such changes and Tenant
shall be liable for the delay in completing the Tenant Improvements and the
increased costs, if any, resulting from such delay.
(b) Final Costs. Upon completion by Landlord of the Tenant
Improvements, Landlord shall determine the actual final Tenant Improvements
Costs and shall submit a written statement of such amount to Tenant. If any
estimate previously paid by Tenant exceeds the amount due hereunder from Tenant
for such work, such excess shall be refunded to Tenant. On the other hand if any
amount is still due from Tenant for such work, then Tenant shall pay such amount
in full within ten (10) days of receipt of Landlord's statement. (See Workletter
Rider 6)
7. CHANGE ORDERS
Tenant may from time to time request and obtain change orders during the
course of construction provided that: (i) each such request shall be reasonable,
shall be in writing and signed by or on behalf of Tenant, and shall not result
in any structural change in the Building, as reasonably determined by Landlord,
(ii) all additional charges and costs, including without limitation
architectural and engineering costs, construction and materials costs, and
processing costs of any governmental entity shall be the sole and exclusive
obligation of Tenant, and (iii) any resulting delay in the completion of the
Additional Space Improvements shall be deemed a Tenant Delay and in no event
shall extend the Commencement Date of the Lease. Upon Tenant's request for a
change order, Landlord shall as soon as reasonably possible submit to Tenant a
written estimate of the increased or decreased cost and anticipated delay, if
any, attributable to such requested change. Within three (3) days of such
estimated cost adjustment and delay are delivered to Tenant, Tenant shall advise
Landlord whether it wishes to proceed with the change order, and if Tenant
elects to proceed with the change order, Tenant shall remit, concurrently with
Tenant's notice to proceed, the amount of the increased cost, if any,
attributable to such change order. Unless Tenant includes in its initial change
order request that the work in process at the time such request is made be
halted pending approval and execution of the change order, Landlord shall not be
obligated to stop construction of the Additional Space Improvements, whether or
not the change order relates to the work then in process or about to be started.
8. TENANT DELAYS
In no event shall the Extension Commencement Date be extended or
delayed due or attributable to delays due to the fault of Tenant ("Tenant
Delays"). Tenant Delays shall include, but are not limited to, delays caused by
or resulting from any one or more of the following:
(a) Tenant's failure to timely review and reasonably approve the
Working Drawings or to furnish information to Landlord for the preparation by
Landlord of the Working Drawings;
(b) Tenant's request for or use of special materials, finishes or
installments which are not readily available, provided that Landlord shall
notify Tenant in writing that the particular material, finish, or installation
is not readily available promptly upon Landlord's discovery of same;
(c) Delays of any nature, whether or not within Tenant's control,
resulting from Tenant's decision to use any materials, finishes or installations
other than "building standard" materials, finishes or installations;
(d) Change orders requested by Tenant;
(e) Interference by Tenant or by Tenant's agents, employees,
contractors or subcontractors with Landlord's construction activities;
(f) Tenant's failure to approve any other item or perform any other
obligation in accordance with and by the dates specified herein or in the
Construction Contract;
(g) Tenant's requested changes in the Preliminary Plans, Working
Drawings or any other plans and specifications after the approval thereof by
Tenant or submission thereof by Tenant to Landlord;
(h) Tenant's failure to approve written estimates of costs in
accordance with this Work Letter; and
(i) Tenant's obtaining or failure to obtain any necessary governmental
approvals or permits for Tenant's intended use of the Additional Space.
If the Extension Commencement Date of the Lease is delayed by any Tenant Delays,
whether or not within the control of Tenant, then the Extension Commencement
Date and the payment of Rent shall be accelerated by the number of days of such
delay. Landlord shall give Tenant written notice within a reasonable time of any
circumstance that Landlord believes constitutes a Tenant Delay.
*If Tenant has paid for the cost of the Preliminary Plans or the Working
Drawings, Tenant shall be reimbursed for such cost from the Tenant Improvement
Allowance.
C-2
<PAGE> 55
9. TRADE FIXTURES AND EQUIPMENT
Tenant acknowledges and agrees that Tenant is solely responsible for
obtaining, delivering and installing in the Premises and the Additional Space
all necessary and desired furniture, trade fixtures, equipment and other similar
items, and that Landlord shall have no responsibility whatsoever with regard
thereto. Tenant further acknowledges and agrees that neither the Extension
Commencement Date nor the payment of Rent shall be delayed for any period of
time whatsoever due to any delay in the furnishing of the Premises with such
items.
10. FAILURE OF TENANT TO COMPLY
Any failure of Tenant to comply with any of the provisions contained in
this Work Letter within the times for compliance herein set forth shall be
deemed a default under the Lease. In addition to the remedies provided to
Landlord in this Work Letter, upon the occurrence of such a default by Tenant.
Landlord shall have all remedies available at law or equity to a landlord
against a defaulting tenant pursuant to a written lease, including but not
limited to those set forth in the Lease.
C-3
<PAGE> 56
[MAP]
<PAGE> 57
SCHEDULE II
TENANT IMPROVEMENT
COST ESTIMATE SHEET
DATE: JUNE 19, 1991
-------------
TENANT: KOFAX IMAGE PRODUCTS SUITE NO. SQ. FT.
--------------------------- ----------- -----------
PROJECT: IRVINE/SAMMIS VENTURE JOB NO. 3 Jenner Street, Suite 100
-------------------------- --------------------------
Prepared by: T. Redler
----------------------
Xc: Tom Williams/Gary Cropp
-------------------------------
<TABLE>
<CAPTION>
DESCRIPTION QUANTITY UNIT PRICE TOTAL COST
- ----------- ---------- ------------ ----------
<S> <C> <C> <C>
Demolition of partition walls 406 lf. 9.00 lf. $ 3,654.00
Cut-in openings 16 85.00 ea. 1,360.00
Fill-in openings 6 125.00 ea. 750.00
Partition walls @ 9' 70 lf. 21.00 lf. 1,470.00
Demising walls @ 20' 20 lf. 55.00 lf. 1,100.00
Misc. drywall repairs lump sum 500.00
Suspended acoustical ceilings 2,205 sf. 1.00 sf. 2,205.00
Misc. suspended ceiling repairs lump sum 750.00
Provide support for folding partition lump sum 750.00
Interior door removal 23 50.00 ea. 1,150.00
Interior door re-installation 11 85.00 ea. 935.00
Interior door supply & install (3'0" x 8'0") 1 350.00 ea. 350.00
Interior door (fire-rated 6'0" x 8'0" pair) 3 986.00 ea. 2,958.00
Interior folding partition door (18'0" x 9') 1 2,160.00 ea. 2,160.00
Interior window frames 7 180.00 ea. 1,260.00
Interior window glass 132 sf. 6.50 sf. 858.00
Cabinetry 24 lf. 230.00 lf. 5,520.00
Electrical duplexes 13 42.00 ea. 546.00
Dedicated duplexes 3 95.00 ea. 285.00
Plugmolding 245 lf. 9.00 lf. 2,205.00
Title 24 light switches 5 55.00 ea. 275.00
Telephone outlets 6 22.00 ea. 132.00
Partition telephone outlets 5 30.00 ea. 150.00
Firewall electrical wraps 38 10.00 ea. 380.00
Electrical light fixtures 32 95.00 ea. 3,040.00
Single circuit 120V/20A J-box 1 112.00 ea. 112.00
Three circuit 120V/20A J-box 4 225.00 ea. 900.00
Demo duplexes 38 7.00 ea. 266.00
Demo telephone outlets 18 7.00 ea. 126.00
Demo CRT outlets 8 7.00 ea. 56.00
Demo light switches 16 7.00 ea. 112.00
Demo strip fixtures 16 7.00 ea. 112.00
HVAC power to disconnect 10 tn 140.00 tn 1,400.00
Exhaust fan power connection w/switch 1 150.00 ea. 150.00
Electrical design fee lump sum 1,590.00
H.V.A.C.
5 ton heat pumps 2
Exhaust fans 1
Thermostats 2
Thermostats (relocated) 5
Supply air registers 16
Return air registers 7
Supply air registers (relocated) 5
Return air registers (relocated) 1
Control panel 1
Water piping & condensate
Design fee lump sum 15,435.00
Plumbing R&R exst'ng watercloset w/trbo 8 315.00 ea. 2,520.00
St. steel sink w/garb. disp. (dishwshr. N.I.C.) 1 lump sum 800.00
Painting 15,030 sf. .18 sf. 2,705.00
Fire Sprinklers 25 115.00 ea. 2,875.00
Carpeting (excluding furniture removal) 874 sy. 14.25 sy. 12,455.00
Vinyl composition floor tile (exc. furn. rm) 5,580 sf. 1.35 sf. 7,533.00
Blueprint/plan reproduction lump sum 80.00
Architectural fee lump sum 2,800.00
Plancheck & permit fees lump sum 2,700.00
----------
*SUBTOTAL $89,470.00
Contingency 89,470.00 1% 895.00
General contractor's fee 90,365.00 5% 4,518.00
General conditions (Insur. salaries. cleanup) lump sum 4,685.00
----------
**TOTAL CONSTRUCTION COSTS 94,833.00
</TABLE>
1
<PAGE> 58
DATE: JUNE 19, 1991
-------------
TENANT: KOFAX IMAGE PRODUCTS SUITE NO. SQ. FT.
--------------------------- ----------- -----------
PROJECT: IRVINE/SAMMIS VENTURE JOB NO. 3 Jenner Street, Suite 100
-------------------------- --------------------------
Prepared by: T. Redler
----------------------
Xc: Tom Williams/Gary Cropp
-------------------------------
<TABLE>
<CAPTION>
DESCRIPTION QUANTITY UNIT PRICE TOTAL COST
- ----------- ---------- ------------ -----------
<S> <C> <C> <C>
Original cost for labor and material only $ 89,470.00
Added cost for construction in (3) phases 13,421.00
-----------
SUBTOTAL $102,891.00
Contingency 102,891.00 1% 1,029.00
General Contractor's fee 103,920.00 5% 5,196.00
General Conditions (insur. salaries, cleanup) lump sum 5,801.00
-----------
TOTAL CONSTRUCTION COST $114,917.00
Additional options:
a) Complete painting of adjoining suite 2,360 sf. .18 sf. 425.00
b) Complete air balance rms. #112, #149, #150 and #151
c) Dual thermostatic control rms. #138, #140 lump sum 175.00
c.2.) 1.5 ton HVAC unit lump sum 3,545.00
d) Carpet replacement @ entry & corridor 189 sy. 14.25 sy. 2,693.00
e) Cost for added partitions 20 lf. 18.00 lf. 360.00
f) Installation of flush valves to exs'tng restrooms 8 135.00 ea. 1,080.00
f.2.) Two additional flush valve toilets 2 450.00 ea. 900.00
g) Exterior sign removal & repainting lump sum 150.00
h) New exterior sign installation "Kofax" lump sum 571.00
i) Increased allowance for folding partition door lump sum 2,500.00
j) Demolition of partition walls, room #105 18 lf. 9.00 lf. 162.00
Associated drywall repair lump sum 100.00
-----------
Subtotal Options Cost $ 12,821.00
General Contractor's fee 12,821.00 5% 641.05
-----------
Total Options Cost $ 13,462.05
Total Construction Cost 114,917.00
-----------
GRAND TOTAL OPTIONS AND CONSTRUCTION COST $128,379.05
===========
</TABLE>
2
<PAGE> 59
Schedule III
Quality of Construction Material Letter
PROJECT: Irvine/Sammis Venture
Irvine, California
REFERENCE: 3 Jenner
DESCRIPTION OF ITEMS
The following listed items represent the quality of materials to be
provided in the Preliminary Cost Estimate provided by Landlord for the Tenant
Improvements.
1. DEMISING PARTITION
6", 20 gauge steel studs at 16" o.c. with 5/8" type "x" gypsum board
each side. Installed from slab to structure above. R-19 batt
insulation in wall cavity.
2. INTERIOR PARTITION
3 5/8", 25 gauge steel studs at 24" o.c. with 5/8" type "x" gypsum
board each side installed from slab to underside of ceiling grid with
seismic bracing per City of Irvine Building Code.
Office to warehouse interior partition: 3-5/8" 25 gauge steel studs at
24" on center with 5/8" type "x" gypsum board each side installed from
slab to 6" above ceiling. R-11 batt insulation in cavity.
3. SINGLE INTERIOR DOOR
1-3/4" solid core : Legacy "Mendicino oak" 3'-0 x 8'-0 set in 3'-0 x
8'-0" Timely prefinished metal section frame door. Latch shall be
Schlage D-10-S-626 "Olympiad" lever design in brushed chrome finish,
or equal.
4. ACOUSTICAL CEILING
2'x 4' white enameled steel grid, 800 series by Chicago Metallic (or
equal). Ceiling tile shall be Armstrong 2 x 4 lay-in 755B natural
fissured. Installed at 9'-0" AFF.
5. LIGHT FIXTURES
2' x 4' recessed fluorescent light fixture with 3 lamps, energy saving
ballast, and acrylic prismatic lens. Lithonia #2GT 440 RW A-12 277ES
(or equal).
6. Two (2) gang switches with ivory plastic cover plate.
7. DUPLEX OUTLETS
120 volt - 15 amp receptacle with ivory cover plate.
8. TELEPHONE OUTLET
Standard mudring without cover plate, conduit to 6" above ceiling.
9. EXIT SIGN
Exit signs as required by City. Illuminated with battery back up.
10. TELEPHONE BACKBOARD
2' x 4' or 4' x 8' plywood backboard with one (1) dedicated duplex
outlet and 1" conduit feed from telephone terminal board.
<PAGE> 60
11. ELECTRICAL SERVICE
120/208 to 277/480 available.
12. HEATING VENTILATION AND AIR CONDITIONING
Water source heat pump units with economizers and isolators. One
thermostat control per unit. Distribution through 2 x 2 louvreface
adjustable grill supply and perforated face diffuser.
13. FIRE EXTINGUISHER
Sampson model 99 fire cabinet with 2A 10BC minimum rated fire
extinguisher or equal.
14. SPRINKLER HEADS
Semi-recessed chrome heads in improved office area. Standard heads all
other areas.
15. COFFEE BAR (if planned)
Plastic laminate top on base cabinet with plastic laminate covered
doors over storage compartments. Stainless steel sink. 15" x 17" Elkay
#PSR-1517 with Elkay #LK2423 "Hi-Arc" faucet.
16. RESTROOM
"Sloan valve" type toilet meeting handicap standards. Wall mounted
sink(s).
Accessories: Handicap approved grab bars, toilet paper holder, 24 x 36
mirror over sink. Exhaust fan wired to wall mounted light fixture over
mirror.
Flooring shall be DAL-tile "Keystone" with color coordinate base to 4"
A.F.F.
Wet walls shall have F.R.P. to 48" above finished floor and water
based enamel paint to ceiling.
Ceiling to be 5/8" gyp board on 6" 20 gauge steel studs at 24" o.c.
with R-19 insulation at 8'2" above finished floor.
17. FLOOR COVERING
Office: Designweave "Dana Point" 32 oz. cut pile carpet. Installed
over 5/16" Nova cushion pad. Armstrong "Excelon 1/8". Vinyl
composition tile where specified.
18. BASE
2 1/2" Burke rubber base, color per building standard.
19. PAINT
Standard paint Frazee "Vinyl-Lux" latex paint with Eggshell finish. 2
coats to cover all walls.
20. WAREHOUSE LIGHTING
8'-0" strip fluorescent light fixtures for minimum warehouse lighting.
21. WINDOW COVERINGS
Miniblinds. Levolor "Riviera" #111 cotton white (exterior windows
only).
<PAGE> 61
WORK LETTER RIDER 6
(Amortization of Excess Costs)
The capitalized terms used and not otherwise defined herein shall have the
same definitions as set forth in the Lease to which the Work Letter relates. The
provisions of this Work Letter Rider shall supersede any inconsistent or
conflicting provisions of the Work Letter.
TO BE ADDED FOLLOWING SECTION 6(b):
(c) AMORTIZATION OF EXCESS COSTS. Provided that no Event of Default
under the Lease has occurred and is continuing, Tenant may elect, by
written notice delivered to Landlord within the time that Tenant is to pay
to Landlord any excess Tenant Improvement Costs, to have such excess costs
up to a maximum amount of Seventy Thousand Dollars ($70,000 ) amortized
over the initial Term of the Lease at a rate of twelve percent (12%) per
annum ("Amortization Rate"), with all such amortized amounts paid by Tenant
to Landlord as Additional Rent at the time and in the manner required for
Tenant to pay Monthly Rent as set forth in the Lease. Upon the occurrence
of any Event of Default under the Lease as amended, which is not cured
within any applicable grace and cure period as set forth in the Lease, as
amended, Landlord shall have the right to accelerate the remaining
principal balance of excess Tenant Improvement Costs amortized hereunder
and to require that the entire amount thereof be immediately paid in full
by Tenant. Should Tenant fail to pay such remaining principal amount within
five (5) business days after any written notice of such election by
Landlord, such principal amount shall thereafter bear interest at the
greater of the Amortization Rate or the Applicable Rate until paid.
<PAGE> 62
EXHIBIT "3"
Option to Lease Additional Vacant Space
THIS Exhibit "3" is attached to and made a part of that Third Amendment
to Lease ("Amendment") dated August 22, 1991 between THE IRVINE COMPANY, a
Michigan corporation, as "Landlord" and KOFAX IMAGE PRODUCTS, a California
corporation, as "Tenant", for the Premises known as 3 Jenner Street, Suite 100 &
150, Irvine, California. The capitalized terms used and not otherwise defined
herein shall have the same definitions as set forth in the Lease. The provisions
of this Exhibit "3" shall supersede any inconsistent or conflicting provisions
of the Amendment.
Provided no Event of Default has occurred and is continuing, Tenant
shall have the option (the "Option") to lease that certain space consisting of
approximately Five Thousand Eight Hundred Seventy-Two (5,872) square feet and
described on Schedule 1 to this Exhibit "3" (the "Option Space"), upon the
following terms and conditions:
(i) Tenant must exercise the Option by written notice to Landlord (the
"Option Notice") given to Landlord on or before February 15, 1993; provided,
however, that if Landlord shall obtain a "Letter of Intent" (as hereinafter
defined) from the existing tenant of the Option Space during the period between
November 15, 1992 and February 15, 1993, then Landlord shall give written notice
thereof to Tenant and, on or before the first to occur of: (i) thirty (30) days
from the giving of Landlord's notice (but no sooner than January 1, 1993), or
(ii) February 15, 1993, Tenant shall be obligated to deliver the Option Notice
to Landlord or lose the Option. As used herein, "Letter of Intent" shall mean a
non-binding letter of intent, or offer to lease the Option Space, executed by
the existing tenant thereof, or its broker or representative, setting forth the
terms and conditions on which said tenant would be willing to lease the Option
Space from and after April 30, 1993. If Tenant fails or elects not to exercise
the Option as above-provided, the option shall automatically terminate without
further action of the parties, and Landlord shall be free to lease the Option
Space to any third party upon such terms and conditions as Landlord desires.
(ii) If Tenant timely and properly exercises the Option, Tenant shall,
within fifteen (15) days after receipt from Landlord, enter into a new lease (on
Landlord's then current standard form for the Project) or an amendment to this
Lease for the Option Space, which new lease or amendment shall incorporate the
terms for the lease of the Option Space set forth herein. If Tenant fails to
execute and deliver said new lease or amendment within said fifteen (15) days,
then the Option shall automatically terminate without further action of the
parties and Landlord shall be free to lease the Option Space to any third party
upon such terms and conditions as Landlord desires.
(iii) If Tenant properly and timely exercises the Option, Tenant's
lease of the Option Space shall commence as of the date of substantial
completion of the Option Space Tenant Improvements (the "Option Space
Commencement Date") and shall expire on November 15, 1994. The parties
anticipate that the Option Space Commencement Date shall occur on May 15, 1993.
Tenant acknowledges that the existing tenant's lease for the Option Space
currently expires on April 30, 1993, and if for any reason Landlord cannot
deliver possession of the Option Space to Tenant on the Option Space
Commencement Date, then Landlord shall not be subject to any liability therefor,
nor shall such failure affect the validity
1.
<PAGE> 63
of this Lease or Tenant's obligation to lease the Option Space hereunder, but in
such case Tenant shall not be obligated to pay Monthly Rent or Additional Rent
for the Option Space until possession of the option space is tendered to Tenant
by Landlord; provided, however, if Landlord shall not have delivered possession
of the Option Space to Tenant with the Option Space Tenant Improvements
substantially completed on or before ninety (90) days from and after the Option
Space Commencement Date, plus periods due to Tenant Delays, then Tenant may, at
its option, by written notice given to Landlord within fifteen (15) days
thereafter, terminate the entire Lease as provided and subject to the terms and
conditions of Paragraph 1 of Exhibit "4" to this Lease, except that Tenant shall
not be obligated to pay that portion of the Termination Fee set forth in
Paragraph 3(c) of said Exhibit "4".
(iv) Tenant's Monthly Rent obligation under this Lease shall be
increased by $.66 per square foot of the Option Space (or Three Thousand Eight
Hundred Seventy-Five Dollars and Fifty-Two Cents ($3,875.52)) commencing on the
Option Space Commencement Date.
(v) Effective as of the Option Space Commencement Date, the number
of vehicle parking spaces shall be increased to one hundred fifty-five (155),
and the Tenant's Percentage (as set forth in Paragraph (q) of the Lease Summary)
shall be increased to 26.83%.
(vi) After Tenant's exercise of the Option, Landlord shall build
out the Option Space Tenant Improvements (as defined below), with a tenant
allowance not to exceed $5,872.00. Further, any excess tenant improvement costs
for such improvements, not to exceed Eleven Thousand Seven Hundred Forty-Four
Dollars ($11,744.00), shall be paid for by Landlord but fully amortized (at a
per annum interest rate of 12%) and paid for by Tenant over the remaining Term
of the Lease. As used herein, "Option Space Tenant Improvements" shall mean
removal of interior walls in the Option Space to be specified, demolition of
certain fixtures in the Option Space to be specified, repainting, recarpeting
and installation of interior office windows. Landlord shall build out the Option
Space Tenant Improvements in a good and workmanlike manner using a licensed,
reputable contractor, and in accordance with all applicable codes. The Option
Space Tenant Improvements shall be of like kind and quality with the Additional
Space Improvements (as defined in Section III.C. of this Amendment), and the
Option Space Commencement Date shall not be delayed by any requests by Tenant
for over-standard materials or finishes or by unreasonable interference with
Landlord's contractor. At the time of Tenant's exercise of the Option, the
parties shall mutually agree on a build-out schedule for the Option Space Tenant
Improvements with a completion date no later than May 15, 1993.
(vii) If Tenant properly and timely exercises the Option, Tenant's
Option to Terminate set forth in Exhibit "4" shall not be exercisable by Tenant
during the initial six (6) months from and after the Option Space Commencement
Date (except as specifically provided in Section (iii) above). Further, an
additional Termination Fee (in addition to the Fee set forth in Paragraph 3 of
Exhibit "4") shall be payable to Landlord if Tenant exercises its Option to
Terminate from and after six (6) months after the Option Space Commencement
Date, which additional fee shall be the sum of: (a) any unamortized excess
tenant improvement costs per Section (vi) above, plus (b) the product of $5,872
x 1/18 x (18 - the number of months that the Lease terminates after the option
Space Commencement Date).
(viii) Tenant's Option is personal to Tenant and may not be
exercised by or assigned to any person or entity other than Tenant, and shall
terminate and be of no further force or effect upon any subsequent assignment of
the Lease or subletting of more than fifty percent (50%) of the square footage
of the Premises.
2.
<PAGE> 64
SCHEDULE 1
EXHIBIT 3
ADDITIONAL VACANT SPACE
5 JENNER SUITE 190
5,862 S.F.
[MAP]
<PAGE> 65
Exhibit "4"
OPTION TO TERMINATE LEASE
THIS EXHIBIT "4" is attached to and made a part of that certain Third
Amendment to Lease (the "Amendment") dated August 22, 1991, between THE IRVINE
COMPANY, a Michigan corporation, as Landlord and KOFAX IMAGE PRODUCTS, a
California corporation, as Tenant. The capitalized terms used and not otherwise
defined herein shall have the same definitions as set forth in the Amendment.
The provisions of this Lease Rider shall supercede any inconsistent or
conflicting provisions of the Amendment.
1. Option To Terminate. Provided no Event of Default has occurred and is
continuing, Tenant shall have an ongoing option to terminate the Lease ("Option
to Terminate" or "Option"), on the terms and conditions herein set forth. The
option shall be exercisable by Tenant on the express conditions that, at the
time of the exercise of such Option and thereafter at all times prior to the
Termination Date, an Event of Default shall not have occurred and be continuing
under the Lease. If Tenant properly exercises the Option, "Term", as used herein
and in the Lease, shall be deemed to include the period from the exercise of the
Option through and including the Termination Date.
2. Exercise of option. Subject to the conditions set forth in this Lease
Exhibit, Tenant may exercise the option by delivering written notice of such
exercise to Landlord at any time during the Term after the twelfth (12th) month
following the Extension Commencement Date. The Lease shall thereafter terminate
on that date (the "Termination Date") which is ninety (90) days following
Tenant's giving of a valid notice of exercise of the Option.
3. Termination Fee. If Tenant exercises the Option, Tenant shall pay to Landlord
a fee (the "Termination Fee") equal to the sum of the amounts described in
subparagraphs (a) through (c) below:
(a) The unamortized cost of any excess Tenant Improvement
Costs (as defined and provided in Paragraph 6 of the Work Letter and in
Work Letter Rider 6) remaining unamortized as of the Termination Date.
(b) An amount to reimburse Landlord for a portion of its
brokerage commissions paid, determined as follows
<TABLE>
<CAPTION>
Month During Which Commission
Termination Date Occurs Reimbursement
----------------------- -------------
<S> <C>
16 - 24 [$436.59 x (24-M) + $4,365.86]
x (1.01)M
25 - 36 [$363.82 x (36-M)] x (1.01)M
</TABLE>
Where: M = Number of months from November 16, 1991 through month
when Termination Date occurs.
1.
<PAGE> 66
(c) An amount determined as follows:
<TABLE>
<CAPTION>
Termination Date occurs: Fee Per Month:
------------------------ --------------
<S> <C>
16 - 18 $0.10 x P.S.F. x N
19 - 24 $0.05 x P.S.F. x N
25 - 36 $0.02 x P.S.F. x N
</TABLE>
Where: N = Number of months from the Extension Commencement Date
through the month when the Termination Date occurs.
P.S.F. = Gross square footage of the Premises (including the Option
Space if Tenant has exercised the Option as provided in
Exhibit "3" and is occupying the Option Space).
The Termination Fee shall be paid in cash to Landlord upon the
Termination Date, and the Lease shall not be terminated unless and until the
Termination Fee is paid to Landlord. Notwithstanding the foregoing, in the event
that Landlord and Tenant shall execute, at any time prior to the Termination
Date, a new lease for space elsewhere in "Landlord's portfolio" containing at
least the same square footage as the Premises, then that portion of the
Termination Fee represented by subparagraphs 3(b) and 3(c) above shall be waived
by Landlord as part of such new lease with Tenant. As used herein, "Landlord's
portfolio" shall mean space in projects wholly owned or owned in joint venture
by Landlord.
4. Option Is Personal To Tenant. The Option is personal to Tenant.
If Tenant subleases more than fifty percent (50%) of the square footage of the
Premises or assigns or otherwise transfers any interest of the Lease prior to
the exercise of the Option, the Option shall lapse.
2.
<PAGE> 67
EXHIBIT 5
OPTION TO EXTEND TERM
(Fair Market Value Adjustment)
This Exhibit is attached to and made part of that certain Third
Amendment to Lease (the "Amendment") dated August 22 between THE IRVINE COMPANY,
a Michigan corporation, as Landlord, and KOFAX IMAGE PRODUCTS, a California
corporation, as Tenant. The capitalized terms used and not otherwise defined
herein shall have the same definitions as set forth in the Lease. The provisions
of this Lease Rider shall supersede any inconsistent or conflicting provisions
of the Lease.
A. OPTION(S) TO EXTEND TERM.
1. Landlord hereby grants to Tenant one (l) option(s) (the "Option(s)") to
extend the Term of the Lease for additional consecutive term(s) of three (3)
years and zero (0) months each (each is called an "Extension"), on the same
terms and conditions as set forth in the Lease, except the Monthly Rent shall be
the amount determined as set forth below. Each Option shall be exercised only by
written notice delivered to Landlord at least one hundred twenty (120) days
before the expiration of the initial Term of the Lease or the immediately
preceding Extension, as the case may be. If Tenant fails to deliver Landlord
written notice of the exercise of an option within the time period prescribed
above, such Option and any succeeding Options shall lapse, and there shall be no
further right to extend the Term of the Lease. Each Option shall be exercisable
by Tenant on the express conditions that (i) at the time of the exercise of such
Option, and thereafter at all times prior to the commencement of such Extension,
an Event of Default shall not have occurred and be continuing under the Lease
and (ii) Tenant has not been ten (10) or more days late in the payment of Rent
more than a total of three (3) times during the Term of the Lease. If Tenant
properly exercises an Option, "Term", as used herein and in the Lease, shall be
deemed to include the applicable Extension.
2. PERSONAL OPTIONS.
Each option is personal to Tenant. If Tenant subleases more than fifty
percent (50%) of the square footage of the Premises or assigns or otherwise
transfers any interest under the Lease prior to the exercise of an Option, such
option and any succeeding Options shall lapse. If Tenant subleases more than
fifty percent (50%) of the square footage of the Premises or assigns or
otherwise transfers any interest of Tenant under the Lease after the exercise of
an Option but prior to the commencement of the Extension to such option, such
Option and any succeeding Options shall lapse and the Term of the Lease shall
expire as if such Option were not exercised. If Tenant subleases more than fifty
percent (50%) of the square footage of the Premises or assigns or otherwise
transfers any interest of Tenant under the Lease after the exercise of an Option
and after the commencement of the Extension related to such option, then the
Term of the Lease shall expire upon the expiration of the Extension during which
such sublease or transfer occurred and only the succeeding Options shall lapse.
B. CALCULATION OF RENT.
The Monthly Rent during each Extension shall be increased, as of the
commencement of each Extension (each is called a "Rental Adjustment Date") to
ninety-five percent (95%) of the "Fair Market Value" of the Premises, determined
in the following manner: Not later than one hundred (100) days prior to any
applicable Rental Adjustment Date, Landlord and Tenant shall met in an effort to
negotiate, in good faith, the Fair Market Value of the Premises as of such
Rental Adjustment Date. If Landlord and Tenant have not agreed upon the Fair
Market Value of the Premises at least ninety (90) days prior to the
<PAGE> 68
applicable Rental Adjustment Date, the Fair Market Value shall be determined by
the following appraisal method:
(i) If Landlord and Tenant are not able to agree upon the Fair Market
Value of the Premises within the time period described above, then Landlord and
Tenant shall attempt to agree in good faith upon a single appraiser not later
than seventy-five (75) days prior to the applicable Rental Adjustment Date. If
Landlord and Tenant are unable to agree upon a single appraiser within such time
period, then Landlord and Tenant shall each appoint one appraiser not later than
sixty-five (65) days prior to the applicable Rental Adjustment Date. Within (10)
days thereafter, the two appointed appraisers shall appoint a third appraiser.
If either Landlord or Tenant fails to appoint its appraiser within the
prescribed time period, the single appraiser appointed shall determine the Fair
Market Value of the Premises. If both parties fail to appoint appraisers within
the prescribed time periods, then the first appraiser thereafter selected by a
party shall determine the Fair Market Value of the Premises. Each party shall
bear the cost of its own appraiser and the parties shall share equally the cost
of the single or third appraiser if applicable. All appraisers shall have at
least five (5) years' experience in the appraisal of commercial/industrial real
property in the area in which the Premises are located and shall be members of
professional organizations such as MAI or its equivalent.
(ii) For the purposes of such appraisal, the term "Fair Market Value"
shall mean the price that a ready and willing tenant would pay, as of the
applicable Rental Adjustment Date, as monthly rent, to a ready and willing
landlord of property comparable to the Premises if such property were exposed
for a lease of three (3) years with no options, on the open market for a
reasonable period of time, and taking into account all of the purposes for which
such property may be used. If a single appraiser is chosen, then such appraiser
shall determine the Fair Market Value of the Premises. Otherwise, the Fair
Market Value of the Premises shall be the arithmetic average of the two (2) of
the three (3) appraisals which are closest in amount, and the third appraisal
shall be disregarded. Landlord and Tenant shall instruct the appraiser(s) to
complete their determination of the Fair Market Value not later than thirty (30)
days prior to the applicable Rental Adjustment Date. If the Fair Market Value is
not determined prior to the applicable Rental Adjustment Date, then Tenant shall
continue to pay to Landlord the Monthly Rent applicable to the Premises
immediately prior to such Rental Adjustment Date until the Fair Market Value is
determined. When the Fair Market Value of the Premises is determined, Landlord
shall deliver notice thereof to Tenant, and Tenant shall pay to Landlord, within
(10) days after receipt of such notice, the difference between the Monthly Rent
actually paid by Tenant to Landlord and the new Monthly Rent determined
hereunder. In no event shall the Monthly Rent be reduced below the Monthly Rent
applicable to the Premises immediately prior to the applicable Rental Adjustment
Date.
2
<PAGE> 69
EXHIBIT "6" Page 1 of 3
IRVINE INDUSTRIAL COMPANY
ENVIRONMENTAL QUESTIONNAIRE AND DISCLOSURE STATEMENT
The purpose of this form is to obtain Information regarding the use of
hazardous substances on Irvine Industrial Company property. Prospective tenants
should answer the questions in light of their proposed operations on the
promises. Existing tenants should answer the questions as they relate to
on-going operations on the promises and should update any Information previously
submitted. if additional space Is needed to answer the questions, you may attach
separate sheets of paper to this form.
Your cooperation in this matter Is appreciated. Any questions should be
directed to, and when completed.. the form should be mailed to:
Asset Manager
The Sammis Company
6 Jenner Street, Suite 230
Attn: Irvine, California 92718
Phone: (714) 727-2011
1. GENERAL INFORMATION
Name of Responding Company. Kofax Image Products
Check the Applicable Status:
Prospective Tenant [ ] Existing Tenant [X]
Mailing Address: 3 Jenner Street
Irvine, California 92718
Contact Person and Title: Ron Fikert, Vice President
Telephone Number: (714) 727-1733
Address of Leased Promises: 3 Jenner Street, Irvine, California, 92718
Length of Lease Term: three (3) years
Describe the proposed operations to take place on the property, Including
principal products manufactured or services to be conducted. Existing
tenants should describe any proposed changes to on-going operations.
Research, development and test of add-in boards for PCs.
2. STORAGE OF HAZARDOUS MATERIALS
2.1 Will any hazardous materials be used or stored on-site?
Wastes Yes [ ] No [X]
Chemical Products Yes [ ] No [X]
2.2 Attach the list of any hazardous materials to be used or stored, the
quantities that will be on-site at any given time, and the location
and method of storage (e.g., 55 gallon drums on concrete pad).
3. STORAGE TANKS & SUMPS
3.1 Is any above or below ground storage of gasoline. diesel. or other
hazardous substances In tanks or sumps proposed or currently conducted
on the promises?
Yes [ ] No [X]
If yes, describe the materials to be stored, and the type, size and
construction of the sump or tank. Attach copies of any permits
obtained for the storage of such substances.
----------------------------------------------------------------------
----------------------------------------------------------------------
3.2 Have any of the tanks or sumps been Inspected or tested for leakage?
Yes [ ] No [ ]
If so, attach the results.
3.3 Have any spills or leaks occurred from such tanks or sumps?
Yes [ ] No [ ]
If so, describe.
3.4 Were any regulatory agencies notified of the spill or leak?
Yes [ ] No [ ]
If so, attach copies of any spill reports filed, any clearance letters
or other correspondence from regulatory agencies relating to the spill
or leak.
3.5 Have any underground storage tanks or sumps been taken out of service
or removed?
Yes [ ] No [ ]
If yes, attach copies of any closure permits and clearance obtained
from regulatory agencies relating to closure and removal of such
tanks.
<PAGE> 70
EXHIBIT "6" Page 2 of 3
4. SPILLS
4.1 During the past year, have any spills occurred on the premises?
Yes [ ] No [X]
If so, please describe the spill and attach the results of any testing
conducted to determine the extent of such spills.
4.2 Were any agencies notified in connection with such spills?
Yes [ ] No [ ]
If so, attach copies of any spill reports or other correspondence with
regulatory agencies.
4.3 Were any clean-up actions undertaken in connection with the spills?
Yes [ ] No [ ]
If so, briefly describe the actions taken. Attach copies of any
clearance letters obtained from any regulatory agencies involved and
the results of any final soil or groundwater sampling done upon
completion of the clean-up work.
----------------------------------------------------------------------
----------------------------------------------------------------------
5. WASTE MANAGEMENT
5.1 Has your company been issued an EPA Hazardous Waste Generator I.D.
Number?
Yes [ ] No [X]
5.2 Has your company filed a biennial report as a hazardous waste
generator?
Yes [ ] No [ ]
If so, attach a copy of the most recent report filed.
5.3 Attach the list of the hazardous waste, if any, generated or to be
generated at the premises, its hazard class and the quantity generated
on a monthly basis.
5.4 Describe the method(s) of disposal for each waste. Indicate where and
how often disposal will take place.
----------------------------------------------------------------------
----------------------------------------------------------------------
5.5 Indicate the name of the person(s) responsible for maintaining copies
of hazardous waste manifests completed for off-site shipments of
hazardous waste.
5.6 Is any treatment or processing of hazardous wastes currently conducted
or proposed to be conducted at the premises:
Yes [ ] No [ ]
If yes, please describe any existing or proposed treatment methods.
----------------------------------------------------------------------
----------------------------------------------------------------------
5.7 Attach copies of any hazardous waste permits or licenses issued to
your company with respect to its operations on the premises.
6. WASTEWATER TREATMENT/DISCHARGE
6.1 Do you discharge wastewater to:
[ ] storm drain? [ ] sewer?
[ ] surface water? [X] no industrial discharge
6.2 Is your wastewater treated before discharge?
Yes [ ] No [ ]
If yes, describe the type of treatment conducted.
----------------------------------------------------------------------
6.3 Attach copies of any wastewater discharge permits issued to your
company with respect to its operations on the premises.
7. AIR DISCHARGES
7.1 Do you have any air filtration systems or stacks that discharge into
the air?
Yes [ ] No [X]
2
<PAGE> 71
EXHIBIT "6" Page 3 of 3
7.2 Do you operate any of the following types of equipment, or any other
equipment requiring an air emissions permit?
[ ] Spray booth
[ ] Dip tank
[ ] Drying oven
[ ] Incinerator
[ ] Other (Please Describe)
[X] No Equipment Requiring Air Permits
7.3 Are air emissions from your operations monitored?
Yes [ ] No [X]
If so, indicate the frequency of monitoring and a description of the
monitoring results.
----------------------------------------------------------------------
7.4 Attach copies of any air emissions permits pertaining to your
operations on the premises.
8. HAZARDOUS MATERIALS DISCLOSURES
8.1 Does your company handle hazardous materials in a quantity equal to or
exceeding an aggregate of 500 pounds, 55 gallons, or 200 cubic feet?
Yes [ ] No [X]
8.2 Has your company prepared a hazardous materials management plan
("business plan") pursuant to Orange County Fire Department
requirements?
Yes [ ] No [X]
If so, attach a copy of the business plan.
8.3 Are any of the chemicals used in your operations regulated under
Proposition 65?
Yes [X] No [ ]
If so, describe the actions taken, or proposed actions to be taken, to
comply with Proposition 65 requirements.
Requested a copy of Prop. 65 with requirements for compliance.
8.4 Describe the procedures followed to comply with OSHA Hazard
Communication Standard requirements.
To be included in Injury & Illness Prevention Program.
9. ENFORCEMENT ACTIONS, COMPLAINTS
9.1 Has your company ever been subject to any agency enforcement actions,
administrative orders, or consent decrees?
Yes [ ] No [X]
It so, describe the actions and any continuing compliance obligations
imposed as a result of these actions.
----------------------------------------------------------------------
9.2 Has your company ever received requests for information, notice or
demand letters, or any other inquiries regarding its operations?
Yes [ ] No [X]
9.3 Have there ever been, or are there now pending, any lawsuits against
the company regarding any environmental or health and safety concerns?
Yes [ ] No [X]
9.4 Has an environmental audit ever been conducted at your company's
current facility?
Yes [ ] No [X]
If so, discuss the results of the audit.
----------------------------------------------------------------------
9.5 Have there been any problems or complaints from neighbors at the
company's current facility?
Yes [ ] No [X]
Kofax Image Products
- ------------------------------------------
Company
By: /s/ [SIG]
---------------------------------------
Title: Vice President
---------------------------------
Date: 9-6-91
----------------------------
3
<PAGE> 72
FOURTH AMENDMENT TO LEASE
I. PARTIES AND DATE.
This Fourth Amendment to Lease (the "Fourth Amendment") dated March 15,
1994, is by and between THE IRVINE COMPANY, a Michigan corporation ("Landlord"),
and KOFAX IMAGE PRODUCTS, a California corporation ("Tenant").
II. RECITALS.
Landlord and Tenant entered into a lease dated as of March 31, 1988, as
amended by First Amendment to Lease dated March 7, 1990, by Second Amendment to
Lease dated May 4, 1990 wherein an additional 5,735 square feet was added, and
by Third Amendment to Lease dated August 22, 1991 (the "Third Amendment"),
wherein an additional 7,705 square feet was added (as amended, the "Lease")
concerning certain premises ("Premises") located at 3 Jenner Street, Suites 100
and 150, Irvine, California.
Landlord and Tenant each desire to modify the Lease to add Suites 165 and
170 comprising 5,124 square feet of space in a building located at 5 Jenner
Street, Irvine, California, extend the Lease Term, adjust the Monthly Rent, and
make such other modifications as are set forth in "III. MODIFICATIONS" next
below. For purposes of this Fourth Amendment, the existing premises located at 3
Jenner Street shall be referred to as the "3 Jenner Premises" and the expansion
premises located at 5 Jenner Street shall be referred to as the "5 Jenner
Premises."
III. MODIFICATIONS.
A. Existing Lease Modifications. It is understood and agreed to by the
parties herein that the provisions of this Fourth Amendment shall supersede and
cancel in their entirety Section III, Paragraphs B, D, E, F and G of the Third
Amendment.
B. Building. Effective as of the "Commencement Date for the 5 Jenner
Premises" (as defined in the Work Letter attached hereto as Exhibit X), all
references to the "Building" in the Lease shall be amended to refer to the two
buildings located at 3 Jenner Street and 5 Jenner Street, Irvine, California,
either collectively or individually as the context may reasonably require.
C. Lease Summary. The Lease Summary is hereby amended as follows:
1. Subparagraph (c) is hereby deleted in its entirety and the
following shall be substituted in lieu thereof:
"(c) Address of Landlord: c/o The O'Donnell Group
One Technology Drive, Suite F-207
Irvine, CA 92718
Attn: Property Manager
2. Effective as of the Commencement Date for the 5 Jenner Premises,
Subparagraph (g) shall be deleted in its entirety and the following shall
be substituted in lieu thereof:
"(g) Premises Square Footage: Approximately 38,199 comprising
33,075 square feet at 3 Jenner Street and 5,124 square feet at 5
Jenner Street."
3. Effective as of the Commencement Date for the 5 Jenner Premises,
Subparagraph (h) shall be amended by adding the following:
"and 5 Jenner Street, Suites 165 and 170, Irvine, CA 92718"
1
<PAGE> 73
4. Effective as of the Commencement Date for the 5 Jenner Premises,
Subparagraph (i) shall be deleted in its entirety and the following shall
be substituted in lieu thereof:
"(i) 3 Jenner Building Square Footage: 33,075
5 Jenner Building Square Footage: 42,078"
5. Subparagraph (j) is hereby amended by adding the following:
"Anticipated Commencement Date for the 5 Jenner Premises: May 1,
1994."
6. Subparagraph (k) is hereby deleted in its entirety and the
following shall be substituted in lieu thereof:
"(k) Term: The Term of this Lease shall expire at midnight on
January 31, 1997."
7. Effective as of the Commencement Date for the 5 Jenner Premises,
Subparagraph (l) (and Exhibit "E" to the Lease) shall be deleted in their
entirety, and the following shall be substituted in lieu thereof:
"(l) Monthly Rent: $25,365.06 Adjustments to Monthly Rent:
Commencing on November 16, 1994, the Monthly Rent shall be $26,357.31"
8. Subparagraph (m) is hereby deleted and the following shall be
substituted in lieu thereof:
"(m) Security Deposit: $26,357.31"
9. Effective as of the Commencement Date for the 5 Jenner Premises,
Subparagraph (q) shall be deleted in its entirety and the following shall
be substituted in lieu thereof:
"(q) 26.33%"
D. Description of Premises. Effective as of the Commencement Date for the 5
Jenner Premises, Exhibit A to the Lease is deleted and is substituted by the
Revised Exhibit A attached to this Fourth Amendment.
E. Security Deposit. Concurrently with Tenant's delivery of this Fourth
Amendment, Tenant shall deliver the sum of Three Thousand Eight Hundred
Eighty-Three Dollars and Thirty-One Cents ($3,883.31) to Landlord, which sum
shall be added to the Security Deposit presently being held by Landlord in
accordance with Paragraph 7 of the Lease.
F. Option to Extend Term. Exhibit 5 to the Third Amendment entitled "Option
to Extend Term" shall remain in full force and effect (granting Tenant the right
to extend the Term beyond January 31, 1997 as therein provided), except that:
(i) the first sentence of Paragraph A.1. is hereby amended by deleting "three
(3) years and zero (0) months" as the "Extension" period and substituting "two
(2) years and zero (0) months" in lieu thereof; and (ii) the first sentence of
Paragraph B(ii) is hereby amended by deleting the interlineated text consisting
of the words "a lease of three (3) years with no options" and substituting "a
lease of two (2) years with no options" in lieu thereof.
G. Right to Terminate. Exhibit 4 to the Third Amendment entitled "Option to
Terminate Lease" is hereby canceled in its entirety. Landlord agrees that Tenant
shall have the following new right to terminate this Lease:
Right to Terminate. Provided no Event of Default has occurred and is
continuing, Tenant shall have a right to terminate the Lease effective as
of any date on or after January 31, 1996 by delivering not less than ninety
(90) days prior written notice of such termination to Landlord. All rental
and other costs due under the Lease shall be due and payable by Tenant to
Landlord through the effective date of any such
2
<PAGE> 74
termination. In addition, should Tenant exercise the foregoing right to
terminate, Tenant shall pay to Landlord, concurrently with its delivery of
the aforementioned 90-day termination notice, a separate termination fee
(the "Termination Fee"), as reasonably computed by Landlord, comprised of:
(1) the sum of Forty Thousand Dollars ($40,000.00), which sum shall be then
reduced ratably based on the number of months or fractions thereof
remaining in the Lease Term as of the effective date of termination; plus
(2) the unamortized portion of the $45,000.00 "Landlord's Contribution"
(amortized on a straight-line basis over a thirty-three (33) month period
with interest at the rate of ten percent (10%) per annum). The provisions
of this Section G shall not modify or impair those provisions of the Lease
which, by their terms, survive the expiration or other earlier termination
of the Lease. The right to terminated as herein provided is personal to
Tenant. If Tenant subleases more than fifty percent (50%) of the square
footage of the Premises or assigns or otherwise transfers any interest in
the Lease prior to its exercise of these termination rights, the rights
herein granted shall be void and of no further force or effect.
H. Parking. In accordance with the provisions of Rider No. 3 to the Lease,
"Parking," effective as of the Commencement Date for the 5 Jenner Premises,
Landlord shall provide Tenant's employees with an additional twenty-one (21)
unreserved parking spaces.
I. Signage. Landlord shall provide Tenant with a standard multi-tenant
identification sign for the 5 Jenner Premises.
J. Tenant Improvements. Landlord hereby agrees to complete the tenant
improvements set forth in Exhibit X, Work Letter, attached hereto.
K. Exhibit "3" Expiration. The parties hereby acknowledge and agree that
the Option to Lease Additional Vacant Space set forth in Exhibit "3" to the
Third Amendment has expired by its terms and is no longer of any force or
effect.
IV. GENERAL.
A. Effect of Amendments. The Lease shall remain in full force and effect
except to the extent that it is modified by this Amendment.
B. Entire Agreement. This Amendment embodies the entire understanding
between Landlord and Tenant with respect to the modifications set forth in "III.
MODIFICATIONS" above and can be changed only by a writing signed by Landlord and
Tenant.
C. Counterparts. If this Amendment is executed in counterparts, each is
hereby declared to be an original; all, however, shall constitute but one and
the same amendment. In any action or proceeding, any photographic, photostatic,
or other copy of this Amendment may be introduced into evidence without
foundation.
D. Defined Terms. All words commencing with initial capital letters in this
Amendment and defined in the Lease shall have the same meaning in this Amendment
as in the Lease, unless they are otherwise defined in this Amendment.
E. Corporate and Partnership Authority. If Tenant is a corporation or
partnership, or is comprised of either or both of them, each individual
executing this Amendment for the corporation or partnership represents that he
or she is duly authorized to execute and deliver this Amendment on behalf of the
corporation or partnership and that this Amendment is binding upon the
corporation or partnership in accordance with its terms.
F. Attorneys' Fees. The provisions of the Lease respecting payment of
attorneys' fees shall also apply to this Amendment.
3
<PAGE> 75
V. EXECUTION.
Landlord and Tenant executed this Amendment on the date as set forth in "I.
PARTIES AND DATE." above.
LANDLORD: TENANT:
THE IRVINE COMPANY, KOFAX IMAGE PRODUCTS,
a Michigan corporation a California corporation
By /s/ ROBERT E. WILLIAMS, JR. By /s/ [SIG]
---------------------------------- ------------------------------------
Robert E. Williams, Jr., President, Title President and CEO
Irvine Industrial Company, a division ---------------------------------
of The Company
By /s/ JOHN C. TSU By /s/ [SIG]
---------------------------------- ------------------------------------
John C. Tsu, Title Vice President and CFO
Assistant Secretary ---------------------------------
[SEAL] [SEAL]
4
<PAGE> 76
[MAP]
JENNER BUSINESS PARK
ORIENTATION SITE PLAN
REVISED EXHIBIT "A"
<PAGE> 77
EXHIBIT A
[ARCHITECTURE/SPACE PLANS]
1 of 3
<PAGE> 78
[ARCHITECTURE/SPACE PLANS]
2 of 3
<PAGE> 79
[ARCHITECTURE/SPACE PLANS]
3 of 3
<PAGE> 80
EXHIBIT X
WORK LETTER/BUILD TO SUIT
Landlord shall cause its contractor to construct the tenant improvements
for the 3 Jenner Premises and 5 Jenner Premises as shown in the space plan (the
"Plan") prepared by Donald Mueller Associates, dated February 24, 1994.
Landlord's total contribution for the tenant improvements, inclusive of space
planning costs shall not exceed Forty-Five Thousand Dollars ($45,000.00)
("Landlord's Contribution"), and any additional cost shall be borne solely by
Tenant and reimbursed to Landlord upon demand. Unless otherwise specified in the
Plan or hereafter agreed in writing by Landlord, all materials and finishes
utilized in constructing the tenant improvements shall be Landlord's building
standard. Should Landlord submit any additional plans, equipment specification
sheets, or other matters to Tenant for approval or completion, Tenant shall
respond in writing, as appropriate, within five (5) working days unless a
shorter period is provided herein. Tenant shall not unreasonably withhold its
approval of any matter, and any disapproval shall be limited to items not
previously approved by Tenant in the Plan or otherwise.
In the event that Tenant requests in writing a revision in the Plan or in
any other plans hereafter approved by Tenant, then provided such change request
is acceptable to Landlord, Landlord shall advise Tenant by written change order
of any additional cost and/or Tenant Delay (as defined below) such change would
cause. Tenant shall approve or disapprove such change order in writing within
two (2) days following its receipt: Tenant's approval of a change order shall
not be effective unless accompanied by payment in full of the additional cost of
the tenant improvement work resulting from the change order. It is understood
that Landlord shall have no obligation to interrupt or modify the tenant
improvement work pending Tenant's approval of a change order.
As used in the Fourth Amendment, the "Commencement Date for the 5 Jenner
Premises" shall mean the earlier of: (a) the date upon which all relevant
governmental authorities have approved the tenant improvements in the 5 Jenner
Premises in accordance with applicable building codes, as evidenced by written
approval thereof in accordance with the building permits issued therefor, or (b)
the date Tenant acquires possession or commences use of the 5 Jenner Premises
for any purpose other than construction; but in no event earlier than the
Anticipated Commencement Date for the 5 Jenner Premises as set fourth in the
fourth Amendment. Notwithstanding any provision in the Fourth Amendment to the
contrary, if Tenant fails to comply with any of the time periods specified in
this Work Letter, requests any changes to the work, furnishes inaccurate or
erroneous specifications or other information, or otherwise delays in any manner
the completion of the tenant improvements or the issuance of an occupancy
certificate (any of the foregoing being referred to in this Work Letter as a
"Tenant Delay"), then Tenant shall bear any resulting additional construction
cost or other expenses and the Commencement Date for the 5 Jenner Premises shall
be deemed to have occurred for all purposes, including Tenant's obligation to
pay rent, as of the date Landlord reasonably determines that it would have been
able to deliver the 5 Jenner Premises to Tenant but for the collective Tenant
Delays. In no event, however, shall such date be earlier than the Anticipated
Commencement Date for the 5 Jenner Premises as set forth in the Fourth
Amendment.
Landlord shall permit Tenant and its agents to enter the 5 Jenner Premises
prior to the Commencement Date for the 5 Jenner Premises in order that Tenant
may perform any work to be performed by Tenant hereunder through its own
contractors, subject to Landlord's prior written approval, and in a manner and
upon terms and conditions and at times satisfactory to Landlord's
representative. The foregoing License to enter the 5 Jenner Premises prior to
the Commencement Date for the 5 Jenner Premises is, however, conditioned upon
Tenant's contractors and their subcontractors and employees working in harmony
and not interfering with the work being performed by Landlord. If at any time
that entry shalt cause disharmony or interfere with the work being performed by
Landlord, this License may be withdrawn by Landlord upon twenty-four (24) hours
written notice to Tenant. That License is further conditioned upon the
compliance by Tenant's contractors with all requirements imposed by Landlord on
third party contractors, including without Limitation the maintenance by Tenant
and its contractors and subcontractors of workers' compensation and public
liability and property damage insurance in amounts and with companies and on
forms satisfactory to Landlord, with certificates of such insurance being
furnished to Landlord prior to proceeding with any such entry. The entry shall
be deemed to be under all of the provisions of the Lease except as to the
covenants to pay rent. Landlord shall not be Liable in any way for any injury,
loss or damage which may occur to any such work being performed by Tenant, the
same being solely at Tenant's risk. In no event shall the failure of Tenant's
contractors to complete any work in the 5 Jenner Premises extend the
Commencement Date for the 5 Jenner Premises beyond the date that Landlord has
completed its tenant improvement work and tendered the 5 Jenner Premises to
Tenant.
Tenant hereby designates Ron Fikert, Telephone No. (714) 727-1733, as its
representative, agent and attorney-in-fact for the purpose of receiving notices,
approving submittals and issuing requests for changes, and Landlord shall be
entitled to rely upon authorizations and directives of such person(s) as if
given by Tenant. Tenant may amend the designation of its construction
representative(s) at any time upon delivery of written notice to Landlord.
It is understood that a portion of the tenant improvements shall be done
during Tenant's occupancy of the 3 Jenner Premises. In this regard, Tenant
agrees to assume any risk of injury, loss or damage which may result. Tenant
further agrees that no rental abatement shall result while the tenant
improvements are completed in the 3 Jenner Premises.
EXHIBIT X
- 1 -
<PAGE> 81
FIFTH AMENDMENT TO LEASE
I. PARTIES AND DATE.
This Fifth Amendment to Lease (the "Fifth Amendment") dated September
25, 1996, is by and between THE IRVINE COMPANY, a Michigan corporation
("Landlord"), and KOFAX IMAGE PRODUCTS, INC., a Delaware corporation as
successor-in-interest by corporate merger to Kofax Image Products, a California
corporation ("Tenant").
II. RECITALS.
Landlord and Tenant entered into a lease dated as of March 31, 1988 for
space located at 3 Jenner Street, Suite 100, Irvine, California ("Premises"),
which lease was amended by First Amendment to Lease dated March 7, 1990, by
Second Amendment to Lease dated May 4, 1990 wherein Suite 150 comprising 5,735
square feet was added, by Third Amendment to Lease dated August 22, 1991 (the
"Third Amendment") wherein an additional 7,705 square feet was added, and by a
Fourth Amendment to Lease dated March 15, 1994 (the "Fourth Amendment") wherein
Suites 165 and 170 comprising 5,124 rentable square feet in a building located
at 5 Jenner Street, Irvine, California was added (as amended, the "Lease").
Landlord and Tenant each desire to modify the Lease to add Suite 180
comprising 5,862 square feet of space in a building located at 5 Jenner Street,
Irvine, California, extend the Lease Term, adjust the Monthly Rent, and make
such other modifications as are set forth in "III. MODIFICATIONS" next below.
III. MODIFICATIONS.
A. Lease Summary. The Lease Summary is hereby amended as follows:
1. Effective as of the Commencement Date for Suite 180 (as
defined in the Work Letter attached hereto), Subparagraph (g)
shall be deleted in its entirety and the following shall be
substituted in lieu thereof:
"(g) Premises Square Footage: Approximately 44,061
comprising 33,075 square feet at 3 Jenner Street and 10,986
square feet at 5 Jenner Street."
2. Effective as of the Commencement Date for Suite 180,
Subparagraph (h) shall be amended by adding the following:
"and 5 Jenner Street, Suite 180, Irvine, CA 92718"
3. Subparagraph (j) is hereby amended by adding the following:
"Anticipated Commencement Date for Suite 180: December 1,
1996"
4. Subparagraph (k) is hereby deleted in its entirety and the
following shall be substituted in lieu thereof:
"(k) Term: The Term of this Lease shall expire at midnight
on January 31, 1999."
5. Effective as of the Commencement Date for Suite 180,
Subparagraph (l) shall be deleted in its entirety and the
following shall be substituted in lieu thereof:
"(l) Monthly Rent: $31,574.00
Adjustments to Monthly Rent:
Commencing on February 1, 1997, the Monthly Rent shall
be $39,214.00.
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<PAGE> 82
Commencing on February 1, 1998 (the "Rental Adjustment
Date"), the Monthly Rent shall be increased by the
percentage increase, if any, in the United States
Department of Labor, Bureau of Labor Statistics,
Consumer Price Index for all Urban Consumers, Los
Angeles-Anaheim-Riverside Area Average, all items
(1982-84=100) (the "Index"). The adjustment shall be
calculated by comparing the Index published for the
third month preceding the Rental Adjustment Date with
the Index published for November, 1996, and the Monthly
Rent then in effect shall be increased by the amount of
the percentage increase, if any, between those
published Index amounts. In no event shall the Monthly
Rent be reduced by reason of such computation. If at
the Rental Adjustment Date the Index shall not exist,
Landlord may substitute another reasonable index
published by any governmental agency. Landlord shall
use diligent efforts to calculate and give Tenant
notice of any such increase in the Monthly Rent on or
near the Rental Adjustment Date, and Tenant shall
commence to pay the increased Monthly Rent effective on
the Rental Adjustment Date. In the event Landlord is
unable to deliver to Tenant the notice of the increased
Monthly Rent at least five (5) days prior to the Rental
Adjustment Date, Tenant shall commence to pay the
increased Monthly Rent on the first day of the month
following the delivery of such notice (the "Payment
Date"), provided Landlord's notice has been given at
least five (5) days in advance. Tenant shall also pay,
together with the first payment of the increased
Monthly Rent, an amount determined by multiplying the
amount of the increase in Monthly Rent times the number
of months that have elapsed between the Rental
Adjustment Date and the Payment Date."
6. Subparagraph (m) is hereby deleted and the following shall be
substituted in lieu thereof:
"(m) Security Deposit: $43,135.00"
7. Effective as of the Commencement Date for Suite 180,
Subparagraph (q) shall be deleted in its entirety and the
following shall be substituted in lieu thereof:
(q) 30.32%"
B. Description of Premises. Effective as of the Commencement Date for Suite
180, Exhibit A to this Fifth Amendment shall be added to Revised Exhibit A of
the Lease.
C. Security Deposit. Concurrently with Tenant's delivery of this Fifth
Amendment, Tenant shall deliver the sum of Sixteen Thousand Seven Hundred
Seventy-Seven Dollars and Sixty-Nine Cents ($16,777.69) to Landlord, which sum
shall be added to the Security Deposit presently being held by Landlord in
accordance with Paragraph 7 of the Lease.
D. Option to Extend Term. Exhibit 5 to the Third Amendment entitled "Option
to Extend Term" (as modified by Paragraph III(F) of the Fourth Amendment) is
hereby deleted in its entirety and nothing shall be substituted in lieu thereof.
E. Right to Terminate. Paragraph III(G) of the Fourth Amendment entitled
"Right to Terminate" is hereby deleted in its entirety and nothing shall be
substituted in lieu thereof.
F. Parking. Effective as of the Commencement Date for Suite 180, Lease
Rider No. 3, "Parking," Paragraph III(H) of the Fourth Amendment, and Paragraph
III(G) of the Third Amendment shall be deleted in their entirety and the
following shall be substituted in lieu thereof:
"During the period commencing as of the Commencement Date for Suite 180 and
ending January 31, 1999, Landlord shall provide Tenant with one hundred
fifty-four (154) unreserved parking spaces. Such parking rights shall be
subject to the provisions of Paragraph 40 of the Lease, shall be at no
additional charge to Tenant (subject to Tenant's obligations under
Paragraph 16 of the Lease), and shall be on a non-exclusive basis in common
with other tenants of the Project."
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<PAGE> 83
G. Holding Over. The second sentence of Paragraph 8 of the Lease entitled
"Holding Over" is hereby amended by deleting the words "one hundred ten percent
(110%)" therefrom and substituting "one hundred fifty percent (150%)" in lieu
thereof.
H. Tenant Improvements. Landlord hereby agrees to complete the tenant
improvements for Suite 180 as set forth in Exhibit X, Work Letter, attached
hereto.
I. Contingency. Tenant understands and agrees that the effectiveness of
this Fifth Amendment is contingent upon the mutual execution and delivery of a
lease surrender and termination agreement between Landlord and Coram Healthcare,
the current tenant in possession of Suite 180.
IV. GENERAL.
A. Effect of Amendments. The Lease shall remain in full force and effect
except to the extent that it is modified by this Amendment.
B. Entire Agreement. This Amendment embodies the entire understanding
between Landlord and Tenant with respect to the modifications set forth in
"III. MODIFICATIONS" above and can be changed only by a writing signed by
Landlord and Tenant.
C. Counterparts. If this Amendment is executed in counterparts, each is
hereby declared to be an original; all, however, shall constitute but one and
the same amendment. In any action or proceeding, any photographic, photostatic,
or other copy of this Amendment may be introduced into evidence without
foundation.
D. Defined Terms. All words commencing with initial capital letters in this
Amendment and defined in the Lease shall have the same meaning in this Amendment
as in the Lease, unless they are otherwise defined in this Amendment.
E. Corporate and Partnership Authority. If Tenant is a corporation or
partnership, or is comprised of either or both of them, each individual
executing this Amendment for the corporation or partnership represents that he
or she is duly authorized to execute and deliver this Amendment on behalf of the
corporation or partnership and that this Amendment is binding upon the
corporation or partnership in accordance with its terms.
F. Attorneys' Fees. The provisions of the Lease respecting payment of
attorneys' fees shall also apply to this Amendment.
V. EXECUTION.
Landlord and Tenant executed this Amendment on the date as set forth in "I.
PARTIES AND DATE." above.
LANDLORD: TENANT:
THE IRVINE COMPANY, [SEAL] KOFAX IMAGE PRODUCTS, INC.,
a Michigan corporation a Delaware corporation
By /s/ CLARENCE W. BARKER By /s/ [SIG]
------------------------------------ --------------------------------
Clarence W. Barker, President, Title President and CEO
Irvine Industrial Company, a division
of The Irvine Company
By /s/ JOHN C. TSU By /s/ [SIG]
------------------------------------ --------------------------------
John C. Tsu, Title CFO and Secretary
Assistant Secretary
3
<PAGE> 84
[ARCHITECTURAL DRAWING]
3 JENNER
EXHIBIT A
Page 1 of 2
<PAGE> 85
[ARCHITECTURAL DRAWING]
5 JENNER
EXHIBIT A
Page 2 of 2
<PAGE> 86
[ARCHITECTURAL DRAWING]
5 JENNER
STE. 180
EXHIBIT A
<PAGE> 87
EXHIBIT X
WORK LETTER
Tenant Improvements for Suite 180
Landlord shall cause its contractor to construct such tenant improvement
work in Suite 180 as may be specified by Tenant not later than September 15,
1996, and approved by Landlord ("Tenant Improvements"). Landlord's total
contribution for the Tenant Improvements, inclusive of space planning costs and
Landlord's construction management fee, shall not exceed Twenty-Nine Thousand
Three Hundred Ten Dollars ($29,300.00) ("Landlord's Contribution"), and any
additional cost shall be borne solely by Tenant and reimbursed to Landlord upon
demand. Unless otherwise agreed in writing by Landlord, all materials and
finishes utilized in constructing the Tenant Improvements shall be Landlord's
building standard. Should Landlord submit any plans, equipment specification
sheets, or other matters to Tenant for approval or completion, Tenant shall
respond in writing, as appropriate, within five (5) working days unless a
shorter period is provided herein. Tenant shall not unreasonably withhold its
approval of any matter, and any disapproval shall be limited to items not
previously approved by Tenant.
In the event that Tenant requests in writing a revision in the Tenant
Improvements or in any work hereafter approved by Tenant, then provided such
change request is acceptable to Landlord, Landlord shall advise Tenant by
written change order of any additional cost and/or Tenant Delay (as defined
below) such change would cause. Tenant shall approve or disapprove such change
order in writing within two (2) days following its receipt. Tenant's approval of
a change order shall not be effective unless accompanied by payment in full of
the additional cost of the tenant improvement work resulting from the change
order. It is understood that Landlord shall have no obligation to interrupt or
modify the Tenant Improvements pending Tenant's approval of a change order.
As used in the Fifth Amendment, the "Commencement Date for Suite 180"
shall mean the earlier of: (a) the date upon which all relevant governmental
authorities have approved the Tenant Improvements in accordance with applicable
building codes, as evidenced by written approval thereof in accordance with the
building permits issued therefor, or (b) the date Tenant acquires possession or
commences use of Suite 180 for any purpose other than construction; but in no
event earlier than the Anticipated Commencement Date for Suite 180 as set forth
in the Fifth Amendment. Notwithstanding any provision In the Fifth Amendment to
the contrary, if Tenant fails to comply with any of the time periods specified
in this Work Letter, requests any changes to the work, furnishes inaccurate or
erroneous specifications or other information, or otherwise delays in any manner
the completion of the Tenant Improvements or the issuance of an occupancy
certificate (any of the foregoing being referred to in this Work Letter as a
"Tenant Delay"), then Tenant shall bear any resulting additional construction
cost or other expenses and the Commencement Date for Suite 180 shall be deemed
to have occurred for all purposes, including Tenant's obligation to pay rent, as
of the date Landlord reasonably determines that it would have been able to
deliver Suite 180 to Tenant but for the collective Tenant Delays.
Landlord shall permit Tenant and its agents to enter Suite 180 prior to
the Commencement Date for Suite 180 in order that Tenant may perform any work to
be performed by Tenant hereunder through its own contractors, subject to
Landlord's prior written approval, and in a manner and upon terms and conditions
and at times satisfactory to Landlord's representative. The foregoing license to
enter Suite 180 prior to the Commencement Date for Suite 180 is, however,
conditioned upon Tenant's contractors and their subcontractors and employees
working in harmony and not interfering with the work being performed by
Landlord. If at any time that entry shall cause disharmony or interfere with the
work being performed by Landlord, this license may be withdrawn by Landlord upon
twenty-four (24) hours written notice to Tenant. That license is further
conditioned upon the compliance by Tenant's contractors with all requirements
imposed by Landlord on third party contractors, including without limitation the
maintenance by Tenant and its contractors and subcontractors of workers'
compensation and public liability and property damage insurance in amounts and
with companies and on forms satisfactory to Landlord, with certificates of such
insurance being furnished to Landlord prior to proceeding with any such entry.
The entry shall be deemed to be under all of the provisions of the Lease except
as to the covenants to pay rent. Landlord shall not be liable in any way for any
injury, loss or damage which may occur to any such work being performed by
Tenant, the same being solely at Tenant's risk. In no event shall the failure of
Tenant's contractors to complete any work in Suite 180 extend the Commencement
Date for Suite 180 beyond the date that Landlord has completed the Tenant
Improvements and tendered Suite 180 to Tenant.
Tenant hereby designates Ron Fikert, Telephone No. (714) 727-1733, as
its representative, agent and attorney-in-fact for the purpose of receiving
notices, approving submittals and issuing requests for changes, and Landlord
shall be entitled to rely upon authorizations and directives of such person(s)
as if given by Tenant. Tenant may amend the designation of its construction
representative(s) at any time upon delivery of written notice to Landlord.
EXHIBIT X
- 1 -
<PAGE> 1
EXHIBIT 10.15
NET LEASE
THIS LEASE, ("Lease") made at Boston, Massachusetts, by and between
Francis D. Burke, Paul E. Guaraldi and Neil MacDonald as trustees of Vesper
Properties 1 Trust under declaration of trust dated January 8, 1986 and recorded
with Middlesex North District Registry of Deeds in Book 3315, Page 65, having a
principal place of business c/o Vesper Properties Inc., Suite 3620, One Post
Office Square, Boston, Massachusetts 02109 ("Landlord") and LaserData Inc., a
Delaware Corporation with a principal place of business at 10 Technology Drive,
Lowell, MA 01851 ("Tenant").
W I T N E S S E T H:
ARTICLE 1
Reference Data and Definitions
1.01. Reference Data
LANDLORD'S ADDRESS: Vesper Properties 1 Trust
c/o Vesper Properties Inc.
One Post Office Square, Suite 3620
Boston, Massachusetts 02109
TENANT'S ADDRESS: As stated above prior to the Term Commencement
Date: thereafter, the Premises
RENTABLE AREA OF THE PREMISES: 21,900 rentable square feet (approximately 21,681
usable square feet), known as Suites A and B, and located at 300 Potash Hill
Road, Tyngsborough, Massachusetts, as shown on Exhibit B.
TENANT'S PROPORTIONATE SHARE: 36.82%
ESTIMATED TERM COMMENCEMENT DATE: May 1, 1989
TERM: THREE (3) LEASE YEARS (the "initial term") subject to Section 3.03
<TABLE>
<S> <C>
BASIC RENT: First Lease Year: $271,057.00
Second Lease Year: $271,057.00
Third Lease Year: $282,007.00
</TABLE>
<TABLE>
<CAPTION>
LEASE EXTENSION TERM RENT (pursuant to Section 3.03)
<S> <C> <C>
Fourth Lease Year: $292,957.00
Fifth Lease Year: $303,907.00
SECURITY DEPOSIT: $45,174.16
</TABLE>
-1-
<PAGE> 2
NET LEASE
THIS LEASE, ("Lease") made at Boston, Massachusetts, by and between
Francis D. Burke, Paul E. Guaraldi and Neil MacDonald as trustees of Vesper
Properties 1 Trust under declaration of trust dated January 8, 1986 and recorded
with Middlesex North District Registry of Deeds in Book 3315, Page 65, having a
principal place of business c/o Vesper Properties Inc., Suite 3620, One Post
Office Square, Boston, Massachusetts 02109 ("Landlord") and LaserData Inc., a
Delaware corporation with a principal place of business at 10 Technology Drive,
Lowell, MA 01851 ("Tenant").
W I T N E S S E T H:
ARTICLE 1
Reference Data and Definitions
1.01. Reference Data
LANDLORD'S ADDRESS: Vesper Properties 1 Trust
c/o Vesper Properties Inc.
One Post Office Square, Suite 3620
Boston, Massachusetts 02109
TENANT'S ADDRESS: As stated above prior to the Term Commencement
Date: thereafter, the Premises
RENTABLE AREA OF THE PREMISES: 21,900 rentable square feet (approximately 21,681
usable square feet), known as Suites A and B, and located at 300 Potash Hill
Road, Tyngsborough, Massachusetts, as shown on Exhibit B.
TENANT'S PROPORTIONATE SHARE: 36.82%
ESTIMATED TERM COMMENCEMENT DATE: May 1, 1989
TERM: THREE (3) LEASE YEARS (the "initial term") subject to Section 3.03
<TABLE>
<S> <C>
BASIC RENT: First Lease Year: $271,057.00
Second Lease Year: $271,057.00
Third Lease Year: $282,007.00
</TABLE>
<TABLE>
<CAPTION>
LEASE EXTENSION TERM RENT (pursuant to Section 3.03)
<S> <C> <C>
Fourth Lease Year: $292,957.00
Fifth Lease Year: $303,907.00
SECURITY DEPOSIT: $45,174.16
</TABLE>
-1-
<PAGE> 3
PERMITTED USES: General office, research and development and light assembly uses
consistent with a first class Research and Development building.
ARTICLE 2
Premises
2.01. Premises. Landlord hereby leases and lets to Tenant, and Tenant
hereby takes and hires from Landlord, upon and subject to the terms, conditions,
covenants and provisions hereof, the Premises, subject to the Permitted
Exceptions.
ARTICLE 3
Term
3.01. Term Commencement. The Lease Term shall commence on the Term
Commencement Date.
3.02. Termination. The Lease Term shall end on the Lease Termination Date.
3.03 Extension Option: Tenant may, at Tenant's sole option, extend the
term of this Lease beyond the initial period of three (3) years subject to all
of the terms and conditions hereof, provided (i) Tenant shall have given notice
in writing to Landlord of Tenant's exercise of such option not less than one
hundred eighty (180) days, but no more than two hundred ten (210) days, prior to
the expiration of the initial term and (ii) no Default shall exist either at the
time such option is exercised or at the expiration of the initial term. In the
event Tenant fails to exercise its option hereunder, or having extended such
option, such Default then or thereafter exists prior to the Commencement of the
extended term hereof, Tenant shall, in addition to all other rights and
remedies, if any, which may be otherwise available to Landlord in such event,
pay to Landlord fifty thousand dollars ($50,000) to reimburse Landlord for
unamortized value of certain capital improvements made to the Premises as part
of Tenant's Finishes, installed for Tenant's particular use thereof.
3.04 Purchase Option for Tenant Improvements. In the event that Tenant
chooses not to exercise the option to extend the Lease pursuant to Section 3.03,
then Tenant shall have the option to purchase the Tenant Improvements described
in Exhibit C-2 herein attached for one hundred twenty seven thousand dollars
($127,000.00) at the end of the initial term. If Tenant chooses to extend the
Lease, then Tenant shall have the option to purchase the Tenant Improvements
described in Exhibit C-2 herein attached, for thirty thousand dollars
($30,000.00) at the end of the extended lease terms
-2-
<PAGE> 4
ARTICLE 4
Rent
4.01. Basic Rent. Tenant shall pay Landlord for the Premises, without
offset or deduction and without previous demand therefor, the Basic Rent as
annual rent for each Lease Year. Basic Rent shall be paid in equal monthly
installments in advance on the first day of each calendar month during the Lease
Term. Notwithstanding the Basic Rent Amount set forth on Page 1, the first two
(2) installments of Basic Rent shall be for a fixed amount of five thousand
dollars ($5,000.00) per installment. Subsequent installments of Basic and
Additional Rent shall be calculated as described herein. Subsequent installments
of Basic Rent shall be paid on the first day of every calendar month thereafter.
Basic Rent for partial months at the beginning or end of the Lease Term shall be
pro-rated and paid on the Term Commencement Date and the first day of the
calendar month in which the Stated Expiration Date is to occur.
4.02. Computation of Basic Rent. The Basic Rent for the first Lease Year
shall be as stated in Article 1.01 hereof.
4.03. Net Lease. This lease is a NET LEASE, and Landlord shall not be
obligated to pay any charge or bear any expense whatsoever against or with
respect to the Premises except to the extent expressly hereinafter provided, nor
shall the rent payable hereunder be subject to any reduction or offset
whatsoever on account of any charge or otherwise except as expressly hereinafter
provided. In order that the Basic Rent shall be absolutely net to Landlord,
Tenant covenants and agrees to pay, with respect to the premises as provided in
Articles 6 and 15, as Additional Rent, taxes, betterment assessments, insurance
costs, and utility charges.
ARTICLE 5
Use of Premises
5.01. Use Restricted. The Premises may be used for the Permitted Use and
for no other purpose. No improvements may be made in or to the Premises except
as otherwise provided in this Lease. Landlord represents and warrants to Tenant
that the Permitted Uses are permitted as of right under applicable zoning laws.
ARTICLE 6
Additional Rent:
Taxes, Insurance and Common Area Maintenance
6.01. Real Estate Taxes. Tenant shall pay, as Additional Rent, Tenant's
Proportionate Share of all Taxes which arise in respect of the operation,
possession or use of the Land and Building including, without limitation, all
charges for utilities furnished to the Premises which may become a lien on the
Premises in the following manner:
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<PAGE> 5
(a) Tenant shall pay to the Landlord one twelfth (1/12) of the amount of
the Tenant's proportionate share of Taxes for each fiscal tax year on or
before the first day of each month during such fiscal year, in advance, in
an amount estimated by Landlord, provided Landlord shall have the right
initially to determine monthly estimates thereof and revise such estimates
from time to time. Within a reasonable period of time after Landlord has
received the tax bill for any such fiscal tax year, Landlord shall furnish
to Tenant a statement (the "Landlord's Tax Statement") setting forth the
amount of such real estate taxes for such fiscal tax year and Tenants
Proportionate Share of Taxes. If the actual amount of Tenant's
Proportionate Share of Taxes for such fiscal tax year exceeds the
estimated amount thereof paid by Tenant for such fiscal tax year, then
Tenant shall pay to Landlord the difference between the amount paid by
Tenant and the actual Tenant's Proportionate Share of Taxes within ten
(10) days after receipt of Landlord's tax statement, and if the total
amount paid by Tenant for any such fiscal tax year shall exceed the actual
amount of Tenant's Proportionate Share of Taxes for such fiscal year, then
such excess shall be credited against the next installment of Tenant's
Proportionate Share of Taxes due from Tenant to Landlord hereunder.
Notwithstanding the foregoing, for any fraction of a tax or assessment period or
installment period, included in the Lease Term at the beginning or end thereof,
Tenant shall pay only the fraction of Taxes so levied or assessed or becoming
payable which is allocable to such included period.
6.02. Insurance Costs. Tenants shall pay, as Additional Rent, Tenant's
Proportionate Share of all premiums and other expenses required to keep in full
force and effect the casualty insurance and umbrella liability insurance carried
by Landlord with respect to the Building.
6.03. Common Area Maintenance. Tenant shall pay as Additional Rent,
Tenant's Proportionate Share of all Common Area Maintenance Charges (as defined
below) during the Lease Term if the manner provided in Section 6.03 hereof. As
used herein, "Common Area Maintenance Charges" shall mean all expenses, costs
and disbursements which Landlord shall pay or become obligated to pay in
connection with operating, maintaining and repairing the Building, Common Areas
and Park Areas, snow removal, rubbish removal, cleaning, landscaping, operation
of any common security system, common elevator, or heating and air conditioning
system, or otherwise including, without limitation: (a) all wages and salaries
of all Persons employed in connection therewith (including taxes, insurance and
benefits relating thereto), (b) the cost of all supplies and materials used in
connection therewith, (c) all maintenance, janitorial and service agreements
including management agreements providing management fees not in excess of those
customarily charged in the Greater Boston area, (d) utilities not separately
metered, (e) insurance including, without limitation, casualty insurance, rent
insurance, flood, hazard insurance, if applicable, liability insurance, by
umbrella or otherwise, and all such other insurance coverage as Landlord's
-4-
<PAGE> 6
mortgagees or ground lessors may from time to time require Landlord may from
time to time reasonably require or Landlord deems necessary or desirable under
the circumstances, (f) assessments and other charges imposed on the owners of
the Building or allocated to the Building, or the maintenance of the Park
pursuant to operating covenants or otherwise, (g) capital items which are
primarily for the purpose of reducing common charges or which may be required by
a governmental authority as reasonably amortized by Landlord, and (h) pursuing
any application for an abatement of Taxes. Common Area Charges shall not Include
(1) capital items, except as provided above, (2) specific costs billed to and
paid by specific tenants, or (3) costs incurred by Landlord during the first two
Lease Years in connection with the repair and maintenance of the roof and
structural elements of the Building. Common Area Charges shall be determined on
an accrual basis in accordance with generally accepted accounting principles
which shall be consistently applied.
6.04. Method of Payment. Tenant shall pay to the Landlord one twelfth
(1/12) of Tenant's Proportionate Share of Common Area Maintenance Charges for
each Calendar Year on the first day of each and every month in advance, in an
amount estimated by Landlord, provided Landlord shall have the right initially
to determine monthly estimates and revise such estimates from time to time.
Within a reasonable period of time after the expiration of such Calendar Year,
Landlord shall furnish to Tenant a statement (the "Landlord's Common Area
Maintenance Expense Statement") setting forth in reasonable detail the Common
Area Maintenance Charges for such Calendar Year, and Tenant's Proportional Share
of Common Area Maintenance Charges. If the actual Common Area Maintenance
Charges for such Calendar Year exceeds the estimated Common Area Maintenance
Charges paid by Tenant for such Calendar Year, Tenant shall pay to Landlord the
difference between the amount paid by Tenant and the actual Tenant's
Proportionate Share of Common Area Maintenance Charges, and if the total amount
paid by Tenant for any such Calendar Year exceed the actual Tenant's
Proportionate Share of Common Area Maintenance Charges for such Calendar Year,
such excess shall be credited against the next installment of the estimated
Tenant's Proportionate Share of Common Area Maintenance Charges due from Tenant
to Landlord hereunder.
ARTICLE 7
Improvements, Repairs, Additions and Replacements
7.01. Preparation of the Premises. Landlord has constructed the base
Building on the Land and shall construct the Building Standard Tenant
Improvements (set forth on Exhibit C) in the Premises subject to the provisions
of the Work Letter attached as Exhibit D. All other work must be of a quality
equal to or better than the Building Standard Tenant Finishes. Landlord shall
also do the work described in the Working Drawings (as described in the Work
Letter), subject to the provisions of the Work Letter. Tenant shall pay the
amount of Tenant's Cost, together with the cost of any special Work, to
Landlord, as Additional Rent, in accordance with Section 9 of the Work Letter.
Title to all improvements constructed by Landlord shall remain in Landlord.
-5-
<PAGE> 7
7.02. Time for Completion. Landlord shall use due diligence to have the
Premises ready for occupancy on or before the Estimated Term Commencement Date,
but in no event later than outside Completion Date. In the event that the
Premises are not so ready by the Outside Completion Date, Tenant shall have the
option of terminating this Lease, exercisable by written notice to Landlord,
within two (2) days following the Outside Completion Date, together with a
payment by certified or bank cashier's check in the amount equal to the cost of
incorporating into the Tenant's Finishes specific items installed for Tenant's
particular use of the Premises. Reference is made to the Work Letter for details
of the completion process. The "Term Commencement Date" shall be the earlier of
(a) the later of (x) the date specified by Landlord in the notice delivered
pursuant to Section 7.03 or (y) the Substantial Completion Date, (b) any other
date for such commencement determined in accordance with this Article 7, or (c)
the date on which Tenant first occupies the Premises for the Permitted Uses.
In the event that the Term Commencement Date is later than May 31, 1989,
Landlord shall allow a credit against installment of the Tenant's Proportionate
Share of Common Area Charges first coming due under this Lease an amount equal
to the difference of (a) the sums paid by Tenant to its current landlord to
continue occupancy of its present leasehold estate at 10 Technology Drive,
Lowell, Massachusetts beyond said May 31, 1989 as a hold-over tenant at
sufferance, minus (b) the amount which would have been otherwise due for such
holdover period if said current landlord allowed such holdover upon monthly
payments equal to all rent then last payable under its lease or sublease, as the
case may be, for such present leasehold estate; provided, however, Tenant uses
diligent efforts to mitigate against the imposition of any occupancy payments in
excess of such current rent.
7.03. Notice to Commence. Approximately fifteen (15) days prior to the
Substantial Completion Date, Landlord shall furnish Tenant a notice stating the
Term Commencement Date.
7.04. Delays. If Landlord shall be delayed in substantially completing the
work in the Premises as the result of
(a) delay in delivery to Landlord of any plans, design work and detailed
drawing, or
(b) Tenant's requests for Special Work or changes to the Working Drawings
pursuant to Section 8 of the Work Letter (notwithstanding Landlord's
approval of such changes), or
(c) delays in performance by Tenant or any Person employed by Tenant which
shall cause delays in the completion of any work to be done by Landlord or
which shall otherwise delay the substantial completion of the Premises, or
(d) any fault, negligence, omission, or failure to act on the part of
Tenant or its agents, contractors, workmen, mechanics, suppliers or
invitees,
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<PAGE> 8
the Premises shall be deemed to be substantially completed on (and the Term
Commencement Date shall be) the Estimated Term Commencement Date.
7.05. Tenant's Access to the Premises. Tenant and Tenant's agents, at
Tenant's sole risk, may, with Landlord's prior consent, enter the Premises prior
to the Term Commencement Date in order to do such work as may be required to
make the Premises ready for Tenant's use and occupancy thereof. If Landlord
permits such entry prior to the Term Commencement Date, such permission shall
be conditioned upon Tenant and Tenant's agents, contractors, workmen, mechanics,
suppliers and invitees, being reasonably satisfactory to Landlord. If at any
time such entry shall cause or threaten to cause disharmony or otherwise
interfere with the orderly operation of the Building or Landlord's other
projects, Landlord shall have the right to withdraw such approval upon
twenty-four (24) hours written notice to Tenant. Any such entry into and
occupation of the Premises shall be deemed to be under all of the terms,
covenants, conditions and provisions of this Lease except the covenant to pay
Rent. Landlord shall not be liable in any way for any injury, loss or damage
which may occur to any of Tenant's work and installations made in the Premises
or to properties placed therein prior to the Term Commencement Date, the same
being at Tenant's sole risk.
7.06. Alterations and Improvements. Tenant shall not make alterations or
additions to the Premises except in accordance with plans and specifications
therefor first approved by Landlord, which approval, in the case of a
nonstructural alteration not including the roof or the mechanical utility
systems of the Building, shall not be unreasonably withheld and shall be deemed
given if Landlord does not object thereto, by written notice to Tenant, within
fourteen (14) days of written request for such approval accompanied by the plans
and specifications therefor. Tenant shall not hang shades, curtains, signs,
awnings or other materials, attach any materials to or make any change in the
appearance of any glass visible from outside of the Premises, add any window
treatment of any kind or make improvements or install furniture visible from
outside of the Premises, without Landlord's prior written consent. Without
limitation, Landlord shall not be deemed unreasonable for withholding approval
of any alterations or additions which would require unusual expense to readapt
the Premises to normal office use upon termination of this Lease or increase in
the cost of insurance or Taxes. The parties understand and agree that cubicles
and workbenches shall not be deemed alterations subject to approval hereunder.
All alterations and additions shall be part of the Premises unless and until
Landlord shall specify the same for removal in a notice delivered to Tenant on
or before the Lease Termination Date. All of Tenant's alterations and additions
and installation of furnishings shall be coordinated with any work performed by
Landlord and in such a manner as to maintain harmonious labor relations and not
to damage the Building or the Premises or interfere with Building operation and,
except for installation of furnishings, shall be performed by contractors or
workmen first reasonably approved by Landlord. Except for work done by or
through Landlord, Tenant before its work is started shall: secure all licenses
and permits necessary therefor; deliver to
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<PAGE> 9
Landlord a statement of the names of all its contractors and subcontractors and
the estimated cost of all labor and material furnished by them; and cause each
contractor to carry workmen's compensation insurance in statutory amounts
covering all the contractor's and subcontractor's employees and comprehensive
public liability insurance with such limits as Landlord may reasonably require,
but in no event less than $500,000 - $1,000,000, and property damage insurance
with limits of not less than $500,000 (all such insurance to be written in
companies approved by Landlord and insuring Landlord and Tenant as well as the
contractors, and to deliver to Landlord certificates of all such insurance.
Tenant agrees to pay promptly when due the entire cost of any work done in the
Premises by Tenant, its agents, employees, or independent contractors, and not
to cause or permit any liens for labor or materials performed or furnished in
connection therewith to attach to the Premises and immediately to discharge any
such liens which may so attach. All construction work done by Tenant, its
agents, employees or manner and in compliance with all Legal Requirements and
Insurance Requirements. Landlord may inspect such work at any time or times and
shall promptly give notice to Tenant of any observed defects.
7.07. Maintenance. Tenant shall, at all times during the Lease Term, and
at its own cost and expense, (i) keep and maintain (or cause to be kept and
maintained) the Premises in good repair and condition (ordinary wear and tear
and damage by fire or other insured casualty only excepted) and (ii) prevent any
waste, damage or injury thereto. Notwithstanding the foregoing, Landlord shall
be responsible for any and all maintenance and repair of the roof and structure
of the Building for the first two Lease Years unless the need for repairs to the
same results, in whole or in part, from the acts and omissions of Tenant, its
contractors, agents, subcontractors, subagents or their respective employees, in
which event Tenant shall be responsible for the portion of the repairs thereof
attributable to it.
7.08. Redelivery. On the Lease Termination Date, Tenant shall quit and
surrender the Premises free and clear of all tenants, occupants, liens, and
encumbrances whatsoever except (i) Permitted Exceptions and (ii) encumbrances,
restrictions or reservations caused by or consented to by Landlord. Tenant
shall, subject to the provisions of Articles 17 and 18 hereof, surrender the
Premises to Landlord broom clean and in good condition and repair (ordinary wear
and tear, damage by fire or other insured casualty only excepted) with all
damages occasioned by Tenant's removal of Tenant's fixtures or equipment
repaired to Landlord's satisfaction.
ARTICLE 8
(Intentionally Deleted]
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<PAGE> 10
ARTICLE 9
Tenant's Particular Covenants
9.01. Pay Rent. Tenant shall pay when due all Basic Rent, Additional Rent,
and all charges for utility services rendered to the Premises not included in
Rent.
9.02. Occupancy of the Premises. Tenant shall occupy the Premises
continuously from the Term Commencement Date for the Permitted use only. Tenant
shall (i) not injure or deface the Premises, (ii) install any sign in or on the
Premises without the prior written approval of Landlord, (iii) permit in the
Premises any inflammable fluids or chemicals not reasonably related to the
Permitted Uses (iv) permit any nuisance or any use thereof which is improper,
offensive, contrary to any Legal Requirement or Insurance Requirement or liable
to render necessary any alteration or addition to the Building; nor (v) permit
any activity on the Land which would require the recording of a notice under
Massachusetts General Laws, Chapter 21C S7.
9.03. Safety. Tenant shall keep the Premises equipped with all safety
appliances required by Legal Requirements or Insurance Requirements because of
any use made by Tenant. Tenant shall procure all Authorizations so required
because of such use and, if requested by Landlord, shall do any work so required
because of such use, it being understood that the foregoing provisions shall not
be construed to broaden in any way the Permitted Uses.
9.04. Rules and Regulations. Tenant shall comply with all Rules and
Regulations, which shall be uniform and generally applicable to all Tenants of
the Building.
9.05. Equipment. Tenant shall not place a load upon the floor of the
Premises exceeding the live load for which the floor has been designed; and
shall not move any safe or other heavy equipment in, about or out of the
Premises except in such manner and at such time as Landlord shall in each
instance authorize.
9.06. Personal Property Taxes. Tenant shall pay promptly when due all
Taxes upon personal property (including, without limitation, fixtures and
equipment) in the Premises to whomsoever assessed.
ARTICLE 10
Requirements of Public Authority
10.01. Legal Requirements. Tenant shall, at its own cost and expense,
promptly observe and comply with all Legal Requirements including, without
limitation, Legal Requirements respecting releases of hazardous substances.
Tenant shall pay all costs, expenses, liabilities, losses, damages, fines,
penalties, claims and demands, that may in any manner arise out of or be imposed
because of the failure of Tenant to comply with the covenants of this Article
10. For the purposes of this Article 10, the terms "hazardous substances" and
"hazardous materials" shall mean the meanings ascribed to the term "hazardous
substance" in the Comprehensive Environmental
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Response Compensation and Liability Act of 1989, 42 U.S.C. 9601, et. seq., as
amended (CERCLA) and those meanings ascribed to the terms "hazardous waste" and
"oil" in the Massachusetts Hazardous Waste Release Prevention and Response Act,
M.G.L.c. 21E, as now or hereafter amended ("Chapter 21E"), and the regulations
now or hereafter adopted pursuant to those Acts.
Landlord shall be held responsible for any damages or liability on account of
the existence on the Premises or the release or discharge on or from the
Premises of hazardous substances to the extent cause by any act, omission,
fault, negligence or misconduct of Landlord, its officers, employees, agents,
contractors and those acting by, through or under Landlord. Tenant shall not be
held responsible for any damages or liability on account of the existence on the
Premises or the release or discharge on or from the Premises of hazardous
substances, which occurred prior to the Commencement Date of the Lease.
10.02 Contests. Tenant shall have the right to contest by appropriate
legal proceedings diligently conducted in good faith, in the name of the Tenant,
or Landlord (if legally required), or both (if legally required), without cost,
expense, liability or damage to Landlord, the validity or application of any
Legal Requirement and, if compliance with any of the terms of any such Legal
Requirement may legally be delayed pending the prosecution of any such
proceeding, Tenant may delay such compliance therewith until the final
determination of such proceeding.
In addition to, and not in limitation of, the provisions of Section 10.01
of the Lease, Tenant shall not (i) generate, store, dispose of, dump, flush or
in any way introduce Hazardous Substances into the septic, sewer and other waste
disposal system serving the Premises, or (ii) generate, store or dispose of such
Hazardous Substances in, on or under the Premises or the Land, except in
accordance with all applicable laws. Tenant shall notify Landlord of any
incident which would require the filing of notice or notification pursuant to
any Legal Requirements as now existing or hereinafter enacted. If, at any time
during the Lease Term, Landlord shall believe that any Hazardous Substances have
been so generated, stored, or disposed of by Tenant, upon demand by Landlord (or
in the event of any such generation, storage or disposal of which Tenant has
knowledge without demand by Landlord), Tenant, at its sole expense, shall cause
a hazardous waste site assessment, so-called, to be made forthwith of the
Premises and the Land (including, without limitation, the subsurfaces of the
same) likely to have been affected by any such generation, storage, disposal or
incident. If such hazardous waste site assessment indicates the existence of
hazardous substances on the surface or in the subsurface soils of any of the
Premises or the Land, Tenant shall thereupon forthwith take all steps necessary
to remove any and all Hazardous Substances and the soils containing same, and
such further steps as shall be necessary to remedy the effects of such Hazardous
Substances.
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Tenant shall make available to Landlord all reports and statements
produced, and information required to be maintained, or obtained by Tenant with
respect to any such Hazardous Substances. Any such site assessment shall be of
an investigatory scope acceptable to Landlord. The obligations of Tenant
hereunder shall survive the termination of this Lease.
ARTICLE 11
Covenant Against Liens
11.01. Mechanics Liens. Landlord's right, title and interest in the
Premises or the Land or the Building shall not be subject to or liable for liens
of mechanics of materialmen for work done on behalf of Tenant in connection with
improvements to the Premises. Notwithstanding such restriction, if because of
any act or omission of Tenant, any mechanic's lien or other lien, charge or
order for payment of money shall be filed against any portion of the Premises or
the Land or the Building, Tenant shall, at its own cost and expense, cause the
same to be discharged or record or bonded within twenty one (21) days after the
filing thereof.
11.02. Right to Discharge. Without otherwise limiting any other remedy of
Landlord for default hereunder, if Tenant shall fail to cause such liens to be
discharged of record of bonded within the aforesaid thirty (30) day period or to
satisfy such liens within thirty (30) days after any judgment in favor of such
lien holders from which no further appeal might be taken then Landlord shall
have the right to cause the same to be discharged. All amounts paid by Landlord
to cause such liens to be discharged shall constitute Additional Rent.
ARTICLE 12
Access to Premises
12.01. Access. Landlord or Landlord's agents and designees shall have the
right, but not the obligation, to enter upon the Premises at all reasonable
times after reasonable notice (except in the case of emergencies) during
ordinary business hours to examine same and to exhibit the Premises to
prospective purchasers and tenants, but in the latter case only during the last
six (6) months of the Lease Term.
ARTICLE 13
Assignment and Subletting:
Occupancy Arrangements
13.01. Subletting and Assignment. Tenant shall not enter into any
Occupancy Arrangement, either voluntary or by operation of law without the prior
written consent of the Landlord which shall be at the Landlord's sole and
absolute discretion, but no such consent by the Landlord shall be deemed to be a
waiver or release of any of the provisions of this Section 13.01 or a consent or
an agreement to
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consent to any such assignment, subletting, or permission to use and occupy
premises thereafter, and none of the foregoing shall release or discharge the
Tenant from any obligations or liabilities set forth in this Lease, which
obligations and liabilities shall continue to be direct and primary in any and
all events.
If Tenant intends to enter into an Occupancy Arrangement, Tenant shall so
notify Landlord in writing, stating the name of (and providing financial
statements for the last five (5) years with respect to) the Person with whom
Tenant intends to enter into such Arrangement, the exact terms of the
Arrangement and a precise description of the portion of the Premises intended to
be subject thereto.
If the Landlord consents to such Occupancy Arrangement, Tenant shall enter
into such Arrangement on the exact terms described to Landlord within thirty
(30) days of Landlord's consent or comply again with the terms of this Section
13.01. If Tenant enters into such an Arrangement, Tenant shall pay to Landlord
when Received the excess, if any, of amounts received in respect of such
Occupancy Arrangement over the Rent.
Notwithstanding the foregoing provisions of this Section 13.01, the
consent of the Landlord shall not be required and such provisions shall not
apply to transactions with an entity into or with which Tenant is merged or
consolidated or to which substantially all of which Tenant's assets are
transferred or to an entity which controls or is controlled by Tenant, or is
under common control with Tenant, provided that in any and all such events (1)
the successor to Tenant has a net worth computed in accordance with generally
accepted accounting principles at least equal to the greater of (a) the net
worth of Tenant immediately prior to such merger, consolidation or transfer or
(b) the net worth of Tenant herein named as of the date of this Lease; and (2)
the assignee agrees directly with Landlord by written instrument in form
satisfactory to Landlord to be bound by all the obligations of Tenant hereunder,
including, without limitation, the covenant against further assignment or
subletting.
If Landlord terminates this Lease, all Rent due shall be adjusted as of
the day the Premises (or portion thereof) are redelivered to Landlord. Any
portion of the Premises so redelivered shall be in the condition specified in
Section 7.07 hereof.
ARTICLE 14
Indemnity
14.01. Tenant's Indemnity. To the fullest extent permitted by law, Tenant
shall indemnify and save harmless Landlord from and against any and all
liability, damage, penalties or judgments (and from and against any claims,
actions, proceedings and expenses and costs in connection therewith, including
reasonable counsel fees arising from injury to person or property) sustained by
any one, in, about, or relating to the Premises or the Building or the Land
resulting from any act or omission of Tenant, or Tenant's officers,
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agents, servants, employees, contractors, sublessees or invitees. It is
expressly agreed that the foregoing indemnity shall include, without limitation,
liability arising out of (i) Legal Requirements respecting hazardous waste or
(ii) electronic or magnetic damage to any electronic equipment. Tenant shall, at
its own cost and expense, defend any and all suits or actions (just or unjust)
brought against Landlord or in which Landlord may be impleaded with others upon
any such above-mentioned matter, claim or claims, except as may result solely
from the acts as set forth in Section 14.02. All merchandise, furniture,
fixtures and property of every kind, nature and description of Tenant or
Tenant's employees, agents, contractors, invitees, visitors or guests which may
be in or upon the Premises, during the Lease Term shall be at the sole risk and
hazard of Tenant, and that if the whole or any part thereof shall be damaged,
destroyed, stolen or removed by reason of any cause or reason whatsoever, other
than the negligence or willful default of Landlord, its contractors, agents,
subcontractors, subagents and their respective employees, no part of said damage
or loss shall be charged to or borne by Landlord.
14.02. Landlord's Liability. Except for its intentional acts or
negligence or the intentional acts or negligence of its officers, agents,
servants, employees or contractors, Landlord shall not be responsible or liable
for any damage or injury to any property, fixtures, buildings or improvements,
or to any person or persons, at any time in the Premises, including any damage
or injury to Tenant or to any of Tenant's officers, agents, servants, employees,
contractors, invitees, customers or sublessees.
ARTICLE 15
Insurance
15.01. Liability Insurance. Tenant shall provide or cause to be provided
at its expense, and keep in force during the Lease Term, general comprehensive
liability insurance in a good and solvent insurance company or companies
licensed to do business in the Commonwealth of Massachusetts, selected by
Tenant, and reasonably satisfactory to Landlord, and in an amount reasonably
required by Landlord but in any event not less than One Million Dollars
($1,000,000.00) with respect to injury or death and Five Hundred Thousand
Dollars ($500,000.00) with respect to damages to property. Such policy or
policies shall include Landlord as an additional insured. Tenant agrees to
deliver certificates of such insurance to Landlord as of the date hereof and
thereafter not less than ten (10) days prior to the expiration of any such
policy. Such insurance shall not be cancellable without ten (10) days written
notice to the Landlord.
15.02. Casualty Insurance. Landlord shall cause the building to be insured
for the benefit of Landlord against loss or damage on an "All Risk" basis in an
amount equal to (i) the replacement value thereof, if insurance in such amount
is available, or (ii) the amount necessary to avoid the effect of co-insurance
provisions of the applicable policies. With respect to the Building, the
replacement value referred to above shall be reasonably determined
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from time to time by Landlord. Such casualty insurance policy or policies shall
designate Landlord as the named insured and loss payee with respect to the
Building and other improvements located on the Premises. Tenant shall maintain
its own casualty insurance with respect to Tenant's personal property and any
leasehold improvements belong to Tenant.
ARTICLE 16
Waiver of Subrogation
16.01. Waiver of Subrogation. All insurance policies carried by either
party covering the Premises, including but not limited to contents, fire and
casualty insurance, shall expressly waive any right on the part of the insurer
to make any claim against the other party. The parties hereto agree that their
policies will include such waiver clause or endorsement.
16.02. Waiver of Rights. Landlord and Tenant each hereby waive all claims,
causes of action and rights or recovery against the other and their respective
partners, agents, officers and employees, for any damage to or destruction of
persons, property or business which shall occur on or about the Premises and
shall result from any of the perils insured under any and all policies of
insurance maintained by Landlord and Tenant, regardless of cause, including the
negligence and intentional wrongdoing of either party and their respective
agents, officers and employees but only to the extent of recovery, if any, under
such policy or policies of insurance; provided, however, that this waiver shall
be null and void to the extent that any such insurance shall be invalidated by
reason of this waiver.
ARTICLE 17
Damage or Destruction
17.01. Substantial Damage. If the building or any part thereof shall be
damaged by fire or other casualty to the extent that substantial alteration or
reconstruction of the Building shall, in Landlord's sole opinion, be required
(whether or not the Premises have been damaged), or if as a result of any
mortgagee of the Building requires that Proceeds payable be used to retire the
mortgage debt, Landlord may, at its option, terminate this Lease by notifying
Tenant in writing of such termination within forty-five (45) days after the date
of such damage. If this Lease is so terminated, Rent shall be abated as of the
date of such damage, and Tenant shall be relieved of all its obligations, both
monetary and otherwise, under this Lease accruing after the date of such damage.
17.02. Restoration. If Landlord does not terminate this Lease pursuant to
Section 17.01, Landlord shall, within fifteen (15) days after receipt by
Landlord of the Proceeds payable in respect of such fire or other casualty,
proceed with reasonable diligence to repair and restore the Building (subject to
Force Majeure) to substantially the same condition in which it was immediately
prior to the occurrence of the casualty to the extent of the Proceeds. Landlord
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shall not be required to rebuild, repair, or replace any part of Tenant's
furniture, furnishings or fixtures or equipment. Landlord shall not be liable
for any inconvenience or annoyance to Tenant or injury to the business of Tenant
resulting in any way from such damage or the repair thereof, except that,
Landlord shall allow Tenant a fair diminution of Rent during the time and to the
extent the Premises are unfit for occupancy. Notwithstanding any provision of
this Section 17.02 to the contrary, if Landlord shall not have commenced such
repair or restoration within seventy five (75) days following such casualty or
having commenced such repairs or restoration, the Premises are not readied for
occupancy within nine (9) months following such casualty, Tenant shall have the
option to terminate this Lease, exercised by written notice (together with
payment by certified or cashier's check in an amount equal to the unamortized
value of the capital items incorporated into the Tenant's Finishes for Tenant's
particular use of the Premises) within seven (7) days after the expiration of
said nine (9) month period.
ARTICLE 18
Eminent Domain
18.01. Total Taking. If the entire Premises should be the subject of a
Taking, then this Lease shall terminate as of the date when physical possession
of the Building or the Premises is taken by the condemning authority.
18.02. Partial Taking. If there occurs a Partial Taking, Landlord (whether
or not the Premises are affected thereby) may terminate this Lease by giving
written notice thereof to Tenant within sixty (60) days after the right of
election accrues, in which event this Lease shall terminate as of the date when
physical possession of such portion of the Building or Premises is taken by the
condemning authority. If upon any such Partial Taking this Lease is not
terminated, Rent shall be abated by an amount representing that part of the Rent
properly allocable to the portion of the Premises so taken and Landlord shall,
at Landlord's sole expense, restore and reconstruct the Premises to
substantially their former condition to the extent that the same, in Landlord's
judgment may be feasible, but such work shall not exceed the scope of Landlord's
Work and the value of Landlord's Contribution.
18.03. Awards and Proceeds. All Proceeds payable in respect of
a Taking shall be the property of Landlord. Tenant hereby assigns to Landlord
all rights of Tenant in or to such Proceeds, provided that Tenant shall be
entitled to separately petition the condemning authority for a separate award
for its moving expenses and trade fixtures but only if such a separate award
will not diminish the amount of Proceeds payable to Landlord.
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ARTICLE 19
Quiet Enjoyment
19.01. Landlord's Covenant. Provided that an Event of Default has not
occurred and is not then continuing, Tenant shall, subject to the Permitted
Exceptions, quietly have and enjoy the Premises during the Lease Term, without
hindrance or molestation from any Person lawfully claiming by, through or under
Landlord.
19.02 Subordination. This Lease is subject and subordinate to any mortgage
now on the Building, and shall be, at the mortgagee's election, subject and
subordinate to any mortgage hereafter on the building and to each advance made
or hereafter to be made under any mortgage, and to all renewals, modifications,
consolidations, replacements and extensions thereof and all substitutions
therefor; provided, however, such mortgagee shall not disturb Tenant's
possession hereunder so long as there exists no Event of Default by Tenant,
mortgagee shall execute a non-disturbance and attornment agreement in favor of
Tenant. This Section 19.02 shall be self-operative and no further instrument of
subordination shall be required, but if such subordination is in writing, then
such mortgagee shall execute a non-disturbance and attornment agreement in favor
of Tenant. In confirmation of such subordination, Tenant shall execute and
deliver promptly any certificate that Landlord or any mortgagee may request.
Tenant hereby irrevocably appoints Landlord as attorney-in-fact for Tenant (such
appointment being coupled with an interest) with full power and authority to
execute and deliver in the name and on behalf of Tenant any such certificate
which Tenant fails so to execute and deliver within ten (10) days after written
request by Landlord or such mortgage.
19.03. Notice to Mortgagee. No act or failure to act on the part of
Landlord which would entitle Tenant under the terms of this Lease, or by law, to
be relieved of Tenant's obligations hereunder or to terminate this Lease, shall
result in a release or termination of such obligations or a termination of this
Lease unless (i) Tenant shall have first given written notice of Landlord's act
or failure to act to all Landlord's mortgagees of which Tenant has been given
notice (from either Landlord or such mortgagee), if any, specifying the act or
failure to act on the part of Landlord which could or would give basis to
Tenant's rights; and (ii) such mortgagees, after receipt of such notice, have
failed or refused to correct or cure the condition complained of within a
reasonable time thereafter; but nothing contained in this Section 19.03 shall be
deemed to impose any obligation on any such mortgagees to correct or cure any
such condition. "Reasonable time" as used above shall mean a period of not less
than thirty (30) Business Days and shall include (but not be limited to) a
reasonable time to obtain possession of the Building if the mortgagee elects to
do so and a reasonable time to correct or cure the condition if such condition
is determined to exist.
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19.04. Other Provisions Regarding Mortgagees. If this Lease or the Rent
due hereunder is assigned to a mortgagee as collateral security for a loan, no
such mortgagee shall be deemed to have assumed any of Landlord's obligations
hereunder solely as a result of said assignment. A mortgage to whom this Lease
has been so assigned shall be deemed to have assumed such obligations only if
(i) by the terms of the instrument of assignment such mortgagee specifically
elects to assume such obligations or (ii) such mortgagee has (a) foreclosed its
mortgage (b) accepted a deed in lieu thereof, or (c) taken possession of the
Premises by entry or otherwise. Even if such mortgagee so assumes the
obligations of Landlord hereunder, (i) any such obligation under Section 24.01
to return the Security Deposit to the Tenant shall be limited to the amount
actually received by the mortgagee with respect thereto, and (ii) such mortgagee
will be liable for breaches of any of Landlord's obligations hereunder only to
the extent such breaches occur during the period of ownership by the mortgagee
after foreclosure (or any conveyance by a deed in lieu thereof), all as set
forth in Section 25.10 hereof.
ARTICLE 20
Defaults; Events of Default
20.01. Defaults. The following shall, if any requirement for notice of
lapse of time or both has not been met, constitute Defaults, and, if such
conditions have been met, constitute Events of Default hereunder:
(1) The occurrence of any event set forth in Article 21 hereof;
(2) The failure of Tenant to pay Rent when the same shall be due and
payable and the continuance of such failure for a period of ten (10) days
thereafter;
(3) The failure of Tenant to observe any covenant made by it in Sections
13.01, 15.01, 15.02, 19.02 or 25.03 hereof; and
(4) The failure-of Tenant to keep, observe or perform any of the other
covenants, conditions and agreements herein contained on Tenant's part to
be kept, observed or performed and the continuance of such failure without
the curing of same for a period of thirty (30) days after receipt by
Tenant of a notice in writing from Landlord specifying the nature of such
failure (or if such Default is of a nonmonetary nature and is not
reasonably susceptible of cure within such thirty (30) days, cure thereof
is commenced within said 30 day period and thereafter diligently
prosecuted).
20.02. Elimination of Default. Notwithstanding anything to the contrary
contained in this Article 20, in the event that any Default(s) of Tenant shall
be cured in any manner hereinabove provided, such Default(s) shall be deemed
never to have occurred and Tenant's rights hereunder shall continue unaffected
by such Default(s).
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ARTICLE 21
Insolvency
21.01. Insolvency. If (1) there occurs with respect to Tenant an
Insolvency or (2) any execution or attachment is issued against Tenant or any of
its property and as a result thereof the Premises are taken or occupied by some
Person other than the Tenant, except as may herein be permitted, then an Event
of Default hereunder shall be deemed to have occurred so that the provisions of
Article 22 hereof shall become effective and Landlord shall have the rights and
remedies provided for therein.
ARTICLE 22
Landlord's Remedies; Damages on Default
22.01. Landlord's Remedies. If an Event of Default shall occur and be
continuing, Landlord may, at its option, give to Tenant a notice terminating
this Lease upon a date specified in such notice, which date shall be not less
than three (3) Business Days after the date of receipt by Tenant of such notice
from Landlord, and upon the date specified in said notice, the term and estate
hereby vested in Tenant shall cease and any and all other right, title and
interest of Tenant hereunder shall likewise cease without further notice or
lapse of time, as fully and with like effect as if the entire Lease Term had
elapsed, Tenant in such event waiving all statutory rights of redemption, but
Tenant shall continue to be liable to Landlord as hereinafter provided.
22.02. Surrender. Upon any termination of this Lease as the result of an
Event of Default, Tenant shall quit and peacefully surrender the Premises to
Landlord, upon or at any time after any such termination, may without further
notice, enter the Premises and possess itself thereof by summary proceedings or
otherwise, and may dispossess Tenant and remove Tenant and all other Persons and
property from the Premises and may have, hold and enjoy the Premises and the
right to receive all rental income of and from the same.
22.03. Right to Relet. At any time or from time to time after any such
termination, Landlord may relet the Premises or any part thereof, in the name of
Landlord or otherwise, for such term or terms (which may be greater or less than
the period which would otherwise have constituted the balance of the Lease Term)
and on such conditions (which may include concessions or free rent) as Landlord,
in its reasonable discretion, may determine and may collect and receive the
rents therefor. Landlord shall in no way be responsible or liable for any
failure to relet the Premises or any part thereof, or for any failure to collect
any rent due upon any such reletting.
22.04. Survival of Covenants. No such termination of this Lease shall
relieve Tenant of its liability and obligations under this Lease and such
liability and obligations shall survive any such termination. Tenant shall
indemnify and hold Landlord harmless from all loss, cost, expense, damage or
liability arising out or in connection with such termination.
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22.05. Damages. In the event of any such termination, Tenant shall pay to
the Landlord the Rent up to the date of such termination. Tenant at the election
of the Landlord (which election may be made or changed at any time or from time
to time), either (a) pay as liquidated damages for so much of the unexpired term
as is covered thereby, and at the same time and in the same installments as are
specified in the Lease, sums equal to the excess to the Rent over the net sums
actually received by the Landlord for the period to which the Rent relates, or
(b) pay as liquidated damages for the the then unexpired Term, the difference
between
(1) the aggregate Rent which would have been payable under this Lease by
Tenant from the date of such termination until the Stated Expiration Date,
less
(2) the fair and reasonable rental value of the Premises for the same
period all of Landlords reasonable estimate of expenses to be incurred in
connection with reletting the Premises, including, without limitation, all
repossession costs, brokerage commissions, legal expenses, reasonable
attorneys' fees, alteration costs, and expenses of preparation for such
reletting, or (c), indemnify the Landlord against loss of the Rent at the
time of such termination or from the time to which installments of
liquidated damages shall have been paid during the residue of the Term -
each of the foregoing alternatives being separable.
If the Premises or any part thereof are relet by the Landlord before
presentation of proof of such liquidated damages to any court, commission or
tribunal, the amount of rent reserved upon such reletting shall be, prima facie,
the fair and reasonable rental value for the part or the whole of the Premises
so relet during the term of the reletting.
In lieu of any other damages and in lieu of full recovery by Landlord of
all sums payable under all the foregoing provisions of this Section 22.05
Landlord may by notice to Tenant, at any time after this Lease is terminated
under any of the provisions contained in Section 22.01 or is otherwise
terminated for breach of any obligation of Tenant and before such full recovery,
elect to recover, and Tenant shall thereupon pay, as liquidated damages, an
amount equal to the aggregate of the Basic Rent and Additional Rent accrued in
the 18 months ended next prior to such termination plus the amount of Rent of
any kind accrued and unpaid at the time of termination and less the amount of
any recovery by Landlord under the foregoing provisions of this Section 22.05 up
to the time of election by Landlord.
Nothing herein contained shall limit or prejudice the right of the
Landlord to prove and obtain as liquidated damages by reason of such
termination, an amount equal to the maximum allowed by any statute or rule of
law in effect at the time when, and governing the proceedings in which, such
damages are to be proved, whether or not such amount be greater, equal to, or
less than the amount of the difference referred to above.
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22. 06. Right to Equitable Relief. If there shall occur a Default or
threatened Default, Landlord shall be entitled to enjoin such Default or
threatened Default and shall have the right to invoke any right and remedy
allowed at law or in equity or by statute or otherwise as though re-entry,
summary proceedings and other remedies were not provided for in this Lease.
22.07. Right to Self Help. If an Event of Default shall occur and be
continuing, Landlord shall have the right, but shall not be obligated to enter
upon the Premises and "to perform such obligation notwithstanding the fact that
no specific provision for such substituted performance by Landlord is made in
this Lease with respect to such Default. In performing such obligation, Landlord
may make any payment of money or perform any other act. The aggregate of (i) all
sums so paid by Landlord (ii) interest (at the rate of 1-1/2% per month or the
highest rate permitted by law, whichever is less) on such sum plus all Rent not
paid when due and (iii) all necessary incidental costs and expenses in
connection with the performance of any such act by Landlord, shall be deemed to
be Rent under this Lease and shall be payable to Landlord immediately upon
demand. Landlord may exercise the foregoing rights without waiving any other of
its rights or releasing Tenant from any of its obligations under this Lease.
22.08. Further Remedies. Upon any termination of this Lease pursuant to
Section 22.01, or at any time thereafter, Landlord may, in addition to and
without prejudice to any other rights and remedies Landlord shall have at law or
in equity, re-enter the Premises, and recover possession thereof and may
dispossess any or all occupants of the Premises in the manner prescribed by the
statute relating to summary proceedings, or similar statutes; but Tenant in such
case shall remain liable to Landlord as hereinbefore provided. Any and all
rights and remedies which Landlord may have under this Lease, and at law and in
equity, shall be cumulative and shall not be deemed inconsistent with each
other, and any two or more of such rights and remedies may be exercised at the
same time in so far as permitted by law.
22.09. If Tenant shall fail to pay any Rent when the same is due (or with
respect to the Basic Rent, within ten (10) days after the same is due), Tenant
shall be obligated to pay a late payment charge equal to the greater of (a)
$100.00 or (b) ten percent (10%) of the Rent payment not so paid when due to
reimburse Landlord for its additional administrative costs. In addition to any
late payment charge which might otherwise be due, any Rent under this Lease
which is not paid when due shall bear interest at the Default Rate from the
first day due until such Rent plus all interest accrued thereon is paid in full.
ARTICLE 23
Waivers
23.01. No Waivers. Failure of Landlord to complain of any act
or omission on the part of Tenant no matter how long the same may continue,
shall not be deemed to be a waiver by said Landlord of any
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<PAGE> 22
of its rights hereunder. No waiver by Landlord at any time, expressed or
implied, of any breach of any provision of this Lease shall be deemed a waiver
of a breach of any other provision of this Lease or a consent to any subsequent
breach of the same or any other provision. No acceptance by Landlord of any
partial payment shall constitute an accord or satisfaction but shall only be
deemed a partial payment on account.
ARTICLE 24
Security Deposit
24.01. Security Deposit. Tenant has deposited the Security Deposit with
Landlord. Landlord shall hold the Security Deposit as security for the full and
faithful payment or performance by Tenant of its obligations under this Lease
and not as a prepayment of Rent. Landlord may commingle the Security Deposit
with other funds of Landlord but shall not be liable to Tenant for the payment
of interest thereon or profits therefrom. (Notwithstanding the provisions of the
foregoing sentence to the contrary, Landlord shall, unless otherwise required by
its mortgagee or the Lessor pursuant to a sale and lease-back, deposit the
Security Deposit in an interest-bearing account and the interest thereon shall,
so long as there shall exist no Event of Default and provided Tenant provides
Landlord with all necessary tax reporting information, be payable to Tenant).
Landlord may expend such amounts from the Security Deposit (and such accured
interest) as may be necessary to cure any Default including, without limitation
a failure to pay utility charges and, in such case, Tenant shall pay to Landlord
the amount so expended, on demand. Landlord may assign the Security Deposit to
any subsequent owner of the Building and thereafter Landlord shall have no
further liability to Tenant with respect thereto. As soon as reasonably
practicable after the Lease Termination Date, Landlord shall (i) inspect the
Premises, (ii) make such payments from the Security Deposit as may be required
to cure any outstanding Events of Default hereunder and (iii) if there is then
no Default (or no event which with the passage of tine in the giving of notice
would constitute a default) is then continuing, pay the balance of the Security
Deposit (together with any then accured but unpaid interest thereon) to Tenant.
ARTICLE 25
General Provisions
25.01. Force Majeure. In the event that Landlord or Tenant shall be
delayed, hindered in or prevented from the performance of any act required
hereunder by reason of Force Majeure, then performance of such act shall be
excused for the period of the delay and the period for the performance of any
such act shall be extend for a period equivalent to the period of such delay.
25.02. Notices and Commissions. All notices, demands, requests and other
communications provided for or permitted under this Lease shall be in writing,
either delivered by hand or sent by first-class mail, postage prepaid, to the
following addresses:
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(a) if to Landlord at the address stated in Section 1.01 hereof, or at
such other address as the Landlord shall have designated in writing to the
Tenant, with a copy to Gadsby & Hannah, one Post Office Square, Boston,
Massachusetts, 02109, attention: David C. Johnson, Esq., and to such
Persons as Landlord shall have designated in writing to Tenant, or
(b) if to Tenant at the address stated in Section 1.01 hereof, or at such
other address as the Tenant shall have designated in writing to the
Landlord, with a copy to such Persons as Tenant shall have designated in
writing to Landlord, and in the case of a Notice of Default, with a copy
to Richard S. Morse, Jr., P.C., Hutchins & Wheeler, 101 Federal Street,
Boston, MA 02110.
Any notice provided for herein shall become effective only upon and at the
time of receipt by the Person to whom it is given, unless such notice is mailed
first class registered or certified mail, in which case it shall be deemed to be
received on (i) the third Business Day following the mailing thereof or (ii) the
day of its receipt, if a Business Day, or the next succeeding Business Day,
whichever of (i) or (ii) shall be the earlier.
25.03. Certificates, Estoppel Letter. Either party shall, without charge,
at any time and from time to time hereafter, within ten (10) days after written
request of the other, certify by written instrument duly executed and
acknowledged to any mortgagee or purchaser, or proposed mortgagee or proposed
purchaser, or any other Person specified in such request: (a) as to whether this
Lease has been supplemented or amended, and if so, the substance and manner of
such supplement or amendment, (b) as to the validity and force and effect of
this Lease, in accordance with its tenor as then constituted, (c) as to the
existence of any Default or Event of Default, (d) as to the existence of any
offsets, counterclaims or defenses thereto on the part of such other party, (e)
as to the Term Commencement Date and Stated Expiration Date, and (f) as to any
other matters as may reasonably be so requested. Any such certificate may be
relied upon by the party requesting it and any other Person to whom the same may
be exhibited or delivered, and the contents of such certificate shall be binding
on the party executing same.
Tenant hereby irrevocably appoints Landlord as attorney-in-fact for Tenant
(such appointment being coupled with an interest) with full power and authority
to execute and deliver in the name and on behalf of the Tenant on any such
certificate which Tenant fails to execute within ten (10) days after written
request therefor.
25.04. Renewal. If this Lease is renewed or extended, the provisions of
Sections 7.01, 7.02, 7.03, 7.04, and 7.05 of Article hereof shall not apply.
25.05. Holding Over. If Tenant occupies the Premises after the Lease
Termination Date without having entered into a new lease of the Premises with
the Landlord, Tenant shall be a tenant-at-sufferance only subject to all of the
terms and provisions of this Lease at twice the then effective Basic Rent. Such
a holding over, even if
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<PAGE> 24
with the consent of the Landlord, shall not constitute an extension or renewal
of this Lease. Tenant hereby irrevocably appoints Landlord as attorney-in-fact
for Tenant (such appointment being coupled with an interest) with full power and
authority to execute and deliver in the name and on behalf of the Tenant on any
such certificate which Tenant fails to execute within ten (10) days after
written request therefor.
25.06. Governing Law. This Lease and the performance thereof shall be
governed, interpreted, construed and regulated by the laws of the Commonwealth
of Massachusetts.
25.07. Partial Invalidity. If any term, covenant, condition or provision
of this Lease or the application thereof to any person or circumstance shall, at
any time or to any extent, be invalid or unenforceable, the remainder of this
Lease, or the application of such term or provision to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant, condition and provision of this Lease
shall be valid and be enforced to the fullest extent permitted by law.
25.08. Notice of Lease. Tenant shall not record this (or a copy of this)
lease. In the event that the Term is for seven (7) years or more, the parties
will at any time, at the request of either one, promptly execute duplicate
originals of an instrument, in recordable form, which will constitute a Notice
of Lease, setting forth a description of the Premises, the Lease Term and other
portions thereof, excepting the rental provisions, as either party may
reasonably request.
25.09. Interpretation. The section headings used herein are for reference
and convenience only, and shall not enter into the interpretation hereof. This
lease may be executed in several counterparts, each of which shall be an
original, but all of which shall constitute one and the same instrument. The
term "Landlord" whenever used herein, shall mean only the owner at the time of
Landlord's interest herein, and upon any sale or assignment (other than as
collateral security for a loan) of the interest of Landlord herein, its
respective successors in interest and/or assigns shall, during the term of
ownership of its respective estates herein, be deemed to be Landlord and the
liability of Landlord, if any, hereunder shall in any event be limited to the
Landlord's interest in the Building.
25.10. Entire Agreement. No oral statement or prior written matter shall
have any force or effect. This Agreement shall not be modified or cancelled
except by writing subscribed to by all parties.
25.11. Parties. Except as herein otherwise expressly provided, the
covenants, conditions and agreements contained in this Lease shall be binding
upon the heirs, successors and assigns of the parties hereto.
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<PAGE> 25
25.12. Brokerage. Tenant represents and warrants that it has dealt with no
broker in connection with this lease transaction other than Coldwell Banker,
broker, and George L. Guaraldi, broker, and agrees to defend, with counsel
approved by Landlord, indemnify and save Landlord harmless from and against any
and all cost, expense or liability for any compensation, commissions or charges
claimed by any broker or agent, other than Coldwell Banker, broker, and George
L. Guaraldi, broker, (it being the parties intent that the commissions, payable
to said Coldwell Banker and George L. Guaraldi shall be the responsibility of
Landlord), with respect to Tenant's dealings in connection with this lease.
25.13. Non Recourse. By the execution and delivery hereof, Tenant hereby
covenants and agrees that, in the event of any claim against Landlord, Tenant
shall look solely to Landlord's interest in the Premises and that no trustee,
beneficiary, partner, director or officer of Landlord or such beneficiary shall
have any personal liability hereunder. In the event that the Landlord's estate
and property in the Premises is sold or transferred, Tenant shall be given
written notice thereof, the seller or transferror thereof shall thereupon be
relieved of all obligations and liabilities hereunder thereafter arising or
occurring, and the purchaser or transferee thereof shall thereupon be deemed to
assume and to have agreed to perform and observe all obligations and liabilities
hereunder thereafter arising or occurring or based on occurrences or situations
thereafter arising or occurring.
25.14. No Offer. The submission of a draft of this Lease or a summary of
some or all of its provisions does not constitute an offer to lease or demise
the Premises, it being understood and agreed that neither Landlord or Tenant
shall be legally bound with respect to the leasing of the Premises unless and
until this Lease has been executed by both Landlord and Tenant and a fully
executed copy delivered.
25.15. General Provisions. For all purposes of this Lease unless otherwise
expressed and provided herein or therein or unless the context otherwise
requires:
(a) The words herein, hereof, hereunder and other words of similar import
refer to this Lease as a whole and not to any particular article, section
or other subdivision of this Lease.
(b) A pronoun in one gender includes and applies to the other genders as
well.
(c) Each definition stated in Section 1.01 or 25.16 of this Lease applies
equally to the singular and the plural forms of the term or expression
defined.
(d) Any reference to a document defined in Section 25.16 of this Lease is
to such document as originally executed, or, if modified, amended or
supplemented in accordance with the provisions of this Lease, to such
document as so modified, amended or supplemented and in effect at the
relevant time of reference thereto.
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<PAGE> 26
(e) All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting
principles.
(f) All references in Section 1.01 hereof are subject to the specific
definitions thereof (if any) in Section 25.16 hereof.
25.16. Terms Defined. Each term or expression set forth above in Section
1.01 hereof or below in this Section 25.16 has the meaning stated immediately
after it.
Additional Rent. All sums and other charges (other than Basic Rent)
due from Tenant to Landlord or incurred by Landlord as the result of a
Default.
Authorizations. All franchises, licenses, permits and other
governmental consents issued by Governmental Authorities pursuant to Legal
Requirements which are or may be required for the use and occupancy of the
Premises and the conduct or continuation of a Permitted Use therein.
Building. The Building located on the Land.
Business Day. A day which is not a Saturday, Sunday or other day on
which banks in Boston, Massachusetts, are authorized or required by law or
executive order to remain closed.
Calendar Year. The First Calendar Year, the Last Calendar Year and
any full calendar year (January 1 through December 31) occurring during
the Lease Term.
C.P.I.. "Consumer Price Index - All Urban Consumers (CPI-U) - U.S.
City Average - All Items (1967=100)" as published by the U.S. Department
of Labor, or if such index is discontinued, a comparable successor index.
Common Areas. All areas devoted to the common use of the occupants
of the Building, including without limitation all corridors, foyers,
stairwells and stairs outside the Premises, common rest rooms, common
mechanical rooms, airshafts, parking areas, driveways, walkways, and
landscaped areas.
Corporation. A corporation, company, association, business trust or
similar organization wherever formed.
Default. Any event or condition specified in Article 20 hereof so
long as any applicable requirement of the giving of notice of lapse of
time or both have not been fulfilled.
Default Rate. An annual rate of interest equal to the lesser of (a)
an annual rate which shall be four (4) percent points above the then
current Base Rate, so called, being charged by the First National Bank of
Boston or (b) the maximum rate permissible from time to time under
applicable law.
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Event of Default. Any event or condition specified in (a) Article 20
hereof (if all applicable periods for the giving of notice or lapse of time or
both have been fulfilled) or (b) in Article 21 hereof.
First Calendar Year. The partial Calendar Year period commencing on the
Term Commencement Date and ending on the next succeeding December 31.
Force Majeure. Acts of God, strikes, lock outs, labor troubles, inability
to procure materials, failure of power, restrictive Legal Requirements, riots
and insurrection, acts of the public enemy, wars, earthquakes, hurricanes and
other natural disasters, fires, explosions, any act, failure to act or Default
of the other party to this Lease or any other reason reasonably beyond the
control of any party to this Lease; provided however, lack of money shall not be
deemed such a cause.
Governmental Authority. United States of America, the Commonwealth of
Massachusetts, the Town of Tyngsborough, County of Middlesex, and any political
subdivision thereof and any instrumentality of any of them.
Insolvency. The occurrence with respect to any Person of one or more of
the following events: the death, dissolution, termination of existence (other
than by merger or consolidation), insolvency, appointment of a receiver for all
or substantially all of the property of such person, the making of a fraudulent
conveyance or the execution of an assignment or trust mortgage for the benefit
of creditors by such Person, or the filing of a petition of bankruptcy or the
commencement of any proceedings by or against such Person under a bankruptcy,
insolvency or other law relating to the relief or the adjustment of
indebtedness, rehabilitation or reorganization of debtors; provided that if such
petition or commencement is involuntarily made against such a Person and is
dismissed within sixty (60) days of the date of such filing or commencement,
such events shall not constitute an insolvency hereunder.
Insurance Requirements. All terms of any policy of insurance maintained by
Landlord or Tenant and applicable to (or affecting any condition, operation, use
or occupancy of) the Building or the Premises or any part or parts of either and
all requirements of the issuer of any such policy and all orders, rules,
regulations and other requirements of the National Board of Fire Underwriters
(or any other body exercising similar functions).
Land. The Land, in the Town of Tyngsborough, County of Middlesex,
Commonwealth of Massachusetts, known as Lot 4, 300 Potash Hill Road, as
described on Exhibit A.
Landlord. As defined in the preamble hereof.
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<PAGE> 28
Last Calendar Year. The partial Calendar Year commencing on January 1 of
the Calendar Year in which the Lease Termination Date occurs of the Lease Term
and ending on the Lease Termination Date.
Lease Term. The period commencing on the Term Commencement Date and ending
on the Lease Termination Date.
Lease Termination Date. The earlier to occur of (1) the Stated Expiration
Date, (2) the termination of this Lease as the result of an Event of Default,
(3) the termination of this Lease pursuant to Articles 17 (Damage or
Destruction) or 18 (Eminent Domain) hereof.
Lease Year. A period commencing on the Term Commencement Date (or an
anniversary thereof) and ending on the Day before the next succeeding
anniversary thereof. For example, the first Lease Year is a period commencing on
the Term Commencement Date and ending on the day before the first anniversary
thereof. The last Lease Year shall end on the Lease Termination Date.
Legal Requirements. All statutes, codes, ordinances (and all rules and
regulations thereunder), all executive orders and other administrative orders,
judgments, decrees, injunctions and other judicial orders of or by any
Governmental Authority which may at any time be applicable to parts or
appurtenances of the Premises or Building or to any condition or use thereof and
the provisions of all Authorizations.
Occupancy Arrangement. With respect to the Premises or any portion thereof
or the Lease, and whether (a) written or unwritten or (b) for all or any portion
of the Lease Term, an assignment, a sublease, any tenancy at will, a tenancy at
sufferance, or any other arrangement (including but not limited to a license or
concession) pursuant to which a Person occupies the Premises for any purpose.
Outside completion Date. August 1, 1989.
Park. The subdivision of which the Land is a part comprising Lots 2
through 17 on the plan referred to in Exhibit A.
Partial Taking. Any Taking which is not a Total Taking.
Permitted Exceptions. Any liens or encumbrances on the Premises in the
nature of (a) liens for Taxes assessed but not yet due and payable, (b)
easements, reservations, restrictions and rights of way encumbering or affecting
the Land on the date of this Lease, (c) the rights of Landlord, Tenant and any
other Persons to whom Landlord has granted such rights to exercise in common
with respect to the Land and the Common Areas the rights granted to Tenant
hereunder, (d) mortgages or record, and (e) Title Conditions.
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<PAGE> 29
Person. An individual, a Corporation, a company, a voluntary association,
a partnership, a trust, an unincorporated organization or a government or any
agency, instrumentality or political subdivision thereof.
Premises. The portion of the Building referenced in Section 1.01 and shown
on Exhibit B hereto together with the right in common with the others entitled
thereto, to use the Common Areas.
Proceeds. With respect to any Taking or occurrence described in Article
17 hereof, with respect to which any Person is obligated to pay any amount to or
for the account of Landlord, the aggregate of (i) all sums payable or receivable
under or in respect of any insurance policy, and (ii) all sums or awards payable
in respect to a Taking.
Prohibited Occupancy Arrangement. An Occupancy Arrangement which provides
for any rent or other payment based in whole or in part on the net income or
profits derived by any person from the Premises.
Rent. Basic Rent and all Additional Rent.
Rentable Area of the Premises. The number of square feet stated in Section
1.01, whether the internal area of the Premises (together with a proportionate
share of the Building's Common Areas) should be more or less as a result of
minor variations resulting from actual construction and completion of the
Building or Premises so long as such work is done in accordance with the terms
and provisions hereof.
Rules and Regulations. The rules and regulations promulgated from time to
time by Landlord and uniformly applicable to Persons occupying space in the
Building, regulating the details of the operation and use of the Building.
Stated Expiration Date. The last day of the last Lease Year of the Term
stated in Section 1.01.
Substantial Completion Date. The date on which the Premises, together with
the appurtenant areas of the Building necessary for access and service thereto
have been completed in accordance with Article 7 hereof, as conclusively
established by the issuance of a certificate of occupancy therefor, except for
items of work and adjustment of equipment and fixtures which are not necessary
to make the premises reasonably tenantable for the Permitted Uses and because of
season or weather or nature of the item cannot practicably be done at the time.
Taking. The taking or condemnation of title to all or any part of the Land
or the possession or use of the Building by a competent person for any public
use or purpose or any proceeding or negotiations which might result in such a
taking or any sale or lease in lieu of or in anticipation of such a taking.
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<PAGE> 30
Taxes. All taxes, special or general assessments, water rents, rates and
charges, sewer rents and other impositions and charges imposed by Governmental
Authorities of every kind and nature whatsoever, extraordinary as well as
ordinary and each and every installment thereof which shall or may during the
term of this Lease be charged, levied, laid, assessed, imposed, become due and
payable or become liens upon or for or with respect to the Park, Land or any
part thereof or on this Lease under or by virtue of all present or future Legal
Requirements and any tax based on a percentage fraction or capitalized value of
this Rent (whether in lieu of or in addition to the taxes hereinbefore
described). Taxes shall not include inheritance, estate, excise, succession,
transfer, gift, franchise, income, gross receipt, or profit taxes except to the
extent such are in lieu of or in substitution for Taxes as now imposed on the
Building, the Land, the Premises or this Lease or to linkeage payments,
so-called, made in connection with the permits and approvals issued for the base
Building.
Tenant. As defined in the preamble hereof.
Tenant's Proportionate Share. 36.82% with respect to the Building and Land
and 23.4% with respect to Park Areas (which 23.4% should be reduced
proportionately upon the construction or occupancy of additional buildings in
the Park).
Term Commencement Date. As defined in Article 7.
Title Conditions. All covenants, agreements, restrictions, easements and
declarations of record on the date hereof so far as the same may be from time to
time in force and applicable.
Total Taking. (i) a Taking of: (a) the fee interest in all or
substantially all of the Building or (b) such title to or easement in, over,
under or such rights to occupy and use any part or parts of the Building to the
exclusion of Landlord as shall have the effect, in the good faith judgment of
the Landlord, of rendering the portion of the Building remaining after such
Taking (even if restoration were made) unsuitable for the continued use and
occupancy of the Building for the Permitted Uses of (ii) a Taking of all or
substantially all of the Premises or such title to or easement in, on or over
the Premises to the exclusion of Tenant which prohibits access to the Premises
(without alternative access being reasonably available) or the exercise by
Tenant of any rights under this Lease.
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<PAGE> 31
Executed as a sealed instrument as of the 24th day of February, 1989.
(Landlord)
Vesper Properties 1 Trust
[SIG]
-----------------------------------------------
As trustee of aforesaid, but not individually
[SIG]
-----------------------------------------------
As trustee of aforesaid, but not individually
(Tenant)
LaserData Inc.
By: [SIG]
---------------------------
Title
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<PAGE> 32
Exhibits
Exhibit A - Land
Exhibit B - Premises
Exhibit C1 - Building Standard Tenant Improvements
Exhibit C2 - Modular Partitioning Specifications
Exhibit D - Floor Plan
Exhibit E - Work Letter
Exhibit F - Minimum Tenant Plan Requirements
Exhibit G - (Intentionally Deleted)
Exhibit H - (Intentionally Deleted)
Exhibit I - Calculation of First Month's Rent
Exhibit J - Attornment Letter
Exhibit K - Building and Park Regulations
Exhibit L - Acceptance of Occupancy of Space
Exhibit M - Punch List Acceptance
Exhibit N - New Customer Letter to Colonial Gas
Exhibit 0 - New Customer Letter to Massachusetts Electric
Exhibit P - New Customer Letter to Tyngsborough Water District
<PAGE> 33
Exhibit A
Legal Description of Land
[GRAPH]
<PAGE> 34
[GRAPH]
<PAGE> 35
[GRAPH]
VESPER EXECUTIVE PARK
<PAGE> 36
AMENDMENT TO LEASE
AMENDMENT 1
Reference is hereby made to the Lease made at Boston, Massachusetts, by
and between Francis D. Burke, Paul E. Guaraldi and Neil Mac Donald as trustees
of Vesper Properties 1 Trust under declaration of trust dated January 8, 1986
and recorded with Middlesex North District Registry of deeds in Book 3315, Page
65, having a principal place of business c/o Vesper Properties Inc., Suite 3620,
One Post Office Square, Boston, Massachusetts 02109 ("Landlord") and LaserData
Inc., a Delaware corporation, having a principal place of business at 300 Vesper
Executive Park, Tyngsborough, Massachusetts 01849 ("Tenant") dated the 24th of
February 1989.
Tenant and Landlord hereby agree that:
1. Tenant has continued as Tenant pursuant to the terms of the Lease
and is not currently in a state of default thereunder.
2. That notwithstanding any provisions therein contained that:
a. The term of the Lease shall be from the date of execution
herein until August 31, 1994.
b. That beginning September 1, 1991 that the Rentable square
footage shall be 37,677 square feet as shown in Exhibit
Amendment 1-A herein attached. The Tenant's Proportionate
Share shall be 63.35%
C. That the Basic Rent beginning September 1, 1991 shall be as
follows:
<TABLE>
<S> <C>
First Lease Year $295,764.45
Second Lease Year $295,764.45
Third Lease Year $295,764.45
</TABLE>
d. That this amendment to the Lease shall replace and void any
option to extend contained in Section 3.03 of the Lease.
1
<PAGE> 37
e. That payment of fees referenced in Section 3.03 for failure
not to extend by Tenant to Landlord pursuant to the terms of
the additional shall be null and void.
f. That payment of any residual value for non-standard fitup as
referred to in the original Lease in Section 3.04 shall be
waived by Landlord if Tenant completes the Term of the Lease
as extended by this Amendment without default. In such event
title to the fitup referenced in section 3.04 of the Lease
shall become property of the Tenant at the completion of this
Lease as amended herein.
g. That Tenant shall have the sole responsibility for and bear
the cost of demising and fitting any additional space occupied
by the Tenant under the terms of this Lease Amendment.
Landlord furnishes additional space as is and Tenant assumes
responsibility for additional fitup required to obtain
occupancy therein.
h. That all other terms of the Lease shall remain in full force
and effect.
Agreed on this 11th day of September, 1991.
Landlord: Tenant:
Vesper Properties 1 Trust LaserData
[SIG]
- ----------------------------- -------------------------------
Francis D. Burke, Trustee Vice President
[SIG]
- -----------------------------
Paul E. Guaraldi, Trustee
2
<PAGE> 38
AMENDMENT NO. 2 TO LEASE
Reference is made to that certain Lease dated February 24, 1989 by and
between Francis D. Burke, Paul E. Guaraldi and Thomas J. Flood, Trustees of
Vesper Properties 1 Trust under Declaration of Trust dated January 8, 1986,
recorded with Middlesex North District Registry of Deeds in Book 3315, Page 65,
having a principal place of business c/o Vesper Properties, Inc., Suite 3620,
One Post Office Square, Boston, Massachusetts 02109 (the "Landlord") and
LaserData Inc., a Delaware corporation with a principal place of business at 300
Vesper Executive Park, Tyngsborough, Massachusetts 01849 (the "Tenant").
WHEREAS Landlord and Tenant amended the above-referenced lease by
Amendment 1 dated September 11, 1991 (the lease, as amended by Amendment 1, is
hereinafter collectively referred to as the "Lease");
WHEREAS, Landlord and Tenant desire to extend the Term of the Lease under
the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant agree to amend
the Lease as follows:
1. The Term of the Lease is hereby extended for three (3) Lease Years,
which extension shall commence on September 1, 1994 and terminate on August 31,
1997. Landlord and Tenant confirm that Tenant's extension option set forth in
Section 3.03 of the original Lease has been deleted by Amendment 1 to the Lease.
2. The Rentable Area of the Premises is hereby reduced from the existing
37,677 square feet to the original 21,900 rentable square feet (approximately
21,681 usable square feet) known as Suites A and B and located at 300 Potash
Hill Road, Tyngsborough, Massachusetts, as shown on Exhibit B attached to the
original Lease.
3. Tenant's Proportionate Share is hereby reduced from 63.35% to 36.82%.
4. The Basic Rent due from Tenant to Landlord during the extension term
described herein is $167,535.00 per Lease Year ($7.65 per rentable square foot).
All other amounts due from Tenant to Landlord in addition to Basic Rent,
including without limitation all Additional Rent, shall continue to be due and
payable as provided in the Lease.
5. The following additional Section 25.16 is added to the Lease:
<PAGE> 39
25.16 Tenant's Right to Terminate Lease.
Provided Tenant is not in default under the Lease, Tenant shall have the
right to terminate this Lease, which termination shall be effective on August
31, 1995, by delivering to Landlord not later than February 28, 1995 (i) written
notice of Tenant's election to so terminate this Lease and (ii) a payment to
Landlord (the "Lease Termination Payment") in the amount of $96,955.00. The
Lease Termination Payment shall be in addition to all other amounts, including
Basic Rent and Additional Rent, due from Tenant to Landlord through such
termination date.
The terms used herein shall have the same meanings as set forth in the
Lease.
Except as expressly set forth herein, all other terms of the Lease shall
remain in full force and effect.
Executed under seal as of this ___day of __________________, 1994.
LANDLORD:
VESPER PROPERTIES 1 TRUST
By FRANCIS D. BURKE, TRUSTEE
--------------------------------------
Francis D. Burke, Trustee
By:
--------------------------------------
Paul E. Guaraldi, Trustee
By:
--------------------------------------
Thomas J. Flood, Trustee
TENANT:
LASERDATA INC.
By: PAUL J. RUSCON
--------------------------------------
Name: Paul J. Ruscon
Title: President/CEO
<PAGE> 40
AMENDMENT NO. 3 TO LEASE
Amendment to Lease dated July 24, 1997 between Francis D. Burke, Paul E.
Guaraldi and Thomas J. Flood, Trustees of Vesper Properties 1 Trust under
Declaration of Trust dated January 8, 1986, recorded with Middlesex North
District Registry of Deeds in Book 3315, Page 65, having a principal place of
business c/o Vesper Properties, Inc., Suite 3620, One Post Office Square,
Boston, Massachusetts 02109 (the "Landlord") and Kofax Image Products, Inc., a
Delaware corporation with a place of business at 300 Vesper Executive Park,
Tyngsborough, Massachusetts 01849 (the "Tenant").
WHEREAS, Landlord and LaserData, Inc., a Delaware corporation
("LaserData") entered into a Lease dated February 24, 1989, as amended by
Amendment 1 dated September 11, 1991 and Amendment No. 2 dated August 31, 1994
(the "Lease"). The tenant's obligations under the Lease were assigned by
LaserData to and assumed by Kofax Image Products, a California corporation
("Kofax") by Agreement dated December 30, 1995 (the "Assumption Agreement"). The
tenant's obligations under the Lease were thereafter assumed by Tenant pursuant
to the corporate reorganization of Kofax;
WHEREAS, Landlord and Tenant desire to extend the Term of the Lease
under the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant agree to amend
the Lease as follows:
1. The Term of the Lease is hereby extended for three (3) Lease Years,
which extension shall commence, on September 1, 1997 and terminate on August 31,
2000. Landlord and Tenant confirm that Tenant's extension option set forth in
Section 3.03 of the original Lease has been deleted by Amendment 1 to the Lease.
2. The Rentable Area of the Premises is hereby reduced from the existing
21,900 rentable square feet to 10,098 square feet, as shown on Exhibit A
attached hereto. Landlord, at its expense, shall construct and paint a demising
wall between the Premises and the adjacent premises, substantially as shown on
Exhibit A.
3. Tenant's Proportionate Share is hereby reduced from 36.82% to 16.95%
(based upon 59,575 rentable square feet in the entire Building).
4. The Basic Rent defined in Section 1.01 of the Lease is hereby amended
to provide as follows:
<PAGE> 41
-2-
(a) September 1, 1997 through August 31, 1998: $9.75 triple net per
rentable square foot ($98,455.50 for such Lease Year, $8,204.63 per
month);
(b) September 1, 1998 through August 31, 1999: $10.00 triple net per
rentable square foot ($100,980.00 for such Lease Year, $8,415.00 per
month); and
(c) September 1, 1999 through August 31, 2000: $10.25 triple net per
rentable square foot ($103,504.50 for such Lease Year, $8,625.38
per month).
All other amounts due from Tenant to Landlord in addition to Basic Rent,
including without limitation all Additional Rent, shall continue to be due and
payable as provided in the Lease.
5. Tenant warrants and represents to Landlord that Tenant is entitled to
the $45,174.16 security deposit described in Section 1.01 of the Lease and
originally paid by LaserData to Landlord. Landlord and Tenant hereby agree to
reduce the security deposit held by Landlord under the Lease from $45,174.16 to
$16.410.00. The $28.764.16 balance of the security deposit shall be credited by
Landlord to Tenant against the successive monthly installments of base rent next
becoming due under the Lease.
6. Landlord hereby consents to the assumption by Tenant of the tenant's
obligations under the Lease.
7. The terms used herein shall have the same meanings as set forth in the
Lease. Except as expressly set forth herein, all other terms and conditions of
the Lease are ratified and confirmed and shall remain in full force and effect.
Executed under seal as of the day and year first above written.
LANDLORD:
VESPER PROPERTIES 1 TRUST
By FRANCIS D. BURKE, TRUSTEE
-----------------------------------
Francis D. Burke, Trustee
By
-----------------------------------
PAUL E. Guaraldi, Trustee
By
-----------------------------------
Thomas J. Flood, Trustee
<PAGE> 42
-3-
TENANT:
KOFAX IMAGE PRODUCTS
BY: [SIG]
------------------------------------
Name: Ronald J. Fikert
Title: Vice President
Hereunto Duly Authorized
<PAGE> 43
Exhibit A
Plan of Leased Premises
I. Floorplan of demising wall attached.
II. Landlord will at tenant's expense remove the existing drywall from the
covered tailboard loading dock and make the loading dock and loading dock
door operational in the proposed Kofax space. Landlord at tenant's
expense will install double doors to access the loading dock area.
Landlord at tenant's expense will install a sink with hot and cold water
in the proposed new lunchroom.
<PAGE> 44
[GRAPH]
<PAGE> 1
EXHIBIT 10.16
ASSET PURCHASE AGREEMENT
DECEMBER 30, 1995
SELLER
LaserData, Inc.
BUYER
Kofax Image Products
<PAGE> 2
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made as of December
30, 1995, by and between KOFAX IMAGE PRODUCTS, a California corporation
("Buyer"), and LASERDATA, INC., a Delaware corporation ("Seller")
R E C I T A L S:
A. Seller owns and operates a business whereby Seller
manufactures and markets optical storage and document management software and
related hardware products (the "Business").
B. Buyer desires to purchase from Seller, and Seller desires to
sell and transfer to Buyer, substantially all of the assets of Seller and
certain of the liabilities of Seller, on the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises, the terms,
covenants and conditions hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereby agree as follows:
1. ASSETS AND LIABILITIES BEING PURCHASED AND ASSUMED.
1.1 PURCHASED ASSETS. Except as and to the extent
otherwise provided in Section 1.2 hereto, Buyer hereby agrees to purchase from
Seller, and Seller hereby agrees to sell, transfer and assign to Buyer, free
and clear of any and all mortgages, liens, security interests, encumbrances,
pledges, leases, equities, claims, charges, restrictions, conditions,
conditional sale contracts and any other adverse interests of any kind
whatsoever (except as disclosed on Schedule 4.5 attached hereto), all of the
assets, wherever located, which are owned by Seller, or in which Seller has any
right, title or interest, and which are used in connection with the Business
(collectively referred to herein as the "Purchased Assets"). The Purchased
Assets shall include, but shall not be limited to, the following:
(a) All of the tangible personal property,
machinery, equipment, tools, machine and electric parts, supplies,
computers, office furniture and fixtures and vehicles, wherever
located, owned or used by Seller in connection with the Business
(collectively, the "Tangible Assets"), all the items of which have
been listed by Seller on Schedule 1.1(a) attached hereto;
(b) All of the rights, tangible and intangible,
of Seller existing under any of the contracts, agreements, leases,
licenses, instruments or commitments that are listed in Schedule
1.1(b) attached hereto, and under any contracts, agreements, leases,
licenses, instruments and commitments which are entered into by Seller
in connection with the Business after the date hereof and prior to the
"Closing" (as defined below) with the prior written consent of Buyer
(collectively, the "Assumed Contracts");
<PAGE> 3
(c) All rights in and to any governmental and
private permits, licenses, franchises and authorizations, to the
extent assignable, used in connection with the Business;
(d) All raw materials, work-in progress and
finished-goods inventories, and all repair and replacement parts and
materials, and all other parts and materials, used in or relating to
the Business, including, without limitation, all inventories of
computer program code (in all media) and materials and program
documentation (collectively, the "Inventory");
(e) All rights in and to any requirements,
processes, formulations, methods, technology, know-how, formulae,
trade secrets, trade dress, designs, inventions and other proprietary
rights and all documentation embodying, representing or otherwise
describing any of the foregoing, owned or held by Seller in connection
with the Business (the assets described in Sections 1.1(e) through
1.1(h) are referred to as the "Intangible Property Rights");
(f) All patents, copyrights, tradenames,
trademarks and service marks of Seller used in the Business, all of
which have been listed by Seller on Schedule 1.1(f), and all
applications therefor, and all documentation embodying, representing
or otherwise describing any of the foregoing;
(g) All rights in and to the customer lists,
parts lists, vendor lists, promotion lists, marketing data and other
compilations of names and data developed in connection with the
Business, and which shall be delivered by or on behalf of Seller to
Buyer at or prior to the Closing;
(h) All of Seller's rights in and to the computer
software programs (including software licensed to Seller) used in
connection with the Business or developed or under development by, or
on behalf of, Seller in connection with the Business and identified on
Schedule 1.1(h), including the source code and object code for such
software, and all technical and descriptive materials (other than
Inventory) relating to the acquisition, design, development, use or
maintenance of computer code and program documentation and materials
in any and all languages ("Technical Documentation"), in each case to
the extent that Seller possesses and has a right to possess and
transfer the same;
(i) All cash, whether on hand, in banks or other
depository accounts, or transit, accounts and notes receivable,
negotiable instruments of or made payable to Seller, advanced
payments, claims for refunds and deposits and other prepaid items of
Seller;
(j) All accounts receivable schedules, lists,
files, books, publications, and other records and data used in
connection with the Business;
(k) All causes of action, claims, suits,
proceedings, judgments or demands, of whatsoever nature, of or held by
Seller against any third parties with respect to the Business;
2
<PAGE> 4
(l) All goodwill associated with the Business and
the Purchased Assets, including the Intangible Property Rights; and
(m) Seller's Non-Competition Agreement referenced
in Section 3.5 hereof.
1.2 EXCLUDED ASSETS. Set forth in Schedule 1.2 is a list
and description of assets owned by Seller which shall not be sold, but shall be
retained, by Seller (the "Excluded Assets"). The Purchased Assets shall not
include any of the Excluded Assets. Seller shall give Buyer reasonable access
upon request, at any time after the Closing, to any records of Seller included
in the Excluded Assets insofar as they relate to the Business or the Purchased
Assets.
1.3 ASSUMED OBLIGATIONS. Buyer hereby agrees to assume
only: (i) those liabilities specifically set forth in Schedule 1.3
(collectively, the "Assumed Liabilities"); and (ii) those liabilities and
obligations arising after the "Closing Date" (as defined below) under the
Assumed Contracts (which, together with the Assumed Liabilities, shall
sometimes be referred to herein collectively, as the "Assumed Obligations").
The Assumed Obligations shall not include, and Seller covenants that Buyer
shall not be liable or responsible for, any obligations or liabilities arising
out of any act or omission of Seller under any Assumed Contract, regardless of
when such liability or obligation is asserted. Seller represents and warrants
that Seller is not in default under any Assumed Obligation, and Buyer shall not
be obligated to assume any Assumed Obligation which is in default as of the
Closing Date.
2. LIABILITIES NOT ASSUMED.
Except for the Assumed Obligations, Seller agrees that Buyer
will not assume or perform, and Seller shall remain responsible for and shall
indemnify, hold harmless and defend Buyer from and against, any and all
liabilities and obligations of Seller, whether known or unknown, and regardless
of when such liabilities or obligations arise or are asserted, including,
without limitation, any obligations or liabilities of Seller with respect to
the following:
(a) With the exception of vacation pay (for which
Seller shall accrue through the Closing Date and for which Buyer shall
assume responsibility to the extent set forth in the schedule of
liabilities to be delivered by Seller to Buyer pursuant to Section 7.9
below), any compensation or benefits payable to employees of Seller,
including, but not limited to, any liabilities arising under any
employee pension or profit sharing plan or other employee benefit
plan, any severance pay or other termination costs due to employees of
Seller or any of Seller's obligations to its employees for salaries
and holiday and sick pay accrued and unpaid as of the Closing Date;
(b) All federal, state, local, foreign or other
taxes, including without limitation any income, sales, use, personal
property and other taxes which may become payable as a result of the
transactions contemplated by this Agreement;
3
<PAGE> 5
(c) Injuries to or the death of any person, or
any employee of Seller, that (i) has occurred or may occur, prior to
Closing, in connection with the Business, or (ii) has occurred prior
hereto or may occur hereafter in connection with any other business
conducted, or any other operations engaged in, by Seller, even if not
discovered until after the Closing Date;
(d) All liens, claims and encumbrances on any of
the Purchased Assets and all obligations and liabilities secured
thereby;
(e) All obligations of Seller for borrowed money,
or incurred in connection with the purchase, lease or acquisition of
any assets, and any obligations of a similar nature incurred by
Seller, including without limitation the obligations of Seller
pursuant to the subordinated notes payable to certain of its
stockholders (the "Subordinated Notes"), including the current
maturities thereof;
(f) Any accounts or notes payable or similar
indebtedness incurred by Seller;
(g) Except as otherwise provided by Section 7.11
below, any claims, demands, actions, suits, legal proceedings,
obligations or liabilities arising from Seller's operation of the
Business, including, but not limited to, those set forth in Schedule
4.13, or arising from any other business or operations of Seller,
whether conducted prior to or after the Closing, whether such claims,
demands, actions, suits, legal proceedings, obligations or liabilities
are presently pending or threatened or are threatened or asserted at
any time after the date hereof and whether before or after the
Closing;
(h) Fees payable to Seller's agents or
representatives for strategic partnerings, or other transactions;
(i) Any legal, accounting or other fees or
expenses of Seller or its stockholders relating to or arising from the
transactions contemplated hereby; and
(j) Any liabilities arising out of the
termination by Seller of any of its employees in anticipation or as a
consequence of, or following, consummation of the transactions
contemplated hereby.
3. PURCHASE PRICE AND TERMS OF PAYMENT.
3.1 PURCHASE PRICE. As consideration for the sale to
Buyer of the Purchased Assets, Buyer shall pay to Seller an amount equal to
Four Million One Hundred Fifty Thousand Dollars ($4,150,000) (the "Purchase
Price"), of which amount Three Million Five Hundred Thousand Dollars
($3,500,000) shall be paid to Seller on Tuesday, January 2, 1996 by wire
transfer and Six Hundred Fifty Thousand Dollars ($650,000) will be deposited
with the Escrow Agent (as such term is defined in Section 3.2 below).
4
<PAGE> 6
3.2 ESCROW. On Tuesday, January 2, 1996, Buyer shall
deliver to, and cause to be directly deposited with, Silicon Valley Bank (the
"Escrow Agent"), for the account and future potential benefit of Seller, cash
in the amount of Six Hundred Fifty Thousand Dollars ($650,000), which amount,
together with all interest and other amounts earned thereon, shall be referred
to as the "Escrowed Funds." The Escrowed Funds shall be held by the Escrow
Agent pursuant to the terms and conditions of an Escrow Agreement, in
substantially the form attached hereto as EXHIBIT A (the "Escrow Agreement'),
by and among Buyer, Seller and the Escrow Agent.
3.3 PURCHASE PRICE ADJUSTMENT.
(a) DETERMINATION OF CLOSING NET WORTH.
Promptly, and in any event within 45 days after the Closing, Buyer shall
prepare and, at its expense, shall engage Deloitte & Touche LLP ("D&T") to
audit or review, at Buyer's option, a balance sheet (the "Closing Balance
Sheet") as of December 30, 1995 in order to determine the net worth of the
Seller as of December 30, 1995 (the "Closing Net Worth"), and shall present the
Closing Balance Sheet to Seller. For purposes hereof, the Closing Net Worth
shall mean the amount by which (i) the aggregate dollar amount of the
historical net book values of the Purchased Assets of the Seller as of December
30, 1995 exceeds (ii) the sum of the liabilities of the Seller outstanding as
of December 30, 1995 under the Assumed Obligations. The Closing Balance Sheet
shall be prepared in accordance with generally accepted accounting principles
("GAAP") and with the same accounting methods, practices, procedures and
policies, and using the same methods of estimates and judgments, used in
preparing the Fiscal 1995 Financial Statements referenced in Section 4.3 below.
The Closing Balance Sheet shall not take into account any write-up in the fair
value of the Purchased Assets or other adjustments required under purchase
method accounting rules or customs, and shall assume that the purchase and sale
of the Purchased Assets contemplated hereby has not been consummated. Upon
receipt of such Closing Balance Sheet, Seller and Seller's representatives, at
Seller's sole expense, shall have the right to review the work papers of D&T
utilized in preparing the Closing Balance Sheet and other relevant documents,
and to discuss related matters with representatives of Buyer and D&T. The
Closing Balance Sheet shall be conclusive and binding upon Seller unless Seller
presents to Buyer within 15 days after receipt of the Closing Balance Sheet
written notice of disagreement specifying in reasonable detail the nature and
extent of the disagreement. If Buyer and Seller are not able to resolve their
disagreement with respect to the Closing Balance Sheet within 15 days after
Buyer receives a timely notice of disagreement, the items of disagreement shall
be submitted to binding resolution by either (i) an independent accounting firm
selected within five days thereafter by agreement of Seller and Buyer or (ii)
in the event Seller and Buyer have been unable to select a firm by agreement
within the prescribed time period, a "Big Six" accounting firm selected by lot,
after eliminating D&T and any other "Big Six" accounting firm that has, in the
prior three years, been engaged to provide accounting or tax advisory services
to Seller or Buyer or any of their respective subsidiaries or affiliates. The
determination of any accounting firm so selected (the "Review Accountants")
with respect to the matters in dispute shall be conclusive and binding upon the
parties. Buyer and Seller shall each pay one-half of the fees and expenses of
any Review Accountants selected to resolve any such dispute. The Closing
Balance Sheet shall be deemed to be binding on Buyer and Seller upon (i)
Seller's failure to deliver to Buyer a notice of disagreement within 15 days
after receipt of the Closing Balance Sheet prepared by or on behalf of Buyer,
(ii) resolution of any disagreement by mutual agreement of the parties after a
timely
5
<PAGE> 7
notice of disagreement has been delivered to Buyer, or (iii) notification of a
final determination of the items of disagreement submitted to the Review
Accountants.
(b) ADJUSTMENT OF PURCHASE PRICE.
Notwithstanding Sections 3.1 and 3.2 above, the Purchase Price shall be reduced
by an amount equal to the amount, if any, by which One Million Dollars
($1,000,000) exceeds Seller's Closing Net Worth (the "Reduction Amount").
Buyer and Seller shall jointly direct the Escrow Agent to offset the Reduction
Amount, if any, against the Escrowed Funds and to promptly disburse the
Reduction Amount to Buyer, all in accordance with the Escrow Agreement.
Notwithstanding the foregoing, the Reduction Amount shall in no event exceed
the then remaining amount of the Escrow Fund and the sole source of recovery
therefor shall be the Escrow Fund under the Escrow Agreement.
3.4 ALLOCATION OF PURCHASE PRICE. The Purchase Price
shall be preliminarily allocated among the Purchased Assets as set forth in
EXHIBIT B attached hereto. After receipt by the parties of the Closing Balance
Sheet pursuant to Section 3.3, the parties shall amend such preliminary
allocation, if necessary, to conform the Purchase Price allocation to the
Closing Balance Sheet and the as-adjusted Purchase Price. The parties hereto
shall report consistent with such preliminary or final allocation on all income
tax returns, and will comply with, and furnish the information required by
Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"), and
any regulations thereunder.
3.5 NON-COMPETITION AGREEMENT. At the Closing, Seller
shall enter into a Non-Competition Agreement, in the form of EXHIBIT C hereto,
with Buyer (the "Non-Competition Agreement"). A portion of the Purchase Price,
as set forth in EXHIBIT B, constitutes the consideration therefor.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Except as disclosed
in the Schedules delivered concurrently herewith by reference to the specific
Section or Sections hereof to which the disclosure pertains, Seller hereby
represents and warrants to Buyer, as of the date hereof and as of the Closing
Date, as follows:
4.1 AUTHORITY AND BINDING EFFECT. Seller has the full
corporate power to execute and deliver this Agreement and each agreement
referenced herein to which it is a party and to consummate the transactions
contemplated by, and comply with its obligations under, such agreements. This
Agreement and each agreement referenced herein to which Seller is a party, and
the consummation by Seller of its obligations herein and therein, have been
duly authorized by all necessary corporate action of Seller, including, without
limitation, the approval of its stockholders in accordance with applicable law.
This Agreement has been duly executed and delivered by Seller, and Seller has
duly executed and delivered the agreements referenced herein to which it is a
party. This Agreement is, and upon its execution and delivery of the Escrow
Agreement and the Non-Competition Agreement will be, the valid and binding
agreements of Seller. This Agreement, the Escrow Agreement and the
Non-Competition Agreement shall be enforceable against Seller in accordance
with their respective terms, except as such enforceability may be limited by
(i) bankruptcy, insolvency, moratorium or other similar laws affecting
creditors' rights generally, and (ii) general principles of equity relating to
the availability of equitable remedies. No further action is required to be
taken by Seller, nor is it necessary for Seller to obtain any action, approval
or consent by or from any third persons, governmental or other, to enable
Seller to enter into or perform its obligations under this Agreement and each
6
<PAGE> 8
agreement referenced herein to which it is a party, except for the consents of
third parties to the assignment and assumption of the Assumed Contracts which
shall be obtained by Seller on or before the Closing (unless waived by Buyer).
Such consents are set forth in Schedule 4.8 hereto.
4.2 ORGANIZATION AND GOOD STANDING. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Seller is duly qualified to do business and is
in good standing as a foreign corporation in the Commonwealth of Massachusetts
and in each other jurisdiction in which such qualification is necessary under
applicable law as a result of the conduct of its business or the ownership or
leasing of its assets and the failure to be so qualified would have a material
adverse effect on Seller or the Business. Seller does not own any stock or
other equity interest in any other corporation or entity. Seller has the legal
right, corporate power and authority, and all licenses and other permits,
required to operate the Business as now conducted and to own, use and sell the
Purchased Assets. Seller has delivered to, or made available for inspection
by, Buyer or its counsel true, correct and complete copies of (i) Seller's
charter documents and all amendments thereto; (ii) Seller's Bylaws and all
amendments thereto, duly certified by its corporate secretary; (iii) Seller's
minute and stock books; and (iv) all agreements, commitments or understandings,
written or oral, if any, restricting the transfer of or otherwise pertaining to
the Purchased Assets or the Business. No actions, proceedings or transactions
have been commenced or undertaken by Seller which give or would give rights to
any person, other than Buyer, in any of the Purchased Assets or interfere with
the consummation of the transactions contemplated by this Agreement.
4.3 FINANCIAL STATEMENTS. Seller has delivered to Buyer
financial statements of Seller consisting of (i) an audited balance sheet and
related audited statement of income as of and for the fiscal year of Seller
ended April 30, 1995 (the "Fiscal 1995 Financial Statements"), and (ii) an
unaudited balance sheet and related statement of income as of, and for the
seven-month period ended November 30, 1995 (the "Interim Financial
Statements") (the Fiscal 1995 Financial Statements and the Interim Financial
Statements are collectively referred to herein as the "Financial Statements").
True, correct and complete copies of the Financial Statements are attached as
Schedule 4.3A hereto. Except as otherwise set forth in the footnotes contained
therein or in Schedule 4.3B, the Financial Statements were prepared in
accordance with GAAP and fairly present the financial condition of Seller and
the results of its operations as of the relevant dates thereof and for the
respective periods covered thereby, subject, in the case of the Interim
Financial Statements, to normal year-end adjustments which would not be
material. Except as set forth in Schedule 4.3B, Seller does not have any
debts, obligations, liabilities or commitments of any nature, whether due or to
become due, absolute, contingent or otherwise, that are not shown on the
November 30, 1995 balance sheet delivered pursuant hereto, other than
liabilities incurred after November 30, 1995 in the ordinary course of business
and consistent with past practice. Such post-November 30, 1995 liabilities
that are not set forth in Schedule 4.3B do not exceed $10,000 (net of payments
made by Seller in the ordinary course of business on the liabilities shown on
the November 30, 1995 balance sheet) in the aggregate and have not had and are
not expected to have, individually or in the aggregate, a material adverse
effect on the financial condition or results of operations or prospects of
Seller or the Business.
7
<PAGE> 9
4.4 ABSENCE OF CERTAIN CHANGES. Except as set forth in
Schedule 4.4 hereto, during the period from November 30, 1995 to the date
hereof, there has not been with respect to or affecting Seller or the Business:
(a) any amendment, termination or revocation, or
any threat known to Seller of any amendment, termination or
revocation, of any material contract or agreement to which Seller is,
or at any time since May 1, 1994 was, a party, or of any license,
permit or franchise required for the continued operation of the
Business as it was conducted since April 30, 1995;
(b) except for the transactions contemplated
hereby, any sale, transfer, mortgage, pledge or subjection to lien,
charge or encumbrance of any kind, of, on or affecting any of the
Purchased Assets, except sales or utilization of Inventory that have
been made in the ordinary course of the Business and consistent with
past practices, and liens for current taxes not yet due and payable;
(c) other than as contemplated in connection with
the transactions contemplated hereby, any increase in the compensation
paid or payable or in the fringe benefits provided to any employees of
Seller;
(d) any damage, destruction or loss, whether or
not covered by insurance, of any of the Purchased Assets;
(e) the incurrence of any indebtedness, either
for borrowed money or in connection with any purchase of assets, or
otherwise, that is not reflected in the November 30, 1995 balance
sheet and individually or in the aggregate involves more than $50,000;
(f) any purchase or lease, or commitment for the
purchase or lease, of equipment, machinery, leasehold improvements or
other capital items not disclosed in the Interim Financial Statements
which involves amounts exceeding $50,000 individually or $50,000 in
the aggregate, or which is in excess of or represents a departure from
the normal, ordinary and usual requirements of the Business;
(g) the execution by Seller of any agreement or
contract that is, or could reasonably be expected to become, material
to the Business; or
(h) the occurrence subsequent to November 30,
1995 of any other event or circumstance which might materially and
adversely affect any of the Purchased Assets, the Business or the
ability of Seller to consummate the transactions contemplated hereby.
4.5 THE PURCHASED ASSETS.
(a) TITLE TO AND ADEQUACY OF PURCHASED ASSETS.
Except as disclosed on Schedule 4.5 hereto, Seller has, and at the Closing
Seller will convey and transfer to Buyer, good, complete and marketable title
to all of the Purchased Assets, free and clear of all mortgages, liens,
security interests, encumbrances, pledges, leases, equities, claims, charges,
8
<PAGE> 10
restrictions, conditions, conditional sale contracts and any other adverse
interests. Except as set forth on Schedule 4.5, all of the Purchased Assets
are in the exclusive possession and control of Seller and Seller has the
unencumbered right to use and sell to Buyer all of the Purchased Assets without
interference from others. The Purchased Assets constitute all the assets,
properties, rights, privileges and interests necessary for Buyer to own and
operate the Business substantially in the same manner as it has been conducted
by Seller during the past twelve (12) months.
(b) TANGIBLE ASSETS. Schedule 1.1(a) is a list
of all of the Tangible Assets used in the Business, other than any Tangible
Asset the replacement cost of which would be less than $1,000 or which is not
of material importance to Seller's operation of the Business. The Tangible
Assets are in good working order and condition, ordinary wear and tear
excepted, have been properly maintained, are suitable for the uses for which
they are being utilized in the Business, do not require more than regularly
scheduled maintenance in the ordinary course, consistent with Seller's
established maintenance policies, to keep them in good operating condition and
comply with all requirements under applicable laws or regulations which govern
the use and operation thereof, or any conditions imposed on Seller or its
operations under any permit, license, franchise or service contract.
(c) INTANGIBLE PROPERTY RIGHTS.
(i) The Intangible Property Rights are
the only material intangible property used by Seller in the Business, and from
and after the Closing Date Buyer shall have the right to use all of the
Intangible Property Rights in the Business consistent with Seller's use of the
Intangible Property Rights in the Business. Seller owns, or holds adequate
licenses, or other rights to use, all of the Intangible Property Rights, such
use does not conflict with, infringe on or otherwise violate any rights of any
other person and Seller has taken all necessary or appropriate actions to
protect the Intangible Property Rights. Except as disclosed in Schedule 4.5,
all of such licenses and rights are transferable to Buyer without cost or
liability to Buyer and will be included in the Purchased Assets being sold to
Buyer hereunder. Except as set forth on Schedule 4.5, Seller has not granted,
transferred or assigned any right, license or interest in any of its Intangible
Property Rights or entered into any contracts, agreements, licenses or other
commitments or arrangements with respect to the marketing, distribution,
licensing, or promotion of Seller's software programs or any other Inventory,
Technical Documentation, or Intellectual Property Rights by any independent
salesperson, distributor, sublicensor, or other remarketing or sales
organization. In no instance has the eligibility of any copyright to any
material property included in the Intangible Property Rights been forfeited to
the public domain by omission of any required notice or any other action. All
personnel, including employees, agents, consultants and contractors, who have
contributed to or participated in the conception and development of any of the
Intangible Property Rights on behalf of Seller either (i) have been party to a
"work-for-hire" arrangement or agreement with Seller, in accordance with
applicable federal and state law, that has accorded Seller full, effective,
exclusive and original ownership of all intellectual property rights thereby
arising or (ii) have executed appropriate instruments of assignment in favor of
Seller as assignee that convey to Seller full, effective and exclusive
ownership of all intangible property rights thereby arising. Except as set
forth in Schedule 4.5, Seller has not infringed, is not now infringing and has
not received notice of any infringement, on any patent, trade name, trademark,
service mark, copyright, trade secret, trade dress, design, invention,
technology, know-how, process or other proprietary right belonging to any other
person, firm or corporation, which infringement would have an adverse effect on
any
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of the Purchased Assets or the Business. There is no infringement by any other
person of any Intangible Property Right.
(ii) Except as set forth in Schedule 4.5,
the Technical Documentation includes the source code, system documentation,
statements or principles of operation, and schematics for all of Seller's
software programs, as well as any pertinent commentary or explanation that may
be necessary to render such materials understandable and usable by a trained
computer programmer. The Technical Documentation also includes any programs
(including compilers), "workbenches," tools and higher level (or "proprietary")
language used for the development, maintenance, and implementation of Seller's
software programs. Schedule 4.5 sets forth a complete and accurate list of all
of the Technical Documentation for Seller's software programs. Schedule 4.5
also sets forth all of Seller's software programs for which Technical
Documentation is not available.
(iii) Seller has validly and effectively
obtained the right and license to use, copy, modify and distribute any
third-party programming and materials contained in Seller's software programs
and Technical Documentation. Seller has no liability for royalties, fees,
payments or other obligations to any third party except as expressly set forth
in Schedule 4.6. Seller's software programs and Technical Documentation
contain no other programming or materials in which any third party may claim
superior, joint or common ownership, including any right or license. Except as
set forth in Schedule 4.5, Seller's software programs and Technical
Documentation do not contain derivative works of any programming or materials
not owned in their entirety by Seller and included in the Purchased Assets.
(d) LEASES. Except as otherwise set forth in
Schedule 4.5(d), Seller does not have a fee interest in any real property.
Each of the facilities or real properties leased by Seller and used in the
Business is listed on Schedule 1.1(b). Such schedule sets forth, among other
things, the address of each facility or real property leased and the name and
address of the landlord. Schedule 1.1(b) also contains a list of all leases
under which Seller possesses or uses personal property in connection with the
conduct or operation of the Business. True, correct and complete copies of all
leases of real property or personal property used in the Business
(collectively, the "Leases") have been delivered to Buyer. Seller is not, and
as of the Closing Date will not be, in default, and no facts or circumstances
have occurred, or on or prior to the Closing will occur, which through the
passage of time or the giving of notice, or both, would constitute a default,
under any of the Leases. In addition, Seller has delivered to Buyer true,
complete and correct copies of the most recent title insurance policy and all
environmental studies and reports that are in the possession of or are readily
available to Seller, with respect to any of the facilities or real properties
described on Schedule 1.1(b) or Schedule 4.5(d). All of the facilities owned,
leased or used by Seller in connection with the Business are to the knowledge
of Seller equipped in substantial conformity with laws and governmental
regulations applicable to Seller or the Business. To the knowledge of Seller,
the zoning of each parcel of real property, the lease for which is to be
assigned by Seller to Buyer, permits, in all material respects, the presently
existing improvements thereon and continuation of the business presently
conducted thereon. No material changes in such zoning are pending or, to the
knowledge of Seller, are threatened. Subject to any consents required
therefor, the assignment of any of the Leases shall not adversely affect
Buyer's quiet enjoyment and use, without disturbance, of all real and personal
properties and assets that are the subject of such leases. No condemnation or
similar proceedings are pending or, to the best knowledge of Seller, threatened
against any of the real
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properties described on Schedule 1.1(b) or Schedule 4.5(d). None of the Leases
contains any provisions which, after the Closing Date, would (i) hinder or
prevent Buyer from continuing to use any of the properties or assets which are
the subject of the Leases set forth in Schedule 1.1(b) in the manner in which
they are currently used or (ii) impose any additional costs (other than
scheduled rental increases) or burdensome requirements as a condition to their
continued use which are not currently in effect. Except as otherwise set forth
in Schedule 4.5(d) hereto, none of the Purchased Assets are held under, or used
by Seller in connection with the Business pursuant to, any lease or conditional
sales contract.
(e) ACCOUNTS RECEIVABLE. Seller has delivered to
Buyer (i) an accurate list, as of December 12, 1995, of all accounts and notes
receivable of Seller, including any accounts or notes receivable not reflected
in the November 30, 1995 balance sheet, and (ii) an aging of all such accounts
and notes receivable showing amounts due in 30-day aging categories. All such
accounts and notes receivable on such listing arose from, and all accounts and
notes receivable of Seller created between December 12, 1995 and the Closing
will have arisen from, the sale of Seller's products or the provision of
services by Seller in the ordinary course of business. All of such accounts
receivable are fully collectible, net of the reserve set forth in the November
30, 1995 balance sheet, subject to year-end adjustments in the balance sheet
which would not be material. Seller has not received any notice of, or know
of, any counterclaim or set-off with respect to any such accounts or notes
receivable, or any facts or circumstances that would be the basis for any such
counterclaim or set-off, which is not reflected or taken into account in the
contractual allowance or bad debt reserves set forth in the November 30, 1995
balance sheet.
(f) INVENTORIES. All the Inventory is of a
quality and quantity usable and saleable in the Seller's ordinary course of
business, except for obsolete items, damaged items, and materials at below
standard quality, all of which have been written off or written down to net
realizable value so that the aggregate dollar amount of Seller's Inventory and
any additional costs to complete and dispose of such Inventory as finished
products will not exceed the selling price of such finished products. Since
November 30, 1995, no Inventory has been sold or disposed of except through
sales in the ordinary course of business consistent with past practices or as
otherwise approved in writing by Buyer. All work-in-process inventory is
either dedicated to firm orders or finished goods produced for stock and
saleable in the ordinary course.
4.6 CONTRACTS, AGREEMENTS AND COMMITMENTS. Schedule 4.6
hereto contains an accurate and complete list of all contracts, agreements,
leases, licenses and instruments, not otherwise disclosed in Schedule 1.1(b),
to which Seller is a party or is bound and which relate to or affect any of the
Purchased Assets or the Business, or which could hinder consummation of the
transactions contemplated by this Agreement or would affect Buyer's title to or
its ability, after the Closing, to conduct the Business as it has been
conducted by Seller during the past twelve (12) months, or its ability to
dispose of any of the Purchased Assets following the Closing. Schedule 1.1(b)
and Schedule 4.6 include, without limitation, all contracts and agreements and
all leases, licenses and instruments, which (i) grant a security interest or
permit or provide for the imposition of any lien, mortgage, security interest
or other encumbrance on, or provide for the disposition of, any of the
Purchased Assets; (ii) require the consent of any third party to, or would be
violated by, the consummation by Seller of the transactions contemplated by
this Agreement, or (iii) would restrict the use or disposition by Buyer after
the Closing of any of the Purchased Assets. True, correct and complete copies
of all items so listed in
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Schedule 1.1(b) and Schedule 4.6 have been furnished to Buyer. Each of such
contracts, agreements, leases, licenses and instruments so listed, or required
to be so listed, in Schedule 1.1(b) or Schedule 4.6 is a valid and binding
obligation of Seller and, to the Seller's knowledge, the other parties thereto,
enforceable in accordance with its terms, except as may be affected by
bankruptcy, insolvency, moratorium or similar laws affecting creditors' rights
generally and general principles of equity relating to the availability of
equitable remedies. Except as otherwise set forth in Schedule 1.1(b) or
Schedule 4.6 hereto, there have not been any defaults by Seller or, to the best
knowledge of Seller, defaults or any claims of default or claims of
nonenforceability by the other party or parties which, individually or in the
aggregate, would have a material adverse effect on the Business or any of the
Purchased Assets, and there are no facts or conditions that have occurred or
that are anticipated to occur which, through the passage of time or the giving
of notice, or both, would constitute a default by Seller, or to the best
knowledge of Seller, by the other party or parties, under any of such
contracts, agreements, leases, licenses and instruments or would cause a
creation of a lien, security interest or encumbrance upon any of the Purchased
Assets or otherwise materially and adversely affect any of the Purchased Assets
or the Business.
4.7 LABOR AND EMPLOYMENT AGREEMENTS; FRINGE BENEFIT
PLANS.
(a) Schedule 4.7 sets forth the name of each
director and officer of Seller and of each employee of Seller, together with a
description of all compensation and benefits that are payable to such
individuals as a result of their employment by or association with Seller.
Seller has furnished to Buyer a copy of its employee handbook and a
description, in writing, of all employment or personnel policies not set forth
in such handbook.
(b) Schedule 4.7 hereto contains a list of any
collective bargaining or other labor, employment, deferred compensation, bonus,
retainer, consulting, or incentive agreement, plan or contract, and all written
or other personnel policies, of Seller or to which Seller is subject or bound.
True, correct and complete copies of any such agreements, plans, contracts and
policies listed in Schedule 4.7 hereto have been furnished to Buyer. Except to
the extent set forth in Schedule 4.7, (i) there has been no strike or other
work stoppage by, nor to the best knowledge of Seller has there been any union
organizing activity among, any of the employees of Seller during the past five
(5) years; (ii) Seller is in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and is not engaged in any unfair labor practice where
non-compliance would have a material adverse effect on the Business; and (iii)
there is no unfair labor practice complaint pending or, to the best knowledge
of Seller, threatened against Seller, nor, to the best knowledge of Seller, is
there any factual basis for any such complaint.
(c) Schedule 4.7 hereto also contains a complete
list of Seller's Employee Plans. True, correct and complete copies or
descriptions of such Employee Plans have been delivered to Buyer. For purposes
of this Section 4.7, the term "Employee Plan" includes all present (including
those terminated or transferred within the past five (5) years) plans,
programs, agreements, arrangements, and methods of contribution or compensation
(including all amendments to and components of the same, such as a trust with
respect to a plan) providing any remuneration or benefits, other than current
cash compensation, to any current or former employee of Seller or to any other
person who provides services to Seller, whether or not such plan or plans,
programs, agreements, arrangements, and methods of contribution or compensation
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are subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and whether or not such plan or plans, programs, agreements,
arrangements and methods of contribution or compensation are qualified under
the Code. The term Employee Plan includes, but is not limited to, pension,
retirement, termination or severance plan or arrangement, profit sharing, stock
option, stock bonus, and nonqualified deferred compensation plans and includes
any Employee Plan that is a multiemployer plan as defined in Section 3(37) of
ERISA. The term Employee Plan also includes, but is not limited to,
disability, medical, dental, health insurance, life insurance, incentive plans,
vacation benefits, and fringe benefits. Any and all tax returns, reports,
forms or other documents required to be filed by Seller under applicable
federal, state or local law with respect to the Employee Plans set forth on
Schedule 4.7 have been timely filed and are correct and complete in all
material respects; and any and all amounts due by Seller to any governmental
agency or entity with respect to the Employee Plans have been timely and fully
paid.
(d) Except as set forth in Schedule 4.7, all
Employee Plans are now, and have always been, established, maintained and
operated in accordance in all material respects with all applicable laws
(including, but not limited to, ERISA and the Code) and all regulations and
interpretations thereunder and in accordance in all material respects with
their plan documents. All communications with respect to each Employee Plan by
any person (including, but not limited, to the members of any plan committee,
all plan fiduciaries, plan administrators, Seller and its management, and
Seller's employees) accurately reflect in all material respects the documents
and operations of each such Employee Plan. Each funded Employee Plan providing
for payment of deferred compensation is and always has been qualified under
Section 401 of the Code. The Internal Revenue Service has issued one or more
determination letters with respect to each funded Employee Plan stating that,
from the inception of each such Employee Plan, such Employee Plan has been and
is qualified under Section 401 of the Code and each trust maintained in
connection with each such Employee Plan has been and is exempt under Section
501 of the Code. Except as set forth in Schedule 4.7, there is no unfunded
liability for vested or nonvested benefits under any funded Employee Plan, and
all contributions required to be made to or with respect to each Employee Plan
have been completely and timely paid. All reports, forms and other documents
required to be filed with any governmental entity with respect to any Employee
Plan have been timely filed and, to the best knowledge of Seller, are accurate.
There have been no filings with respect to any Employee Plan with the Pension
Benefit Guaranty Corporation ("PBGC"). No liability to the PBGC has been
incurred or is expected with respect to any Employee Plan except for insurance
premiums, and all insurance premiums incurred or accrued up to and including
the Closing Date have been or will be timely paid by Seller. No amount is, and
as of the Closing Date no amount will be, due or owing from Seller to any
"multiemployer plan" (as defined in Section 3(37) of ERISA) on account of any
withdrawal therefrom. To the Seller's knowledge, there has been no event or
condition, nor is any event or condition expected, that would present a risk of
termination of any Employee Plan, or which would constitute a "reportable
event" within the meaning of Section 404(3) of ERISA and the regulations and
interpretations thereunder. There has been no merger, consolidation, or
transfer of assets or liabilities (including, but not limited to, a split-up or
split-off) with respect to any Employee Plan. There is and there has been no
actual or, to the best knowledge of Seller, anticipated, threatened or expected
litigation or arbitration concerning or involving any Employee Plan. No
complaints to or by any governmental entity have been filed or, to the best
knowledge of Seller, have been threatened or are expected with respect to any
Employee Plan. No Employee Plan or any other person has any liability to any
plan participant, beneficiary or other person under any provision
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of ERISA, the Code or any other applicable law by reason of any action or
failure to act in connection with any Employee Plan. There has been no
prohibited transaction as described in Section 406 of ERISA and Section 4975 of
the Code with respect to any Employee Plan. No Employee Plan provides medical
benefits to one or more former employees (including retirees), other than
benefits required to be provided under Section 4980B of the Code. There is no
contract, agreement or benefit arrangement covering any employee of Seller
which individually or collectively would constitute an "excess parachute
payment" under Section 280G of the Code.
4.8 CONFLICTS. Except as described on Schedule 4.8
hereto, neither the execution and delivery of, nor the consummation of the
transactions contemplated by, this Agreement or any of the agreements
referenced herein to which Seller is a party will or could result in any of the
following:
(a) a default or an event that, with notice or
lapse of time, or both, would be a default, breach or violation of the
respective charter, bylaws or other governing instruments of Seller,
or any contract, lease, license, franchise, promissory note,
conditional sales contract, commitment, indenture, mortgage, deed of
trust, security or pledge agreement, or other agreement, instrument or
arrangement to which Seller is a party or by which the Business or any
of the Purchased Assets is bound;
(b) the termination of any contract, lease,
agreement, or commitment, or the acceleration of the maturity of any
indebtedness or other obligation of Seller;
(c) the creation or imposition of any lien,
charge or encumbrance on any of the respective assets or properties of
Seller, including any of the Purchased Assets;
(d) a violation or breach of any writ, injunction
or decree of any court or governmental instrumentality to which Seller
is a party or by which any of their respective properties or any of
the Purchased Assets or the Business is bound;
(e) a loss or adverse modification of any
license, franchise, permit, other authorization or right (contractual
or other) to operate, granted to or otherwise held by Seller or used
in the Business, which would have a material adverse effect on the
Business or Buyer; or
(f) the cessation or termination of any other
business relationship or arrangement between Seller and any third
party that is material to the Business, or its operating results,
condition (financial or other) or prospects or any of the Purchased
Assets.
4.9 INSURANCE. Schedule 4.9 contains an accurate
description (including liability limits, deductibles and coverage exclusions)
of all policies of fire, general liability, property, worker's compensation,
product liability, errors and omissions and other forms of insurance maintained
by or on behalf of Seller in connection with the Business as protection for the
Purchased Assets and the Business. Except as set forth in Schedule 4.9 hereto,
all of such policies are now in full force and effect and policies covering the
same risks and in substantially the same amounts have been in full force and
effect continuously for the past five (5) years. Seller has not received any
notice of cancellation or material amendment of any such policies; no
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coverage thereunder is being disputed; and all material claims thereunder have
been filed in a timely fashion.
4.10 TAXES AND TAX RETURNS.
(a) Except as set forth on Schedule 4.10: (i)
Seller has duly filed all Tax Returns (as hereinafter defined) which are
required by law to be filed by it; (ii) Seller has duly paid all Taxes (as
hereafter defined) due or claimed to be due from it with respect to such Tax
Returns (whether or not shown on any Tax Return), and there are no assessments
or claims for payment of Taxes now pending or, to the best knowledge of Seller,
threatened, nor any audit of the records of Seller being made or, to the best
knowledge of Seller, threatened by any taxing authority; (iii) to the best
knowledge of Seller, there are no facts or circumstances which could reasonably
be expected to constitute a basis for assessments or claims for the payment of
additional Taxes by Seller; (iv) each Tax Return previously filed by Seller, or
filed by Seller prior to the Closing, relating to any period up to the Closing
Date, correctly sets forth, or will set forth, the amount of Taxes payable by
Seller with respect to such Tax Return; and (v) Seller is not currently the
beneficiary of any extension of time within which to file any Tax Return. The
respective amounts set up as provisions for Taxes, if any, on the November 30,
1995 Balance Sheet of Seller included in the Financial Statements are
sufficient for the payment of all unpaid Taxes of Seller accrued for or
applicable to the periods ended on such date and all years and periods prior
thereto and for which Seller, at those dates, may have been liable, subject to
normal year-end adjustments that would not be material. Except as set forth in
Schedule 4.10, Seller has properly withheld and paid, or accrued for payment,
when due, to appropriate state and/or federal authorities, all sales and use
taxes, if any, and all amounts required to be withheld from payments made to
its employees, independent contractors, creditors, stockholders, or other third
parties and has also paid all employment taxes as required under applicable
laws.
(b) Except as set forth in Schedule 4.10, Seller
has not waived any statute of limitation in respect of any Taxes or assessments
by any federal, state, county, local, foreign or other taxing jurisdiction or
agreed to any extension of time with respect to an assessment or deficiency in
any Tax. Seller has not filed a consent under Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code") concerning collapsible
corporations.
(c) Except as set forth in Schedule 4.10, (i)
Seller has not made any payments, and Seller is not obligated to make any
payments, and Seller is not a party to any agreement that under any
circumstances could obligate it to make any payments, that would not be
deductible under Section 280G of the Code, (ii) Seller has not been a United
States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code, and (iii) Seller is a not party to any allocation
or tax sharing agreement.
(d) Except as set forth in Schedule 4.10, Seller
(i) is not now required or has ever been required to file a consolidated or
combined state or federal income Tax Return with any other person or entity and
(ii) is not liable for the Taxes of any person under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local, or foreign law),
as a transferee or successor, by contract or otherwise.
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(e) For purposes of this Agreement, the term
"Tax" or "Taxes" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security, unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto.
(f) For purposes of this Agreement, the term "Tax
Return" means any return, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
4.11 COMPLIANCE WITH LAW/PERMITS.
(a) Except as set forth in Schedule 4.11(a)
hereto, Seller is in compliance with all, and is not in violation of any, law,
ordinance, order, decree, rule or regulation of any governmental agency or
authority, the violation of or noncompliance with which could have a material
adverse effect on the Business or any of the Purchased Assets. Except as
disclosed in Schedule 4.11(a) hereto, and without limiting the generality of
this Section 4.11(a), there are no unresolved (i) proceedings or investigations
instituted or, to the best knowledge of Seller, threatened, by any such
governmental authorities against Seller or relating to the Business, or (ii)
citations issued or, to the best knowledge of Seller, threatened against Seller
or the Business by any governmental authorities, or (iii) other notices of
deficiency or charges of violation brought or, to the best knowledge of Seller,
threatened against Seller or the Business, including under any federal or state
regulation or otherwise, which could have, individually or in the aggregate, a
material adverse effect on the Business or any of the Purchased Assets, or
interfere with the maintenance, or the transfer or reissuance to Buyer, of the
permits, licenses, franchises, certificates, authorizations or any right to
operate held by Seller; and, to the best knowledge of Seller, there are no
facts or circumstances upon which any such proceedings, investigations,
citations, notices, disallowances or charges may be instituted, issued or
brought hereafter.
(b) Schedule 4.11(b) contains a true, correct and
complete list of all governmental licenses, permits, authorizations,
franchises, or certificates or rights (contractual or other) to operate the
Business, that are held by Seller (collectively, "Licenses and Permits"). Such
Licenses and Permits are the only licenses, permits, authorizations,
franchises, certificates and rights to operate required for operation of the
Business, as it has been conducted since January 1, 1994. Except as set forth
on Schedule 4.11(b), all of such Licenses and Permits are at the date hereof,
and will be as of the Closing, in full force and effect and the continuing
validity and effectiveness of such Licenses and Permits will not be affected by
the sale of the Purchased Assets to Buyer. Seller has provided Buyer with
true, correct and complete copies of each License and Permit listed in Schedule
4.11(b). Seller is in compliance in all material respects with all conditions
or requirements imposed by or in connection with such Licenses and Permits and
with respect to its use of the Purchased Assets and operation of the Business,
and Seller has not received any notice, nor does Seller have any knowledge or
reason to believe, that any governmental authority intends to cancel, terminate
or modify any of such Licenses or Permits or that valid grounds for any such
cancellation, termination or modification currently exist, except that, by
reason of change of ownership of the Business, the Licenses and Permits
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listed in Schedule 9.1 will have to be transferred or reissued to Buyer.
Assuming proper and timely submission by Buyer of applications therefor and
reasonable cooperation by Buyer with the appropriate authorities, Seller has no
reason to believe that Buyer will not be able to obtain, by transfer or initial
application, the Licenses and Permits now held by Seller on substantially the
same terms and conditions as are now applicable to Seller, for the use of the
Purchased Assets and operation of the Business, commencing as of the Closing,
as those contained in Schedule 4.11(b).
4.12 LITIGATION AND PROCEEDINGS. Except as set forth in
Schedule 4.12 hereto, there is no action, suit, proceeding or investigation, or
any counter or cross-claim in an action brought by or on behalf of Seller,
whether at law or in equity, or before or by any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind, that is pending or, to the best knowledge of
Seller, threatened against Seller which (i) could reasonably be expected to
affect adversely any such party's ability to perform its obligations under this
Agreement or the agreements referenced herein or complete any of the
transactions contemplated hereby or thereby, or (ii) involves the reasonable
possibility of any judgment or liability, or which may become a claim, against
Buyer, the Business or any of the Purchased Assets prior to or subsequent to
the Closing Date, and Seller knows of no facts or circumstances which are
reasonably likely to be the basis for the assertion of any such claims or
causes of action against Seller or Buyer. Except as set forth in Schedule
4.12, Seller is not subject to any judgment, order, writ, injunction, decree or
award of any court, arbitrator or governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over Seller, any of its
assets or the Business.
4.13 CERTAIN TRANSACTIONS. Except as set forth in
Schedule 4.13 , there are no existing or pending transactions, nor are there
any agreements or understandings, with any stockholders, officers, directors,
or employees of Seller, or any person or entity affiliated with any of them
(collectively, "Affiliates"), relating to, arising from or affecting the
Business, or any of the Purchased Assets, including, without limitation, any
transactions, arrangements or understandings relating to the purchase or sale
of goods or services, the lending of monies, or the sale, lease or use of any
of the Purchased Assets, with or without adequate compensation, in any amount
whatsoever. No existing or former stockholder, director, officer or employee
of Seller has any claims against or disputes with Seller which could result in
the imposition of any liability or judgment against the Business or any of the
Purchased Assets.
4.14 ENVIRONMENTAL AND SAFETY MATTERS. Except as set
forth in Schedule 4.14, Seller has complied with, and the operation of the
Business and the use of the Purchased Assets are in compliance with, in all
material respects, all federal, state, local and regional statutes, laws,
ordinances, rules, regulations and orders relating to the protection of human
health and safety, natural resources or the environment, including, but not
limited to, air pollution, water pollution, noise control, on-site or off-site
hazardous substance discharge, disposal or recovery, toxic or hazardous
substances, training, information and warning provisions relating to toxic or
hazardous substances, and employee safety relating to the Business or any of
the Purchased Assets (collectively the "Environmental Laws"); and no notice of
violation of any Environmental Laws or of any permit, license or other
authorization relating thereto has been received, nor is any such notice
pending or, to the best knowledge of Seller, threatened. Except as set forth
in Schedule 4.14, to the Seller's knowledge no underground or above-ground
storage tanks or surface impoundments are located on any of the real properties
that are used, operated,
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leased or owned by Seller and (i) except in compliance with applicable
Environmental Laws and any licenses or permits relating thereto, there has been
no generation, use, treatment, storage, transfer, disposal, release or
threatened release in, at, under, from, to or into, or on such properties of
toxic or hazardous substances during the ownership or occupancy thereof by
Seller or, to the best knowledge of Seller, prior to such ownership or
occupancy, and (ii) in no event has there been to Seller's knowledge any
generation, use, treatment, storage, transfer, disposal, release or threatened
release in, at, under, from, to or into, or on such properties of toxic or
hazardous substances that has resulted in or is reasonably likely to result in
a material adverse effect on the Business or any of the Purchased Assets.
Seller has not received any notice or claim to the effect that it is or may be
liable to any governmental authority or private party as a result of the
release or threatened release of any toxic or hazardous substances in
connection with the Business or any of the Purchased Assets, and none of the
operations of the Business is the subject of any federal, state or local
investigation evaluating whether any remedial action is needed to respond to a
release or a threatened release of any toxic or hazardous substances at any of
the real properties leased, used, operated or owned by Seller in connection
with the Business or at any other properties as a result of the operations of
the Business. Seller has not disposed, or had disposed of on its behalf, toxic
or hazardous substances at any site other than a federal and state licensed
hazardous waste treatment, storage and disposal facility and, to the best
knowledge of Seller, each such facility is currently, and at the time of such
disposal was, licensed and operating in compliance in all material respects
with all applicable laws, is not currently listed, or to Seller's knowledge
threatened to be listed, on any state or federal "superfund" list and there is
no proceeding, inquiry or investigation, formal or informal, with respect to
any release or threatened release of any toxic or hazardous substances at any
such site. For the purposes of this Section 4.14, "toxic or hazardous
substances" shall include any material, substance or waste that, because of its
quantity, concentration or physical or chemical characteristics, is deemed
under any federal, state, local or regional statute, law, ordinance, regulation
or order, or by any governmental agency pursuant thereto, to pose a present or
potential hazard to human health or safety or the environment, including, but
not limited to, (i) any material, waste or substance which is defined as a
"hazardous substance" pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. Section 9601, et seq.), as
amended, and its related state and local counterparts, (ii) asbestos and
asbestos containing materials and polychlorinated biphenyls, and (iii) any
petroleum hydrocarbon including oil, gasoline (refined and unrefined) and their
respective constituents and any wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal energy.
4.15 OPERATIONAL RESTRICTIONS. Seller is not a party to
any undisclosed agreement or instrument or subject to any undisclosed charter
or other corporate restriction or any undisclosed judgment, order, writ,
injunction, decree, or order, which materially adversely affects, or in the
future could reasonably be expected to adversely affect, the Business, or any
of the Purchased Assets or the ability of Seller to transfer the Purchased
Assets to Buyer pursuant to the terms of this Agreement. Except as disclosed
in Schedule 4.15, Seller knows of no facts, circumstances or events which
result, or with the passage of time may result, in any material adverse change
in the condition (financial or other), operating results, business or prospects
of the Business or which might adversely affect any of the Purchased Assets.
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4.16 ILLEGAL OR IMPROPER PAYMENTS. During the past five
(5) years neither Seller nor to Seller's knowledge any of Seller's directors,
officers or employees have, in connection with the operation of the Business:
(i) made any illegal political contribution from assets; (ii) been involved in
the disbursement or receipt of corporate funds outside normal internal control
systems of accountability; (iii) made or received payments, whether direct or
indirect, to or from government officials, employees or agents for purposes
other than the satisfaction of lawful obligations, or been involved in any
transaction that has or had as its intended effect the transfer of funds or
assets of Seller other than for the satisfaction of lawful obligations of
Seller; or (iv) been involved in the willfully inaccurate recording of payments
and receipts on the books of Seller or any other matter of a similar nature
involving disbursements of funds or assets, and they are not aware of any
material inaccurate recording of any payment or receipt on the books of Seller.
4.17 PRODUCT WARRANTIES AND LIABILITIES. Except as set
forth on Schedule 4.17, Seller has not given or made any express warranties to
third parties with respect to any products manufactured or sold or services
performed by Seller, except for the limited warranties stated in the standard
forms of warranty used by it, complete and correct copies of which are attached
to Schedule 4.17. Seller does not have any knowledge of any fact or of the
occurrence of any event forming the basis of any present or future claim
against Seller, whether or not fully covered by insurance, for liability on
arising out of the manufacture or sale of products or the performance of
services by Seller, whether based on theories of negligence or products
liability or on account of any express or implied product warranty, except for
warranty obligations and product returns in the ordinary course of business and
as set forth on Schedule 4.17.
4.18 REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Seller contained herein and the materials contained in the
Schedules attached hereto do not contain any statement of a material fact that
was untrue when made or omits any material fact necessary to make the
information contained therein not misleading. For purposes of this Section 4,
wherever there is a reference to "knowledge" or "best knowledge" of Seller,
Seller will be charged only with knowledge of facts, circumstances, conditions,
occurrences and events known to Paul J. Rusconi, Jonathan Rosen or John
Aukshunas. Information in any one Schedule delivered pursuant hereto need not
be repeated in any other Schedule; provided, that an appropriate specific
cross-reference is made in the other Schedule to such information contained
elsewhere in the Schedules.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby
represents and warrants to Seller, as of the date hereof and again as of the
Closing Date, as follows:
5.1 ORGANIZATION AND RELATED MATTERS. Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California. Buyer is duly qualified to do business and is
in good standing as a foreign corporation in each jurisdiction where such
qualification is necessary under applicable law as a result of the conduct of
its respective business and where the failure to be so qualified would have a
material adverse effect on Buyer. Buyer has the requisite corporate power and
authority to carry on its business as now being conducted and to execute and
deliver this Agreement and each of the agreements referenced herein to which
Buyer and Seller is a party.
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5.2 NECESSARY ACTIONS; BINDING EFFECT. Prior to the
Closing Date, Buyer will have taken all corporate action necessary to authorize
the execution and delivery of, and the performance of its obligations under,
this Agreement and each of the agreements referenced herein to which Buyer and
Seller is a party. This Agreement constitutes, and upon its execution and
delivery, the Escrow Agreement and the Non-Competition Agreement will
constitute, the valid obligation of Buyer that is legally binding on and
enforceable against Buyer in accordance with their respective terms, except as
such enforceability may be limited by (i) bankruptcy, insolvency, moratorium or
other similar laws affecting creditors' rights, and (ii) general principles of
equity relating to the availability of equitable remedies.
5.3 NO CONFLICTS. Except as set forth on Schedule 5.3,
neither the execution and delivery, nor the performance of, this Agreement, the
Escrow Agreement or the Non-Competition Agreement by Buyer will result in any
of the following: (i) a default or an event that, with notice or lapse of
time, or both, would constitute a default, breach or violation of (A) the
Articles of Incorporation or Bylaws of Buyer, (B) any contract, lease, license,
franchise, promissory note, conditional sales contract, commitment, indenture,
mortgage, deed of trust, security or pledge agreement, or other agreement,
instrument or arrangement to which Buyer is a party and which is material to
Buyer (a "Material Buyer Contract"); (ii) the termination of any Material Buyer
Contract or the acceleration of the maturity of any indebtedness or other
monetary obligation of Buyer that is material in amount; or (iii) a violation
or breach of any writ, injunction or decree of any court or governmental
instrumentality to which Buyer is a party or by which any of its properties are
bound or a violation of any laws or regulations applicable to Buyer, where the
violation would have a material adverse effect on Buyer.
5.4 REPRESENTATIONS AND WARRANTIES. Each representation,
warranty or statement made, or information provided, by Buyer in this
Agreement, in the Exhibits or Schedules hereto, or in any certificates or
documents to be delivered to Seller herewith, shall be true, complete and
correct in all material respects when made and also as of the Closing Date.
6. CONDUCT OF BUSINESS PENDING THE CLOSING. Between the date
hereof and the Closing, and except as otherwise consented to by Buyer in
writing, or permitted pursuant to Section 7 below, Seller covenants as follows:
6.1 FULL ACCESS. Subject to the provisions of Section 14
below, Seller shall afford to Buyer, its counsel, accountants, lenders and
investors (and their respective accounting and legal and other authorized
representatives), upon reasonable prior notice by Buyer of the identity of such
representatives, full access during normal business hours to all properties,
personnel and information of Seller, including, without limitation, financial
statements and records, leases and agreements and tax returns of Seller, to
determine that the purchase of the Purchased Assets can be consummated in
accordance with applicable statutes and regulations, to verify the accuracy of
the representations and warranties made herein and to fully investigate the
affairs of the Business as fully as Buyer may desire. Seller shall furnish to
Buyer and its representatives such information and data concerning the
Purchased Assets and the operation of Business as Buyer or any such
representative shall reasonably request.
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6.2 CONDUCT OF SELLER'S BUSINESS. Unless Buyer gives its
prior written consent for actions to be taken to the contrary, from the date of
this Agreement and until the Closing or termination of this Agreement,
whichever first occurs, Seller shall:
(a) OPERATION OF BUSINESS. Operate and conduct
the Business diligently and only in the ordinary course of business consistent
with past practices. Seller shall not: (i) incur any new indebtedness or
increase the amount due and owing to any existing lender for borrowed money;
(ii) increase the compensation or benefits of any employee, independent
contractor or agent, or adopt or amend any commission plan or arrangement or
any employee benefit plan or arrangement of any type which results or may
result in an increase in costs or liabilities thereunder of more than $5,000
per month, in the aggregate, above those existing on the date hereof; or (iii)
lend or advance any sum or extend credit to any employee, director or
stockholder or any of their respective affiliates;
(b) ORGANIZATION. Use its best efforts to retain
the services of all vendors, suppliers, manufacturers, agents and consultants
used in the Business, commensurate with the requirements of the Business;
(c) INSURANCE. Maintain all insurance polices
set forth in Schedule 4.9, consistent with past practices and, unless
comparable insurance is substituted therefor, not take any action to terminate
or modify, nor permit the lapse or termination of, the present insurance
policies and coverages of Seller as set forth in Schedule 4.9 hereto;
(d) LAWSUITS, CLAIMS. Promptly notify Buyer of,
and diligently defend against, all lawsuits, claims, proceedings or
investigations that are, or which any officers of Seller, as a result of events
or circumstances actually known to them, has reason to believe may be,
threatened, brought, asserted or commenced against Seller or any of its
stockholders, officers or directors, involving or affecting in any way the
Business, any of the Purchased Assets or the transactions contemplated hereby;
and not settle any action or proceeding which would materially adversely affect
the Business or any of the Purchased Assets or the consummation of the
transactions contemplated hereby; and not release, settle, compromise or
relinquish any claims, causes of action or rights involving more than $25,000
individually or $50,000 in the aggregate which Seller may have against any
other persons (except that Seller may settle its disputes with Societa Per IL
Software, S.r.L. at Seller's sole expense out of the proceeds of the sale of
the Purchased Assets pursuant to this Agreement);
(e) CERTAIN CHANGES. Not sell or otherwise
dispose, or enter into any agreement for the sale, of any of the Purchased
Assets, except for sales of inventory and obsolete equipment in the ordinary
course of business and consistent with past practices, and not permit or allow,
or enter into any agreements providing for or permitting, any of the Purchased
Assets to be subjected to any mortgage, security interest, pledge, option,
lien, charge or encumbrance other than liens or security interests in existence
on the date hereof and statutory liens to secure taxes that are not yet due and
payable, all of which are listed on Schedule 4.5;
(f) CONDITION OF ASSETS. Use its best efforts to
maintain in good working order and condition, ordinary wear and tear excepted,
and in compliance in all material respects with all applicable laws and
regulations, all of the Purchased Assets;
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(g) AGREEMENTS AND COMMITMENTS. Observe and
perform all terms, conditions, covenants and obligations contained in all
existing agreements between Seller and third parties the violation of which
would have, individually or in the aggregate, a material adverse effect on the
Business or any of the Purchased Assets; not take any action which would cause
a breach or violation of or default under any material agreement, lease,
contract, or other written instrument, commitment or arrangement, or under any
License or Permit, judgment, writ or order, applicable to or affecting the
Business or any of the Purchased Assets, and promptly notify Buyer in writing
of the occurrence of any such breach or default; and not enter into any
transaction with any stockholder, director or officer or any person or entity
related to or affiliated with Seller;
(h) CONSENTS; COMPLIANCE WITH LAWS. Use its best
efforts to obtain and maintain all consents, assignments or approvals of, and
Licenses and Permits granted by, governmental authorities and agencies and
other third parties, in form and substance reasonably satisfactory to Buyer,
the absence or loss of which would have a material adverse effect on the
Business or any of the Purchased Assets either prior to or following the
Closing; and not take any action which would result in a violation of or the
noncompliance with any laws, regulations, consents or approvals applicable to
the Business or any of the Purchased Assets, where such violation or
noncompliance could have a material adverse effect on the Business or any of
the Purchased Assets, or result in the incurrence of any material liability
against the Business or any of the Purchased Assets or in the revocation,
modification or loss of any License or Permit or other right needed for the
operation of the Business as presently conducted by Seller;
(i) TAXES. Pay all federal, state, local and
foreign taxes (including interest or penalties, if any) assessed against
Seller, the Business or any of the Purchased Assets, when due, and in any event
prior to the imposition or assessment of any liens against the Business or any
of the Purchased Assets;
(j) DIVIDENDS, ETC. Not declare or pay any
dividends or make any distributions with respect to, or redeem any shares of,
Seller's capital stock, or accelerate the payment or prepay any indebtedness or
other obligations, of Seller;
(k) CORPORATE MATTERS. No change or amendment
shall be made in the charter, Bylaws or other governing instruments of Seller
or in the ownership of the outstanding capital stock or other equity interests
of Seller in a manner which could interfere with the consummation of the
transactions contemplated by this Agreement, nor shall Seller terminate or
modify, or take any actions which it has reason to believe would result in
termination or modification of, any of the agreements, contracts, leases,
licenses or rights included in the Purchased Assets;
(l) LIABILITIES AND EXPENSES. Not create or
incur (whether as principal, surety or otherwise) any actual or contingent
liabilities or expenses other than liabilities and expenses incurred in the
ordinary course of business consistent with past practices; and
(m) PAYMENT OF INDEBTEDNESS. Not make any
payment of principal or interest on the Subordinated Notes, whether or not due,
nor prepay any indebtedness or other monetary obligations nor, except in the
ordinary course of business and consistent with practices, pay any short-term
debt that has no specified maturity date.
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6.3 FURNISHING OF CERTAIN INFORMATION. If requested by
Buyer and at Buyer's sole expense, Seller (i) shall make, or cause to be made,
available to Buyer true, correct and complete copies of Seller's historical
financial statements for any periods prior to the Closing Date and such other
information concerning Seller or the Business as Buyer may request; (ii) shall
permit Buyer's independent public accountants to have access to the books and
records of Seller so that any historical financial statements and other
financial information of Seller and its subsidiaries, if any, can be reviewed
or audited; and (iii) shall permit such financial statements and other
information concerning Seller or the Business to be disclosed in any public
filing by Buyer under or pursuant to the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended ("Securities Filings"). In
addition, Seller shall use its best efforts to cause Seller's independent
public accountants to provide such information and assistance, including the
execution and delivery of opinions and consents with respect to Seller's
historical financial statements, as may be required by Buyer for inclusion in
any such Securities Filings. Disclosure of such financial statements and
information furnished hereunder in any Securities Filing shall not constitute a
breach or violation of the confidentiality provisions of Section 14 of this
Agreement.
7. OBLIGATIONS PENDING AND FOLLOWING THE CLOSING.
7.1 TERMINATION OF SECURITY INTERESTS AND LIENS. At no
cost or expense to Buyer, Seller shall cause, as of the Closing Date, all
security interests, liens, claims, encumbrances and adverse interests to which
any of the Purchased Assets are subject (except for those listed on Schedule
4.5 and which are not otherwise specified in Schedule 4.5 to be terminated) to
be terminated and all indebtedness or obligations secured thereby to be paid.
7.2 CONSENTS. Each party to this Agreement shall use its
best efforts to obtain or cause to be obtained at the earliest practicable date
and prior to the Closing Date, all consents, approvals and Licenses and
Permits, if any, which such party requires to permit it to consummate the
transactions contemplated hereby without violating any agreement, contract,
instrument or applicable law or regulation or any License or Permit to which it
is a party or to which it or its assets are subject. The parties hereto shall
cooperate with each other in their efforts to obtain all such consents,
approvals and Licenses and Permits.
7.3 FURTHER ASSURANCES. Each party hereto shall execute
and deliver, both before and after the Closing, such instruments and take such
other actions as the other party or parties, as the case may be, may reasonably
request in order to carry out the intent of this Agreement or to better
evidence or effectuate the transactions contemplated herein.
7.4 NOTICE OF BREACH. Each party to this Agreement will
immediately give notice to the other parties of the occurrence of any event, or
the failure of any event to occur, that results in or constitutes a breach by
it of any representation or warranty or a failure by it to comply with or
fulfill any covenant, condition or agreement contained herein.
7.5 EXCLUSIVITY/OTHER OFFERS. Unless and until this
Agreement has been terminated in accordance with Section 12 below, none of
Seller or any of its directors, officers, employees, agents or representatives
shall provide information regarding Seller or its business, capitalization,
financial condition or operating results or business plans to any person (other
than to a government agency having jurisdiction over Seller), or solicit or
entertain any offers or any
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proposal which contemplates, or enter into discussions or any agreement with
respect to: (i) any sale or disposition or any mortgage or encumbrance of any
of Seller's assets (except for sales of Inventory in the ordinary course of
business); (ii) any sales or issuances of shares of capital stock, or rights,
options or other securities that are exercisable or convertible into shares of
capital stock, of Seller; (iii) any tender offer for purchase of any
outstanding shares of capital stock of Seller; (iv) any merger or business
combination or reorganization involving Seller; or (v) the incurrence by Seller
of any indebtedness or any other transaction that would interfere with the
consummation of the transactions contemplated hereby.
7.6 EMPLOYEES. Seller hereby authorizes Buyer to offer
employment to any or all of its employees conditioned on the consummation of
the sale of the Purchased Assets pursuant hereto; waives any rights Seller may
have to prohibit such employees from being employed by Buyer; and shall not
offer new employment to those of such employees who are offered employment by
Buyer and who accept such employment.
7.7 TAXES. Seller shall pay all taxes of any kind or
nature arising from (i) the conduct of Seller's business or operations, whether
prior to or after the Closing Date, (ii) consummation of the transactions
contemplated hereby, including, without limitation, all income, sales, use or
similar taxes, if any, that may arise from or be assessed by reason of the sale
of the Purchased Assets by Seller to Buyer, and (iii) liquidation, partial or
whole, of Seller. If any taxes required under this Section 7.7 to be borne by
Seller are assessed against Buyer, Buyer shall notify Seller in writing
promptly thereafter and Seller shall be entitled to contest, in good faith,
such assessment or charge. Notwithstanding the foregoing, Buyer may, but shall
not be obligated to, pay any such taxes assessed against it but payable by
Seller pursuant hereto, if Buyer's failure to do so, in the reasonable judgment
of Buyer, could result in the imposition of a lien or attachment on any of the
Purchased Assets or any other assets of Buyer or would constitute a violation
of any agreement to which Buyer is subject, or if Seller fails to contest such
assessment or charge in good faith. In the event Buyer pays any taxes which
pursuant hereto are required to be borne by Seller, Buyer shall be entitled to
reimbursement thereof from Seller, on demand.
7.8 CHANGE OF SELLER'S CORPORATE NAME. On the Closing
Date, Seller shall deliver to Buyer a true, correct and complete copy of, and
within one week after the Closing Date, shall cause to be filed with the
Delaware Secretary of State, an amendment to its charter, adopted by its Board
of Directors and stockholders and in a form legally sufficient for filing,
deleting the word "LaserData" from its corporate name. Seller shall not make
any use of such name or any variations thereof after the Closing Date.
7.9 SCHEDULES OF ACCOUNTS RECEIVABLE AND LIABILITIES.
Within seven (7) days after the Closing, Seller shall deliver or cause to be
delivered to Buyer:
(a) a detailed schedule of all unpaid accounts
receivable of Seller as of December 30, 1995, which schedule shall set
forth all of the accounts receivable of Seller outstanding as of the
end of such day, together with an aging thereof setting forth the
amounts due in respect of such receivables in 30-day aging categories
up to 180 days; and
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(b) with respect to any and all liabilities,
debts and obligations of Seller, whether or not Assumed Obligations,
and whether or not fixed, accrued or contingent, as of the Closing
Date, the amount of such debt, liability or obligation and the name
and address of the creditor, together with the name of the appropriate
contact person.
Seller represents and warrants that the schedules to be delivered pursuant to
this Section 7.9 shall be true, correct and accurate representations of the
facts set forth therein.
7.10 ACCOUNTS AND NOTES RECEIVABLE COLLECTIONS. In the
event Seller receives any payment after the Closing of or in respect of any
accounts or notes receivable included in the Purchased Assets, Seller shall
promptly deliver such payment, or the instrument of payment, with proper
endorsements or assignments, to Buyer. Seller further agrees to cooperate with
Buyer in notifying account obligors of the transfer of such accounts and notes
receivable and instructing them to make all payments in respect thereof
following the Closing to Buyer.
7.11 PRODUCT WARRANTIES AND LIABILITIES. Buyer shall be
responsible for all customer requests made subsequent to the Closing Date for
returns and allowances for credit on account of allegedly defective products
which are made by customers in the ordinary course of business consistent with
prior commercial practices of Seller with respect to products shipped prior to
the Closing. Buyer's responsibility shall be limited to the obligations to
credit or substitute product in an amount not more than the product returned
and, without limiting the generality of the foregoing, shall not (a) include
any loss, damage, personal injury, property damage, lost profits, consequential
damages, or special damages or the like arising from or related to such
allegedly defective products, or (b) even though arising in the ordinary course
of business, exceed the warranty reserves established for such matters in the
Interim Financial Statements.
7.12 EMPLOYEE MATTERS. With the exception of Paul
Rusconi, the Buyer shall offer employment to all of Seller's employees (except
any such employees who have given notice of termination to Seller prior to the
Closing) on substantially those terms that the Seller currently employs those
persons. All severance costs associated with those employees if they are
terminated from the Buyer's employment will be paid by Buyer except that the
Seller will reimburse the Buyer, within five (5) days of Buyer's request, for
up to two weeks severance pay for former employees of Seller whose employment
is terminated by Buyer on or before March 31, 1996 (up to a maximum of $20,000
in the aggregate). Seller shall retain cash in the amount of $20,000 in order
to perform its obligations under this Section 7.12.
8. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All of
the representations and warranties set forth in this Agreement or in any
certificates delivered pursuant hereto, as the same have been modified by the
information contained in the Schedules to this Agreement delivered on the date
hereof by Seller to Buyer, or by Buyer to Seller, and all covenants which by
their terms require performance or compliance following the Closing, shall
remain in full force and effect and shall survive the Closing until (i) in the
case of the representations and warranties, the expiration of the periods
following the Closing Date applicable to such representations and warranties as
set forth in Section 13(c) hereof, regardless of any investigation,
verification or approval by any party hereto or by anyone or on behalf of any
party hereto, and (ii) in the case of any such covenants, until they have been
fully performed
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and no further performance is required with respect thereto pursuant to this
Agreement, unless the party for whose benefit such covenant, representation or
warranty was made waives the same in writing.
9. CONDITIONS TO OBLIGATIONS OF BUYER. The obligation of Buyer
to consummate the transactions contemplated by this Agreement is subject to the
satisfaction, or the waiver in writing by Buyer, at or before the Closing, of
all the conditions set out below in this Section 9.
9.1 PERMITS. Each of the governmental agencies listed in
Schedule 9.1 hereto (the "Authorities") shall have approved the transfer to
Buyer of the Licenses and Permits under which Seller operates the Business, or,
in the alternative, shall have approved the succession by Buyer to the Licenses
and Permits, or shall have issued to Buyer new Licenses and Permits in
substitution for the Licenses and Permits, in each instance on the same terms
and conditions that were applicable to Seller, and without the imposition of
any material conditions or requirements on Buyer that were not applicable to
Seller; and the additional consents listed on Schedule 9.1 (the "Additional
Consents") shall have been obtained without the imposition of any burdensome
conditions or requirements. At the Closing, Seller shall represent and warrant
in writing to Buyer that, except for the Licenses and Permits and Additional
Consents obtained pursuant hereto, there are no other Licenses or Permits or
Additional Consents that are material to the on-going operations, operating
results, financial condition or prospects of the Business that have not been
obtained, except those, if any, which are uniquely applicable to Buyer.
9.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES/COMPLIANCE
WITH COVENANTS. All of the representations and warranties of Seller contained
in this Agreement and the Schedules hereto, were true and correct when made and
remain true and correct as of the Closing Date. Seller shall, in all material
respects, have performed, satisfied and complied with all covenants, agreements
and conditions required by this Agreement to have been performed or complied
with by Seller on or before the Closing Date.
9.3 NO MATERIAL ADVERSE CHANGES. Subsequent to November
30, 1995, there shall not have occurred nor shall there exist (i) any material
adverse change in the financial condition, properties, assets, business or
operating results or prospects of the Business from that reflected in the
Interim Financial Statements, except for changes disclosed in this Agreement or
in the Schedules hereto delivered with this Agreement on the date hereof; (ii)
any material breach or default by any party thereto of any of the Assumed
Contracts or Assumed Liabilities or any other material contracts or agreements
relating to or affecting any of the Purchased Assets or the Business, the
existence of which breach or default is not disclosed in this Agreement or in
the Schedules delivered with this Agreement on the date hereof; (iii) any
damage or loss, whether or not insured, to any of the Purchased Assets; or (iv)
any other event or condition or state of facts of any character which could
materially adversely affect the Business or any of the Purchased Assets.
9.4 ABSENCE OF LITIGATION. There shall be no pending
action, suit, investigation or other proceeding before any court or by any
governmental body or other authority, whether brought against any of Seller or
Buyer, seeking to prevent the consummation of the transactions contemplated by
this Agreement, and no such litigation shall have been threatened nor shall
there be in effect any order restraining or prohibiting the consummation of the
transactions contemplated by this Agreement nor any proceedings pending with
respect
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thereto. There shall be no pending or threatened litigation, or asserted or
unasserted claims, assessments, or other loss contingencies, materially
affecting the Business or any of the Purchased Assets, other than as disclosed
in the Schedules delivered pursuant hereto as of the date of this Agreement.
9.5 CERTIFICATES. Buyer shall have received the
following:
(a) Certificates of Status, each dated as of a
recent date, from the Secretaries of State of the States of Delaware
and Massachusetts, and similar certificates of the appropriate state
agencies of each other state in which Seller is qualified to do
business, together with certificates of the appropriate state tax
authorities indicating that Seller is not delinquent in the payment of
income, franchise, sales or other state taxes or the filing of any tax
returns;
(b) A certificate signed by the Chief Executive
Officer and Chief Financial Officer of Seller, and dated as of the
Closing Date, certifying that (i) all representations and warranties
of Seller were true and correct in all material respects when made and
remain true and correct as of the Closing Date; (ii) all of the
respective covenants, agreements, obligations and conditions of Seller
required to have been performed as of or prior to the Closing have
been fully performed and complied with; and (iii) all of the
conditions to Buyer's obligations under this Agreement required to be
satisfied by Seller by the Closing Date have been satisfied and
fulfilled; and
(c) A certificate signed by the Secretary of
Seller and dated as of the Closing Date, as to the incumbency of each
officer of Seller executing this Agreement and the other agreements
being delivered pursuant hereto, and certifying the effectiveness,
accuracy and completeness of the copies attached to such certificate
of resolutions duly adopted by Seller's Board of Directors and its
stockholders, authorizing the execution and delivery of this
Agreement, the Escrow Agreement and the Non-Competition Agreement by
Seller, and the performance by Seller of its respective obligations
hereunder and the consummation of the transactions contemplated
thereby.
9.6 UCC TERMINATION STATEMENTS. Seller shall have
delivered or caused to be delivered to Buyer, at or before the Closing, UCC
Termination Statements and such other releases as Buyer may reasonably request,
duly completed and executed by each person having any security interest, lien,
claim or other encumbrances or adverse interests in or on any of the Purchased
Assets (except for those listed on Schedule 4.5 and which are not otherwise
specified in Schedule 4.5 to be terminated), in order to evidence the
termination thereof.
9.7 LEGAL OPINION. On the Closing Date, Seller shall
have delivered or caused to be delivered to Buyer a legal opinion of Hutchins,
Wheeler & Dittmar, A Professional Corporation, in the form of EXHIBIT D hereto.
9.8 OTHER CONSENTS AND APPROVALS. Receipt of all
consents and approvals, in addition to those referenced in Section 9.1 above,
required for the consummation of the transactions contemplated by this
Agreement and to permit Buyer to acquire all of the Purchased Assets pursuant
hereto, without thereby violating any laws, government regulations or
agreements to which Buyer is subject or is a party, in form and substance
reasonably acceptable to Buyer.
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9.9 OTHER DOCUMENTS. Seller shall have delivered to
Buyer all instruments, consents, deeds, assignments and other documents called
for in this Agreement, including, without limitation, a Bill of Sale in the
form of EXHIBIT E hereto ("Bill of Sale"), and assignments and certificates of
title for the vehicles included in the Purchased Assets, properly executed and
acknowledged for transfer, and such other documents and instruments as Buyer or
its counsel reasonably requests to better evidence or effectuate the
transactions contemplated hereby.
9.10 DUE DILIGENCE. Buyer and its representatives shall
have completed their legal, business and accounting review of Seller and the
Business and shall be satisfied, in their sole discretion, with the results
thereof.
9.11 ESCROW AGREEMENT. Buyer, Seller and the Escrow Agent
shall have executed and delivered the Escrow Agreement.
9.12 NON-COMPETITION AGREEMENT. Buyer and Seller shall
have entered into the Non-Competition Agreement.
9.13 CONSULTING AGREEMENT. Buyer and Paul J. Rusconi
shall have executed and delivered a Consulting Agreement, containing such terms
and provisions which are mutually satisfactory to Buyer and Mr. Rusconi,
pursuant to which Mr. Rusconi shall agree to make himself available to Buyer
for transitional consulting services for not less than the three-month period
following January 2, 1996 for a monthly consulting fee of $3,333 (based on 100
hours of service at $100 per hour) plus $100 per hour for each hour of service
over 100 hours.
9.14 EMPLOYMENT OF CERTAIN KEY EMPLOYEES. Each of John
Aukshunas and Peter Gill shall have accepted offers of employment with Buyer,
on terms and conditions reasonably satisfactory to Buyer, and agreed to remain
in the employ of Buyer for at least one year following the Closing Date.
10. CONDITIONS TO THE OBLIGATIONS OF SELLER. The obligations of
Seller under this Agreement to be performed on or before the Closing Date shall
be subject to the satisfaction, or the waiver by Seller, on or before the
Closing Date, of each of the following conditions:
10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES/COMPLIANCE
WITH COVENANTS. All of the representations and warranties of Buyer contained
in this Agreement and in the Schedules hereto were true and correct when made
and remain true and correct as of the Closing Date. Buyer shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed or
complied with by it on or prior to the Closing.
10.2 ABSENCE OF LITIGATION. No action, suit,
investigation or other proceeding before any court or by any governmental body
or other authority shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby.
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10.3 CERTIFICATES. Seller shall have received the
following:
(a) A Certificate of Status of Buyer, dated as of
a recent date, from the California Secretary of State;
(b) A certificate signed by the President and
Chief Financial Officer of Buyer, dated as of the Closing Date,
certifying that (i) all representations and warranties of Buyer were
true and correct when made and remain true and correct as of the
Closing; (ii) all of the covenants, agreements, obligations and
conditions of Buyer required to have been performed by Buyer as of or
prior to the Closing have been fully performed and complied with; and
(iii) all of the conditions to Seller's obligations under this
Agreement required to be satisfied by the Closing Date by Buyer have
been satisfied and fulfilled; and
(c) A certificate signed by the Secretary of
Buyer, dated as of the Closing Date, as to the incumbency of each
officer of Buyer that has executed this Agreement or any of the other
agreements being delivered pursuant hereto, and certifying the
effectiveness, accuracy and completeness of the copies attached to
such certificate of resolutions duly adopted by the Board of Directors
of Buyer authorizing the execution and delivery of this Agreement and
the performance by Buyer of its obligations hereunder and the
consummation of the transactions contemplated hereby.
10.4 LEGAL OPINION. Buyer shall have delivered to Seller
at Closing a legal opinion of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation, in the form of EXHIBIT F hereto.
10.5 ESCROW AGREEMENT. Buyer, Seller and the Escrow Agent
shall have executed and delivered the Escrow Agreement.
11. CLOSING.
11.1 TIME, DATE AND PLACE OF CLOSING. The closing of the
sale and purchase of the Purchased Assets contemplated by this Agreement (the
"Closing") shall take place on Saturday, December 30, 1995, and confirmation of
the Closing shall be telephonically effected by counsel for Seller and counsel
for Buyer, or at such location or time or on such other date as the parties may
agree to in writing (the "Closing Date"). The parties acknowledge and agree
that the effective time of the purchase and sale of the Purchased Assets, of
the assumption by Buyer of the Assumed Obligations and of the obligation of
Buyer to pay the Purchase Price shall be deemed to be 11:59 p.m., Eastern Time,
on Saturday, December 30, 1995.
11.2 SELLER'S OBLIGATIONS AT CLOSING. Subject to the
satisfaction, or Seller's waiver, of the conditions precedent contained in
Section 10 hereof, at the Closing, Seller shall deliver, or cause to be
delivered to Buyer, the following documents and instruments, in form and
substance satisfactory to Buyer and its counsel:
(a) The Bill of Sale, duly executed by Seller;
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(b) Each of the certificates, opinions and other
documents and instruments required to be delivered by Seller to
satisfy the conditions set forth in Section 9 above;
(c) Evidence of the issuance of the Licenses and
Permits and Additional Consents required pursuant to Section 9.1
above;
(d) The UCC Termination Statements, and such
instruments and other documents as Buyer may request, from all persons
holding security interests, liens, claims or encumbrances or any other
adverse interests on any of the Purchased Assets, terminating and
discharging all of such security interests, liens, claims,
encumbrances and adverse interests;
(e) The certificates of title to each of the
vehicles, if any, included in the Purchased Assets, duly endorsed for
transfer to Buyer;
(f) The Non-Competition Agreement, duly executed
by Seller;
(g) The Escrow Agreement, duly executed by
Seller;
(h) Records relating to all bank and other
depository accounts in which Seller has deposited any funds included
in the Purchased Assets, together with documents required to transfer
such accounts to Buyer;
(i) All checks and other negotiable instruments
in the possession of Seller evidencing or constituting payment of any
accounts or notes receivable included in the Purchased Assets,
endorsed for payment to Buyer; and
(j) Such other documents and instruments as Buyer
or Buyer's counsel may reasonably request to better evidence or
effectuate the transactions contemplated hereby.
11.3 OBLIGATIONS OF BUYER AT THE CLOSING. Subject to the
satisfaction, or Buyer's written waiver, of the conditions precedent contained
in Section 9 hereof, at the Closing, Buyer shall deliver the following to
Seller:
(a) The Non-Competition Agreement, duly executed
by Buyer;
(b) The Escrow Agreement, duly executed by Buyer;
(c) The Bill of Sale, duly executed by Buyer;
(d) Each of the certificates and other documents
and instruments required to be delivered by Buyer to Seller pursuant
to Section 10 above; and
(e) Such other documents and instruments as
Seller or Seller's counsel may reasonably request to better evidence
or effectuate the transactions contemplated hereby.
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On Tuesday, January 2, 1996, Buyer shall deliver the following:
(a) To Seller, a cashier's check or wire transfer
in the amount of Three Million Five Hundred Thousand Dollars
($3,500,000);
(b) To the Escrow Agent, a cashier's check or
wire transfer in the amount of Six Hundred Fifty Thousand Dollars ($650,000),
for deposit pursuant to the Escrow Agreement; and
(c) To the Escrow Agent, the Escrow Agreement,
duly executed by Buyer and Seller.
12. TERMINATION
12.1 METHODS OF TERMINATION. This Agreement may be
terminated and the transactions herein contemplated may be abandoned at any
time, without liability to the terminating party:
(a) By mutual written consent of Buyer and
Seller; or
(b) By either Buyer or Seller, if the Closing has
not occurred by December 31, 1995; provided that the party so
terminating is not in breach of any of its material obligations under
this Agreement as of December 31, 1995.
12.2 PROCEDURE UPON TERMINATION. In the event of
termination of this Agreement by Buyer or Seller or by both Buyer and Seller
pursuant to Section 12.1 hereof, written notice thereof shall forthwith be
given to the other party or parties hereto and the transactions contemplated
herein shall be abandoned without further action by Buyer or Seller. In
addition, if this Agreement is terminated as provided herein:
(a) Each party will redeliver all documents,
workpapers and other material of any other party relating to the
transactions contemplated hereby, whether so obtained before or after
the execution hereof, to the party furnishing the same;
(b) The confidentiality of all information of a
confidential nature received by any party hereto with respect to the
business of any other party (other than information which is a matter
of public knowledge or which has heretofore been or is hereafter
published in any publication for public distribution or filed as
public information with any governmental authority) shall be
maintained in accordance with Section 14 hereof which shall survive
termination of this Agreement; and
(c) Except as hereinabove provided in this
Section 12.2, the respective obligations of the parties hereto under
this Agreement shall terminate; provided, that if any party hereto has
breached any of its obligations or representations or warranties under
this Agreement prior to the termination of this Agreement, termination
of this Agreement shall not release such party from liability therefor
to the other party.
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13. INDEMNIFICATION.
(a) Seller hereby agrees that it will indemnify,
hold harmless and defend Buyer and its directors, officers, stockholders,
employees, agents and successors and assigns (collectively, the "Buyer's
Affiliates") from and against any and all Liabilities (as hereinafter defined)
that arise from or are in connection with: (i) any facts, circumstances or
events, the existence or happening of which constitutes a breach of or
inaccuracy in any of the representations or warranties of Seller contained in
this Agreement or in any Exhibits or Schedules hereto or any certificates or
other documents delivered hereunder by or on behalf of Seller; (ii) any breach
or default by Seller of any of its covenants or agreements contained in this
Agreement; (iii) any legal actions or proceedings that have arisen or may
hereafter arise out of the business or operations of Seller, whether before or
after the Closing, including, without limitation, any of the pending or
threatened legal actions described in Schedule 4.12 hereto; (iv) the existence
prior to the Closing Date of any toxic or hazardous substances (as defined in
Section 4.14) upon, about or beneath any of the real properties used, operated,
leased or owned by Seller at any time or migrating or threatening to migrate
from any of such properties, or the existence of a violation of any
Environmental Laws pertaining to such properties, regardless of whether the
existence of such toxic or hazardous substances or the violation of the
Environmental Laws arose prior to the present use, operation, leasing or
ownership of such properties by Seller and regardless of whether the existence
of such toxic or hazardous substances or the violation of the Environmental
Laws is disclosed in this Agreement or any Schedules hereto; and (v)
noncompliance with the applicable requirements of the Massachusetts Uniform
Commercial Code concerning bulk transfers. The liability of Seller to Buyer
pursuant to this Section 13(a) shall be subject to the limitation that: (i)
Seller shall not be liable for indemnity under this Section 13 until the
aggregate amount of Liabilities exceeds the sum of $25,000 (the "Threshold
Amount"), whereupon Seller shall become liable to indemnify Buyer hereunder for
all Liabilities in excess of such Threshold Amount; and (ii) the obligations of
Seller to Buyer or the Buyer's Affiliates under this Section 13(a) shall be
limited to $650,000 and is to be recovered solely and exclusively out of the
Escrow Funds pursuant to the Escrow Agreement. If the Escrow Funds are reduced
by the Reduction Amount due to the Purchase Price adjustment provisions of
Section 3.3 above, then the limitation on Seller's obligations under this
Section 13(a) set forth in clause (ii) of the immediately preceding sentence
shall be reduced to the extent of the Reduction Amount. "Liabilities" as used
in this Agreement shall mean: (Y) demands, claims, actions, suits and legal or
other proceedings brought against any "Indemnified Party" (as hereinafter
defined), and any judgments rendered therein or settlements thereof, and (Z)
all liabilities, damages, losses, taxes, costs and expenses, including, without
limitation, reasonable attorneys' fees, incurred by any Indemnified Party,
whether or not they have arisen from or were incurred in or as a result of any
demand, claim, action, suit, assessment or other proceeding or any settlement
or judgment, and whether sustained before or after the Closing Date.
(b) Buyer hereby agrees that it will indemnify,
hold harmless and defend Seller and its directors, officers, stockholders,
employees, agents and successors and assigns from and against any and all
Liabilities that arise from or are in connection with: (i) any facts,
circumstances or events, the existence or happening of which constitutes a
breach of or inaccuracy in any of the representations or warranties of Buyer
contained in this Agreement or in any Exhibits or Schedules hereto or any
certificates or other documents delivered hereunder by or on behalf of Buyer;
(ii) any breach or default by Buyer of any of its covenants or agreements
contained in this Agreement; and (iii) any claims arising with respect to
Buyer's operation of the
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Business and the Purchased Assets following the Closing. The liability of
Buyer to Seller pursuant to this Section 13(b) shall be subject to the
limitation that Buyer shall not be liable for indemnity under this Section 13
until the aggregate amount of Liabilities exceeds the Threshold Amount,
whereupon Buyer shall become liable to indemnify Seller hereunder for all
Liabilities in excess of such Threshold Amount.
(c) No claim for indemnification under this
Section 13 may be made by any party hereto after September 30, 1996; provided,
that any claim by Buyer for indemnification relating to any taxes or tax
returns or reports may be made at any time within the statute of limitations
relating to such taxes or tax returns or reports, including any extensions
thereof. To be effective, any claim for indemnification under this Section 13
by a party or parties entitled to indemnification (the "Indemnified Party")
must be made by a written notice (a "Notice of Claim") to the indemnifying
parties (the "Indemnifying Parties"), given in accordance with the provisions
of Section 16 hereof, accompanied by documentation supporting the claim;
provided, however, that if the Indemnified Party has made such claim prior to
such expiration date, such Indemnified Party shall be entitled to recover the
full amount of the Liabilities incurred by it even if that amount is not
finally determined until after such expiration date. In the event of the
assertion, in writing, of a third-party claim or dispute which, if adversely
determined would entitle an Indemnified Party to indemnification hereunder, the
Indemnified Party shall promptly notify the Indemnifying Parties thereof in
writing. The Indemnifying Parties may elect, by written notice to the
Indemnified Party, to assume and direct, at their sole expense, the defense of
any such third-party claim, and may, at their sole expense, retain counsel in
connection therewith, provided that such counsel is reasonably acceptable to
the Indemnified Party. After the assumption of such defense by the
Indemnifying Parties with counsel reasonably acceptable to the Indemnified
Party, and for so long as the Indemnifying Parties conduct such defense on a
diligent and timely basis, the Indemnifying Parties shall not be responsible
for the payment of legal fees incurred thereafter by the Indemnified Party (who
may, however, continue to participate in the defense thereof with separate
counsel); provided, that, the Indemnifying Parties shall be responsible for
paying the fees and expenses of one separate counsel for the Indemnified Party
if the Indemnifying Parties and the Indemnified Party have conflicting
positions with respect to such third-party claim or dispute, including without
limitation, by virtue of any business relationship with any third party
involved in any matter related to a claim which is subject to indemnification,
or if the Indemnifying Parties, on the one hand, or the Indemnified Party, on
the other hand, have defenses not available to the other. If the Indemnifying
Parties fail to and until the Indemnifying Parties undertake the defense of any
such third-party claim or dispute, or if the Indemnifying Parties discontinue
the diligent and timely conduct thereof, the Indemnified Party may undertake
such defense and the Indemnifying Parties shall be responsible for reimbursing
the Indemnified Party for its legal fees and expenses as and when incurred by
the Indemnified Party. No party hereto may settle or compromise any such
third-party claim or dispute without the prior written consent of the other
parties hereto, which consent shall not be unreasonably withheld.
(d) Upon receipt of a Notice of Claim, the
Indemnifying Parties shall have twenty (20) calendar days to contest their
indemnification obligation with respect to such claim, or the amount thereof,
by written notice to the Indemnified Party (a "Contest Notice"); provided,
however, that if, at the time a Notice of Claim is submitted to the
Indemnifying Parties the amount of the Liability in respect thereof has not yet
been determined, such twenty (20) day period shall not commence until a further
written notice (a "Notice of Liability") has been sent or
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delivered by the Indemnified Party to the Indemnifying Parties setting forth
the amount of the Liability incurred by the Indemnified Party that was the
subject of the earlier Notice of Claim. Such Contest Notice shall specify the
reasons or bases for the objection of the Indemnifying Parties to the claim,
and if the objection relates to the amount of the Liability asserted, the
amount, if any, which the Indemnifying Parties believe is due the Indemnified
Party. If no such Contest Notice is given with such 20-day period, the
obligation of the Indemnifying Parties to pay to the Indemnified Party the
amount of the Liability set forth in the Notice of Claim, or subsequent Notice
of Liability, shall be deemed established and accepted by the Indemnifying
Parties. If, on the other hand, the Indemnifying Parties contest a Notice of
Claim or Notice of Liability (as the case may be) within such 20-day period,
the Indemnified Party and the Indemnifying Parties shall thereafter attempt in
good faith to resolve their dispute by agreement. If they are unable to so
resolve their dispute within the immediately succeeding thirty (30) days, such
dispute shall be resolved by binding arbitration in Orange County, California,
as provided in Section 17(i) below. The award of the arbitrator shall be final
and binding on the parties and may be enforced in any court of competent
jurisdiction. Upon final determination of the amount of the Liability that is
the subject of an indemnification claim (whether such determination is the
result of the Indemnifying Parties' acceptance of, or failure to contest, a
Notice of Claim or Notice of Liability, or of a resolution of any dispute with
respect thereto by agreement of the parties or binding arbitration), such
amount shall be payable, in cash, by the Indemnifying Parties to the
Indemnified Party who have been determined to be entitled thereto within five
(5) days of such final determination of the amount of the Liability due by the
Indemnifying Parties. Notwithstanding anything to the contrary contained
elsewhere in this Section 13, if the Indemnifying Parties are contesting only
the amount of any Liability, then as a condition precedent to the effectiveness
of any Contest Notice, the Indemnifying Parties shall pay to the Indemnified
Party concurrently with the delivery of such Contest Notice the portion of the
Liability which it is not contesting. Any amount that becomes due hereunder
and is not paid when due shall bear interest at the Interest Rate until paid.
14. CONFIDENTIALITY. Each party acknowledges that it may have
access to various items of proprietary and confidential information of the
other in the course of investigations and negotiations prior to Closing.
Except as otherwise provided in Section 6.3 above, each party agrees that any
such confidential information received from the other party shall be kept
confidential and shall not be used for any purpose other than to facilitate the
arrangement of financing for and the consummation of the transactions
contemplated herein. Confidential information shall include any business or
other information which is specifically marked by the party claiming
confidentiality as being confidential, unless such information (i) is already
public knowledge, (ii) becomes public knowledge through no fault, action or
inaction of the receiving party, or (iii) was known by the receiving party, or
any of its directors, officers, employees, representatives, agents or advisors
prior to the disclosure of such information by the disclosing party to the
receiving party. No party hereto, nor its respective officers, directors,
employees, accountants, attorneys, or agents shall intentionally disclose the
existence or nature of, or any of the terms and conditions relating to, the
transaction referred to herein, to any third person; provided, however, that
such information may be disclosed in applications or requests required to be
made to obtain any Licenses and Permits, approvals or consents needed to
consummate the transactions contemplated herein or in any filings with state or
federal securities agencies.
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15. EXPENSES AND BROKER'S FEES.
15.1 EXPENSES. Each of the parties shall pay all legal
and accounting fees, and other costs and expenses incurred or to be incurred by
it in connection with the negotiation, preparation, execution, delivery and
performance of its respective obligations under this Agreement and the
agreements and transactions contemplated hereby; provided, however, Buyer shall
not assume, pay or be responsible for, directly or indirectly, any of such
fees, costs or expenses incurred by or on behalf of Seller. Seller agrees that
all of such fees, costs and expenses shall be paid solely from the proceeds of
purchase price to be paid by Buyer and shall not be paid prior to the Closing.
15.2 BROKER'S FEES. Each party represents and warrants
that, except as set forth on Schedule 15.2, it has not utilized the services
of, and that it does not and will not have any liability to, any broker or
finder in connection with this Agreement or the transactions contemplated
hereby. Seller agrees to indemnify and hold harmless Buyer, and Buyer agrees
to hold harmless Seller, against any loss, liability, damage, cost, claim or
expense incurred by reason of any brokerage commission or finder's fee alleged
to be payable as a result of, or in connection with, this Agreement or the
transactions contemplated hereby by reason of any act, omission or statement of
the indemnifying party.
16. NOTICES. All notices, requests, demands or other
communications hereunder shall be in writing and shall be deemed to have been
duly given, if delivered in person or by a nationally recognized courier
service, if sent by facsimile machine ("fax") or mailed, certified,
return-receipt requested, postage prepaid:
(a) If to Seller prior to the Closing:
LaserData, Inc.
300 Vesper Park
Tyngsboro, MA 01879
Attention: Mr. Paul J. Rusconi, President
or if to Seller after the Closing:
LASD Corp.
Post Office Box 711
Tyngsboro, MA 01879
Attention: Mr. Paul J. Rusconi, President
With copies to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attention: Jonathan R. Karis, Esq.
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and New England Capital Management
75 Federal Street, Suite 1101
Boston, MA 02110-1910
Attention: Kevin McCafferty , Chairman
(b) If to Buyer:
Kofax Image Products
3 Jenner Street
Irvine, CA 92718
Attention: Mr. David Silver,
Chief Executive Officer
With a copy to:
Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660-6441
Attention: K.C. Schaaf, Esq.
Any party hereto may from time to time, by written notice to the other parties,
designate a different address, which shall be substituted for the one specified
above for such party. If any notice or other document is sent by certified or
registered mail, return receipt requested, postage prepaid, properly addressed
as aforementioned, the same shall be deemed served or delivered seventy-two
(72) hours after mailing thereof. If any notice is sent by fax to a party, it
will be deemed to have been delivered on the date the fax thereof is actually
received, provided the original thereof is sent by certified or registered
mail, in the manner set forth above, within twenty-four (24) hours after the
fax is sent. If the notice is delivered in person or is sent by a nationally
recognized courier service, it shall be deemed to have been delivered on the
date received by the recipient of such notice.
17. MISCELLANEOUS
(a) BINDING EFFECT. Subject to the terms of
Section 17(b) below, this Agreement shall be binding upon the heirs, executors,
representatives, successors and assigns of the respective parties hereto.
(b) ASSIGNMENT. No party may assign this
Agreement, or assign its rights or delegate its duties hereunder, without the
prior written consent of the other party, except that Buyer may assign this
Agreement to a wholly-owned subsidiary of Buyer in connection with its proposed
reincorporation in the State of Delaware, and Seller hereby consents to such
assignment (provided that, if Buyer's corporate existence continues after such
reincorporation, Buyer ultimately remains liable for all of its obligations
hereunder).
(c) COUNTERPARTS. This Agreement may be executed
in facsimile and in any number of counterparts, each of which shall be deemed
to be an original and all of which together shall be deemed to be one and the
same instrument.
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(d) HEADINGS. The subject headings of the
sections and subsections of this Agreement are included for purposes of
convenience only and shall not affect the construction or interpretation of any
of its provisions.
(e) WAIVERS. Any party to this Agreement may
waive any right, breach or default which it has the right to waive; provided,
that such waiver will not be effective against the waiving party unless it is
in writing and specifically refers to this Agreement and notice thereof is
promptly given to all parties in the manner provided in Section 16 of this
Agreement. No waiver will be deemed to be a waiver of any other matter,
whenever occurring and whether identical, similar or dissimilar to the matter
waived.
(f) ENTIRE AGREEMENT. Except as provided in
Section 6.4 above, this Agreement, including the Schedules, Exhibits and other
documents referred to herein which form a part hereof, embodies the entire
agreement and understanding of the parties hereto, and supersedes all prior or
contemporaneous agreements or understandings (whether written or oral) among
the parties, in respect to the subject matter contained herein.
(g) GOVERNING LAW. This Agreement is deemed to
have been made in the State of California, and its interpretation, its
construction and the remedies for its enforcement or breach are to be applied
pursuant to, and in accordance with, the laws of California for contracts made
and to be performed in that state.
(h) ARBITRATION. All disputes between the
parties hereto shall be determined solely and exclusively by arbitration under,
and in accordance with the rules then in effect of, the American Arbitration
Association, or any successors thereto ("AAA"), in Orange County, California,
unless the parties otherwise agree in writing. The parties shall jointly
select an arbitrator. In the event the parties fail to agree upon an
arbitrator within ten (10) days, then each party shall select an arbitrator and
such arbitrators shall then select a third arbitrator to serve as the sole
arbitrator; provided, that if either party, in such event, fails to select an
arbitrator within seven (7) days, such arbitrator shall be selected by the AAA
upon application of either party. Judgment upon the award of the agreed upon
arbitrator or the so chosen third arbitrator, as the case may be, shall be
binding and shall be entered into by a court of competent jurisdiction. The
prevailing party in any such arbitration shall be entitled to recover from the
losing party its reasonable attorneys' fees, expenses and costs, including
costs of the arbitration.
(i) SEVERABILITY. Any provision of this
Agreement which is illegal, invalid or unenforceable shall be ineffective to
the extent of such illegality, invalidity or unenforceability, without
affecting in any way the remaining provisions hereof.
37
<PAGE> 39
IN WITNESS WHEREOF, the undersigned corporations have caused this
Agreement to be executed by officers thereunto duly authorized, and the
individuals have executed this Agreement, on the date first above stated.
SELLER:
LASERDATA, INC,
a Delaware corporation
By: [Sig unreadable]
-----------------------------------
Its: President
----------------------------------
BUYER:
KOFAX IMAGE PRODUCTS,
a California corporation
By:
-----------------------------------
Its:
----------------------------------
38
<PAGE> 40
IN WITNESS WHEREOF, the undersigned corporations have caused this
Agreement to be executed by officers thereunto duly authorized, and the
individuals have executed this Agreement, on the date first above stated.
SELLER:
LASERDATA, INC,
a Delaware corporation
By:
-----------------------------------
Its:
----------------------------------
BUYER:
KOFAX IMAGE PRODUCTS,
a California corporation
By: [Sig unreadable]
-----------------------------------
Its: President
----------------------------------
39
<PAGE> 41
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Escrow Agreement
Exhibit B Allocation of Purchase Price
Exhibit C Form of Non-Competition Agreement
Exhibit D Form of Opinion of Counsel for Seller
Exhibit E Form of Bill of Sale
Exhibit F Form of Opinion of Counsel for Buyer
SCHEDULES
---------
Schedule 1.1(a) Tangible Assets
Schedule 1.1(b) Assumed Contracts
Schedule 1.1(f) Patents, Copyrights, Trademarks
Schedule 1.1(h) Computer Software Programs
Schedule 1.2 Excluded Assets
Schedule 1.3 Assumed Liabilities
Schedule 4.3A Financial Statements
Schedule 4.3B Financial Statement Exceptions
Schedule 4.4 Certain Changes
Schedule 4.5 Exceptions to Title
Schedule 4.5(d) Leases
Schedule 4.6 Contracts and Commitments
Schedule 4.7 Labor and Employment Matters
Schedule 4.8 Conflicts
Schedule 4.9 Insurance Policies
Schedule 4.10 Taxes and Tax Returns
Schedule 4.11(a) Compliance With Laws
Schedule 4.11(b) Permits and Licenses
Schedule 4.12 Litigation
Schedule 4.13 Certain Transactions
Schedule 4.14 Environmental and Safety Matters
Schedule 4.15 Operational Restrictions
Schedule 4.17 Product Warranties and Liabilities
Schedule 5.3 Conflicts of Buyer
Schedule 9.1 Authorities and Additional Consents
Schedule 15.2 Broker's Fees
</TABLE>
<PAGE> 1
EXHIBIT 10.17
DISTRIBUTOR AGREEMENT
---------------------
BETWEEN
KOFAX WAGE PRODUCTS INC.
3 JENNER STREET
IRVINE, CALIFORNIA 92718
TEL: (714)727-1733
FAX: (714) 727-3144
AND
DISTRIBUTOR: LAW-CYPRESS DISTRIBUTING
ADDRESS: 560 LINCOLN AVE.
SAN JOSE, CA 95126
COMMENCEMENT DATE:
<PAGE> 2
AGREEMENT
Kofax Image Products Inc., a California corporation, with offices at 3 Jenner
St., Irvine, CA 92718, hereinafter referred to as (Kofax),
and___________________________________,a_____________________corporation with
offices at___________________ herein after referred to as (Distributor), agree
that the following terms and conditions shall govern the sale and discounting
of Products as herein defined.
1. Definitions
1.1 Parties, Party
"Parties" means Kofax and Distributor, collectively. "Party"
means either Kofax or Distributor.
1.2 Agreement
Agreement means this Authorized Industrial Distributor
Agreement.
1.3 Products
The term "Product" or "Products" as used herein shall mean the
items listed on APPENDIX "A" hereto, as changed from time to
time in accordance with the provisions of this Agreement.
2. Appointment
2.1 Authorization
Kofax hereby authorizes Distributor to advertise, demonstrate,
market, promote, distribute, and solicit orders for Products on
a non-exclusive basis subject to all the terms and conditions of
this Agreement.
2.2 Use of Trademarks/Trade Names
During the term of this Agreement, Distributor is authorized to
use Kofax's trademarks, trade names and logos in connection with
Distributor's sale, advertisement and promotion of Products.
Upon termination of this Agreement, Distributor shall cease to
use any of such marks, names or logos and shall within a
reasonable time, remove any reference to Kofax from its
advertising and promotional material.
2
<PAGE> 3
2.3 Non Assignability
Distributor's rights under this Agreement are personal, and may
not be assigned without the prior written authorization of
Kofax. Such authorization may be withheld for any reason.
2.4 No Authority to Make Agreements
Distributor shall not have the authority to make any agreement
or incur any Liability on behalf of Kofax. The authority of the
Distributor on behalf of Kofax is limited to the rights granted
in Paragraph 2.1 above.
2.5 No Authority to Accept Orders
Distributor shall not have the authority to accept any orders
from customers on behalf of Kofax. All such orders are subject
to approval and acceptance by Kofax at its principal place of
business.
2.6 Reserved Rights
Kofax reserves the right to market the Products in any manner
and without limitation both within and outside of the Territory.
Kofax reserves the right to change the scope of the Territory by
giving Distributor 60 days prior written notice.
3. Commencement Date & Term
3.1 Commencement Date
This agreement shall be effective, after execution by both
parties, on the commencement date specified herein.
3.2 Term
The initial term of this agreement shall be for Twelve (12)
months from the commencement date.
3.3 Renewal
This Agreement will be renewed for subsequent one year terms,
unless (1) one Party gives written notice of termination to the
other party, at least 60 days prior to the end of the initial
term or any one of the renewal terms. The initial term, and any
subsequent term, shall be subject to termination under the
provisions of Section 9.
3
<PAGE> 4
4. Product Changes
4.1 Product Modifications
Kofax reserves the right to modify, alter, improve, delete or
change any and all of the Products covered by this Agreement.
However, this Agreement will cover the sales of Products as they
may be modified, altered, improved, or changed.
4.2 Product Deletions
Kofax may at its discretion, and upon prior notice to
Distributor, delete Products from Appendix "A" at any time. In
the event of any such deletions, Distributor may, within thirty
(30) days after receipt of such notice, return any or all of
such Products in its inventory which have been so deleted. Any
such Products not returned within the above allotted time
period, (thirty (30) days) may no longer be returned under any
circumstances or provisions of this Agreement, nor may they be
subsequently rotatable under the provisions of paragraph 7.11
below.
All Products returned in accordance with this provision must be
returned freight pre-paid and must be previously unsold, unused,
and in their original containers. Distributor shall receive full
credit for all such Products so returned. Any such credit shall
be in the amount of the actual net invoice price paid by
Distributor for the Products less any prior credits granted by
Kofax to Distributor.
4.3 Engineering Changes
Kofax shall, if possible, give Distributor at least thirty (30)
days advance written notice of all engineering changes that will
affect form, fit or function of any Products in Distributor's
Inventory. If these modifications will adversely affect the
sales of Distributor's inventory of such Products once the
engineering modifications are implemented, then Kofax shall
cooperate with Distributor to sell such affected inventory. If,
after the aforementioned efforts (but in no event later than one
hundred twenty [120] days after the first public announcement of
such modification or the first shipment of the modified Product,
whichever occurs first), any of the affected Product still
remains in Distributor's inventory, Kofax agrees at
Distributor's election to replace it with upgraded Products, or
to rework affected inventory for engineering changes affecting
form, fit or function.
4
<PAGE> 5
5. Responsibilities of Distributor
Distributor shall have the following responsibilities:
5.1 Marketing Efforts
To exert its best efforts to advertise, demonstrate, market,
promote, distribute, and solicit orders for the Products.
5.2 Promotional Cooperation
To cooperate with and assist Kofax in promotional and selling
campaigns including attending appropriate trade shows.
5.3 Promotional Materials
To distribute promotional material to Distributor's sales
offices on a timely basis.
5.4 Product Information
To procure from Kofax and furnish to customers additional
manuals and documentation as required to support Products.
5.5 Sales Reports
To provide Kofax, within 5 working days after the end of each
Distributor's sales month, a detailed sales activities report
for sales which shall include names and zip code addresses of
purchasers, model numbers, products codes, products and
quantities purchased and dollar amounts invoiced to said
purchasers.
5.6 Complaints
To promptly report to Kofax any complaint relating to sales of
Products.
5.7 Business Expenses
To pay all of the expenses of the operation of its business,
including salaries and expenses.
5.8 Inventory
Distributor shall maintain a reasonable inventory of Products in
order to satisfy Distributor's anticipated sales and where
applicable, support thereof.
5
<PAGE> 6
5.9 Initial Stocking Order
Distributor is required to purchase an initial stocking order
and to take delivery of this order no later than 30 days after
the Effective Date of this Agreement
5.10 Demonstration System
Distributor shall, at all times, maintain a working
demonstration system including scanner and laser printer.
5.11 Forecast
Distributor shall provide to Kofax a three month rolling
forecast for Products. This forecast is to be updated every
month.
5.12 Staffing and Training
Distributor will staff and train employees as required to
demonstrate, market, promote, distribute and support Kofax
Products.
5.13 Competitive Products
To provide written notification to Kofax prior to marketing and
distributing Products which compete directly with Products sold
by Kofax.
6. Responsibilities of Kofax
In consideration of Distributor's fulfillment, of the
responsibility set forth in Section 5;
6.1 Kofax shall consistently keep Distributor informed on a timely
basis of changes and innovations in performance,
serviceability, uses and applications of all Products.
6.2 Kofax will provide Distributor with initial familiarization and
standard sales training, including materials, at no charge, for
a reasonable number of Distributor's employees at a location of
Kofax's designation. All expenses of Distributor's employees
associated with such training, such as transportation, meals and
lodging, are the responsibility of Distributor. Additional
Standard technical training courses from Kofax's Training
Department are available to Distributor at standard locations,
rates and terms.
6.3 Kofax at its expense, will provide Distributor with two hundred
(200) data sheets or brochures for each Product with a part
number beginning with either KF or TK that is marketed by
Distributor ( per APPENDIX A). Distributor may purchase
additional copies of the above materials at the current costs.
6
<PAGE> 7
Kofax will also prepare duplicate transparencies of available
photography at the Distributor's request. Cost to the
Distributor will be the reproduction cost.
7. Product Orders
7.1 Product Pricing
The prices to be paid by Distributor for any Products ordered
pursuant to this Agreement are set forth in Appendix A.
7.2 Service Pricing
The prices to be paid by Distributor for any hardware updates or
repairs for Products that are out of Warranty are set forth in
Appendix B and there are no discounts on the prices.
7.3 Purchase Orders
Distributor shall submit a written purchase orders (telex or FAX
acceptable) for all Products, services, and other items ordered
from Kofax. Purchase orders shall specify Product model numbers,
quantity ordered, Product options, sales tax status, shipping
destination, carrier, and shipping dates. In order for the
purchase orders to be valid, Kofax shall acknowledge receipt and
acceptance of such purchase order. However, all orders for
Products by Distributor are subject to the terms and conditions
set forth in this Agreement. Any other terms or conditions
contained in any order from Distributor which add to or differ
from the terms of this Agreement shall be invalid.
7.4 Terms of Payment
Terms of payment for all Products, services and other items sold
to Distributor by Kofax are the net invoice amount due within 30
days from the date of each invoice submitted to Distributor by
Kofax. Kofax shall have the unqualified right to withhold
shipment of Products and services, including repair of Products
returned by Distributor, if any payments due to Kofax by
Distributor are delinquent.
7.5 Customer Billing
Distributor shall bill its customers directly. Distributor shall
be solely responsible for any losses arising from the failure of
any customer to pay the customer's account. Kofax shall have no
liability to Distributor for any bad debt arising from the sale
by Distributor of Products. Failure of Distributor to collect
shall in no way alter Distributor's payment obligations to
Kofax.
7
<PAGE> 8
7.6 Monies, Taxes, and Duties
All prices and fees described or contemplated under this
Agreement are in U.S. dollars. Prices quoted do not include
federal, state, or local taxes, fees, duties, or licenses. All
applicable taxes, fees, duties, and licenses will be added to
the sales price and shall be paid by Distributor, (but not
including any taxes on the income or net income of Kofax) unless
Distributor furnishes an exemption certificate satisfactory to
the appropriate authorities.
7.7 Delivery
Unless otherwise agreed upon in writing by Kofax, delivery of
the Products purchased by Distributor under this Agreement shall
be made directly to Distributor and shall be FOB Kofax's place
of manufacture. All stated delivery and shipment dates are
approximate only, and will be computed from the date
Distributor's purchase order is acknowledged. Delivery dates are
given to the best of Kofax's knowledge based on conditions
existing at the time of order acknowledgment. Failure to make
shipment or delivery as quoted does not constitute a cause for
damages of any kind. If Distributor agrees to take partial
shipments of any order, each such partial shipment shall be
deemed a separate sale, and payment for such separate shipments
shall become due in accordance with the provisions of paragraph
7.3. Distributor shall designate the freight carrier to be used.
7.8 Clear Title
Kofax warrants the title to all Products to be sold to
Distributor hereunder and warrants that such Products are not
subject to any security interests, liens or other encumbrances.
7.9 Risk of Loss
From and after delivery of the Products to a carrier at Kofax's
facility, Irvine, Ca. Distributor shall be responsible for the
entire risk of Loss, theft, damage to or destruction of the
Products.
7.10 Cancellation/Reschedule
Orders accepted by Kofax are subject to cancellation or
rescheduling only upon written notice by Distributor and in
accordance with the following provision.
8
<PAGE> 9
NOTICE RECEIVED BY KOFAX CANCELLATION CHARGES
Orders may only be rescheduled twice and may not be subsequently
canceled and must thereafter be rescheduled for shipment within
sixty (60) days of the originally scheduled shipping date.
Orders not rescheduled for shipment within the above time period
will be considered canceled and become subject to the above
cancellation charges.
Distributor may not cancel or reschedule any order or portion
thereof after shipment. In the event Distributor does not accept
delivery of the Products after shipment, or causes Kofax to
withhold shipment of the Products (i.e. for nonpayment or
credit-hold) for a Period of thirty (30) days after the
scheduled delivery date, such Products will be considered
canceled and Distributor shall pay the maximum cancellation
charges specified above.
7.11 Stock Rotation
Within 30 days after the end of each March, June, September and
December during the term of this Agreement, Distributor may
return Products to Kofax for restocking only after Kofax has
given a Return Material Authorization (RMA) number to
Distributor. Distributor may only return Products which have
been shipped to the Distributor within the prior 6 months.
Distributor may return any quantity of Products to Kofax for
credit provided the total credit shall not exceed 5% of the net
sales dollars invoiced by Kofax to the Distributor during the
said 6 month period. The credit to be issued in respect of each
such Product returned shall be the actual net invoiced charged
for same, less any prior credits granted by Kofax to
Distributor. All Products returned in accordance with this
provision must be returned freight pre-paid and must be
previously unsold, unused, and in their original containers. The
Distributor will place a non-cancelable order of equal value to
offset the credit issued at the time the RMA is requested. Any
demonstration unit or non-standard special order products
purchased by Distributor as "non-cancelable/non-returnable" do
not quality for stock rotation.
7.12 Price Protection
Kofax agrees to provide Distributor with inventory price
protection under the following terms and conditions:
9
<PAGE> 10
7.12.1 Distributor acknowledges and agrees that Kofax has the
right to raise or lower prices set forth in the product
Price schedule (APPENDIX A) from time to time by giving
at least 30 days prior written notice to Distributor of
such intent.
7.12.2 In the event that Kofax permanently decreases the price
of any Product, Distributor will be entitled to a credit
equal to the difference between the net price paid by
Distributor, less any prior credits granted by Kofax,
and the new decreased Distributor's price for the
Product multiplied by the quantity of such Product in
Distributor's inventory on the effective date of the
reduction.
Similar price adjustments will also be made on all such
effected Products then on order, or in transit to
Distributor on the effective date of such price
decrease. This section does not apply to Price
reductions made by Kofax where such reductions are
initiated for reasons other than permanently reducing
prices and/or are periodic and temporary in nature.
7.12.3 To obtain the credit described above, Distributor shall
submit to Kofax, not later than twenty (20) working days
after the effective date of such price decrease, a
Product inventory report as of the effective date.
7.12.4 Upon Kofax's verification of the Product inventory
report, Kofax will apply the said credit to
Distributor's account, as of the effective date of such
price decrease. Kofax reserves the right to perform a
physical inventory at each Distributor location.
7.12.5 In the event of a price increase, Distributor shall
continue to receive current pricing for (a) all Products
then on order and scheduled for delivery within thirty
(30) days from the effective date of the increase; and
(b) all new orders received within the thirty (30) day
notification period and scheduled for shipment before
the effective date of such price increase.
7.13 Offset
Kofax may, without notice, offset any overdue payments owed by
Distributor to Kofax against any amounts that may be owing by
Kofax to Distributor.
8. Termination
8.1 This Agreement may be terminated at any time, without cause, by
either party upon giving the other party at least sixty (60)
days prior written notice. Such termination shall be effective
on the date stated in said notice.
10
<PAGE> 11
8.2 This Agreement may be terminated immediately for cause by either
party in the event the other party (i) shall become insolvent or
bankrupt, or (ii) admits in writing its inability to pay its
debts as they mature, or (iii) makes an assignment for the
benefit of creditors, or (iv) ceases to function as a going
concern or to conduct its operations in the normal course of
business, or (v) fails to perform any of the obligations imposed
upon it under the terms of this Agreement so as to be in default
hereunder and fails to cure such default within thirty (30) days
after written notice thereof.
8.3 In the event Kofax terminates this Agreement, Kofax shall
repurchase, within one hundred and eighty (180) days of the
effective termination date, all unsold Products in Distributors
inventory. The repurchase price for such unsold Products shall
be the actual net invoice price paid by Distributor less any
prior credits granted by Kofax to Distributor. All Products to
be repurchased pursuant to this paragraph 9.3 must be in unused,
factory-shipped condition and must be returned in original
cartons.
8.4 In the event Distributor terminates this Agreement, Kofax shall
repurchase, within one hundred and eighty (180) days of the
effective date, all unsold Products in Distributors inventory.
The repurchase price for such unsold Products shall be the
actual net invoice price paid by Distributor less a twenty
percent 20% restocking charge, and less any prior credits
granted by Kofax to Distributor. All Products to be repurchased
pursuant to this paragraph 9.4 must be in unused,
factory-shipped condition and must be returned in the original
cartons.
8.5 Continued Support and Pricing
If Kofax terminates this Agreement other than for the default of
Distributor, Distributor shall be eligible to receive support
and pricing as specified in this Agreement for a period of 60
days following the date on which the termination becomes
effective, to the extent such support and pricing are for the
purpose of consummating sales proposals which were in effect on
the effective date of termination. All orders subsequent to
termination, shall be on a prepaid basis.
8.6 Accrued Balances
Within 30 days after any termination of this Agreement,
Distributor must pay all outstanding account balances.
8.7 Remedies Not Limited
Neither the of this Agreement, nor the waiver of any right to
terminate under this Agreement, shall limit any other remedies
which Kofax may have for a default or breach by Distributor of
this Agreement or any provisions thereof.
11
<PAGE> 12
9. Warranty
Kofax warrants the Products in accordance with its standard
warranty terms for each particular product as set forth in
Appendix B. Distributor is authorized to pass this warranty
through to Distributor's customers.
This warranty period shall commence upon delivery of the
Products by Kofax to the Distributor and shall continue for
either the length of the warranty period plus three months
(shelf life) or the actual length of the warranty period
following delivery by Distributor to its end-user customer,
whichever occurs first.
10. Defective Products
Notwithstanding any other provision of this Agreement or of any
APPENDIX hereto, Distributor may return for full credit any and
all products found to be defective upon delivery, or within ten
(10) days thereafter, provided, however, that any such defective
Products are returned to Kofax, freight collect, within thirty
(30) days of the discovery of the defect. However, prior to any
Products being returned to Kofax, Distributor must obtain a
Return Material Authorization (RMA) Number from Kofax and Place
it on the outside of the carton containing the defective
Product.
10.1 In the event of such a return, Kofax shall provide Distributor
with a Return Material Authorization number, the location to
which Distributor shall return the Product or item, and the
method of transportation. In no event will Kofax accept any
returned part or Products which does not have a valid Return
Material Authorization number, nor will Kofax accept or pay for
any excess charges, (duties, freight, or taxes) which become due
in the event a returned item has been shipped in a manner not
designated by Kofax.
11. Limitation on Cause of Action
The Parties agree that any suit or other legal action or any
arbitration relating in any way to this Agreement or to Products
must be filed or officially commenced by party making a claim no
later that 2 years after the cause of the claim first
12. Confidentiality
If either party hereto receives from the other party written
information which is marked "Confidential" and/or "Proprietary,"
the receiving party agrees not to use such information except in
the performance of this Agreement, and to treat such information
in the same manner as it treats its own confidential
information. The obligation to keep information confidential
shall not apply to any such information that has been disclosed
in publicly available sources; is,
12
<PAGE> 13
through no fault of the party receiving the confidential
information, hereafter disclosed in a publicly available source;
is in the rightful possession of the party receiving the
confidential information without an obligation of
confidentiality; or is required to be disclosed by operation of
law. Except as otherwise provided herein, the obligation not to
disclose shall be for a period of one year after the termination
of this Agreement.
13. Compliance with Law
Distributor shall comply with all applicable Laws, statutes, and
regulations relating to the sale and distribution of Products,
and the performance of Distributor's duties and obligations
under this Agreement. In particular, Distributor agrees not to
sell any of the Products in any country or territory prohibited
by applicable U.S. laws, and agrees to obtain from its customers
representations that they will not resell, transfer, or assign
any of the Products to any such prohibited countries or
territories.
14. Patent/Copyright Indemnification
Kofax shall defend any suit or proceeding brought against
Purchaser based on a claim of a third party that the Product(s),
or any part thereof, furnished by Kofax constitutes an
infringement of any patent of the U.S., provided that Kofax is
notified promptly in writing and given Authority, information
and assistance (at Kofax's expense) for the defense of such a
suit or proceeding, and Kofax will pay all damages and costs
awarded against Purchaser. In case the Product(s) furnished by
Kofax, or any part thereof, is enjoined, Kofax shall, at its own
expense and option (i) procure for Purchaser the right to
continue using the Product(s), (ii) replace the same with
non-infringing Product(s) (iii) modify the Product(s) so it
becomes non-infringing, or (iv) grant the Purchaser 1 credit,
for such equipment in accordance with the then applicable Kofax
depreciation policy and accept its return. Kofax shall not be
liable to Purchaser hereunder if the patent infringement or
claim thereof is based upon the use of the Product in connection
with other Products not delivered by Kofax, or in a manner for
which the Kofax Product(s) was not designed, or where the
Product(s) was modified by or for the Purchaser in a manner to
become infringing.
IN NO EVENT SHALL KOFAX BE LIABLE TO DISTRIBUTOR UNDER THIS
PARAGRAPH FOR CONSEQUENTIAL OR SPECIAL DAMAGES EXCEPT WHERE A
THIRD PARTY OBTAINS SUCH DAMAGES AGAINST DISTRIBUTOR. EXCEPT AS
EXPRESSLY SET FORTH HEREIN, KOFAX SHALL HAVE NO OTHER LIABILITY
OR OBLIGATION TO DISTRIBUTOR WITH RESPECT TO PATENT OR COPYRIGHT
INFRINGEMENT MATTERS.
13
<PAGE> 14
15. General Indemnification
15.1 Kofax and Distributor each agrees to indemnify and hold the
other harmless from and against any and all claims, damages and
liabilities asserted by any person or entity resulting directly
from:
(i) Any breach by it, or by any of its employees or agents,
of this Agreement or any of its warranties,
representations, covenants or obligations as provided
for in this Agreement.
(ii) Any negligent act, affirmative act of omission to act
by it or any of its employees or agents.
Such indemnification shall include the payment of all
reasonable attorneys' fees and other costs incurred by
the party seeking indemnification in defending such
claims.
15.2 Notwithstanding anything to the contrary in this Agreement or
the Exhibits or Appendices hereto, in no event will either party
be liable to the other for (i) special, indirect or
consequential damages or (ii) any damages whatsoever resulting
from loss of use, data or profits, arising out of or in
connection with this Agreement, whether in an action of contract
or tort including negligence.
15.3 Arbitration
All disputes concerning the terms and conditions of this
Agreement and involving less than $25,000 shall be subject to
expedited binding arbitration outside of the American
Arbitration Association ("AAA") before any attorney or expert
who is knowledgeable and experienced in the data processing
equipment and services field and who is selected by mutual
agreement of the Parties. A Party shall commence arbitration by
DELIVERING written notice to the other party. Where the parties
cannot agree on an attorney as arbitrator or fail to act within
30 days after notice or a commencement of arbitration is
delivered, arbitration shall be by the AAA, subject to the rules
of the AAA then in effect. The AAA shall decide, as required, on
the number and identity of the arbitrators and the place of the
arbitration. Judgment upon the award rendered in any arbitration
may be entered in any court having jurisdiction of the matter.
15.4 Attorneys' Fees
If any arbitration, litigation, or other legal proceedings occur
between the parties relating to this Agreement, the prevailing
Party shall be entitled to recover (in addition to any other
relief awarded or granted) its reasonable costs and expenses,
including attorneys' fees, incurred in the proceeding.
14
<PAGE> 15
15.5 Notices
Unless otherwise expressly provided for, all notices, requests,
demands, consents or other communications required or pertaining
to this Agreement must be in writing and must be delivered
personally or sent by certified or registered mail (postage
prepaid and return receipt requested) to the other Party at the
address set forth below (or to any other address given by either
Party to the other Party in writing):
TO KOFAX: TO DISTRIBUTOR:
3 Jenner Street _______________________
Irvine, CA 92718 _______________________
Attention: Contracts Manager _______________________
In case of mailing, the effective date of delivery of any
notice, demand, or consent shall be considered to be 5 days
after proper mailing.
15.6 Waiver and Amendment
No waiver, amendment, or modification of this Agreement shall be
effective unless in writing and signed by the Party against whom
the waiver, amendment, or modification is sought to be enforced.
No failure or delay by either Party in exercising any right,
power, or remedy under this Agreement shall operate as a waiver
of the right, power, or remedy. No waiver of any term, condition
or default of this Agreement shall be construed as a waiver of
any other term, condition, or default.
15.7 Assignment
This Agreement is binding upon and insures to the benefit of the
successors and assigns of the Parties. However, Distributor may
not assign or transfer the rights or obligations granted to it
under this Agreement without the prior written consent of Kofax.
15.8 No Third Party Rights
This Agreement is not for the benefit of any third party and
shall not be deemed to grant any right or remedy to any third
party, whether or not referred to in this Agreement.
15
<PAGE> 16
15.9 Headings
The section and paragraph headings of this Agreement are
intended as a convenience only, and shall not affect the
interpretation of its provisions.
15.10 Singular and Plural Terms
Where the context of this Agreement requires, singular terms
shall be considered plural, and plural terms shall be considered
singular.
15.11 Severability
If any provision(s) of this Agreement is finally held by a court
or arbitration panel of competent jurisdiction to be unlawful,
the remaining provisions of this Agreement shall remain in full
force and effect to the extent that the intent of the parties
can be enforced.
15.12 Governing Law and Forum
Unless otherwise provided, the validity, construction, and
performance of this Agreement is governed by the laws of
California. Distributor agrees that this Agreement is considered
to be entered into in Orange County, California, and that all
obligations of Kofax under this Agreement are incurred in and
are to be performed in Orange County. The parties consent to
personal jurisdiction in Orange County with respect to any
arbitration or suit brought relating to this Agreement. The
Parties waive all objections to venue to the extent permitted by
law.
16. General Terms and Conditions
16.1 Relationship of the Parties
This Agreement does not constitute a partnership agreement, nor
does it create a Joint venture or agency relationship between
the Parties.
16.2 Survivorship
All obligations and duties hereunder which shall by their nature
extend beyond the expiration or termination of this Agreement,
shall survive and remain in effect beyond any expiration or
termination hereof.
16.3 Force Majeure
Neither party shall be responsible for any delay or failure in
performance of any part of this agreement or order to the extent
that such delay or failure is caused by fire, flood, explosion,
war, strike, embargo, government requirement action
16
<PAGE> 17
of civil or military authority, act of God act or omission of
carriers or the inability to obtain necessary labor, materials,
(or manufacturing facilities or any other similar causes beyond
its control. In the event of any such delay, the time of
performance that was delayed for such causes will be extended
for a period equal to the time lost by reason of the delay.
Kofax shall have the right to cancel any order placed or to
refuse or delay the shipment thereof for failure of Distributor
to promptly meet payments due Kofax or any other reasonable
requirements established by Kofax or for any acts or omissions
of Distributor which delays Kofax's performance.
16.4 Conflicting Terms
The Parties agree that the terms and conditions of this
Agreement shall prevail, notwithstanding the contrary or
additional terms, in any purchase order, sales acknowledgment,
confirmation or any other document issued by either Party
effecting the purchase and/or sale of Products.
16.5 Export Authorization
Regardless of any disclosure made by Distributor to Kofax of any
ultimate of the Products, Distributor will not export, re-export
or re-sell to any unauthorized end use either directly or
indirectly, any Product or system incorporating such Product
without first obtaining prior written authorization from the
U.S. Department of Commerce or any other Agency or Department of
the United States Government, as and if required.
16.6 Entire Agreement
This Agreement, including all appendices, constitutes the
complete and final Agreement between the Parties, and supersedes
all prior negotiations and agreements between the parties
concerning its subject matter.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement effective as of the date first above set forth.
KOFAX IMAGE PRODUCTS INC DISTRIBUTOR
BY: DAVID E. LAW BY: RICK MURPHY
----------------- -----------------
NAME:DAVID E. LAW NAME: RICK MURPHY
--------------- ---------------
TITLE: President TITLE: V.P. Sales
-------------- --------------
DATE: 7/31/90 DATE: 8/16/90
--------------- ---------------
17
<PAGE> 18
ADDENDUM TO DISTRIBUTOR AGREEMENT
Tech Data Corporation
This addendum is written to amend the Distributor Agreement dated March 1, 1993.
WHEREAS Kofax desires to appoint Tech Data as its non-exclusive distributor to
market its new NetScan Product within the territory defined as Canada, The
United States of America and its territories and possessions, and
WHEREAS Tech Data desires to sell the Kofax NetScan products within the
territory defined above,
Kofax hereby amends the Distribution Agreement to incorporate the NetScan
product into Tech Data's product line. The pricing of the product at it's
introduction is established as:
List Price [*]
Tech Data Discount [*]
All other terms and conditions of the said Agreement will remain unchanged.
KOFAX IMAGE PRODUCTS TECH DATA CORPORATION
/s/ /s/
- -------------------------------- -----------------------------------
Signature, Title Signature, Title
8-8-96 10/23/96
- -------------------------------- -----------------------------------
Date Date
* Such portions are filed under an application for confidential treatment.
<PAGE> 1
EXHIBIT 10.18
DISTRIBUTOR CONTRACT
BETWEEN
TECH DATA CORPORATION
AND
KOFAX IMAGE PRODUCT
CONFIDENTIAL TREATMENT
<PAGE> 2
DISTRIBUTOR AGREEMENT
THIS AGREEMENT, dated this 1st day of March, 1993 (the "Effective
Date"), is between TECH DATA CORPORATION, a Florida corporation ("Tech Data"),
and KOFAX IMAGE PRODUCTS ("KOFAX").
W I T N E S S E T H:
WHEREAS, Tech Data desires to purchase certain Products from KOFAX from
time to time: and
WHEREAS, KOFAX desires to sell certain Products to Tech Data in
accordance with the terms and conditions set forth in this Agreement; and
WHEREAS, KOFAX desires to appoint Tech Data as its non-exclusive
distributor to market Products within the territory defined below;
NOW, THEREFORE, in consideration of the mutual premises herein contained
and other good and valuable consideration, Tech Data and KOFAX hereby agree as
follows:
ARTICLE I. TERM OF AGREEMENT
1.1 Term of Agreement. During the term of this Agreement, KOFAX will provide
to Tech Data the Products set forth in Purchase Orders (as defined
herein) in accordance with the terms and conditions set forth in this
Agreement. The term of this Agreement shall commence on the Effective
Date and, unless terminated by either party as set forth in this
Agreement, shall remain in full force and effect for a term of one (1)
year, and may be renewed for successive one (1) year terms upon written
confirmation of both parties.
1.2 Definitions, The following definitions shall apply to this Agreement.
(a) "Applicable Specification" shall mean the functional
performance, operational and compatibility characteristics of a
Product agreed upon in writing by the parties or, in the absence
of an agreement, as described in applicable Documentation.
(b) "Documentation" shall mean user manuals, training materials,
product descriptions and specifications, technical manuals,
license agreements, supporting materials and other printed
information relating to the Products, whether distributed in
print, electronic, or video format in effect as of the date of
the applicable Purchase Order and incorporated therein by
reference.
(c) "Products" shall mean, individually or collectively as
appropriate, hardware, licensed software, Documentation,
developed Products, supplies, accessories, and other commodities
related to any of the foregoing, provided or to be provided by
KOFAX pursuant to this Agreement.
(d) "Standard Products" shall mean Products requiring no
changes, alterations, or additions, from those Products
customarily offered by KOFAX, described in brochures and by
exhibits.
<PAGE> 3
(e) "Customized Products" shall mean any Products KOFAX must
purchase requiring KOFAX to perform changes, alterations,
assembly, additions or special packaging prior to shipping to
Tech Data, as described in brochures and by exhibits.
(f) "Territory" shall mean the United States of America and its
territories and possessions.
(g) "Customers" of Tech Data shall include dealers, resellers,
commercial Customers, value added resellers and other similar
Customers, but shall not include End Users unless specifically
set forth.
(h) "End Users" shall mean final retail purchasers or licensees
who have acquired Products for their own use and not for resale,
remarketing or redistribution, unless specifically set forth in
a separate agreement.
(i) "Services" means any warranty, maintenance, advertising,
marketing or technical support and any other services performed
or to be performed by KOFAX.
1.3 Appointment as Distributor. KOFAX hereby grants to Tech Data the
non-exclusive right to distribute Products during the term of this
agreement within the Territory as herein defined. KOFAX reserves the
right to appoint other authorized distributors. Tech Data will use its
best efforts to promote sales of the Products.
ARTICLE II. PURCHASE ORDERS
2.1 Preparation of Purchase Orders. From time to time or at Tech Data's,
request KOFAX shall inform Tech Data of Products available from KOFAX
including, but not limited to, replacement Products, new releases,
enhancements or versions of existing Products. KOFAX shall use best
efforts to notify Tech Data at least thirty (30) days prior to the date
any new Product is to be introduced and shall make such Product
available to Tech Data for distribution no later than the date it is
first introduced in the market place.
2.2 Issuance and Acceptance of Purchase Orders. Tech Data may purchase and
KOFAX shall sell to Tech Data, Products as described below:
(a) Tech Data may issue to KOFAX one or more purchase orders
identifying the Products Tech Data desires to purchase from
KOFAX. Each Purchase Order may include other terms and
conditions which are consistent with the terms and conditions of
this Agreement, or which are necessary to place a Purchase
Order, such as billing and shipping information, required
delivery dates, delivery locations, and the purchase price or
charges for Products, including any discounts or adjustments for
special marketing programs. Purchase orders will be placed by
Tech Data by fax or electronically transferred and followed by a
written confirmation within five (5) working days to avoid
cancellation of the purchase order.
(b) A Purchase Order shall be deemed accepted by KOFAX unless
KOFAX notifies Tech Data in writing within five (5) days after
receiving the Purchase Order that KOFAX does not accept the
Purchase Order.
<PAGE> 4
(c) KOFAX shall accept Purchase Orders from Tech Data for
additional Products which Tech Data is contractually obligated
to furnish to its Customers and does not have in its inventory
upon the termination of this Agreement: provided Tech Data
notifies KOFAX of any and all such transactions in writing
within sixty (60) days of the termination date.
(d) This agreement shall not obligate Tech Data to purchase any
Products or services except as specifically set forth in a
written purchase order
2.3 Purchase Order Alterations or Cancellations. No less than fifteen (15)
days prior to shipment of Standard Products, KOFAX shall accept an
alteration or cancellation to a Purchase Order in order to: (i) change a
location for delivery, (ii) modify the quantity or type of Products to
be delivered or (iii) correct typographical or clerical errors. Tech
Data may not alter or cancel any Purchase Order for Customized Products
after such time as the Products have been altered to a point where such
Products are no longer capable of resale by KOFAX after reasonable
efforts.
2.4 Product Shortages. If for any reason KOFAX's production is not on
schedule, KOFAX agrees to allocate Product to Tech Data's orders based
upon a percentage equal to the same percentage as KOFAX's like Customers
purchasing like volume of same Products.
ARTICLE III. DELIVERY AND
ACCEPTANCE OF PRODUCTS
3.1 Subsidiaries. KOFAX understands and acknowledges that Tech Data may
obtain Products in accordance with this Agreement for the benefit of
subsidiaries of Tech Data. Upon prior approval from KOFAX subsidiaries
of Tech Data shall be entitled to obtain Products directly from KOFAX
pursuant to this Agreement.
3.2 Acceptance of Products. Tech Data shall have the ability to return for
credit products which have boxes that are or become damaged, unless such
damage was caused by Tech Data or for which damages Tech Data can be
reimbursed by their insurance carrier. Tech Data shall request such RMA
prior to returning any Products and KOFAX will issue said (RMA) to Tech
Data within forty-eight (48) hours of Tech Data's request, if approved
and KOFAX shall not unreasonably withhold or delay; however, if no
response is received or if KOFAX withhold the RMA without just cause for
more than five (5) business days KOFAX will then accept returned
Products absent an RMA. An offsetting purchase order for the same
Product being returned will be placed. In addition, KOFAX will supply to
Tech Data, at no charge, any and all material(s) missing from original
packaging.
Tech Data shall have the ability to return for credit products which
have boxes that are or become damaged, unless such damage was caused by
Tech Data or for which damages Tech Data can be reimbursed by their
insurance carrier. An offsetting purchase order will be placed for all
bad box returns. In addition, KOFAX will supply to Tech Data, at no
charge, any and all material(s) missing from original packaging.
3.3 Defective Products. In the event any Products are received in a
defective condition or not in accordance with KOFAX's published
specifications or the documentation relating to such Products, Tech Data
may return the Products for full credit. Products shall be
<PAGE> 5
deemed defective if the Product, or any portion of the Product, fails to
operate properly on initial "burn in", boot, or use as applicable. Tech
Data shall have the right to return any such Products that are returned
to Tech Data from its Customers or End Users within sixty (60) days of
the Products' initial delivery date to the end-user.
3.4 Transportation of Products. KOFAX shall deliver the Products to Tech
Data at the location shown and on the delivery date set forth in the
applicable Purchase Order or as otherwise agreed upon by the parties.
Charges for transportation of the Products shall be paid by Tech Data.
KOFAX shall use only those common carriers preapproved by Tech Data or
listed in Tech Data's published routing instructions, unless prior
written approval of Tech Data is received.
3.5 Title and Risk of Loss. FOB Irvine, CA. Title to Products shall pass to
Tech Data at the time that the Products are delivered to the common
carrier. All risk of loss or damage to the Products shall be borne by
KOFAX until delivery of such Products to the common carrier.
3.6 Resale of Products by Tech Data. During the term of this Agreement, Tech
Data may market, promote, distribute and resell Products to Customers of
Tech Data, either directly or through its subsidiaries, in accordance
with the following terms and conditions:
(a) KOFAX shall extend to Tech Data and each Customer of Tech
Data the same warranties and indemnifications, with respect to
Products purchased and resold hereunder as KOFAX extends to its
end-user Customers. The term of warranties and indemnities
extended by KOFAX to an End User shall commence upon delivery of
the Product to the End User.
(b) KOFAX shall make available at no charge to Tech Data all
training, technical support and other services related to the
Products that are currently offered or that may be offered by
KOFAX. KOFAX also agrees to provide Tech Data a dedicated
telephone support representative at no charge during KOFAX's
normal business hours (6:00 am to 5:30pm PST).
(c) KOFAX shall provide at no charge to Tech Data sales
training, marketing support advertising materials and technical
training in connection with the resale of Products as are
currently offered or that may be offered by KOFAX.
(d) Tech Data is hereby authorized to use trademarks and trade
names of KOFAX and third parties used in connection with the
Products, advertising, promoting or distributing the Products.
Tech Data recognizes KOFAX or other third parties may have
rights or ownership of certain trademarks, trade names and
patents associated with the Products, Tech Data will act
consistently with such rights, and Tech Data shall comply with
any reasonable, written guidelines when provided by KOFAX or
third parties relating to such trademark or trade name usage.
Tech Data will notify KOFAX of any infringement of which Tech
Data has actual knowledge. Tech Data shall discontinue use of
KOFAX's trademarks or trade names upon termination of this
agreement, except as may be needed to sell or liquidate any
final inventories of Product.
(e) KOFAX shall clearly mark each unit package with the serial
number, product description and machine readable bar code
(employing ISBN or other industry standard bar code) approved in
writing by Tech Data.
<PAGE> 6
3.7 Inventory Adjustment. Thirty (30) days after the end of each March, June
September and December during the term of this Agreement, Tech Data may
return Products to KOFAX for inventory adjustment, only after KOFAX has
given a Return Material Authorization (RMA) number to Tech Data. Tech
Data may only return Products which have been shipped to Tech Data
within the prior six (6) months. Tech Data may return any quantity of
Products to KOFAX for credit provided the total credit shall not exceed
ten percent (10%) of the net sales dollars invoiced by KOFAX to Tech
Data during the said six (6) month period. The credit to be issued in
respect of each such Product return shall be the actual net invoiced
charge for same. All Products returned in accordance with this provision
must be returned freight pre-paid and must be unused, and in their
original containers. Tech Data will place an order of equal value to
offset the credit issued at the time the RMA is requested. Any
demonstration unit or non-standard special order Products purchased by
Tech Data as "non-cancelable/non-returnable" do not qualify for stock
rotation.
In addition, Tech Data shall have the right to return for full credit,
without limitation as to the dollar amount, all Products that become
obsolete or KOFAX discontinues or are removed from KOFAX's current price
list; provided Tech Data returns such Products within ninety (90) days
after Tech Data receives written notice that such Products are obsolete,
discontinued or are removed from KOFAX's price list.
3.8 Time of Performance. rime is hereby expressly made of the essence with
respect to each and every term and provision of this agreement.
3.9 Quality Control. KOFAX shall test and inspect Products prior to
shipment. KOFAX's standard inspection records, and a report setting
forth product defect percentage rates are to be maintained by KOFAX and
made available to Tech Data upon request with reasonable notice or, at
the option of Tech Data, on a quarterly basis.
ARTICLE IV. WARRANTIES,
INDEMNITIES AND LIABILITIES
4.1 Warranty. KOFAX hereby represents and warrants that it has not entered
into any agreements or commitments which are inconsistent with or in
conflict with the rights granted to Tech Data herein; the Products shall
be free and clear of all liens and encumbrances; Tech Data and its
Customers and end-users shall be entitled to use the Products without
disturbance; the Products will be free from latent and patent defects in
design, materials, and workmanship for a period of one (1) year from
date of delivery to the end-user, the Products have been listed with
Underwriters' Laboratories whenever such listing is available; the
Products meet all FCC requirements; the Products do and will conform to
all codes, Laws or regulations, are merchantable and fit for their
intended user, and the Products conform in all respects to the Product
warranties. KOFAX shall supply Tech Data, at no additional charge, all
services, parts or replacement Products necessary for KOFAX to comply
with its Product warranties. KOFAX agrees that Tech Data shall be
entitled to pass through to Customers of Tech Data and End Users of the
Products all warranties granted by KOFAX. KOFAX represents that the
Product warranties shall also include those set forth in literature,
specifications, documentation, advertising and printed material
distributed by KOFAX. KOFAX shall indemnify and hold Tech Data, its
subsidiaries, Customers and end-users and their respective successors,
officers, directors, employees and agents harmless from and against all
actions, claims, losses, damages, liabilities, awards, costs and
expenses (including a reasonable attorney's fee) resulting from or
arising out of any breach or claimed breach of the foregoing warranties.
<PAGE> 7
4.2 Proprietary Rights Indemnification. KOFAX shall defend any suit or
proceeding brought against Tech Data based on a claim of a third party
that the Product(s), or any part thereof, furnished by KOFAX constitutes
an infringement of any patent, copyright, trademark of the US or other
third party intellectual right, provided that KOFAX is notified promptly
in writing and given Authority, information and assistance (at KOFAX's
expense) for the defense of such a suit or proceeding, and KOFAX will
pay all damages and costs, including attorneys fees in connection
therewith. In case the Product(s) furnished by KOFAX, or any part
thereof, is enjoined, KOFAX shall, at its expense and option (i) procure
for Tech Data the right to continue using the Product(s); (ii) replace
the same with non-infringing Product(s); (iii) modify the Product(s) so
it becomes non-infringing; or (iv) grant Tech Data credit for such
equipment at the purchase price and accept its return. KOFAX shall not
be liable to Tech Data hereunder if the patent infringement or claim
hereof is based upon the use of the Product in connection with other
Products not reasonably intended for use with the Product, or in a
manner for which the KOFAX Product(s) was not designed, or where the
Product(s) was modified by or for Tech Data in a manner to become
infringing.
IN NO EVENT SHALL KOFAX BE LIABLE TO TECH DATA UNDER THIS PARAGRAPH FOR
CONSEQUENTIAL OR SPECIAL DAMAGES EXCEPT WHERE A THIRD PARTY OBTAINS SUCH
DAMAGES AGAINST TECH DATA. EXCEPT AS EXPRESSLY SET FORTH HEREIN, KOFAX
SHALL HAVE NO LIABILITY OR OBLIGATION TO TECH DATA WITH RESPECT TO
PATENT OR COPYRIGHT INFRINGEMENT MATTERS.
4.3 Cross Indemnification. In the event any act or omission of either party
or its employees, servants, agents or representatives causes or results
in (i) loss, damage to or destruction of property of the other party or
third parties, and/or (ii) death or injury to persons including, but not
limited to, employees or invitees of either party, then such party shall
indemnify, defend and hold the other party harmless from and against any
and all claims, actions, damages, demands, liabilities, costs and
expenses, including reasonable attorneys' fees and expenses, resulting
therefrom. The indemnifying party shall pay or reimburse the other party
promptly for all such loss, damage, destruction, death or injury.
4.4 Insurance.
(a) The parties shall be responsible for providing Workman's
Compensation insurance on its employees,
(b) Without in any way limiting KOFAX's indemnification obligations as
set forth in this Agreement, KOFAX shall maintain Comprehensive General
Liability (Bodily Injury and Property Damage) Insurance in such amounts
as is satisfactory to Tech Data, including the following supplementary
coverage:
(1) Personal Injury Liability with "employee" and
contractual exclusions deleted;
(2) Product and Completed Operations Liability;
(3) KOFAX shall provide certificates of all coverage to Tech
Data naming Tech Data as additional insured and
requiring thirty (30) days prior notice to Tech Data
before termination of any such insurance.
<PAGE> 8
4.5 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PURSUANT TO THIS AGREEMENT FOR AMOUNTS REPRESENTING LOSS OF PROFITS,
LOSS OF BUSINESS OR INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES OF THE
OTHER PARTY.
4.6 Unauthorized Representations. Tech Data shall have no authority to alter
or extend any of the warranties of KOFAX expressly contained or referred
to in this Agreement without prior approval of KOFAX.
4.7 Tech Data or Tech Data's Customer shall bear all costs of shipping and
risk of loss of in-warranty Products to KOFAX's location KOFAX shall
bear the costs of shipping and risk of loss of in-warranty Products back
to Tech Data or Tech Data's Customer.
4.8 Continuing Availability of Parts. KOFAX agrees to offer for sale to Tech
Data for the purpose of warranty or resale to its Customers during the
term of this Agreement for a period of five (5) years after the
expiration of this Agreement, functionally equivalent maintenance,
replacement and repair parts for all Products sold to Tech Data. If
KOFAX fails to supply such parts, then such inability shall be
considered noncompliance with this section, and in addition to whatever
other rights and remedies Tech Data may have at law or in equity, Tech
Data shall be entitled to require KOFAX to provide Tech Data with the
technical information or any other rights required on a non-exclusive
basis, so that Tech Data can have such parts manufactured or can obtain
such parts from other sources.
4.9 Disclaimer of Warranties. KOFAX has made expressed warranties in this
Agreement and in documentation, promotional and advertising materials.
EXCEPT AS SET FORTH HEREIN OR THEREIN, KOFAX DISCLAIMS ALL WARRANTIES
WITH REGARD TO THE PRODUCTS.
ARTICLE V. PAYMENT TO KOFAX
5.1 Charges, Prices and Fees for Products. Charges, prices, quantities and
discounts, if any, for Products shall be determined as set forth in
Exhibit A, or as otherwise agreed upon by the parties, and may be
confirmed at the time or order. In no event shall charges exceed KOFAX's
then current established charges. KOFAX shall have the right to increase
prices from time to time, upon written notice to Tech Data not less than
thirty (30) days prior to the effective date of such increase. All
orders placed prior to the effective date of the increase, for shipment
within thirty (30) days after the effective date, shall be at the old
price, Tech Data shall not be bound by any of KOFAX's suggested prices.
5.2 Most Favored Pricing and Terms. KOFAX represents that the prices charged
and the terms offered to Tech Data are and will be at least as low as
those charged or offered by KOFAX to any of its other domestic
distributors. If KOFAX offers price discounts, promotional discounts or
other special prices to its other distributors, Tech Data shall also be
entitled to participate and receive notice of the same no later than
other distributors.
5.3 Payment. Except as otherwise set forth herein, any undisputed sum due to
KOFAX pursuant to this Agreement shall be payable as follows: net thirty
(30) days after the invoice receipt. KOFAX shall invoice Tech Data no
earlier than the applicable shipping date for the Products covered by
such invoice. The due date for payment shall be extended during any time
the parties have a bona fide dispute concerning such payment.
<PAGE> 9
5.4 Taxes. KOFAX shall directly reimburse Tech Data for all taxes,
assessments, permits and fees, however designated which are levied upon
this Agreement or the Products, excluding franchise taxes, sales or
other use taxes and taxes based upon Tech Data's income.
5.5 Price Protection. KOFAX shall grant to Tech Data a retroactive price
credit for the full amount of any KOFAX price decrease on all Products
on order, in transit and in its inventory on the effective date of such
price decrease. Tech Data shall, within thirty (30) days after receiving
written notice of the effective date of the price decrease, provide a
list of all Products for which it claims a credit. KOFAX shall have the
right to a reasonable audit at KOFAX's expense. All orders scheduled for
shipment or in transit to Tech Data at the time of notice of the price
decrease shall be adjusted to the decreased price.
5.6 Invoices. A "correct" invoice shall contain (i) KOFAX's name and invoice
date, (ii) a reference to this Agreement, the Purchase Order or other
authorizing document, (iii) separate descriptions, unit prices and
quantities of the Products actually delivered, (iv) credits (if
applicable), (v) shipping charges (vi) name (where applicable), title,
phone number and complete mailing address of responsible official to
whom payment is to be sent, and (vii) other substantiating documentation
or information as may reasonably be required by Tech Data from time to
time.
5.7 Advertising Credit. KOFAX offers a two percent [*] co-op program and may
offer additional advertising credits, promotional programs or incentives
to Tech Data as it offers its other distributors, then Tech Data shall
have the right at Tech Data's option, to participate in such programs.
KOFAX shall attach copy of its co-op program hereto.
5.8 KOFAX Reports. KOFAX shall, if requested, render monthly reports to Tech
Data setting forth the separate Products, dollars invoiced for each
Product, and total dollars invoiced to Tech Data for the month, and such
other information as Tech Data may reasonably request
5.9 Tech Data Reports. Tech Data shall, if requested, render monthly sales
out reports on diskette, in ASCII Comma Delimited Format. Information
provided will include: Month and year sales activity occurred, internal
product number (assigned by Tech Data), written description, State and
zip-code of Resellers location, unit cost (distributor's cost at
quantity 1), quantity and extended cost (cost times quantity). A monthly
inventory report, will be provided on a paper format once a month. The
reports will be delivered to the KOFAX at different times in the month.
ARTICLE VI. TERMINATION
6.1 Termination. Either party may terminate this agreement, with or without
cause, upon giving the other party sixty (60) days prior written notice.
In the event that either party materially or repeatedly defaults in the
performance of any of its duties or obligations set forth in this
Agreement, and such default is not substantially cured within thirty
(30) days after written notice is given to the defaulting party
specifying the default, then the party not in default may, by giving
written notice thereof to the defaulting party, terminate this Agreement
or the applicable Purchase Order relating to such default as of the date
specified in such notice of termination.
- ----------
* Confidential Portions omitted and filed separately with the Commission.
<PAGE> 10
6.2 Termination for Insolvency or Bankruptcy. Either party may immediately
terminate this Agreement and any Purchase Order by giving written notice
to the other party in the event of (i) the liquidation or insolvency of
the other party, (ii) the appointment of a receiver or similar officer
for the other party, (iii) an assignment by the other party for the
benefit of all or substantially all of its creditors, (iv) entry by the
other party into an agreement for the composition, extension, or
readjustment of all or substantially all of its obligations, or (v) the
filing of a meritorious petition in bankruptcy by or against the other
party under any bankruptcy or debtors' law for its relief or
reorganization.
6.3 Rights Upon Termination. Termination of any Purchase Order or this
Agreement shall not affect KOFAX's right to be paid for undisputed
invoices for Products already shipped. The termination of this Agreement
shall not affect any of KOFAX's warranties, indemnifications or
obligations relating to returns, credits or any other matters set forth
in this agreement that are to survive termination in order to carry out
their intended purpose, all of which shall survive this Agreement. Upon
termination of this Agreement, Tech Data shall discontinue holding
itself out as a distributor of KOFAX's Products. The expiration of the
term of this Agreement shall not affect the obligations of either party
to the other party pursuant to any Purchase Order previously forwarded
to KOFAX.
6.4 Repurchase of Products Upon Termination. In the event Tech Data
terminates this Agreement for cause or KOFAX terminates this Agreement,
KOFAX shall repurchase all the Products in Tech Data's inventory at the
original actual net invoice purchase price less any prior credits
granted by KOFAX to Tech Data; provided that the Products have been
unused, and are in their original factory sealed packages and factory
shipped condition.
In the event Tech Data terminates this Agreement without cause, KOFAX
shall have the option to repurchase all the Product in Tech Data's
inventory at the original actual net invoice purchase prices, less any
prior credits granted by KOFAX to Tech Data; provided that the Products
have been unused and are in their original factory sealed packages and
factory shipped condition.
ARTICLE VII. MISCELLANEOUS
7.1 Binding Nature, Assignment, and Subcontracting. This Agreement shall be
binding on the parties and their respective successors and assigns, but
neither party shall have the power to assign this Agreement without the
prior written consent of the other party.
7.2 Counterparts. This Agreement may be executed in several counterparts,
all of which taken together shall constitute one single agreement
between the parties.
7.3 Headings. The Article and Section headings used in this Agreement are
for reference and convenience only and shall not enter into the
interpretation hereof.
7.4 Relationship of Parties. Tech Data is performing pursuant to this
Agreement only as an independent contractor. Nothing set forth in this
Agreement shall be construed to create the relationship of principal and
agent between Tech Data and KOFAX. Neither party shall act or represent
itself, directly or by implication, as an agent of the other party.
7.5 Confidentiality. Each party acknowledges that in the course of
performance of its obligations pursuant to this Agreement, it may obtain
certain confidential and/or proprietary information. Each party hereby
agrees that all such information communicated to it by the other party,
its subsidiaries, or Customers, whether before or
<PAGE> 11
after the effective date, shall be and was received in strict
confidence, shall be used only for purposes of this Agreement, and shall
not be disclosed without the prior written consent of the other party,
except as may be necessary by reason of legal, accounting or regulatory
requirements beyond either party's reasonable control. The provisions of
this Section shall survive the term or termination of this Agreement for
any reason.
7.6 Arbitration. Any disputes arising under this Agreement shall be
submitted to arbitration in accordance with such rules as the parties
jointly agree. If the parties are unable to agree on arbitration
procedures, arbitration shall be conducted in Pinellas County, Florida
in accordance with the rules of the American Arbitration Association.
Any such award shall be final and binding upon both parties.
7.7 Notices. Wherever one party is required or permitted to give notice to
the other pursuant to this Agreement, such notice shall be deemed given
when delivered in hand, by telex or cable, or when mailed by registered
or certified mail, return receipt requested, postage prepaid, and
addressed as follows:
IN THE CASE OF KOFAX: IN THE CASE OF TECH DATA:
--------------------- -------------------------
Kofax Image Products Tech Data Corporation
3 Jenner Street 5350 Tech Data Drive
Irvine, CA 92718 Clearwater, FI 34620
Attn: Distribution Sales Manager Attn: Jennifer M. Dougan
Director of Marketing Operations
cc: Debi A. Schwatka
Contracts Administrator
Either party may from time to time change its address for notification
purposes by giving the other party written notice of the new address and
the date upon which it will become effective.
7.8 Force Majeure. The term "Force Majeure" shall be defined to include
fires or other casualties or accidents, acts of God, severe weather
conditions, strikes or Labor disputes, war or other violence, or any
law, order, proclamation, regulation, ordinance, demand or requirement
of any governmental agency.
(a) A party whose performance is prevented, restricted or
interfered with by reason of a Force Majeure condition shall be
excused from such performance to the extent of such Force
Majeure condition so long as such party provides the other party
with prompt written notice describing the Force Majeure
condition immediately continues performance whenever and to the
extent such causes are removed.
(b) If, due to a Force Majeure condition, the scheduled time of
delivery or performance is or will be delayed for more than
ninety (90) days after the scheduled date, the party not relying
upon the Force Majeure condition may terminate, without
liability to the other party, any Purchase Order or portion
thereof covering the delayed Products.
7.9 Return Material Authorization Numbers. When a Return Material
Authorization Number (RMA) is required by KOFAX for returning Products,
Tech Data shall request such RMA prior to returning any Products and
KOFAX will issue said (RMA) to Tech Data within forty-eight (48) hours
of Tech Data's request; however, if no response is received or if
<PAGE> 12
KOFAX withhold the RMA without just cause for more than five (5)
business days KOFAX will then accept returned Products absent an RMA.
The net purchase price, minus any adjustments of such Products returned
to KOFAX shall be credited to Tech Data's account.
7.10 Credits to Tech Data. In the event any provisions of this Agreement or
any other agreement between Tech Data and KOFAX require that KOFAX grant
credits to Tech Data's account, and such credits are not received within
thirty (30) days then, all such credits shall become effective
immediately upon notice to KOFAX. In such event, Tech Data shall be
entitled to deduct any such credits from the next monies owed to KOFAX.
In the event credits exceed any balances owed by Tech Data to KOFAX,
then KOFAX shall issue a check payable to Tech Data within ten (10) days
of such notice.
7.11 Severability. If, but only to the extent that, any provision of this
Agreement is declared or found to be illegal, unenforceable or void,
then both parties shall be relieved of all obligations arising under
such provision, it being the intent and agreement of the parties that
this Agreement shall be deemed amended by modifying such provision, to
the extent necessary to make it legal and enforceable while preserving
its intent.
7.12 Waiver. A waiver by either of the parties of any covenants, conditions
or agreements to be performed by the other or any breach thereof shall
not be construed to be a waiver of any succeeding breach thereof or of
any other covenant, condition or agreement herein contained.
7.13 Remedies. All remedies set forth in this Agreement shall be cumulative
and in addition to and not in lieu of any other remedies available to
either party at law, in equity or otherwise, and may be enforced
concurrently or from time to time.
7.14 Survival of Terms. Termination or expiration of this Agreement for any
reason shall not release either party from any liabilities or
obligations set forth in this Agreement which (i) the parties have
expressly agreed shall survive any such termination or expiration, or
(ii) remain to be performed or by their nature would be intended to be
applicable following any such termination or expiration.
7.15 Non-exclusive Market and Purchase Rights. It is expressly understood and
agreed that this Agreement does not grant to KOFAX or Tech Data an
exclusive right to purchase or sell Products and shall not prevent
either party from developing or acquiring other KOFAX's or Customers or
competing Products.
7.16 Specifications and Drawing. KOFAX agrees to provide upon Tech Data's
request, at no charge to Tech Data, quantities as requested by Tech Data
of the following: (1) the specifications, (2) published user
instructions, manuals and other training materials, and (3) current
manuals covering installation, operation and complete maintenance of the
Products. Tech Data shall have the right to copy or reproduce the
foregoing materials for use in connection with Tech Data's use or sale
of the Products.
7.17 Entire Agreement. This Agreement, including any Exhibits and documents
referred to in this Agreement or attached hereto, constitutes the entire
and exclusive statement of Agreement between the parties with respect to
its subject matter and there are no oral or written representations,
understandings or agreements relating to this Agreement which are not
fully expressed herein.
7.18 Governing Law. This Agreement shall have Florida as its situs and shall
be governed by and construed in accordance with the laws of the State of
Florida.
<PAGE> 13
7.19 Software Licenses. Whenever the Products described in this Agreement
shall include software licenses, KOFAX hereby grants to Tech Data a
non-exclusive license to market, demonstrate and distribute the software
to Customers of Tech Data. Tech Data agrees to comply with KOFAX's
reasonable software license agreements, and agrees to use reasonable
efforts to protect KOFAX's software, including using reasonable efforts
to avoid allowing Customers, individuals, or employees to make any
unauthorized copies of KOFAX's licensed software; to modify, disassemble
or decompile any software; to remove, obscure or after any notice of
patent, trademark, copyright or trade name; or authorize any person to
do anything that Tech Data is prohibited from doing under this
Agreement. Provided, however, KOFAX shall provide Tech Data with copies
of appropriate software and documentation, at no charge, for the purpose
of effectively demonstrating equipment to Customers. This demonstration
software shall be updated as appropriate to insure that current software
is available for sales demonstration. Tech Data acknowledges that no
title or ownership of the proprietary rights to any software is
transferred by virtue of this Agreement. Tech Data will use reasonable
efforts to protect KOFAX's rights under this section but Tech Data is
not authorized and shall not be required to instigate legal action on
behalf of KOFAX or its suppliers against third parties for infringement.
Tech Data will notify KOFAX of any infringement of which it has actual
knowledge.
7.20 International Business. KOFAX acknowledges that Tech Data may desire to
obtain Products or Systems for use in countries outside the United
States and its territories. The parties acknowledge that in such case it
may be necessary to enter into additional agreements between KOFAX and
Tech Data and/or the respective subsidiaries, agents, distributors or
subsidiaries authorized to conduct business in such countries or to
negotiate further terms and conditions to provide for such right. The
parties intend that any further agreements or terms and conditions will
be consistent with and based upon the applicable terms and conditions of
this Agreement, subject, however, to requirements of local law and local
business practice. All Products obtained pursuant to this Section shall
be deemed for purposes of calculating accumulated purchases and any
discounts set forth in this Agreement, to have been obtained pursuant to
this Agreement.
IN WITNESS WHEREOF, the parties have each caused this Agreement to be
signed and delivered by its duly authorized officer or representative as of the
Effective Date.
KOFAX IMAGE PRODUCTS TECH DATA CORPORATION
By: /s/ RICK MURPHY By: /s/ PEGGY K. CALDWELL
------------------------- ---------------------------
Printed Name: RICK MURPHY Printed Name: PEGGY K. CALDWELL
Title: Vice President, Sales Title: Senior Vice President
Marketing
Date: Date: 3/1/93
<PAGE> 14
MODIFICATION AGREEMENT
This Modification Agreement is effective as of the 24th day of September, 1996
(the "Effective Date") is between Tech Data Corporation, a Florida corporation
("Tech Data") and Kofax Image Products, a Delaware corporation ("Kofax").
RECITALS
A. Tech Data and Kofax entered into a Distributor Agreement, dated March 1,
1993, (the "Original Agreement") pursuant to which Tech Data acts as a
distributor of Kofax's Products.
B. Tech Data and Kofax desire to modify certain terms of the Original
Agreement in accordance with this Modification Agreement. The Original
Agreement as modified by this Modification Agreement is hereinafter
referred to as the "Agreement."
NOW THEREFORE, in consideration of mutual promises herein contained and other
good and valuable consideration, Tech Data and Kofax hereby agree as follows:
1. Modification. The Original Agreement is hereby modified and amended as stated
in this section 1.
a. Section 1.1 of the Original Agreement is hereby revised in its
entirety to read as follows:
1.1 Term of the Agreement. The term of this Agreement shall
automatically renew for successive one (1) year terms unless prior
written notification of termination is delivered by one of the parties
to the other in accordance with the notice provision of this Agreement.
b. Section 2.3 of the Original Agreement is hereby revised in its
entirety to read as follows:
2.3 Purchase Order Alterations or Cancellations, No less than 5 working
days prior to shipment of Products, Kofax shall accept alterations or
cancellation to a purchase order in order to: (i) change a location for
delivery, (ii) modify the quantity or type of Products to be delivered
or (iii) correct typographical or clerical errors.
c. Section 3.2 of the Original Agreement is hereby revised in its
entirety to read as follows:
3.2 Acceptance of Products. Tech Data shall, after a reasonable time to
inspect each shipment, accept Product (the "Acceptance Date") if the
Products and all necessary documentation delivered to Tech Data are in
accordance with the purchase order. Any Products not ordered or not
otherwise in accordance with the purchase order, (e.g. mis-shipments,
overshipments) may be returned to Kofax at Kofax's expense (including
without limitation costs of shipment or storage). Tech Data shall not be
required to accept partial shipment unless Tech Data agrees prior to
shipment.
In addition, Tech Data shall return for credit Products which have boxes
that are or become damaged. Kofax will supply to Tech Data, at no
charge, any and all material(s) which are missing in the original
Product package. Tech Data shall provide an offsetting purchase order
for such bad box returns.
d. Section 3.7 of the Original Agreement is hereby revised in its
entirety to read as follows:
3.7 Inventory Adjustment. In the first month of each calendar quarter,
Kofax agrees to accept return of overstocked Products, provided such
returns shall not exceed the value of fifteen percent (15%) of the prior
quarter's purchases. Shipments of Product being returned shall be new,
unused and in sealed cartons. Kofax shall credit Tech Data's account in
the amount of the price paid by Tech Data therefor less any price
protection credits but not including any early payment or prepayment
discounts (the "Return Credit").
<PAGE> 15
In addition, Tech Data shall have the right to return for full credit,
without limitation as to the dollar amount, all Products that become
obsolete or Kofax discontinues or are removed from Kofax's current price
list; provided Tech Data returns such Products within ninety (90) days
after Tech Data receives written notice from Kofax that such Products
are obsolete, superseded by a newer version, discontinued or are removed
from Kofax price list.
e. Section 5.3 of the Original Agreement is hereby revised in its
entirety to read as follows:
5.3 Payment. Except as otherwise set forth in this Agreement, any
undisputed sum due to Kofax pursuant to this Agreement shall be payable
net forty-five (45) days after the invoice date. Kofax shall invoice
Tech Data no earlier than the applicable shipping date for the Products
covered by such invoice. Products which are shipped from outside the
United States, shall not be invoiced to Tech Data prior to the Products
being placed on a common carrier within the United States for final
delivery to Tech Data. The due date for payment shall be extended during
any time the parties have a bona fide dispute concerning such payment.
f. Section 5.9 of the Original Agreement is hereby revised in its
entirety to read as follow:
5.9 Tech Data Reports. Tech Data shall, if requested, render monthly
sales out reports on diskette, in ASCII Comma Delimited Format.
Information provided will include: Month and year sales activity
occurred, internal product number (assigned by Tech Data), written
description, Customer name and zip code, unit cost (distributor's cost
at quantity 1), quantity and extended cost (cost times quantity). Kofax
agrees that the Customer names provided by Tech Data are for purposes of
commission reporting only, will be kept confidential by Kofax, and will
not be used in any other manner. A monthly inventory report will be
provided on a paper format.
g. Section 6.4 of the Original Agreement is hereby revised in its
entirety to read as follows:
6.4 Repurchase of Products Upon Termination or Expiration. Upon the
effective date of termination or expiration of this Agreement for any
reason, Kofax agrees to repurchase all Products in Tech Data's inventory
or which are returned to Tech Data within sixty (60) days following the
effective date of termination or expiration. Kofax will repurchase the
Products at the original purchase price; less any deductions for price
protection. The repurchase price shall not be reduced by any deductions
or offsets for early pay or prepay discounts. Such returns shall not
reduce or offset any co-op payments or obligations owed to Tech Data.
Tech Data shall submit to Kofax, within sixty-five (65) days after the
termination or expiration date, the quantity of Product that Tech Data
will be returning to Kofax for repurchase. Kofax will issue a Return
Material Authorization (RMA) to Tech Data for all such Products;
provided, however, that Kofax shall accept returned Products in
accordance with this Section absent an RMA if Kofax fails to issue said
RMA within five (5) business days of Tech Data's request. Kofax shall
credit any outstanding balances owed to Tech Data. If such credit
exceeds amounts due from Tech Data, Kofax shall remit in the form of a
check to Tech Data the excess within thirty (30) days of receipt of the
Product. Customized Products shall not be eligible for repurchase
pursuant to this Section.
h. 7.7 Notices is hereby updated as follows:
In the case of Tech Data, notices shall be sent Attn: V.P. of Marketing
Operations., cc: Contracts Administration.
i. Section 7.21 is hereby added and shall read as follows:
7.21 Financial Statements.
Kofax agrees that for the term of this Agreement, Kofax shall provide
financial statements annually. Kofax shall provide other additional
financial information upon reasonable request by Tech Data.
2. Entire Agreement. The Agreement, including any Exhibits and Schedules
attached hereto or thereto, constitute the entire agreement between Tech Data
and Kofax concerning the subject matter hereof and supersedes all prior
agreements between the parties.
<PAGE> 16
3. Ratification. Except as modified by this Modification Agreement, the parties
hereby ratify and confirm all terms and conditions of the Original Agreement.
IN WITNESS WHEREOF, each party has signed this Modification Agreement on the day
and year written above effective as of the Effective Date.
KOFAX IMAGE PRODUCTS TECH DATA CORPORATION
A Delaware corporation a Florida corporation
By: /s/ By: /s/
------------------------------ --------------------------------
Printed Name: Printed Name:
Title: Title: Senior Vice President & CFO
Date: Date: 10/23/96
<PAGE> 17
[KOFAX LETTERHEAD]
October 16, 1996
Ms. Kathy Benefield
Contracts Administrator
Tech Data Corporation
5350 Tech Data Drive
Clearwater, Florida 34620
Dear Kathy:
This letter is written to amend the Distributor Agreement dated March 1, 1993.
Kofax Image Products desires to modify Section 1.2 (f) of the agreement to read:
"Territory" shall mean the United States of America and its territories
and possessions and Canada.
All other terms and conditions of the said Agreement will remain unchanged.
KOFAX IMAGE PRODUCTS TECH DATA CORPORATION
/s/ /s/
- -------------------------------- -----------------------------------
Signature, Title Vice President Signature, Title
10-16-96 10/23/96
- -------------------------------- -----------------------------------
Date Date
<PAGE> 1
EXHIBIT 10.19
DISTRIBUTOR AGREEMENT
BETWEEN
KOFAX IMAGE PRODUCTS INC.,
3 JENNER STREET
IRVINE, CALIFORNIA 92718
TEL: (714) 727-1733
FAX: (714) 727-3144
AND
CRANEL INC.
51OF East Wilson Bridge Rd.
Worthington, OH 43085
(614) 433-0045
COMMENCEMENT DATE: JULY 25, 1990
<PAGE> 2
AGREEMENT
Kofax Image Products Inc., a California corporation, with offices at 3 Jenner
St., Irvine, CA 92718, hereinafter referred to as (Kofax), and Cranel Inc., an
Ohio corporation with offices at 51OF East Wilson Bridge Rd. Worthington, OH
43085, herein after referred to as (Distributor), agree that the following terms
and conditions shall govern the sale and discounting of Products as herein
defined.
1. Definitions
1.1 Parties, Party
"Parties" means Kofax and Distributor, collectively. "Party"
means either Kofax or Distributor.
1.2 Agreement
"Agreement" means this Authorized Industrial Distributor
Agreement.
1.3 Products
The term "Product" or "Products" as used herein shall mean the
items listed on APPENDIX "A" hereto, as changed from time to time
in accordance with the provisions of this Agreement.
2. Appointment
2.1 Authorization
Kofax hereby authorizes Distributor to advertise, demonstrate,
market, promote, distribute, and solicit orders for Products on a
non-exclusive basis subject to all the terms and conditions of
this Agreement.
2.2 Use of Trademarks/Trade Names
During the term of this Agreement, Distributor is authorized to
use Kofax's trademarks, trade names and logos in connection with
Distributor's sale, advertisement and promotion of Products. Upon
termination of this Agreement, Distributor shall cease to use any
of such marks, names or logos and shall, within a reasonable
time, remove any reference to Kofax from its advertising and
promotional material.
2
<PAGE> 3
2.3 Non Assignability
Distributor's rights under this Agreement are personal, and may
not be assigned without the prior written authorization of Kofax.
Such authorization may be withheld for any reason.
2.4 No Authority to Make Agreements
Distributor shall not have the authority to make any agreement or
incur any Liability on behalf of Kofax. The authority of the
Distributor on behalf of Kofax is limited to the rights granted
in Paragraph 2.1 above.
2.5 No Authority to Accept Orders
Distributor shall not have the authority to accept any orders
from customers on behalf of Kofax. All such orders are subject to
approval and acceptance by Kofax at its principal place of
business.
2.6 Reserved Rights
Kofax reserves the right to market the Products in any manner and
without limitation both within and outside of the Territory.
Kofax reserves the right to change the scope of the Territory by
giving Distributor 60 days prior written notice.
3. Commencement Date & Term
3.1 Commencement Date
This agreement shall be effective, after execution by both
parties, on the commencement date specified herein.
3.2 Term
The initial term of this agreement shall be for Twelve (12)
months from the commencement date.
3.3 Renewal
This Agreement will be renewed for subsequent one year terms,
unless (1) one Party gives written notice of termination to the
other party, at least 60 days prior to the end of the initial
term or any one of the renewal terms. The initial term, and any
subsequent term, shall be subject to termination under the
provisions of Section 9.
3
<PAGE> 4
4. Product Changes
4.1 Product Modifications
Kofax reserves the right to modify, alter, improve, delete or
change any and all of the Products covered by this Agreement.
However, this Agreement will cover the sales of Products as they
may be modified, altered, improved, or changed.
4.2 Product Deletions
Kofax may at its discretion, and upon prior notice to
Distributor, delete Products from Appendix "A" at any time. In
the event of any such deletions, Distributor may, within thirty
(30) days after receipt of such notice, return any or all of such
Products in its inventory which have been so deleted. Any such
Products not returned within the above allotted time period,
(thirty (30) days) may no longer be returned under any
circumstances or provisions of this Agreement, nor may they be
subsequently rotatable under the provisions of paragraph 7.11
below.
All Products returned in accordance with this provision must be
returned freight pre-paid and must be previously unsold, unused,
and in their original containers. Distributor shall receive full
credit for all such Products so returned. Any such credit shall
be in the amount of the actual net invoice price paid by
Distributor for the Products less any prior credits granted by
Kofax to Distributor.
4.3 Engineering Changes
Kofax shall, if possible, give Distributor at least thirty (30)
days advance written notice of all engineering changes that will
affect form, fit or function of any Products in Distributor's
inventory. If these modifications will adversely affect the sales
of Distributor's inventory of such Products once the engineering
modifications are implemented, then Kofax shall cooperate with
Distributor to sell such affected inventory. If, after the afore-
mentioned efforts (but in no event later than one hundred twenty
(120) days after the first public announcement of such
modification or the first shipment of the modified Product,
whichever occurs first), any of the affected Product still
remains in Distributor's inventory, Kofax agrees at Distributor's
election to replace it with upgraded Products, or to rework
affected inventory for engineering changes affecting form, fit or
function.
4
<PAGE> 5
5. Responsibilities of Distributor
Distributor shall have the following responsibilities:
5.1 Marketing Efforts
To exert its best efforts to advertise, demonstrate, market,
promote, distribute, and solicit orders for the Products.
5.2 Promotional Cooperation
To cooperate with and assist Kofax in promotional and selling
campaigns including attending appropriate trade shows.
5.3 Promotional Materials
To distribute promotional material to Distributor's sales
offices, on a timely basis.
5.4 Product Information
To procure from Kofax and furnish to customers additional manuals
and documentation as required to support Products.
5.5 Sales Reports
To provide Kofax, within 5 working days after the end of each
Distributor's sales month, a detailed sales activities report for
sales which shall include names and zip code addresses of
purchasers, model numbers, products codes, products and
quantities purchased and dollar amounts invoiced to said
purchasers.
5.6 Complaints
To promptly report to Kofax any complaint relating to sales of
Products.
5.7 Business Expenses
To pay all of the expenses of the operation of its business,
including salaries and expenses.
5.8 Inventory
Distributor shall maintain a reasonable inventory of Products in
order to satisfy Distributor's anticipated sales and where
applicable, support thereof.
5
<PAGE> 6
5.9 Initial Stocking Order
Distributor is required to purchase an initial stocking order and
to take delivery of this order no later than 30 days after the
Effective Date of this Agreement.
510 Demonstration System
Distributor shall, at all times, maintain a working demonstration
system including scanner and laser printer.
5.11 Forecast
Distributor shall provide to Kofax a three month rolling forecast
for Products. This forecast is to be updated every month.
5.12 Staffing and Training
Distributor will staff and train employees as required to
demonstrate, market, promote, distribute and support Kofax
Products.
5.13 Competitive Products
To provide written notification to Kofax prior to marketing and
distributing Products which compete directly with Products sold
by Kofax.
6. Responsibilities of Kofax
In consideration of Distributor's fulfillment of the
responsibilities set forth in Section 5;
6.1 Kofax shall consistently keep Distributor informed on a timely
basis of changes and innovations in performance, serviceability,
uses and applications of all Products.
6.2 Kofax will provide Distributor with initial familiarization and
standard sales training, including materials, at no charge, for a
reasonable number of Distributor's employees at a location of
Kofax's designation. All expenses of Distributor's employees
associated with such training, such as transportation, meals and
lodging, are the responsibility of Distributor. Additional
standard technical training courses from Kofax's Training
Department are available to Distributor at standard locations,
rates and terms.
6.3 Kofax at its expense, will provide Distributor with two hundred
(200) data sheets or brochures for each Product with a part
number beginning with either KF or TK that is marketed by
Distributor (per APPENDIX A). Distributor may purchase
additional copies of the above materials at the current costs.
6
<PAGE> 7
Kofax will also prepare duplicate transparencies of available
photography at the Distributor's request. Cost to the Distributor
will be the reproduction cost.
7. Product Orders
7.1 Product Pricing
The prices to be paid by Distributor for any Products ordered
pursuant to this Agreement are set forth in Appendix A.
7.2 Service Pricing
The prices to be paid by Distributor for any hardware updates or
repairs for Products that are out of Warranty are set forth in
Appendix B and there are no discounts on the prices.
7.3 Purchase Orders
Distributor shall submit a written purchase order (telex or FAX
acceptable) for all Products, services, and other items ordered
from Kofax. Purchase orders shall specify Product model numbers,
quantity ordered, Product options, sales tax status, shipping
destination, carrier, and shipping dates. In order for the
purchase orders to be valid, Kofax shall acknowledge receipt and
acceptance of such purchase order. However, all orders for
Products by Distributor are subject to the terms and conditions
set forth in this Agreement. Any other terms or conditions
contained in any order from Distributor which add to or differ
from the terms of this Agreement shall be invalid.
7.4 Terms of Payment
Terms of payment for all Products, services and other items sold
to Distributor by Kofax are the net invoice amount due within 30
days from the date of each invoice submitted to Distributor by
Kofax. Kofax shall have the unqualified right to withhold
shipment of Products and services, including repair of Products
returned by Distributor, if any payments due to Kofax by
Distributor are delinquent.
7.5 Customer Billing
Distributor shall bill its customers directly. Distributor shall
be solely responsible for any losses arising from the failure of
any customer to pay the customer's account. Kofax shall have no
liability to Distributor for any bad debt arising from the sale
by Distributor of Products. Failure of Distributor to collect
shall in no way alter Distributor's payment obligations to Kofax.
7
<PAGE> 8
7.6 Monies, Taxes, and Duties
All prices and fees described or contemplated under this
Agreement are in U.S. dollars. Prices quoted do not include
federal, state, or local taxes, fees, duties, or licenses. All
applicable taxes, fees, duties, and licenses will be added to
the sales price and shall be paid by Distributor, (but not
including any taxes on the income or net income of Kofax) unless
Distributor furnishes an exemption certificate satisfactory to
the appropriate authorities.
7.7 Delivery
Unless otherwise agreed upon in writing by Kofax, delivery of the
Products purchased by Distributor under this Agreement shall be
made directly to Distributor and shall be FOB Kofax's place of
manufacture. All stated delivery and shipment dates are
approximate only, and will be computed from the date
Distributor's purchase order is acknowledged. Delivery dates are
given to the best of Kofax's knowledge based on conditions
existing at the time of order acknowledgment. Failure to make
shipment or delivery as quoted does not constitute a cause for
damages of any kind. If Distributor agrees to take partial
shipments of any order, each such partial shipment shall be
deemed a separate sale, and payment for such separate shipments
shall become due in accordance with the provisions of paragraph
7.3. Distributor shall designate the freight carrier to be used.
7.8 Clear Title
Kofax warrants the title to all Products to be sold to
Distributor hereunder and warrants that such Products are not
subject to any security interests, liens or other encumbrances.
7.9 Risk of Loss
From and after delivery of the Products to a carrier at Kofax's
facility, Irvine, Ca. Distributor shall be responsible for the
entire risk of Loss, theft, damage to or destruction of the
Products.
7.10 Cancellation/Reschedule
Orders accepted by Kofax are subject to cancellation or
rescheduling only upon written notice by Distributor and in
accordance with the following provision.
In the event Distributor (i) cancels any order or a portion
thereof or (ii) fails to meet any obligation hereunder causing
cancellation of any order or portion thereof, Distributor agrees
to pay Kofax cancellation charges, computed from the original
scheduled shipment date, as follows:
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NOTICE RECEIVED BY KOFAX CANCELLATION CHARGES
30 days or less prior to 25% of dollar value original scheduled
shipment date.
Unless otherwise stated, cancellation charges for outstanding
orders shall be computed based on the net dollar value of
Purchase Orders affected.
Orders may only be rescheduled twice and may not be subsequently
canceled and must thereafter be rescheduled for shipment within
sixty (60) days of the originally scheduled shipping date. Orders
not rescheduled for shipment within the above time period will be
considered canceled and become subject to the above cancellation
charges.
Distributor may not cancel or reschedule any order or portion
thereof after shipment. In the event Distributor does not accept
delivery of the Products after shipment, or causes Kofax to
withhold shipment of the Products (i.e. for nonpayment or
credit-hold) for a Period of thirty (30) days after the scheduled
delivery date, such Products will be considered canceled and
Distributor shall pay the maximum cancellation charges specified
above.
7.11 Stock Rotation
Within 30 days after the end of each March, June, September and
December during the term of this Agreement, Distributor may
return Products to Kofax for restocking only after Kofax has
given a Return Material Authorization (RMA) number to
Distributor. Distributor may only return Products which have been
shipped to the Distributor within the prior 6 months. Distributor
may return any quantity of Products to Kofax for credit provided
the total credit shall not exceed 5% of the net sales dollars
invoiced by Kofax to the Distributor during the said 6 month
period. The credit to be issued in respect of each such Product
returned shall be the actual net invoiced charged for same, less
any prior credits granted by Kofax to Distributor. All Products
returned in accordance with this provision must be returned
freight pre-paid and must be previously unsold, unused, and in
their original containers. The Distributor will place a
non-cancelable order of equal value to offset the credit issued
at the time the RMA is requested. Any demonstration unit or
non-standard special order products purchased by Distributor as
"non-cancelable/non-returnable" do not qualify for stock
rotation.
7.12 Price Protection
Kofax Agrees to provide Distributor with inventory price
protection under the following terms and conditions:
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<PAGE> 10
7.12.1 Distributor acknowledges and agrees that Kofax has the
right to raise or lower prices set forth in the product Price
schedule (APPENDIX A) from time to time by giving at least 30
days prior written notice to Distributor of such intent.
7.12.2 In the event that Kofax permanently decreases the price of any
Product, Distributor will be entitled to a credit equal to the
difference between the net price paid by Distributor, less any
prior credits granted by Kofax, and the new decreased
Distributor's price for the Product multiplied by the quantity
of such Product in Distributor's inventory on the effective date
of the reduction.
Similar price adjustments will also be made on all such effected
Products then on order, or in transit to Distributor on the
effective date of such price decrease. This section does not
apply to price reductions made by Kofax where such reductions
are initiated for reasons other than permanently reducing prices
and/or are periodic and temporary in nature.
7.12.3 To obtain the credit described above, Distributor shall submit
to Kofax, not later than twenty (20) working days after the
effective date of such price decrease, a Product inventory
report as of the effective date.
7.12.4 Upon Kofax's verification of the Product inventory report, Kofax
will apply the said credit to Distributor's account, as of the
effective date of such price decrease. Kofax reserves the right
to perform a physical inventory at each Distributor location.
7.12.5 In the event of a price increase, Distributor shall continue to
receive current pricing for (a) all Products then on order and
scheduled for delivery within thirty (30) days from the
effective date of the increase; and (b) all new orders received
within the thirty (30) day notification period and scheduled for
shipment before the effective date of such price increase.
7.13 Offset
Kofax may, without notice, offset any overdue payments owed by
Distributor to Kofax against any amounts that may be owing by
Kofax to Distributor.
8. Termination
8.1 This Agreement may be terminated at any time, without cause, by
either party upon giving the other party at least sixty (60)
prior written notice. Such termination shall be effective on the
date stated in said notice.
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8.2 This Agreement may be terminated immediately for cause by either
party in the event the other party (i) shall become insolvent or
bankrupt, or (ii) admits in writing its inability to pay its
debts as they mature, or (iii) makes an assignment for the
benefit of creditors, or (iv) ceases to function as a going
concern or to conduct its operations in the normal course of
business, or (v) fails to perform any of the obligations imposed
upon it under the terms of this Agreement so as to be in default
hereunder and fails to cure such default within thirty (30) days
after written notice thereof.
8.3 In the event Kofax terminates this Agreement, Kofax shall
repurchase, within one hundred and eighty (180) days of the
effective termination date, all unsold Products in Distributors
inventory. The repurchase price for such unsold Products shall be
the actual net invoice price paid by Distributor less any prior
credits granted by Kofax to Distributor. All Products to be
repurchased pursuant to this paragraph 9.3 must be in unused,
factory-shipped condition and must be returned in original
cartons.
8.4 In the event Distributor terminates this Agreement, Kofax shall
repurchase, within one hundred and eighty (180) days of the
effective termination date, all unsold Products in Distributors
inventory. The repurchase price for such unsold Products shall be
the actual net invoice price paid by Distributor less a twenty
percent 20% restocking charge, and less any prior credits granted
by Kofax to Distributor. All Products to be repurchased pursuant
to this paragraph 9.4 must be in unused, factory-shipped
condition and must be returned in the original cartons.
8.5 Continued Support and Pricing
If Kofax terminates this Agreement other than for the default of
Distributor, Distributor shall be eligible to receive support and
pricing as specified in this Agreement for a period of 60 days
following the date on which the termination becomes effective, to
the extent such support and pricing are for the purpose of
consummating sales proposals which were in effect on the
effective date of termination. All orders subsequent to
termination, shall be on a prepaid basis.
8.6 Accrued Balances
Within 30 days after any termination of this Agreement,
Distributor must pay all outstanding account balances.
8.7 Remedies Not Limited
Neither the termination of this Agreement, nor the waiver of any
right to terminate under this Agreement, shall limit any other
remedies which Kofax may have for a default or breach by
Distributor of this Agreement or any provisions thereof.
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<PAGE> 12
9. Warranty
Kofax warrants the Products in accordance with its standard
warranty terms for each particular product as set forth in
Appendix B. Distributor is authorized to pass this warranty
through to Distributor's customers.
This warranty period shall commence upon delivery of the Products
by Kofax to the Distributor and shall continue for either the
length of the warranty period plus three months (shelf life) or
the actual length of the warranty period following delivery by
Distributor to its end-user customer, whichever occurs first.
10. Defective Products
Notwithstanding any other provision of this Agreement or of any
APPENDIX hereto, Distributor may return for full credit any and
all Products found to be defective upon delivery, or within ten
(10) days thereafter; provided, however, that any such defective
Products are returned to Kofax, freight collect, within thirty
(30) days of the discovery of the defect. However, prior to any
Products being returned to Kofax, Distributor must obtain a
Return Material Authorization (RMA) Number from Kofax and place
it on the outside of the carton containing the defective Product.
10.1 In the event of such a return, Kofax shall provide Distributor
with a Return Material Authorization number, the location to
which Distributor shall return the Product or item, and the
method of transportation. In no event will Kofax accept any
returned part or Products which does not have a valid Return
Material Authorization number, nor will Kofax accept or pay for
any excess charges, (duties, freight, or taxes) which become due
in the event a returned item has been shipped in a manner not
designated by Kofax.
11. Limitation on Cause of Action
The Parties agree that any suit or other legal action or any
arbitration relating in any way to this Agreement or to Products
must be filed or officially commenced by party making a claim no
later that 2 years after the cause of the claim first arises.
12. Confidentiality
If either party hereto receives from the other party written
information which is marked "Confidential" and/or "Proprietary",
the receiving party agrees not to use such information except in
the performance of this Agreement, and to treat such information
in the same manner as it treats its own confidential information.
The obligation to keep information confidential shall not apply
to any such information that has been disclosed in publicly
available sources; is,
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<PAGE> 13
through no fault of the party receiving the confidential
information, hereafter disclosed in a publicly available source;
is in the rightful possession of the party receiving the
confidential information without an obligation of
confidentiality; or is required to be disclosed by operation of
law. Except as otherwise provided herein, the obligation not to
disclose shall be for a period of one year after the termination
of this Agreement.
13. Compliance with Law
Distributor shall comply with all applicable Laws, statutes, and
regulations relating to the sale and distribution of Products,
and the performance of Distributor's duties and obligations under
this Agreement. In particular, Distributor agrees not to sell any
of the Products in any country or territory prohibited by
applicable U.S. laws, and agrees to obtain from its customers
representations that they will not resell, transfer, or assign
any of the Products to any such prohibited countries or
territories.
14. Patent/Copyright Indemnification
Kofax shall defend any suit or proceeding brought against
Purchaser based on a claim of a third party that the Product(s),
or any part thereof, furnished by Kofax constitutes an
infringement of any patent of the U.S., provided that Kofax is
notified promptly in writing and given Authority, information and
assistance (at Kofax's expense) for the defense of such a suit or
proceeding, and Kofax will pay all damages and costs awarded
against Purchaser. In case the Product(s) furnished by Kofax, or
any part thereof, is enjoined, Kofax shall, at its own expense
and option (i) procure for Purchaser the right to continue using
the Product(s), (ii) replace the same with non-infringing
Product(s), (iii) modify the Product(s) so it becomes
non-infringing, or (iv) grant the Purchaser ; 1 credit for such
equipment in accordance with the then applicable Kofax
depreciation policy and accept its return. Kofax shall not be
liable to Purchaser hereunder if the patent infringement or claim
thereof is based upon the use of the Product in connection with
other Products not delivered by Kofax, or in a manner for which
the Kofax Product(s) was not designed, or where the Product(s)
was modified by or for the Purchaser in a manner to become
infringing.
IN NO EVENT SHALL KOFAX BE LIABLE TO DISTRIBUTOR UNDER THIS
PARAGRAPH FOR CONSEQUENTIAL OR SPECIAL DAMAGES EXCEPT WHERE A
THIRD PARTY OBTAINS SUCH DAMAGES AGAINST DISTRIBUTOR. EXCEPT AS
EXPRESSLY SET FORTH HEREIN, KOFAX SHALL HAVE NO OTHER LIABILITY
OR OBLIGATION TO DISTRIBUTOR WITH RESPECT TO PATENT OR COPYRIGHT
INFRINGEMENT MATTERS.
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15. General Indemnification
15.1 Kofax and Distributor each agrees to indemnify and hold the other
harmless from and against any and all claims, damages and
liabilities asserted by any person or entity resulting directly
from:
(i) Any breach by it, or by any of its employees or agents, of
this Agreement or any of its warranties, representations,
covenants or obligations as provided for in this Agreement.
(ii) Any negligent act, affirmative act of omission to act by it,
or any of its employees or agents.
Such indemnification shall include the payment of all reasonable
attorneys' fees and other costs incurred by the party seeking
indemnification in defending such claims.
15.2 Notwithstanding anything to the contrary in this Agreement or the
Exhibits or Appendices hereto, in no event will either party be
liable to the other for (i) special, indirect or consequential
damages or (ii) any damages whatsoever resulting from loss of
use, data or profits, arising out of or in connection with this
Agreement, whether in an action of contract or tort including
negligence.
15.3 Arbitration
All disputes concerning the terms and conditions of this
Agreement and involving less than $25,000 shall be subject to
expedited binding arbitration outside of the American Arbitration
Association ("AAA") before any attorney or expert who is
knowledgeable and experienced in the data processing equipment
and services field and who is selected by mutual agreement of the
Parties. A Party shall commence arbitration by DELIVERING written
notice to the other party. Where the parties cannot agree on an
attorney as arbitrator or fail to act within 30 days after notice
or a commencement of arbitration is delivered, arbitration shall
be by the AAA, subject to the rules of the AAA then in effect.
The AAA shall decide, as required, on the number and identity of
the arbitrators and the place of the arbitration. Judgment upon
the award rendered in any arbitration may be entered in any court
having jurisdiction of the matter.
15.4 Attorneys' Fees
If any arbitration, litigation, or other legal proceedings occur
between the parties relating to this Agreement, the prevailing
Party shall be entitled to recover (in addition to any other
relief awarded or granted) its reasonable costs and expenses,
including attorneys' fees, incurred in the proceeding.
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<PAGE> 15
15.5 Notices
Unless otherwise expressly provided for, all notices, requests,
demands, consents or other communications required or pertaining
to this Agreement must be in writing and must be delivered
personally or sent by certified or registered mail (postage
prepaid and return receipt requested) to the other Party at the
address set forth below (or to any other address given by either
Party to the other Party in writing):
TO KOFAX: TO DISTRIBUTOR:
3 Jenner Street 510 F. East Wilson Bridge
Irvine, CA 92718 Worthington, OH 43085
Attention: Contracts Manager Jim Wallace
In case of mailing, the effective date of delivery of any notice,
demand, or consent shall be considered to be 5 days after proper
mailing.
15.6 Waiver and Amendment
No waiver, amendment, or modification of this Agreement shall be
effective unless in writing and signed by the Party against whom
the waiver, amendment, or modification is sought to be enforced.
No failure or delay by either Party in exercising any right,
power, or remedy under this Agreement shall operate as a waiver
of the right, power, or remedy. No waiver of any term, condition
or default of this Agreement shall be construed as a waiver of
any other term, condition, or default.
15.7 Assignment
This Agreement is binding upon and insures to the benefit of the
successors and assigns of the Parties. However, Distributor may
not assign or transfer the rights or obligations granted to it
under this Agreement without the prior written consent of Kofax.
15.8 No Third Party Rights
This Agreement is not for the benefit of any third party and
shall not be deemed to grant any right or remedy to any third
party, whether or not referred to in this Agreement.
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<PAGE> 16
15.9 Headings
The section and paragraph headings of this Agreement are intended
as a convenience only, and shall not affect the interpretation of
its provisions.
15.10 Singular and Plural Terms
Where the context of this Agreement requires, singular terms
shall be considered plural, and plural terms shall be considered
singular.
15.11 Severability
If any provision(s) of this Agreement is finally held by a court
or arbitration panel of competent jurisdiction to be unlawful,
the remaining provisions of this Agreement shall remain in full
force and effect to the extent that the intent of the parties can
be enforced.
15.12 Governing Law and Forum
Unless otherwise provided, the validity, construction, and
performance of this Agreement is governed by the laws of
California. Distributor agrees that this Agreement is considered
to be entered into in Orange County, California, and that all
obligations of Kofax under this Agreement are incurred in and are
to be performed in Orange County. The parties consent to personal
jurisdiction in Orange County with respect to any arbitration or
suit brought relating to this Agreement. The Parties waive all
objections to venue to the extent permitted by law.
16. General Terms and Conditions
16.1 Relationship of the Parties
This Agreement does not constitute a partnership agreement, nor
does it create a Joint venture or agency relationship between the
Parties.
16.2 Survivorship
All obligations and duties hereunder which shall by their nature
extend beyond the expiration or termination of this Agreement,
shall survive and remain in effect beyond any expiration or
termination hereof.
16.3 Force Majeure
Neither party shall be responsible for any delay or failure in
performance of any part of this agreement or order to the extent
that such delay or failure is caused by fire, flood, explosion,
war, strike, embargo, government requirement, action
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<PAGE> 17
of civil or military authority, act of God, act or omission of
carriers or the inability to obtain necessary labor, materials,
(or manufacturing facilities or any other similar causes beyond
its control. In the event of any such delay, the time of
performance that was delayed for such causes will be extended for
a period equal to the time lost by reason of the delay. Kofax
shall have the right to cancel any order placed or to refuse or
delay the shipment thereof for failure of Distributor to promptly
meet payments due Kofax or any other reasonable requirements
established by Kofax or for any acts or omissions of Distributor
which delays Kofax's performance.
16.4 Conflicting Terms
The Parties agree that the terms and conditions of this Agreement
shall prevail, notwithstanding the contrary or additional terms,
in any purchase order, sales acknowledgment, confirmation or any
other document issued by either Party effecting the purchase
and/or sale of Products.
16.5 Export Authorization
Regardless of any disclosure made by Distributor to Kofax of any
ultimate destination of the Products, Distributor will not
export, re-export or re-sell to any unauthorized end user either
directly or indirectly, any Product or system incorporating such
Product without first obtaining prior written authorization from
the U.S. Department of Commerce or any other Agency or Department
of the United States Government, as and if required.
16.6 Entire Agreement
This Agreement, including all appendices, constitutes the
complete and final Agreement between the Parties, and supersedes
all prior negotiations and agreements between the parties
concerning its subject matter.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
effective as of the date first above set forth.
KOFAX IMAGE PRODUCTS INC. DISTRIBUTOR
BY: KOFAX IMAGE PRODUCTS BY: CRANEL INCORPORATED
---------------------------- ----------------------------
NAME: RICHARD M. MURPHY NAME: JAMES H. WALLACH
-------------------------- --------------------------
TITLE: V.P. SALES TITLE: PRESIDENT
------------------------- -------------------------
DATE: 7-25-90 DATE: 7-25-90
-------------------------- --------------------------
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Exhibit 10.20
CAERE CORPORATION
LICENSEE AGREEMENT
THIS LICENSEE AGREEMENT (the "Agreement") is made and entered into this
10th day of September, 1996 ("Effective Date"), by and between CAERE
CORPORATION, a Delaware corporation having its principal office at 100 Cooper
Court, Los Gatos, California 95030 ("CAERE"), and Kofax Image Products a
California corporation having its principal office at 3 Jenner Street, Irvine,
California 92718 ("Licensee").
WHEREAS CAERE possesses certain ownership interests in proprietary
software and desires to license such software to Licensee under the terms of
this Agreement; and
WHEREAS Licensee desires to license such software from CAERE and
incorporate such software into certain Licensee hardware and/or software
products and distribute such CAERE software as incorporated into Licensee's
products;
Now THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties agree as follows:
1. Definitions
1.1 For purposes of this Agreement:
(a) CUSTOMER. "Customer" shall mean the resellers, value added
resellers, original equipment manufacturers, integrators and distributors to
whom Licensee distributes Final Products for further distribution to End Users.
(b) DOCUMENTATION. "Documentation" shall mean CAERE's standard user
manuals and other written and graphic materials related to the Products.
(c) END USER. "End User" shall mean a third party who acquires
Final Products from Licensee for its own internal use other than distribution
and resale and who is granted a sublicense to the Products by Licensee pursuant
to the terms of this Agreement.
(d) FINAL PRODUCTS. "Final Products" shall mean the Products and
the Licensee Products bundled together into a single package or the Products
incorporated into or installed onto the Licensee Products as a single unit or
system, which is intended to be sold and sublicensed to End Users for a single
price.
(e) LICENSEE PRODUCTS. "Licensee Products" shall mean Licensee's
hardware and/or software products as set forth in Exhibit A which add
substantial value to the Products.
(f) PRODUCTS. "Products" shall mean only those CAERE products in
object code form as described in Exhibit B.
1
CONFIDENTIAL TREATMENT
<PAGE> 2
(f) TERRITORY. "Territory" shall mean worldwide.
2. RIGHTS AND RESTRICTIONS
2.1 COPYRIGHT LICENSE. Subject to the terms of this Agreement, CAERE
hereby grants to Licensee, and Licensee accepts, the non-exclusive,
non-transferable, royalty bearing right under CAERE's copyrights to reproduce
the Products and distribute the Products, during the term of this Agreement, to
End Users in the Territory through Licensee's normal chains of distribution,
provided that the Products are bundled and used only with LICENSEE Products as
Final Products, and provided FURTHER that LICENSEE does not bundle or use, nor
does it allow a third party to bundle or use, the Licensee Products in any way
that directly or indirectly, (i) utilize the OCR functionality of the Products
or (ii) make calls to CAERE's OCR engine, without CAERE's prior written consent.
LICENSEE acknowledges that LICENSEE has not been granted the right to sublicense
its right to reproduce the Products.
2.2 PATENT LICENSE. Subject to the terms of this Agreement, CAERE
hereby grants to LICENSEE, and LICENSEE hereby accepts, the non-exclusive,
non-transferable, royalty bearing license under CAERE's patents to make the
Products and SELL the Products, during the term of this Agreement, to End Users
in the Territory through LICENSEE's normal chains of distribution, provided that
the Products are bundled with LICENSEE Products for use only as Final Products,
and provided further that LICENSEE does not bundle or use, nor does it allow
third parties to bundle or use, the Licensee Products in any way that directly
or indirectly, (i) utilize the OCR functionality of the Products or (ii) make
calls to CAERE's OCR engine, without CAERE's prior written notice. LICENSEE
acknowledges that LICENSEE has not been granted the right to sublicense its
right to make the Products.
2.3 RESTRICTIONS. Licensee acknowledges and agrees that the Products
contain CAERE's proprietary information and in order to protect such
information, Licensee shall not, nor shall it allow a third party to, decompile,
reverse engineer, disassemble or otherwise reduce the Products to a humanly
perceivable form. Licensee agrees to execute a customer agreement with End Users
to whom Products are sublicensed, which provisions shall be no less restrictive
than the provisions contained in CAERE's standard software license set forth in
Exhibit C. There are no implied licenses under this Agreement, and any rights
not expressly granted to Licensee hereunder are reserved by CAERE.
2.4 REPRODUCTION
(a) SOFTWARE. CAERE will provide Licensee with one master copy of
each Product in machine readable object code in the languages enumerated in
Exhibit B. Licensee will, at Licensee's sole cost: (i) make copies of the
Products exactly in accordance with any specifications provided by CAERE, unless
and except as otherwise agreed to in writing by CAERE; (ii) supply media on
which such copies will be made; and (iii) as applicable, manufacture and apply
on the disks pre-approved disk labels. Licensee shall not localize, alter,
modify, or change any Product or its package. CAERE is under no obligation to
provide Licensee with any new products or version of the Products under this
Agreement. Licensee expressly agrees that all copies made under this Section
will be made only for sublicense pursuant to Section 2.1 and 2.2.
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<PAGE> 3
(b) DOCUMENTATION. Subject to the terms of this Agreement, CAERE
grants to Licensee the non-exclusive, nontransferable right to use, reproduce
and distribute the Documentation solely in conjunction with the sublicense of
the Final Products. CAERE will provide Licensee with one master copy of each
item of the Documentation in the languages enumerated in Exhibit B, in both hard
copy and machine readable text. At Licensee's sole expense, Licensee will make
copies of the Documentation without any modification. Licensee will make only
the number of copies of the Documentation necessary for the purposes of this
Agreement.
3. DELIVERY, TESTING OF PRODUCTS. To assure that the Products reproduced
by Licensee meet Caere's quality standards, Licensee shall provide Caere with a
sample of the Final Product in the form in which Licensee proposes to distribute
the Final Product prior to any distribution of the Final Product by Licensee.
Caere shall have a period of 10 business days after receipt of the media to test
the Final Product to determine whether it meets Caere's quality standards as
well as to review the placement of any required copyright, patent and trademark
notices. If Caere for any reason in its sole discretion finds that the Final
Product as reproduced does not meet its quality standards or that the notices
are not properly displayed, Caere shall notify Licensee of the deficiency and
Licensee shall correct such deficiency to Caere's satisfaction before
distributing or selling the Final Product. In no event shall any failure by
Caere to notify Licensee of any such deficiency constitute a waiver of any
rights of Caere under this Agreement or the grant of any warranty in excess of
that expressly provided herein. In addition, at Caere's request during the term
of the Agreement, Licensee shall provide Caere with a sample of the Final
Product in the form in which Licensee is distributing the Final Product for
Caere's use in on-going quality control testing. If Caere for any reason in its
sole discretion finds that the Product does not meet its quality standards or
that proprietary notices are not properly displayed; Caere shall notify Licensee
of the deficiency and Licensee shall cease distribution of the Final Product
until such time as the deficiency is remedied to Caere's satisfaction.
4. ROYALTIES AND STATEMENTS.
4.1 ROYALTY PAYMENTS. Subject to Section 4.2, Licensee agrees to pay to
Caere royalties, in U.S. Dollars and as set forth in Exhibit D, based on the
number of copies of the Products distributed by or on behalf of Licensee.
Royalty payments shall be credited first against any prepaid royalties; after
the prepaid royalties have been fully credited, Licensee shall pay royalties
directly to CAERE as set forth in Section 4.4.
4.2 PREPAID ROYALTIES. Upon the execution of this Agreement, Licensee
agrees to pay the prepaid royalty amount set forth on Exhibit D.
4.3 FORECASTS. On the first day of each calendar month, Licensee will
provide to CAERE a ninety (90) day rolling forecast of the number of Final
Products Licensee intends to distribute.
4.4 REPORTING. Within twenty (20) days following the end of each
calendar quarter during the term of this Agreement, Licensee shall render to
CAERE a statement showing in
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<PAGE> 4
reasonable detail the number of copies of the Products and Evaluation Copies (as
that term is defined in Exhibit D) made and the number of copies of the Products
and Evaluation Copies distributed during such month. Such statement shall be
accompanied by payment of the amounts then due.
4.5 RECORDS AND INSPECTION RIGHTS. Licensee will keep and maintain, for
a period of two (2) years, proper records and books of account relating to
Licensee's marketing and distribution of the Products. CAERE may inspect such
records to verify Licensee's statements. Any such inspection will be conducted
only by independent public accountants during regular business hours at
Licensee's offices in a manner that does not unreasonably interfere with
Licensee's business activities. Such inspection shall be at CAERE's cost and
expense; provided, however, if the audit reveals overdue payments in excess of
five percent (5%) of the payments owed to date, Licensee shall pay the cost of
such audit(s) and for each such audit CAERE may conduct another audit during the
same twelve (12) month period. Licensee shall also immediately pay any overdue
payments revealed by such audit(s) plus interest at the rate of the lesser of
one and one half percent (1 1/2%) per month or the maximum then permitted by
applicable law, from the due date until paid. Except as set forth above, such
audits may be conducted no more than once in any twelve (12) month period. In
the event that CAERE wishes to inspect such books and records, Licensee will
make all relevant records available, including but not limited to all records
relating to activities outside of the United States (whether such records were
originally generated within or outside of the United States). In no event may
CAERE commence an inspection of any statement later than two (2) years from the
date of such statement.
4.6 TAXES. Licensee's payments required under this Section 4 are
exclusive of taxes except as provided herein, and Licensee agrees to bear and be
solely responsible for the payment of all such taxes, other than taxes payable
on CAERE's net income, including but not limited to all sales, use, rental
receipt, personal property or other taxes and their equivalents which may be
levied or assessed in connection with the use, manufacture or sale of the
Products or the Final Products. Notwithstanding the foregoing, in the event
Licensee is required to withhold taxes imposed upon CAERE for any payment under
this Agreement by virtue of the statutes, laws, codes or governmental
regulations of a country in which the Final Products are sold, then such
payments will be made by Licensee and deducted from Licensee's royalty
obligations under this Agreement; provided, however, that Licensee will obtain
and furnish CAERE with official tax receipts or other evidence of payment issued
by the respective tax authorities, sufficient to enable CAERE to establish
payment of such taxes in support of a claim for a credit against CAERE's United
States tax liability.
4.7 NOT FOR RESALE UNITS. Licensee will not owe any royalty for any
copy of Products distributed free of charge for Licensee's or Resellers'
marketing or promotional purposes or for Licensee's or Resellers' own internal
and demonstration uses; provided, however, Licensee shall not distribute or use
more than four hundred (400) copies of any such Products in any one year.
4.8 ROYALTY ADJUSTMENTS. CAERE may not modify the royalty rates set
forth in Exhibit D for the Products for the initial term of this Agreement.
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5. PRICING.
Licensee's prices for the Final Products will be at Licensee's sole
discretion; however, Licensee agrees not to offer the Products as "free"
software and shall only offer the Products for the single price offered for the
Final Products.
6. MARKETING.
6.1 WEB LINKS. Licensee shall provide to CAERE, at no cost, a link from
Licensee's home page on the Internet to CAERE's home page on the Internet and
shall permit CAERE to establish, at no cost, a link from CAERE's home page to
Licensee's home page.
7. PRODUCT WARRANTY.
7.1 WARRANTY. CAERE warrants to Licensee that, for a period of ninety
(90) days from the date of delivery to Licensee of the master disks, the
Products will substantially perform the functions described in the Documentation
for such version. CAERE DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF TITLE, MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND, EXCEPT AS PROVIDED FOR IN SECTION 13.1,
FREEDOM FROM THIRD PARTY INFRINGEMENT CLAIMS. Licensee's sole remedy for failure
of a Product to meet this warranty shall be limited to having CAERE undertake to
correct documented nonconformances within a reasonable period of time.
7.2 NO PASS THROUGH. Licensee will not pass through to End Users the
warranty in Section 6.1 and shall make no other representations to End Users on
behalf of CAERE. Licensee shall be solely responsible for providing support and
warranty service to End Users for the Final Products. Licensee shall indicate to
End Users that they must look solely to Licensee in connection with any
problems, warranty claims, or other matters regarding the Products or Final
Products. Licensee shall make no warranties to End Users on behalf of CAERE and
agrees to indemnify and hold CAERE harmless from any third party claims based on
warranties given in violation of this Agreement.
7.3 EXCLUSIONS. This limited warranty does not cover loss or damage
which: (i) occurs in shipment to or from Licensee, (ii) is due to improper
installation or maintenance, misuse, neglect, or any cause other than ordinary
commercial or industrial application; (iii) is due to adjustment, repair or
modification by any person other than as authorized by CAERE; (iv) is due to
storage or use in an improper environment, excessive or inadequate heating or
air conditioning and electrical power failures, surges or other irregularities;
or (v) is due to any statement about the Products other than as provided in this
Agreement, unless confirmed in writing by an authorized corporate officer of
CAERE.
CAERE does not warrant that the Products will meet Licensee's
requirements, that operation of the Products will be uninterrupted or
error-free, or that all software errors will be
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corrected. CAERE is not responsible for problems caused by computer hardware or
computer operating systems (including those making up Licensee Products) which
are not compatible with the system specifications required to run the Products
as set forth in the Product's user manual, or for problems in the interaction of
the Products with non-CAERE software. CAERE does not warrant the Licensed
Components; such software is sublicensed AS IS.
7.4 BUG FIXES. For a period of one (1) year from the date of delivery,
CAERE will provide to Licensee, at no charge, all bug fixes to the Products
which CAERE makes generally available at no charge to its customers.
8. LIMITATION OF LIABILITY.
CAERE SHALL NOT BE LIABLE TO LICENSEE, END USERS OR ANY OTHER ENTITY
CLAIMING THROUGH OR UNDER LICENSEE FOR ANY LOSS OF PROFITS OR INCOME, LOSS OF
DATA, OR OTHER TANGIBLE BUSINESS LOSS OR OTHER CONSEQUENTIAL, INCIDENTAL, OR
SPECIAL DAMAGES, OR FOR ANY CLAIM BY ANY OTHER PARTY, WHETHER IN AN ACTION IN
CONTRACT OR TORT OR BASED ON A WARRANTY, EVEN IF CAERE HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE
LICENSES GRANTED HEREUNDER. LICENSEE'S, END USERS' OR ANY OTHER ENTITY'S SOLE
AND EXCLUSIVE REMEDIES SHALL BE AS SET FORTH IN SECTIONS 7 AND 13.
CAERE'S AGGREGATE LIABILITY FOR DAMAGES UNDER THIS AGREEMENT SHALL NOT
EXCEED THE AMOUNT ACTUALLY PAID BY LICENSEE TO CAERE DURING THE TWELVE MONTH
PERIOD PRECEDING THE DATE UPON WHICH A CLAIM FOR SUCH DAMAGE AROSE.
9. LICENSEE'S OBLIGATIONS.
9.1 TECHNICAL SUPPORT. Licensee shall provide a customer support
telephone number accessible in each country in which Licensee distributes the
Final Products. The telephone number need not be free of toll charges to users.
During Licensee's customer support telephone hours (which shall be no less than
Licensee's normal business hours), Licensee will provide customer and technical
support to End Users. Licensee will include its customer support phone numbers
and hours in the documentation distributed with the Final Products. If
Licensee's personnel cannot answer an End User's question regarding the Products
after using "reasonable efforts," such personnel may contact CAERE with such
questions. "Reasonable efforts" include, at minimum, reviewing CAERE's written
reference materials. CAERE may refer End Users who first call CAERE directly to
Licensee for customer and technical support. CAERE shall not be obligated to
provide any technical support to end users of Licensee Products with which Final
Products have been integrated.
9.2 MARKETING. Licensee will use its best efforts to market the Final
Products. Licensee will retain and have available trained and specialized
personnel sufficient to market the Final Products effectively and to assure End
User satisfaction.
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9.3 During the term of this Agreement, Licensee agrees to bundle and/or
incorporate the Products with all Licensee Products listed on Exhibit A, which
list may be amended by mutual consent of the parties.
10. CAERE SUPPORT AND MAINTENANCE.
10.1 TECHNICAL INFORMATION. CAERE will provide Licensee with technical
information regarding the Products that CAERE provides to other similarly
situated Product licensees. Upon Licensee's written request and at CAERE's
discretion, CAERE may provide special documentation, customization and
configuration of the Products at a fee mutually determined by the parties. At
Licensee's reasonable request, CAERE will use commercially reasonable efforts to
provide on-site technical assistance visits to Licensee at CAERE's then current
applicable hourly rate (as of Effective Date,[*] per person hour), plus
out-of-pocket travel and lodging expenses. CAERE is not responsible for the
installation or field maintenance of the Products.
10.2 TRAINING. CAERE may, at its discretion, offer training classes at
CAERE's facility. The parties will mutually agree upon Licensee's personnel in
attendance and any fees for such classes.
11. TRADEMARKS; MARKINGS.
11.1 TRADEMARKS AND TRADE NAMES. Subject to Section 11.3, CAERE hereby
grants to Licensee the limited, nonexclusive right during the term of this
Agreement to use the trademarks, trade names and other marketing names used by
CAERE, a current list of which is set forth in Exhibit E hereto (the
"Trademarks"), in connection with its advertising, promotion and marketing of
the Product and in related product brochures and other materials. CAERE may from
time to time attach other or additional Trademarks or names to Products. CAERE
grants no rights other than expressly granted hereunder, and Licensee hereby
agrees to and recognizes CAERE's exclusive ownership of such marks and names and
the renown of CAERE's Trademarks and names worldwide. Licensee agrees not to
take any action inconsistent with such ownership and further agrees to take any
action, at CAERE's cost, including without limitation, the conduct of LEGAL
proceedings, which CAERE deems necessary to establish and preserve CAERE's
exclusive rights in and to its Trademarks and trade names.
11.2 MARKINGS. Any reproduction of CAERE's Trademarks, logos, symbols
and other identifying marks shall be true reproductions. Licensee will not
remove or make or permit alterations to any labels or other identifying markings
placed by CAERE on any Product or Documentation.
11.3 USE OF CAERE'S MARKS AND NAMES. Licensee may use CAERE's
Trademarks in Licensee's advertising and promotional materials subject to
CAERE's prior written approval, which approval shall not be unreasonably
withheld.
11.4 USE OF LICENSEE'S NAMES. CAERE may use Licensee's name and the
name of the Final Products in CAERE promotional literature and marketing
materials, subject to Licensee's prior written approval, which approval shall
not be unreasonably withheld.
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12. CONFIDENTIALITY.
12.1 CONFIDENTIAL INFORMATION. The term "Confidential Information"
means any technical or non-technical information relating to CAERE, Licensee,
the Products, Documentation and Licensee Products, such as product plans, costs,
prices, names, finances, marketing plans, business opportunities, personnel and
the like, which is disclosed by one party ("Disclosing Party") to the other
party ("Receiving Party") in a written or other tangible form clearly marked
"Confidential" or with a comparable legend. Oral or visual information shall not
be considered Confidential Information unless it is designated confidential by
Disclosing Party at the time of such oral or visual disclosure, and subsequently
reduced to writing clearly marked "Confidential" or with a comparable legend,
and sent to Receiving Party within thirty (30) days after such oral or visual
disclosure.
12.2 NO USE OF CONFIDENTIAL INFORMATION FOR OWN PURPOSE. During this
Agreement, and for one (1) year after the termination of this Agreement,
Receiving Party agrees to keep Confidential Information of Disclosing Party in
confidence, and shall neither disclose it to any third party nor use the same
for any purposes other than those contained in this Agreement. Notwithstanding
the foregoing, Receiving Party shall have no confidentiality obligation and no
use restriction with respect to any information that:
(a) the Disclosing Party approves, by prior written consent,
Receiving Party to release or disclose to any third parties;
(b) the Receiving Party already knows, as evidenced by its written
and dated records, when received from Disclosing Party;
(c) the Receiving Party receives in good faith from a third party
lawfully in possession thereof and having no similar obligation to keep such
information confidential;
(d) is or becomes publicly known to Receiving Party at or after
the Receiving Party receives it from Disclosing Party through no fault of
Receiving Party;
(e) the Disclosing Party furnishes to a third party without a
similar restriction;
(f) the Receiving Party independently develops without using the
Disclosing Party's Confidential Information; or
(g) is disclosed pursuant to the requirement of a governmental
agency or disclosure is required by operation of law.
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13. INFRINGEMENT INDEMNITY.
13.1 CAERE'S' INDEMNITY.
(a) CAERE shall, at its own expense, defend Licensee against any
third party claim, action, suit or proceeding, claiming that any Product
furnished and used within the scope of this Agreement or the use, sale or other
disposition thereof, infringes any U.S. copyright or U.S. patent right existing
or issued as of the Effective Date. CAERE shall indemnify Licensee for all
losses, damages and all reasonable expenses and costs incurred by Licensee as a
result of a final judgment entered against Licensee in any such claim, action,
suit or proceeding; provided that Licensee gives CAERE prompt written notice of
any such claim, grants CAERE control of the defense and any settlement thereof,
and reasonably cooperates with CAERE at CAERE's expense.
(b) If the Products, in whole or in part, are or in CAERE's
opinion may become, the subject of any claim, action, suit or proceeding for
infringement of, or if it is judicially determined that the Products, in whole
or in part, infringe any third party's U.S. copyright or U.S. patent right, or
if the Product's use is enjoined, then CAERE may, at its option and expense: (1)
procure for Licensee the right to continue the Product's sale and use; (2)
replace or modify the Product so as not to infringe such third party's copyright
or patent right while conforming, as closely as possible, to the Documentation,
or (3) terminate this Agreement as to such Products. The foregoing remedial
actions shall not affect the royalty rates and do not relieve CAERE from its
obligations under Section 13.1(a)
13.2 LIMITATION ON LIABILITY/EXCLUSIVE REMEDY.
(a) CAERE will have no liability under Section 13.1 for any
infringement claim based upon: (i) the use or combination of the Products with
software, hardware, or other materials not provided by CAERE; (ii) components or
software which were not manufactured by CAERE; (iii) the Licensed Components;
and (iv) any use of an altered version of the Products.
(b) SECTIONS 13.1 AND 13.2 STATE CAERE'S ENTIRE OBLIGATION AND
LIABILITY WITH RESPECT TO ANY CLAIMS OF PATENT, COPYRIGHT OR OTHER PROPRIETARY
RIGHT INFRINGEMENT.
14. LICENSEE'S INDEMNITY.
Licensee shall, at its own expense, defend and hold harmless CAERE
against any third party claim, action, suit or proceeding alleging that any
Licensee Product furnished and used within the scope of this Agreement or the
use, sale or other disposition thereof, infringes any U.S. copyright or patent
right existing or issued as of the Effective Date. Licensee shall indemnify
CAERE for all losses, damages and all reasonable expenses and costs incurred by
CAERE as a result of a final judgment entered against CAERE in any such claim,
action, suit or proceeding; provided that CAERE gives Licensee prompt written
notice of any such claim,
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grants Licensee control of the defense and any settlement thereof, and
reasonably cooperates with Licensee at Licensee's expense.
15. TERM.
The term of this Agreement shall expire 24 months from the Effective
Date unless terminated earlier by either party by delivering written notice (a)
to the other prior to thirty (30) calendar days preceding expiration of the term
of this Agreement or (b) in accordance with Section 16. This Agreement shall
automatically be renewed for an additional one year term unless terminated by
either party by delivering written notice to the other party at least 90 days
prior to the scheduled expiration of the current term.
16. TERMINATION.
16.1 TERMINATION FOR CAUSE BY EITHER PARTY. Subject to Section 16.2,
either party may, by written notice to the other party, terminate this Agreement
upon the occurrence of any one or more of the following events:
(a) Upon the failure of the other party to pay any monies when
payable hereunder, if such default continues for five (5) business days or more
after written notice to the other party;
(b) Upon material failure of the other party to observe, keep or
perform any of the covenants, terms or conditions herein (other than as provided
in (a) above), if such default continues for thirty (30) days after written
notice by the other party; or
(c) If the other party ceases to function as a going concern or to
conduct its operations in the normal course of business.
16.2 TERMINATION BY CAERE. CAERE may, by written notice to Licensee,
immediately terminate this Agreement upon the occurrence of any one or more of
the following events:
(a) In the event Licensee or its sublicensees, are in breach of
Sections 2, 11 or 12.2 of this Agreement;
(b) In the event Licensee or is sublicensees, fail to fully comply
with any and all governmental laws and regulations pertaining to the
exportation from the United States of the Products covered by this Agreement.
16.3 EFFECT OF TERMINATION. Upon termination of expiration of this
Agreement:
(a) All licenses and rights granted to Licensee under this
Agreement shall terminate;
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(b) Licensee shall promptly return to CAERE all marketing and
selling materials, all manuals, all technical data and all other documents and
copies thereof previously supplied by CAERE, except such documents as are
necessary for Licensee to provide support to End Users;
(c) Licensee shall cease using CAERE's name, trademarks and trade
names and refrain thereafter from representing itself as a Licensee of CAERE;
(d) Termination by either party under this Agreement shall not
affect the sublicenses previously granted by Licensee to End Users; and
(e) Any other rights of either party which may have accrued up to
the date of such termination or expiration shall not be affected.
17. GENERAL TERMS.
17.1 ASSIGNMENT. Licensee may not assign this Agreement in whole or in
part without CAERE's prior written consent which shall not be unreasonably
withheld; provided, however, that no such consent shall be required in
connection with the sale of Licensee's business by merger, reorganization, sale
of assets, sale of stock or otherwise to a party that does not compete with
Caere. Caere may assign this Agreement, its rights, obligations and duties under
this Agreement and the Agreement will inure to the benefit of and be binding on
CAERE's successors and assigns.
17.2 RIGHT TO ENTER AGREEMENT. Each party has full power and authority
to enter into and perform this Agreement, and the person signing this Agreement
on behalf of each has been properly authorized and empowered to enter into this
Agreement. Each party further acknowledges that it has read this Agreement,
understands it, and agrees to be bound by it.
17.3 NOTICES. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed effective when mailed by registered or certified mail, postage prepaid,
and received by the party at its respective address and representative as set
forth on the signature page below. Either party may change its address by
written notice to the other.
17.4 SEVERABILITY AND HEADINGS. If any of the provisions, or portions
thereof, of this Agreement is held by a court of competent jurisdiction to be
invalid under any applicable statute or rule of law, the parties agree that such
invalidity shall not affect the validity of the remaining portions of this
Agreement and further agree to substitute for the invalid provision a valid
provision which most closely approximates the intent and economic effect of the
invalid provision. Headings used in this Agreement are for reference purposes
only and in no way define, limit, construe or describe the scope or extent of
such section, or in any way affect this Agreement.
17.5 NON-WAIVER. No term or provisions hereof shall be deemed waived
and no breach excused, unless such waiver or consent shall be in writing and
signed by the party
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claimed to have waived or consented. Any consent by any party to, or waiver of,
a breach by the other, whether express or implied, shall not constitute a
consent to, waiver of, or excuse for any other different or subsequent breach.
17.6 FORCE MAJEURE. If the performance of this Agreement, or any
obligation hereunder, except the making of payments hereunder, is prevented,
restricted or interfered with by reason of fire, flood, earthquake, acts of God,
explosion or other casualty of war, labor dispute, inability to procure or
obtain delivery of parts, supplies or power, violence, any law, order,
regulation, ordinance, demand or requirement of any governmental agency, or
any other act or condition whatsoever beyond the reasonable control of the
affected party, the party so affected, upon giving prompt notice to the other
party, will be excused from such performance to the extent of such prevention,
restriction or interference.
17.7 INDEPENDENT CONTRACTOR. The parties' relationship shall be solely
that of independent contractor and nothing contained in this Agreement shall be
construed to make either party an agent, partner, co-venturer, representative or
principal of the other for any purpose, and neither party shall have any right
whatsoever to incur any liability or obligation on behalf of or binding upon the
other party.
17.8 SURVIVAL. Sections 4.5, 7, 8, and 17 of this Agreement shall
survive the termination of this Agreement.
17.9 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California, excluding its conflicts of law
principles. Any suit hereunder shall be brought in the federal or state courts
in Santa Clara County, California and Licensee submits to the jurisdiction
thereof. The parties exclude the application of the 1980 United Nations
Convention on Contracts for the International Sale of Goods if applicable.
17.10 ENTIRE AGREEMENT; AMENDMENT. This Agreement, including Exhibits A
through E, which are hereby incorporated into and made a part of this Agreement,
constitute the final, complete and exclusive entire agreement between the
parties with respect to the subject matter hereof and supersedes any previous
proposals, negotiations, agreements, arrangements, or warranties, whether verbal
or written, made between the parties with respect to such subject matter. It is
expressly understood and agreed that sales conditions of the Products as
contained in orders or any other form or request submitted by Licensee to CAERE
shall be subject to the provisions of this Agreement, and in no event shall the
terms and conditions set forth in such order or other business form, whether it
is CAERE's standard or not, be applicable to the transactions between the
parties under this Agreement. This Agreement shall control over any additional
or conflicting term in any of Licensee's purchase orders or other business
forms. This Agreement may only be amended or modified by mutual agreement of
authorized representatives of the parties in writing.
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17.11 ATTORNEY'S FEES. If any legal action is brought to construe or
enforce any provision of this Agreement, the prevailing party shall be entitled
to receive its attorneys' fees and court costs in addition to any other relief
it may receive.
CAERE CORPORATION KOFAX IMAGE PRODUCTS
100 Cooper Court 3 Jenner Street
Los Gatos, CA 95030 Irvine, CA 92718
By: /s/ SERGE BLANC By: /s/ KEVIN DRUM
------------------------------ ----------------------------------
Name: Serge Blanc Name: Kevin Drum
---------------------------- --------------------------------
Title: VP, ADE Title: VP Marketing
--------------------------- -------------------------------
Date: 10/1/96 Date: 9/19/96
---------------------------- --------------------------------
By: /s/ BLANCHE M. SUTTER
------------------------------
Name: Blanche M. Sutter
----------------------------
Title: Senior VP, CFO
---------------------------
Date: 9/23/96
----------------------------
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EXHIBIT A
LICENSEE PRODUCTS
Products
Ascent Scan Station
Ascent Scan Lite
Ascent Workstation
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EXHIBIT B
PRODUCTS
Product (Version and Platform)
- ------------------------------
WordScan Plus 3.0 for Windows 3.1x and Windows 95.
Other products may be added upon mutual consent of the parties.
Lanquages
- ---------
All languages supported by WordScan Plus 3.0 for Windows 3.1x and Windows 95.
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EXHIBIT C
SOFTWARE LICENSE AGREEMENT
PLEASE READ CAREFULLY BEFORE OPENING THIS ENVELOPE.
THIS AGREEMENT STATES THE TERMS AND CONDITIONS UPON WHICH CAERE CORPORATION
("CAERE") OFFERS TO LICENSE THE ENCLOSED SOFTWARE ("THE SOFTWARE") TO YOU. BY
OPENING THIS ENVELOPE, YOU ARE AGREEING TO BECOME BOUND BY THE TERMS OF THIS
AGREEMENT. IF YOU DO NOT AGREE TO THE TERMS OF THIS AGREEMENT, DO NOT OPEN THE
ENVELOPE. PROMPTLY RETURN THE SOFTWARE TO THE PLACE WHERE YOU OBTAINED IT.
The Software consists, in part, of an OCR Engine the provides OCR functionality.
You acknowledge that the value of the Software in large part consists of the
utility of the OCR Engine embedded therein. You further understand and
acknowledge that the OCR Engine may have utility with or be able to be called by
other software and/or hardware, which CAERE considers to be an unauthorized use
of the OCR Engine and the Software. Accordingly, you agree that you will use the
OCR Engine only as part of the Software, and not in conjunction with, as part
of, or as a component of, other software and/or hardware which make calls to
CAERE's OCR Engine.
1. License. The enclosed Software and documentation ("Documentation")
are licensed, not sold, to you for use only under the terms of this license, and
CAERE reserves all rights not expressly granted to you. This license allows you
to:
(a) for a single-user version, install and use in a limited manner
the Software for internal purposes only on a single computer (the Software is
considered in use when it is installed in the temporary memory, i.e. RAM, or the
permanent memory, i.e. hard drive); (b) for a multi-user version (e.g., a CAERE
10-User Pack), install and use in a limited manner the Software for internal
purposes only for the number of computers or simultaneous users identified in
the Documentation; (c) make one copy of the Software in machine-readable form
solely for backup purposes, provided that your backup is not installed on any
computer. You are only permitted to use the Software and the optical character
recognition ("OCR") software engine ("OCR Engine") embedded therein as described
in the Documentation provided to you.
You must reproduce on any copy all copyright notices and any other ownership,
confidentiality or proprietary legends that are on the original copy of the
Software. The enclosed disk may contain two system versions of the Software (a
Macintosh version and a Windows version) and multiple language versions of the
Software. For a single user license, you may install one system and language
version of the Software on a single computer; you may not install the other
versions on another computer. For a multi-user license, you may install the
Software (regardless of version) only on the number of computers or for the
number of simultaneous users identified in the Documentation. For example, if
you have purchased a 10-user license, you may install, on up to 10 computers or
for 10 simultaneous users, 7 Windows and 3 Macintosh versions in one language,
or any other combination of the two system and language versions you choose that
total ten copies.
2. Restrictions: (a) You may not market, distribute or transfer copies
of the Software or Documentation to others or electronically transfer the
Software from one computer to another over a network except as provided for
above; (b) you may not decompile, reverse engineer, disassemble or otherwise
reduce the code of the Software to a human perceivable form; (c) YOU MAY NOT
MODIFY, ADAPT, TRANSLATE, RENT, LEASE OR LOAN THE SOFTWARE OR DOCUMENTATION OR
CREATE DERIVATIVE WORKS BASED ON THE SOFTWARE OR DOCUMENTATION; (d) The Software
and Documentation are copyrighted. Unauthorized copying of the Software,
including portions thereof or the written materials, is expressly forbidden; (e)
You understand that CAERE may update or revise the Software and in so doing
incurs no obligation to furnish such updates to you; (f) If you upgrade the
Software to a higher-numbered version of the Software or to a comparable CAERE
software product (including versions for different operating systems), this
license is terminated and your rights shall be limited to the license associated
with that product or version.
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3. Termination. This License is effective until terminated. Except for
Sections 6, 7, and 8, this License shall terminate automatically upon the
earlier of your breach of your obligations under the License or January 1. 2030.
Upon termination, you agree that you will destroy the Software and all copies.
This remedy shall be in addition to any other remedies available to CAERE.
4. Export Control. You agree that the Software and Documentation will
not be shipped, transferred or exported into any country or used in any manner
prohibited by the United States Export Administration Act or any other export
laws, restrictions or regulations.
5. Government End Users. The Software is a "commercial item," as that
term is defined at 48 C.F.R. 2.101 (OCT 1995), consisting of "commercial
computer software" and "commercial computer software documentation," as such
terms are used in 48 C.F.R. 12.212 (SEPT 1995). Consistent with 48 C.F.R. 12.212
and 48 C.F.R. 227.7202-1 through 227.7202-4 (JUNE 1995), all U.S. Government End
Users acquire the Software and Documentation with only those rights set forth
herein.
6. Limited-Warranty. CAERE warrants that the Software and the
accompanying media will perform substantially in accordance with the
specification set forth in the Documentation for a period of ninety (90) days
after your payment of the license fee, when properly installed on a computer for
which a license is granted hereunder. CAERE does not warrant that the operation
of the Software will meet your requirements or operate free from error. CAERE
DISCLAIMS ALL OTHER WARRANTIES AND CONDITIONS EITHER EXPRESS OR IMPLIED,
INCLUDING THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE
AND NON-INFRINGEMENT OF THIRD PARTY RIGHTS. NO ORAL OR WRITTEN INFORMATION OR
ADVICE GIVEN BY CAERE, ITS DEALERS, DISTRIBUTORS, AGENTS OR EMPLOYEES SHALL
CREATE A WARRANTY OR IN ANY WAY INCREASE THE SCOPE OF THIS WARRANTY AND YOU MAY
NOT RELY ON ANY SUCH INFORMATION OR ADVICE. SOME STATES DO NOT ALLOW THE
EXCLUSION OF IMPLIED WARRANTIES, SO THE ABOVE EXCLUSION MAY NOT APPLY TO YOU.
THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS AND YOU MAY ALSO HAVE OTHER LEGAL
RIGHTS WHICH VARY FROM STATE TO STATE.
7. Limited Remedies. If the Software or media fails to perform as
warranted, your sole and exclusive remedy shall be to return the media to CAERE,
postage prepaid, with a copy of the receipt. CAERE shall, at its option, (i)
replace the Software or media with Software or media which conforms to the
warranty, or (ii) correct the error. CAERE SHALL NOT BE LIABLE FOR ANY
INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING DAMAGES FOR LOST BUSINESS
PROFITS, LOSS OF INFORMATION, BUSINESS INTERRUPTION, OR THE LIKE) ARISING OUT OF
THE USE OR INABILITY TO USE THE SOFTWARE EVEN IF CAERE OR ITS REPRESENTATIVE
HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. SOME STATES DO NOT ALLOW
THE LIMITATION OR EXCLUSION OF LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES
SO THE ABOVE LIMITATION OR EXCLUSION MAY NOT APPLY TO YOU.
8. Limited Liability. The liability of CAERE for any claims arising out
of this License based upon the Software, regardless of the form of action, shall
not exceed the license fee for the Software.
9. General. This License shall be governed and interpreted in
accordance with the laws of the State of California, USA, without giving effect
to choice of law principles. This License shall not be governed by the United
Nations Convention for the International Sales of Goods, the application of
which is expressly excluded. This License contains the entire agreement between
the parties with respect to the subject matter hereof, and supersedes all prior
agreements or understandings (oral or written).
If you have any questions about this License, contact CAERE at: 100 Cooper
Court, Los Gatos, California 95030, USA, Attn: Contract Administrator.
17
<PAGE> 18
EXHIBIT D
LICENSEE ROYALTIES
ROYALTIES
a. Licensee shall pay to CAERE the following royalties for each copy of
a Product, including Products distributed with Final Product upgrades,
distributed by or on behalf of Licensee during the term of this Agreement:
Ascent Module Royalty
------------- -------
Scan Station [ * ]
Scan Lite [ * ]
Workstation [ * ]
b. Prepaid Royalties. Licensee agrees to pay [ * ] in non-refundable
prepaid royalties to CAERE upon the execution of this Agreement. Such prepaid
royalties are based on 25% of the total revenue forecasted to Caere based on
sales of 1,000 copies sold over 12 months. Prepaid royalties shall be credited
against sales of the Final Products. Additional royalties shall not accrue until
the prepaid royalties have been fully credited against future sales of Final
Products.
c. "Net Selling Price" is defined as the price Licensee charges its End
Users for the Final Products net of returns or allowances according to the
Generally Accepted Accounting Principles (GAAP).
d. Evaluation Copies. Licensee may distribute evaluation copies
("Evaluation Copies") to End Users without incurring a royalty provided that
such Evaluation Copies are designed such that all of the software on the
Evaluation Copies "times out" and becomes unusable no later than 30 days from
the date of receipt of such Evaluation Copies by the End User.
18
* Such portions are filed under an application for confidential treatment.
<PAGE> 19
EXHIBIT E
TRADEMARKS, TRADE NAMES
Caere(R)
WordScan(R)
19
<PAGE> 1
EXHIBIT 10.21
SOFTWARE LICENSE AGREEMENT
This License Agreement ("Agreement") made as of October 1, 1993, between
Softbridge Inc., a corporation incorporated under the laws of the Commonwealth
of Massachusetts having its principal place of business at 125 CambridgePark
Drive, Cambridge, Massachusetts 02140 ("Softbridge") and Kofax Image Products
("Customer") having its principal place of business at 3 Jenner Street, Irvine,
CA 92718.
WITNESSETH
WHEREAS, Softbridge has developed and owns certain computer software known as
Softbridge Basic Language herein after referred to as "Product"; and,
WHEREAS, Softbridge desires to license Product to Customer and Customer desires
to license Product from Softbridge on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, license grant and mutual
covenants contained herein, the parties hereto agree as follows:
SECTION I
DEFINITIONS
1.1 "Product" - Product refers to components of the current release of
Softbridge Basic Language ("SBL"), as described in Exhibit A, that is supplied
to Customer under the terms of this Agreement. Product shall be provided in the
form of a run-time version.
1.2 "Documentation" - Documentation shall mean the "SBL - Language Reference
Manual" and the "SBL - API Reference Manual".
1.3 "Product Releases" - A new Release is a major enhancement of Product and
identified with an integer version number i.e., Release 2.0.
1.4 "Maintenance Release" - A Maintenance Release updates an existing Release by
correcting documented bugs or adds minor features and is identified by a decimal
integer appended to the Product Release number. i.e. Release 2.1.
1.5 "Customer" - Customer shall mean Kofax Image Products and its authorized
affiliates and subsidiaries.
1.6 "Application"- The set of current software programs into which Customer
wishes to integrate Product, as described in Exhibit C. Should Customer wish to
integrate Product into future software programs, it shall provide an update
Exhibit to C, and such software programs shall be covered by the terms and
conditions of this Agreement.
1.7 "Product Platform" - Product Platform shall refer to a copy of the Product
which runs within a particular operating environment, such as, Microsoft's
Windows or IBM's OS/2.
CONFIDENTIAL TREATMENT
<PAGE> 2
SECTION 2
LICENSE OF THE PRODUCT
2.1 License. Subject to the terms and conditions of this Agreement, including
the payment of fees (see section 2.2), Softbridge hereby grants to Customer a
personal, non-exclusive, non-transferable, worldwide license to incorporate the
Product in Customer's proprietary computer software Application(s), as described
in Exhibit C, and thereafter market, license and sub-license, without
restriction, the Customer's Application(s) which incorporate, have access to,
and utilize the Product and any modifications, enhancements and alterations made
by the Customer thereto.
Notwithstanding, the Customer may not sub-license the Product to any third party
for the purpose of embedding the Product into another software product nor may
the Customer sub-license the Product alone.
2.2 Consideration. The consideration which the Customer shall pay to Softbridge
for the foregoing license of the Product shall be composed of a one-time license
fee and a royalty payment based on revenues of the Customer's Application(s).
The timetable for and description of these payments are detailed in Exhibit B of
this Agreement.
2.3 Proprietary Rights. The Customer agrees that the Product is and shall remain
the sole property of and proprietary to Softbridge. Nothing in this Agreement
shall diminish or extinguish these rights and no title to or ownership of the
Product is transferred to the Customer. Softbridge agrees that all
modifications, enhancements and alterations made by or exclusively for the
Customer to the Product shall be and remain the sole property of and proprietary
to the Customer. Nothing in the Agreement shall diminish or extinguish these
rights and no rights to such modifications, enhancements and alterations are
granted hereby to Softbridge.
2.4 Delivery of Product. Upon the execution of this Agreement, Softbridge shall
deliver to the Customer the Product,(by magnetic diskettes or other media for
installation on the Customer's computers) and such other diskettes, tapes,
manuals, routines, development materials and other information as may relate to
or comprise the Product including without limitation the items described on
Exhibit A hereto. The Product will be shipped to the Customer (at the address
set forth on the signature page or such address specified by the Customer in
writing.) F.O.B. Cambridge, Massachusetts. Softbridge may package and ship the
product in any commercially reasonable manner.
2.5 Taxes. Prices and fees are exclusive of and Customer is responsible for all
applicable sales, use, personal property, excise or other similar taxes or
export and import taxes, duties and charges, however designated. Consequently,
in addition to the payments due hereunder, the amount of any present or future
sales, use, personal property, or other similar tax and export and import taxes,
duties and charges which become due based on the transactions provided for in
this Agreement shall be paid directly by the Customer or reimbursed by the
Customer to Softbridge, as necessary.
<PAGE> 3
SECTION 3
SUPPORT AND MAINTENANCE
Softbridge will provide Product support and maintenance to the Customer as
described in Exhibit B.
COVENANTS
4.1 Confidentiality. Each party hereto covenants that it will keep confidential
any confidential information relating to the Product or to the other party's
business, finances, marketing and technology to which it obtains access and that
it will take all reasonable precautions to protect such confidential information
of the other party or any part thereof from any use, disclosure or copying,
except to the extent technical information relating to the Product is used, by
the Customer for the purpose of (i) developing Application programs
incorporating the Product, (ii) obtaining any necessary governmental approvals,
or (iii) otherwise performing its rights or obligations as contemplated by this
Agreement. Confidential information of a party shall not include information
which (i) is or becomes available to the public through no fault of the other
party, (ii) is disclosed to the other party by a third party who had lawfully
obtained such information and without a breach of such third party's
confidentiality obligations, (iii) is developed independently by the other
party, or (iv) the party has given written permission to the other party to not
keep confidential.
4.2 Injunctive Relief. In the event of a breach of any of the provisions of
Section 4.1, the Customer agrees that Softbridge will not have an adequate
remedy at law, and accordingly the Customer agrees that Softbridge, in addition
to any other available legal or equitable remedies, is entitled to seek
injunctive relief against such breach without any requirement to post bond as a
condition of such relief.
4.3 Copyright Protection. Neither Softbridge nor the Customer shall publish or
distribute the Product in a manner which would jeopardize or preclude protection
thereof under applicable copyright laws, or would diminish the trade secret
status of the Product.
4.4 Reverse Compiling. The Customer shall not attempt to create or permit others
to attempt to create, by reverse compiling or disassembling or otherwise, any
part of the source program for the Product from the object code or from other
information made available to the Customer.
4.5 Copies. The Customer may make machine readable copies of each Product and
copies of the Documentation and other documents as necessary for the use
authorized in this Agreement. All copies, whether in machine readable, printed,
or other form, are part of the Product and the Customer must include on all such
material Softbridge's notice of its proprietary rights in the form set forth in
the Product as delivered to the Customer.
4.6 Access. The Customer may make the Product accessible to its employees and
agents only, to the extent needed to exercise the licenses granted hereunder.
4.7 General Payment Terms. Softbridge reserves the right to charge interest on
past due amounts at a rate equal to twelve percent (12%) per annum. In the event
that Softbridge is required to take legal action to collect unpaid amounts and
Softbridge is successful in such action, the Customer shall reimburse all costs
and reasonable attorneys fees incurred by Softbridge in such collection.
4.8 Software Certification. Softbridge may, at any time, require Customer to
certify in writing that Customer has performed its obligations pursuant to this
Software License Agreement.
<PAGE> 4
4.9 Product Source Code. Provided all monies due Softbridge have been paid and
that Customer has complied with the terms of this Agreement, Customer shall have
the option to license Product Source Code at Softbridge's then prevailing
charges, terms, and conditions. Notwithstanding the above, the one-time fee for
licensing the source code on the date of this Agreement is acknowledged to be
[*]. If Customer exercises its option to license the source code, the fee
charged to Customer shall be the lesser of the current prevailing charges as
published by Softbridge, or the current [*] fee (increased by a prorated annual
percentage of 10%). This option expires January 1, 1995.
At the request of Customer and with a mutually agreed upon escrow agreement in
place, Softbridge shall deposit one complete current copy of the source code
which comprises the Product with a mutually agreeable escrow agent and shall
promptly update the deposit to reflect the source code of the most recent
Product as Maintenance Releases and Product Releases are made. Customer will
assume all costs and expenses associated therewith including time and handling
changes at Softbridge's current rates.
SECTION 5
WARRANTY AND INDEMNIFICATION
5.1 Express Warranties. Softbridge hereby represents and warrants to Customer
that (i) Softbridge has all rights, absolute title and interest in and to the
Product subject to no adverse claim, lien, encumbrance or license or rights of
any nature of any third party, including, but not limited to, ownership, patent,
trademark, copyright or trade secrecy claims or rights of any kind, (ii) the
Product will substantially conform to its published specifications. (iii) the
Product is not in the public domain and does not infringe upon any intellectual
property rights of any other person, and (iv) Softbridge has the full and
unrestricted right, power and authority to enter into this Agreement, to license
the Product to the Customer and to consummate the transactions contemplated
hereby.
This warranty is limited and shall not apply to: (a) Components of the Product
not of Softbridge origin, or (b) failure of the Product to satisfy this warranty
if determined by Softbridge to result from (i) improper use of the Product, (ii)
operation of the Product outside the environmental conditions specified on the
User Documentation, (iii) modifications to the Product not made by Softbridge,
(iv) other conditions external to the Product that occur following delivery of
the Product by Softbridge, or (v) any Release of the Product that is designated
"beta test software" or "pre-release software" by Softbridge.
5.2 EXCLUSION OF IMPLIED WARRANTIES. ANY AND ALL OTHER WARRANTIES AS TO THE
PRODUCT AND USER DOCUMENTATION, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE OR USE, ARE SPECIFICALLY EXCLUDED, WAIVED
AND NEGATED. SOFTBRIDGE MAKES NO WARRANTIES AS TO THE ACCURACY OR COMPLETENESS
OF USER DOCUMENTATION OR THAT THE PRODUCT IS ERROR FREE.
5.3 LIMITATION OF LIABILITY. (a) NEITHER SOFTBRIDGE NOR ANYONE ELSE WHO HAS BEEN
INVOLVED IN THE CREATION, PRODUCTION OR DELIVERY OF THE PRODUCT SHALL BE LIABLE
FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, SUCH AS, BUT NOT LIMITED
TO, LOSS OF ANTICIPATED PROFITS OR BENEFITS, LOSS RESULTING FROM THE USE OF THE
PRODUCT OR ARISING OUT OF ANY BREACH OF ANY WARRANTY. EXCEPT AS EXPRESSLY
PROVIDED ABOVE, SOFTBRIDGE SHALL HAVE NO LIABILITY FOR ANY CLAIM OF ANY KIND OR
NATURE, INCLUDED BUT NOT LIMITED TO SOFTBRIDGE'S NEGLIGENCE, ARISING OUT OF OR
IN ANY WAY RELATED TO THIS AGREEMENT, OR IN CONNECTION WITH ANY USE OR OTHER
EMPLOYMENT
* Such portions are filed under an application for confidential treatment.
<PAGE> 5
OF ANY PRODUCT LICENSED TO THE CUSTOMER HEREUNDER, WHETHER SUCH LIABILITY ARISES
FROM ANY CLAIM BASED UPON CONTRACT, WARRANTY, OR OTHERWISE, WHICH MAY BE
ASSERTED BY THE CUSTOMER.
(b) SOFTBRIDGE'S LIABILITY TO THE CUSTOMER FOR DIRECT LOSS OR DAMAGE WHETHER IN
NEGLIGENCE, CONTRACT OR OTHERWISE ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT, OR THE OPERATION OR FAILURE TO OPERATE OF THE PRODUCT, SHALL IN ANY
EVENT BE LIMITED IN RESPECT OF ANY ONE INCIDENT OR SERIES OF CONNECTED INCIDENTS
TO THE SUM OF THE MONIES PAID TO SOFTBRIDGE BY THE CUSTOMER UNDER THIS
AGREEMENT.
5.4 Notification. Each party shall notify the other in writing of any claim or
other legal proceeding involving the Product promptly after it becomes aware of
any such claim of proceeding. The Customer will also report promptly to
Softbridge all claimed or suspected failures of the Product to conform to the
Documentation promptly after the Customer becomes aware of any such claimed or
suspected failure, during the first year of this Agreement.
5.5 Indemnification by Softbridge. Softbridge represents the Product as
delivered to the Customer does not infringe any valid claim of copyright or
trademark of any third party, or any valid claim under any U.S. patent that has
issued as of the date of delivery. Softbridge will defend, indemnify and hold
harmless the Customer against any claim of infringement of the aforementioned
rights, provided that the Customer gives Softbridge prompt written notice
thereof, grants Softbridge sole control of the defense and any related
settlement negotiations and cooperates with Softbridge in the defense of such
claim. In the event that use of the Product is finally enjoined, Softbridge, at
its option, will either (i) procure for Customer the right to use that Product,
(ii) replace the Product with a substantially equivalent program the use of
which is not so enjoined, or (iii) refund the license fee paid for the Product.
Notwithstanding the foregoing, Softbridge shall have no liability to Customer if
the infringement results from (a) use of the Product in combination with
particular software or hardware, if such infringement would not have resulted
from the use of the Product with other software or hardware, whether or not such
other software or hardware is capable of performing the same functions as the
particular software or hardware actually used in combination with the Product,
(b) modifications to the Product not made by Softbridge if such infringement
would have been avoided by the absence of such modification, or (c) use of other
than the version of the Product most recently offered to Customer if such
infringement would have been avoided by use of such a current version. THE
FOREGOING STATES THE ENTIRE LIABILITY OF SOFTBRIDGE WITH RESPECT TO INFRINGEMENT
OF INTELLECTUAL PROPERTY RIGHTS OR CONTRACTUAL RIGHTS OF THIRD PARTIES BY THE
PRODUCT(S) OR ANY PARTS THEREOF.
5.6 Exclusive Remedies. The Customer's exclusive remedies for any claims against
Softbridge arising out of the Agreement shall be limited to the following, at
the option of Softbridge: (a) replacement by Softbridge of the Product with
software that functions substantially in accordance with the User Documentation;
(b) repair by Softbridge of the Product, by patch or work around, so that it
functions substantially in accordance with the User Documentation or, (c) refund
by Softbridge of the monies paid by Customer and received by Softbridge in
respect of the Product. Customer acknowledges that this Section 5.6 limits its
remedies in the event that Softbridge has breached any of its obligations to
Customer. WITHOUT LIMITING THE FOREGOING, SOFTBRIDGE AND THE CUSTOMER AGREE THAT
IF ANY REMEDY HEREUNDER IS DETERMINED TO HAVE FAILED OF ITS ESSENTIAL PURPOSE,
ALL LIMITATIONS AND EXCLUSIONS OF LIABILITY SET FORTH HEREIN SHALL REMAIN IN
EFFECT.
<PAGE> 6
SECTION 6
TERM AND TERMINATION
6.1 Term: Termination for Convenience. This Agreement shall take effect on the
date it is executed by Softbridge and shall continue in effect for one year, and
thereafter from year to year, unless and until terminated by Customer on thirty
(30) days prior written notice, by Softbridge for noncompliance with any of the
terms of this Agreement by Customer, or at any time, by mutual written agreement
of the parties.
6.2 Termination for Cause. The occurrence of any of the following events shall
constitute a default under the terms of this Agreement:
a) The default by Customer in the payment of any amount due hereunder, if
any, after written notice of a thirty (30) day grace period to allow
Customer to cure such default,
b) The breach by Customer of the provisions of Sections 2.1, 2.3, or, 4.1,
if any, after written notice of a thirty (30) day grace period to
allow Customer to cure such breach, if such breach can be cured.
6.3 Effect of Termination. If this Agreement is terminated a) the license
granted hereunder shall be terminated; b) Customer's right to distribute the
licensed Product shall end immediately; and c) Customer shall return or destroy
all copies of Product in Customer's possession and certify in writing that all
copies of Product have been destroyed or returned.
Notwithstanding any provisions herein to the contrary, following any termination
of this Agreement and for so long as thereafter (but not to exceed 12 months) as
is necessary for Customer to satisfy, and solely to satisfy, its then existing
contractual obligations for maintenance services to its end users, Customer
shall have a limited license to use the Product solely for such purposes.
None of Customer's existing sublicenses to its end users for Product in
Customer's proprietary computer software application(s) shall be affected by any
termination of this Agreement and shall remain in full force and effect until
the end of their then respective terms.
6.4 No Damages for Termination. Neither Softbridge nor Customer shall be liable
to the other for damages of any kind, including but not limited to lost profits
or incidental, punitive or consequential damages, relative to termination of
this Agreement in accordance with Section 6.1 or 6.2, even if advised of the
possibility of such damages.
6.5 Survival. Sections 2.3 and 4.1, as well as Customer's obligations to pay
Softbridge all sums due hereunder, shall survive termination or expiration of
this Agreement.
SECTION 7
MISCELLANEOUS PROVISIONS
7.1 Headings. Headings in this Agreement are included solely for convenience of
reference and are not to be considered part of this Agreement.
7.2 No Joint Venture. This is an Agreement between separate legal entities and
neither is the agent or employee of the other for any purpose whatsoever. The
parties do not intend to create a partnership or joint venture between
themselves. Neither party shall have the right to bind the
<PAGE> 7
other to any Agreement with a third party or to incur any obligation or
liability on behalf of the other party.
7.3 Waiver. The failure of either party to exercise any of its rights under this
Agreement or to require the performance of any term or provision of this
Agreement, or the waiver by either party of such breach of this Agreement, shall
not prevent a subsequent exercise or enforcement of such rights or be deemed a
waiver of any subsequent breach of the same or any other term or provision of
this Agreement. Any waiver of the performance of any of the terms or conditions
of this Agreement shall be effective only if in writing and signed by the party
against which such waiver is to be enforced.
7.4 Validity. If any of the terms and provisions of this Agreement are invalid
or unenforceable, such terms or provisions shall not invalidate the rest of the
Agreement which shall remain in full force and effect as if such invalidated or
unenforceable terms or provisions had not been made a part of this Agreement. In
the event this Section 7.4 becomes operative, the parties agree to attempt to
negotiate a settlement that carry out the economic intent of the term(s) found
invalid or unenforceable.
7.5 Force Majeure. If circumstances beyond the control of the parties shall
temporarily make it impossible for either or both of them to perform their
agreements hereunder, then the principles of force majeure shall apply and the
rights and obligations of the parties shall be temporarily suspended during the
force majeure period to the extent that such performance is reasonably affected
thereby.
7.6 Notices. All notices and other communications herein provided for shall be
sent by postage prepaid, registered or certified mail, return receipt requested,
or delivered personally to the parties at their respective addresses as set
forth on the first page of this Agreement or to such other address as either
party shall give to the other party in the manner provided herein for giving
notice. Notice by mail shall be considered given on the date received. Notice
delivered personally shall be considered given at the time it is delivered.
7.7 Transfer, etc. Neither party may assign, transfer or delegate this Agreement
or any such party's right and obligation hereunder to any third party hereto,
without the consent of the other party, which consent shall not be unreasonably
withheld. Each party may assign this Agreement and such party's rights and
obligations hereunder to a subsidiary or affiliate so long as such party remains
primarily liable for its obligations hereunder. In addition, either party may
assign this Agreement, and its rights and obligations hereunder, to any party
that acquires substantially all of such party's stock or assets relating to
that portion of such party's business that is related to the subject of this
Agreement. Any attempted assignment, delegation, or transfer in contravention of
this Agreement shall be null and void.
7.8 Successors and Permitted Assigns. This Agreement shall inure to the benefit
of and be binding upon each of the parties hereto and their respective
successors and permitted assigns.
7.9 Complete Agreement. This Agreement contains the whole Agreement between the
parties concerning the subject matter hereof and there are no collateral or
precedent representations, agreements or conditions not specifically set forth
herein.
7.10 Modification or Amendment. Any modification or amendment of any provision
of this Agreement must be in writing, signed by the parties hereto and dated
subsequent to the date hereof.
7.11 Laws Governing Agreement. The validity of this Agreement and the rights,
obligations and relations of the parties hereunder shall be construed and
determined under and in accordance
<PAGE> 8
with the laws of the State of Massachusetts without giving effect to the
conflict of laws rules of such State.
7.12 No Third Party Beneficiaries The provisions of this Agreement are solely
for the benefit of the parties hereto, and not for the benefit of any other
person, persons or legal entities.
Customer Softbrid
Name [SIG] Name [SIG]
----------------------------- ----------------------------------
Title CFO Title GM
---------------------------- ---------------------------------
Date Feb. 3, 1994 Date Feb. 1, 1994
----------------------------- ----------------------------------
<PAGE> 9
EXHIBIT A
SBL SOFTWARE DEVELOPMENT KIT (SDK) The set of SBL software and documentation
components necessary to integrate SBL into the Application. This set
includes
o software files to build a copy of SBL with a Customer specific name that is
different than SBL.DLL,
o C headers files and library files for linking SBL to the Customer's
Application,
o files containing the SBL on-line documentation required for the integration
of the SBL help text into the Customer's Application,
o source files and build scripts for Sb/Edit. Sb/Edit can be modified by
Customer and integrated into Application.
o the SBL - Language Reference Manual,
o the SBL - API Reference Manual.
The SBL language will implement and conform with the SBL - Language Reference
Manual. The SBL Application Programmer's Interface (API) will implement and
conform with the SBL - API Reference Manual.
SBL RUNTIME DISK(S)
Contains the Sb/Edit program, SBL.DLL, SBL on-line help files, and example SBL
programs.
SBL PRODUCT PLATFORMS
The currently defined Product Platforms for SBL are:
Windows and Windws/NT Product Platform
Product shall be provided for the Windows Product Platform operating environment
initially. Other commercially available Product Platform operating environments
will be provided to Customer upon request at no additional license fee.
<PAGE> 10
Exhibit B
1 LICENSE FEES AND ROYALTY PAYMENTS
Customer shall pay to Softbridge for Product a one time license fee and royalty
payments as follows:
1.1 ONE TIME LICENSE FEE. Customer shall pay a one time license fee of [*] as
follows
Date Amount
---- ------
Upon Agreement execution by Customer [ * ]
1.2. ROYALTY FEES
Within 30 days after the last day of each calendar quarter, Customer shall
report and pay Softbridge a royalty fee which is [*] multiplied by Customer's
Net Revenues for all Customer Application(s) which incorporate, have access to,
and utilize the Product commencing with the calendar quarter that Agreement is
executed by Customer.
As used in this Agreement, "Net Revenues" means all amounts actually received by
Customer from unrelated third parties in respect of the licensing of Customer
Applications but not including any taxes, shipping charges, services or like
charges.
2 CONVERSION TO OTHER SBL LICENSE ARRANGEMENTS:
2.1 CONVERTING TO UNLIMITED DISTRIBUTION LICENSE:
Customer shall have the option at the beginning of each calendar quarter
starting with the quarter that is at least two (2) years after the first
commercial shipment of Application which contains SBL to purchase a royalty
free, unlimited distribution license at Softbridge's then prevailing prices and
terms and shall be entitled to a credit based upon the below schedule:
a) [*] of royalties paid in previous four quarters, plus
b) [*] of royalties paid in the four quarter prior to a), plus
c) [*] of royalties paid in the four quarters prior to b).
2.2 CONVERTING TO OTHER ROYALTY BASED LICENSES:
Customer shall have the option at the beginning of each calendar quarter
starting with the quarter that is at least one (1) year after the first
commercial shipment of Application which contains SBL to convert to any other
royalty based license that Softbridge's currently has available. At time of
conversion, Customer will pay royalty and maintenance fees according with the
elected royalty plan.
Notwithstanding the above, the other royalty based licensing alternative at the
date of this Agreement is acknowledged as described in Exhibit D. Customer is
granted an option to convert to that license schedule on the one year
anniversary of the first commercial shipment of Application which contains SBL.
* Such portions are filed under an application for confidential treatment.
<PAGE> 11
3 MAINTENANCE:
Until September 31, 1994, Softbridge will, free of charge, provide i) all
Product Releases and Maintenance Releases, as well as ii) up to twelve (12)
telephone calls for support to assist Customer in the use of Product. Technical
phone support will be provided during Softbridge's normal business hours. Phone
support in addition to the aforementioned (12) calls will be billed to Customer
at [*] per phone call.
Starting with the calendar quarter beginning October 1, 1994, Softbridge will
continue providing Product Releases and up to three (3) telephone support calls
on quarterly basis, at no charge to Customer, if at least [*] in royalties are
paid in a previous calendar quarter for each Product Platform requested. If
royalty payment is below this amount, Customer has the option to pay any
difference. If Customer converts to another royalty license schedule,
maintenance will continue as long as minimum royalty payments are paid. Phone
support in addition to the aforementioned three (3) calls will be billed to
Customer at [*] per phone call.
* Such portions are filed under an application for confidential treatment.
<PAGE> 12
EXHIBIT C
CUSTOMER APPLICATION(S)
<TABLE>
- --------------------------------------------------------------------------------------------------------
Application Name Description Scheduled Release Date
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
AISP Document Capture Application that provides for indexing
System- Indexing of scanned or imported images.
Module
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 13
SCHEDULE D
SOFTBRIDGE, (embeddable) BASIC LANGUAGE
Royalty Based SBL License Schedule
Effective Date: May 10, 1993
ROYALTY AS NET
SALES % OF MINIMUM ANNUAL UP
REVENUES FRONT PAYMENT
1st Year [*] [*]
2nd Year [*] [*]
3rd Year [*] [*]
4th Year [*] [*]
5th Year and [*] [*]
beyond
Notes
1. Conversion to an unlimited distribution license is available after two
years from initial shipment of customer application that contains SBL.
Royalty payments will be credited at
[ * ]
[ * ]
[ * ]
2. SBL source code is available for an additional one-time charge of [*]
3. Maintenance will continue at no charge if at least [*] in royalties are
paid per year.
CONFIDENTIAL INFORMATION
* Such Portions are filed under an application for confidential treatment.
<PAGE> 1
EXHIBIT 10.22
SOFTWARE LICENSE AGREEMENT
THIS AGREEMENT is entered into effective as of June 1, 1993 by and between
Pixel Translations, Inc., a California corporation ("Pixel") and Kofax Image
Products, a California corporation ("Kofax").
R E C I T A L S:
Whereas Pixel has developed certain software products; and
Whereas Kofax desires to license certain of the software developed by Pixel for
integration and use within certain software products developed by Kofax:
Now therefore, Pixel and Kofax agree as follows:
1. LICENSES CONVEYED
1.1 Object Code Licenses. Pixel hereby agrees to deliver to Kofax one object
code copy of each of the Products described on Schedule 1 hereto and licenses
Kofax to duplicate and sublicense all or portions of such Products to its
customers, but only integrated within software products of significant value
developed by Kofax which are licensed for use on a single computer. Kofax will
not remove any copyright notices which Pixel shall place in the Products, and a
copyright notice stating "Portions of this product, Copyright (c) 1990, 1991,
1992 Pixel Translations, Inc." (with the years identified revised to reflect
revisions by Pixel), shall be included in at least one appropriate location in
the documentation shipped with all Kofax products incorporating the Products.
Kofax shall not reverse engineer, decompile, or disassemble any object code
delivered by Pixel. Kofax shall only sublicense the object code subject to a
signed or shrink-wrap license agreement which contains all of the restrictions
set forth on Exhibit A hereto.
1.2 Source Code Licenses. Pixel also hereby agrees to deliver to Kofax one copy
of the source code described on Schedule 2 hereto and licenses Kofax to use such
source code, but only for purposes of supporting, modifying or enhancing the
object code otherwise licensed to Kofax pursuant to this Agreement. Kofax shall
not under any circumstances be permitted to duplicate any source code delivered
by Pixel, other than for archival purposes, or to sublicense any other party to
use such source code. Kofax agrees to treat all source code delivered by Pixel
under any circumstances as a confidential trade secret of Pixel and to safeguard
all copies of such source code.
1.3 License Fees. Kofax agrees to pay Pixel the license fees set forth on
Schedule 3 hereto with respect to the Products. In addition to the license fees
set forth on Schedule 3 hereto, Kofax shall pay, or reimburse Pixel for, the
gross amount of all shipping charges and any present or future sales, use,
excise or similar tax or any customs duty applicable to the license or
furnishing of any Products under this Agreement. In lieu of a specific tax,
Kofax may provide Pixel with a tax exemption certificate acceptable to the
applicable taxing authority.
1.4 Kofax Products. Kofax will provide Pixel, without charge, promptly upon
commercial release by Kofax, with one copy of, and one fully paid object code
license to use, any software licensed or sold by Kofax which contains any
portion of any of the Products, including any Product Enhancement or Product
Update. During the term of this Agreement, Kofax shall also provide Pixel with
reasonable use for evaluation purposes, at Pixel's facilities, of any hardware
products sold by Kofax which contain any portion of any of the Products.
-1-
CONFIDENTIAL TREATMENT
<PAGE> 2
2. PRODUCT UPDATES AND PRODUCT ENHANCEMENTS
2. 1 Products. "Products" as used in this Agreement shall mean the software
products described on Schedule 1 hereto, any "Product Updates" and any "Product
Enhancements" provided to Kofax by Pixel pursuant to this Agreement, and any
additional products provided by Pixel which Pixel and Kofax agree shall be
provided to Kofax pursuant to this Agreement. When a Product Update, a Product
Enhancement or an additional product is delivered to Kofax pursuant to this
Agreement, it shall be added to the Products deemed to be described on Schedule
1 to this Agreement and Kofax shall have the license rights set forth in Section
1.1 of this Agreement with respect to such Product. In addition, when a Product
Update or a Product Enhancement is delivered to Kofax pursuant to this
Agreement, to the extent that any source code which Kofax has been licensed to
use pursuant to Section 1.2 of this Agreement has been modified or replaced by
such Product Update or Product Enhancement, Kofax shall receive a copy of the
licensed source code as so modified or replaced and Kofax's license pursuant to
Section 1.2 hereof shall be extended to include such additional source code upon
all the terms set forth herein with respect to source code licenses.
2.2 Product Updates. During the term of this Agreement, Pixel shall deliver to
Kofax, for the support fees set forth on Schedule 3 hereto, all Product Updates
which Pixel releases for the Products licensed by Kofax under this Agreement.
For purposes of this Agreement, a "Product Update" shall mean a revised version
of a Product which is required due to minor modifications or additions by the
provider of hardware or software which interacts with the Product or is
otherwise released by Pixel, in its discretion, as a "Product Update". To the
extent that creating the revisions to a Product required as a result of the
modifications or additions by a provider of hardware or software requires more
than eight hours of skilled professional labor by Pixel, Pixel may, in its
discretion, release the revised version of the Product as a Product Enhancement
rather than a Product Update.
2.3 Product Enhancements. Pixel shall deliver to Kofax, for the support fees set
forth on Schedule 3 hereto, four Product Enhancements per complete calendar year
during the term of this Agreement, for the ISIS Drivers licensed by Kofax as
Products under this Agreement. Each such Product Enhancement shall consist of a
new driver for support of new or substantially modified scanners or file formats
in a particular operating environment (such as, Windows, Windows NT, Macintosh,
OS-2, or MS-DOS). The obligation of Pixel to provide such Product Enhancements
shall be subject to the availability of an adequate number of new or
substantially modified available scanners (desktop scanners in production
release, free from substantial defects) for the environment.
2.4 Equipment Loans. Pixel's obligation to provide any Product Update pursuant
to Section 2.2 hereof, or any Product Enhancement pursuant to Section 2.3
hereof, shall be subject to Kofax providing all hardware and software required
for developing and testing such Product Update or Product Enhancement in those
cases when Pixel is unable to obtain, through reasonable efforts, access to such
hardware or software at no charge from the manufacturer.
3. NEW PRODUCTS
Pixel may, from time to time, offer Kofax the opportunity to obtain licenses to
additional products not previously licensed by Kofax pursuant to this agreement,
including additional and/or new products and Product Enhancements which Pixel is
not obligated to provide to Kofax pursuant to Section 2.3 hereof. To the extent
that Pixel and Kofax agree in writing, such additional products may be added to
this Agreement, upon such additional terms and conditions as may be agreed by
Pixel and Kofax in writing.
4. SUPPORT
4.1 Telephone Support. Pixel will provide telephone support for the Products
during Pixel's normal business hours for the support fees set forth on Schedule
3 hereto during the term of this Agreement.
-2-
<PAGE> 3
4.2 Correction of Defects. During the term of this Agreement, as part of Pixel's
support obligation, Pixel will use commercially reasonable efforts to respond to
and correct defects in the Products identified by Kofax within the following
time periods (in working days):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Defect Description Respond Correct
Level Within Within
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Critical Product crashes under normal use or is unusable as a whole 1 day 10 days
Serious Important feature is unusable or performance is unacceptable 2 days 30 days
Minor Less important feature is unusable or easy workaround 5 days 90 days
</TABLE>
Pixel shall have no obligation with respect to correction of any defect in the
Products other than to use commercially reasonable efforts pursuant to this
Section to correct the defect; provided, however, that to the extent the defect
is identified by Kofax during the Warranty Period for the Product, as defined in
Section 5 hereof, then Pixel shall also have the warranty obligations expressly
set forth in such Section 5.
5. LIMITITED WARRANTY
Kofax is sophisticated, experienced and technically competent with expertise in
products of the type provided under this Agreement. Kofax has tested samples of
the Products and has made its own determination that the Products meet the
requirements of Kofax. Pixel warrants to Kofax only that each Product delivered
under this Agreement will perform substantially in accordance with the
specifications set forth in Exhibit B. This warranty is made for a period of one
year from the date of delivery of the Product to Kofax (the "Warranty Period").
To the extent that Kofax advises Pixel in writing during the Warranty Period
that a Product does not perform substantially in accordance with the
specifications set forth in Exhibit B with respect to such Product, Pixel shall
correct the defect within a reasonable time period. If Pixel is unable to
correct the defect within a reasonable period of time, or in its discretion
elects not to undertake, or to discontinue, efforts to correct the defect, Pixel
will refund any license fees paid by Kofax with respect to the defective
Product. These are Kofax's sole and exclusive remedies for any breach of
warranty.
THE EXPRESS WARRANTY PROVIDED IN THIS SECTION 5 IS IN LIEU OF ALL OTHER
WARRANTIES, AND PIXEL DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
ARISING FROM THE COURSE OF DEALING BETWEEN THE PARTIES OR USAGE OF TRADE. PIXEL
WILL NOT, UNDER ANY CIRCUMSTANCES, BE LIABLE TO KOFAX, OR ANY END-USER OR
TRANSFEREE FROM KOFAX, FOR SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF
WHATEVER NATURE ARISING OUT OF THIS AGREEMENT OR RESULTING FROM THE SUBLICENSE
OR PROVISION OF PRODUCTS OR SERVICES BY KOFAX OR RELICENSE OR USE BY ANY
END-USER OR TRANSFEREE OF SUCH PRODUCTS, EVEN IF PIXEL HAS BEEN NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
6. SUITABILITY/LIMITATIONS ON REMEDIES AND LIABILITY
Kofax hereby understands that it is responsible for satisfying itself as to the
suitability of Products for the purposes for which Products are licensed.
The express remedies set forth in this Agreement are in lieu of all obligations
or liabilities on the part of Pixel for damages resulting from breach of
warranty, breach of contract, negligence or on any other legal theory. The
limitations on remedies, liability and damages set forth in this Agreement, and
the corresponding allocations of risks, are essential elements of the bargain
between the parties and are knowingly agreed to by both parties.
-3-
<PAGE> 4
IN NO EVENT SHALL PIXEL BE LIABLE FOR COSTS OF PROCUREMENT OF SUBSTITUTE
PRODUCTS OR SERVICES, LOST PROFITS, OR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR
INCIDENTAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING IN
ANY WAY OUT OF THE LICENSE OR PROVISION OF, OR AGREEMENT TO LICENSE OR PROVIDE,
PRODUCTS OR SERVICES TO KOFAX. THIS LIMITATION SHALL APPLY EVEN IF PIXEL HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING ANY FAILURE
OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
Neither Pixel nor Kofax shall by reason of the termination of this Agreement
under any circumstances be liable to the other for compensation, reimbursement
or damages on account of the loss of prospective profits on anticipated sales,
or on account of expenditures, investments, leases or commitments in connection
with the business or goodwill of Pixel or Kofax, or otherwise.
7. INDEMNIFICATION
7.1 Indemnity. Pixel will defend, at its own expense, any claim, suit or
proceeding brought against Kofax to the extent it is based upon a claim that any
software licensed by Pixel to Kofax pursuant to this Agreement infringes upon
any patent, copyright or trade secret of any third party. Kofax agrees that it
shall promptly notify Pixel in writing of any such claim or action and give
Pixel full information and assistance in connection therewith. Pixel shall have
the sole right to control the defense of any such claim or action and the sole
right to settle or compromise any such claim or action. If Kofax complies with
the provisions hereof, Pixel will pay all damages, costs and expenses finally
awarded to third parties against Kofax in such action. If such software is, or
in Pixel's opinion might be, held to infringe as set forth above, Pixel may, at
its option, replace or modify such software so as to avoid infringement, or
procure the right for Kofax to continue the use and sublicense of such software.
If neither of such alternatives is, in Pixel's opinion, commercially reasonable,
the infringing software shall be returned to Pixel and Pixel's sole liability,
in addition to its obligation to reimburse awarded damages, costs and expenses
set forth above, shall be to refund the amounts paid to license such software by
Kofax.
7.2 Limitations. Pixel will have no liability for any claim of infringement
arising as a result of Kofax's use of the licensed software in combination with
any items not supplied by Pixel, or any modification of the licensed software by
Kofax or third parties where such infringement would not exist through use of
the unmodified licensed software alone.
7.3 Entire Liability. THE FOREGOING STATES THE ENTIRE LIABILITY OF PIXEL TO
KOFAX OR ANY SUBLICENSEE OF SOFTWARE CONCERNING INFRINGEMENT OF INTELLECTUAL
PROPERTY RIGHTS, INCLUDING BUT NOT LIMITED TO, PATENT, COPYRIGHT AND TRADE
SECRET RIGHTS.
8. CONFIDENTIALITY
Pixel and Kofax may disclose certain information which the disclosing party
considers to be confidential. In order for any information disclosed by one
party to the other to be treated as "Confidential Information" protected by this
Section 8, it must be (i) prominently marked as confidential when disclosed in
writing, or (ii) if disclosed orally, identified as confidential at time of
disclosure and reproduced in writing, marked confidential and sent to the
receiving party within thirty (30) days after it is first communicated to such
party; provided, however, that under any circumstances all source code received
from Pixel and the pricing information set forth on Schedule 3 hereto shall be
treated as Confidential Information. Confidential Information shall not be
deemed to include information which is published or otherwise becomes available
to the public other than by a breach of this Agreement; or is lawfully received
by the receiving party from a third party without any confidentiality
obligations; or was known by the receiving party prior to its receipt from the
disclosing party.
-4-
<PAGE> 5
The receiving party shall not during the Term of this Agreement and for a period
of five years after the termination thereof, use for any purpose other than as
contemplated by this Agreement, or divulge to any third party, any Confidential
Information; provided, further, however, that such obligations with respect to
any source code received from Pixel shall continue in perpetuity.
9. TERM AND TERMINATION
9.1 Term. The term of this Agreement shall commence on the effective date set
forth above and shall continue for a period of one year from that date (the
"Initial Term"). Unless Kofax or Pixel gives written notice that it elects not
to renew the Agreement at least thirty (30) days prior to the end of the Initial
Term, the Agreement shall automatically renew for an additional one year term (a
"Subsequent Term"). Similarly, unless Kofax or Pixel gives written notice that
it elects not to renew the Agreement at least thirty (30) days prior to the end
of a Subsequent Term, the Agreement shall automatically renew for an additional
one year Subsequent Term; provided, however, that the Agreement shall not be
automatically renewed under any circumstances for more than a total of four
Subsequent Terms.
9.2 Termination. If either party defaults in the performance of any material
provision of this Agreement, then the non-defaulting party may terminate this
Agreement by written notice to the defaulting party that if the default is not
cured within thirty days (30) days the Agreement will be terminated. In
addition, in the event that any amount payable by Kofax pursuant to this
Agreement has not been paid within ten (10) days following written notice of
delinquency, Pixel shall be entitled to terminate this Agreement immediately
upon written notice to Kofax.
9.3 Effects of Termination. In the event that this Agreement is terminated by
reason of an early nonrenewal election made by Pixel pursuant to Section 9.1
hereof, or in the event that it is terminated by Kofax pursuant to Section 9.2
hereof, then Kofax shall have the right to grant object code licenses for the
Products, but only integrated with hardware and/or software products of
significant value provided by Kofax, and subject to the other restrictions on
such grants of object code licenses set forth in this Agreement, for the
remainder of the remaining possible Subsequent Terms otherwise available under
this Agreement. In the event that this Agreement is terminated pursuant to
Section 9.1, other than by reason of an early nonrenewal election made by Pixel
pursuant to Section 9.1 hereof, or in the event that this Agreement is
terminated by Pixel pursuant to Section 9.2 hereof, all rights of Kofax pursuant
to this Agreement shall be immediately terminated and Kofax shall immediately
destroy all object code copies of the Products licensed to it which have not
been sublicensed to customers of Kofax and shall immediately return to Pixel all
source code materials received from Pixel and any copies of such materials which
Kofax may have made; however, the rights of sublicensees of the Products from
Kofax shall not be affected by such termination of the Agreement. Under no
circumstances shall Pixel be obligated to refund any amount to Kofax with
respect to any licensee fee paid or Discount Allowance granted pursuant to
Schedule 3 hereto.
10. GENERAL
10.1 Audit Rights. Pixel shall have the right, at any time up to one year after
the termination of this Agreement to have Kofax's books and records related to
the sublicense of the Products examined by an independent certified public
accountant selected by Pixel. If such examination reveals that the license fees
paid by Kofax pursuant to this Agreement are understated by 5% or more for any
period, Kofax shall reimburse Pixel for the reasonable fees and expenses of such
certified public accountant.
-5-
<PAGE> 6
10.2 Notices. Any notice required to be given hereunder shall be in writing and
may be given personal delivery (including by professional courier) at, or
mailing (by first class receipted prepaid mail) to, the address of the party set
forth below, addressed to the attention of "Contracts Administrator" in the case
of Pixel and to the attention of Contracts Administrator in the case of Kofax,
or such other address as such party may have notified the other of pursuant to
this Section. In the case of personal delivery, such notice shall be deemed to
have been given upon the date of such delivery. In the case of mailing, such
notice shall be deemed to have been given seven days after such mailing.
10.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to its
provisions concerning the applicability of the laws of other jurisdictions. Any
suit hereunder shall be brought in the federal or state courts in the districts
which include Cupertino, California, and Kofax hereby agrees and submits to the
personal jurisdiction and venue thereof
10.4 Relationship of Parties. Nothing in this Agreement shall constitute or be
deemed to constitute a partnership between the parties. The relationship between
Pixel and Kofax shall be that of licensor and licensee. The officers, agents and
employees of one party shall under no circumstances be considered the agents,
employees or representatives of the other party. Neither Kofax nor Pixel shall
have the right to enter into any contracts or binding commitments, or make any
representations, in the name of or on behalf of the other in any respect
whatsoever.
10.5 Assignment. Neither party will assign any of its rights or obligations
hereunder, whether voluntarily or by operation of law, without the prior written
consent of the other party, other than as part of an acquisition of the party,
whether by merger or sale of substantially all of the assets of the party.
Subject to the foregoing, this Agreement will inure to the benefit of and be
binding upon the successors and assigns of the parties.
10.6 Force Majure. Neither party shall be liable for any failure to perform any
of its obligations hereunder (other than the payment of money) which results
from act of God, the elements, fire, flood, component shortages, force majeure,
riot, insurrection, industrial dispute, accident, war, embargoes, legal
restrictions or any other cause beyond the control of the party.
-6-
<PAGE> 7
10.7 Entire Aggeement. All previous agreements and arrangements (if any) made by
the parties, and relating to the subject matter hereof, including any agreements
concerning confidentiality of information, are hereby superseded and this
Agreement embodies the entire understanding of the parties, there being no
promises, terms, conditions or obligations, oral or written, express or implied,
other than those contained herein. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument. This Agreement shall supersede any
provision of any purchase order submitted by Kofax; notwithstanding any
provision in such purchase order to the contrary.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
Pixel Translations, Inc.
10062 Miller Avenue, Suite 205
Cupertino, CA 95014
USA
By: [Sig unreadable]
--------------------------------------
Title: Vice President
-----------------------------------
Kofax Image Products
3 Jenner Suva
Irvine, CA 92718
USA
By: [Sig unreadable]
--------------------------------------
Title: Vice President and Secretary
-----------------------------------
-7-
<PAGE> 8
SCHEDULE 1
OBJECT CODE LICENSES
ISIS Drivers for Windows 3.X.
ISIS Drivers for DOS.
-8-
<PAGE> 9
SCHEDULE 2
SOURCE CODE LICENSES
None.
-9-
<PAGE> 10
SCHEDULE 3
LICENSE AND SUPPORT FEES
Binary License fees for ISIS Drivers
Within thirty days of the end of each calendar quarter, any portion of which
falls within the term of the Agreement, Kofax shall notify Pixel of the number
of copies of the Product distributed by Kofax during the calendar quarter, both
in the "single driver" category and in the "driver set" category for each
licensed environment. This report shall indicate all copies of the Products
which have been distributed, including indicating any copies as to which a
royalty is not due pursuant to the provisions hereof, whether because it is a
promotional copy or a product upgrade as to which a license fee was previously
paid.
License fees due under this Agreement will be determined by one of the two
following schedules. Any licenses granted in excess of those prepaid prior to
their shipment shall be paid for under the "Quarterly Schedule" and shall be
paid for at the time of the quarterly notification either in cash or by
allocation of a previously granted Discount Allowance. Kofax may also, at any
time, elect to prepay some number of licenses under the "Prepay Schedule".
Prepayment at the time of such election may also be made either in cash or by
allocation of a previously granted Discount Allowance.
PREPAY Schedule
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Quantity 50 100 250 500 1,000 2,500 5,000 10,000
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Individual [*] [*] [*] [*] [*] [*] [*] [*]
(except Ricoh
410/510/520)
- -------------------------------------------------------------------------------------------
Set (5 or more; [*] [*] [*] [*] [*] [*] [*] [*]
except Ricoh
410/510/520)
- -------------------------------------------------------------------------------------------
Set (5 or more; [*] [*] [*] [*] [*] [*] [*] [*]
w/ Ricoh
410/510/520)
- -------------------------------------------------------------------------------------------
</TABLE>
QUARTERLY Schedule
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Quantity 1- 50- 100- 250- 500- 1,000- 2,500 5,000+
49 99 249 499 999 2,499 4,999
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Individual [*] [*] [*] [*] [*] [*] [*] [*]
(except Ricoh
410/510/520)
- ------------------------------------------------------------------------------------------
Ricoh 410/5XO [*] [*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------
Set (5 or more; [*] [*] [*] [*] [*] [*] [*] [*]
except Ricoh
410/5XO)
- ------------------------------------------------------------------------------------------
Set (5 or more; [*] [*] [*] [*] [*] [*] [*] [*]
w/ Ricoh
410/5X0)
- ------------------------------------------------------------------------------------------
</TABLE>
-10-
* Such portions are filed under an application for confidential treatment.
<PAGE> 11
Kofax shall have the right to distribute, royalty free, Products included as
part of Kofax products which are Promotional Distributions. For these purposes,
"Promotional Distributions" shall include only distributions of the Products,
integrated with Kofax's products, for demonstration or promotional purposes,
when the price charged is equal to or less than the actual cost of the goods
distributed, plus reasonable shipping and handling charges. However, Products
which are distributed at such a price as part of an offer or promotion including
any other Kofax product which is not being distributed at a price equal to or
less than the actual cost of the goods distributed, plus reasonable shipping and
handling charges, shall not be considered Promotional Distributions.
Kofax shall have the right to distribute, royalty free, Product Updates and
Product Enhancements as product upgrades to Kofax's customers who have been
previously licensed to use the Product which is so upgraded and for which a
license fee has previously been paid pursuant to this Agreement.
A maximum of [*] will be due for actual licenses granted during any four
consecutive calendar quarters for each licensed environment. Prepayments for
licenses used beyond the period in question will not be included for purposes of
applying this maximum.
Support Fees for ISIS Drivers
Within 30 days of each annual renewal of this Agreement, whether or not such
renewal is automatic, Kofax shall pay [*]for Support Fees for ongoing Product
Updates, Product Enhancements, and telephone support.
Notwithstanding the foregoing, if License Fees for ISIS drivers, due and paid in
the previous 12 months, exceed [*] then no Support Fees shall be due.
-11-
* Such portions are filed under an application for confidential treatment.
<PAGE> 12
EXHIBIT A - LICENSE AGREEMENT
This Software License Agreement (the "Agreement") grants you a nonexclusive
license to use the software supplied to you by Kofax Image Products
("Licensor"), including the software supplied to you on disks, diskettes and/or
as part of the equipment supplied by Licensor (the "Software"). It also imposes
certain restrictions on your use of the Software. Licensor, and/or its
licensors, retains ownership of the Software and no rights are granted to you
other than a license to use the Software on the terms expressly set forth in
this Agreement.
For backup purposes, you may make a copy of the Software supplied on disks
and/or diskettes, but you may not use the backup copy other than as an archive
for the replacement of the primary copy. You must include on the backup copy all
copyright and other notices included on the Software as supplied by Licensor.
You may not otherwise make any copy of any of the Software, and you may not make
any copy of any of the written materials accompanying the Software and/or the
equipment supplied by Licensor.
You acknowledge that the underlying structure, sequence, organization and source
code of the Software is a valuable trade secret of Licensor and/or its
licensors, and you agree not to decompile, disassemble or reverse engineer, or
modify in any way, any of the Software.
You may not transfer or assign your rights to use the Software, unless Licensor
receives the written agreement of the transferee to be bound by all of the terms
of this Agreement.
Upon violation of any of the provisions of this Agreement, your rights to use
the Software shall automatically terminate and you shall be obligated to return
the Software to Licensor, or destroy all copies of the Software. This
Agreement shall be governed by California law, other than its provisions
concerning the applicability of laws of other jurisdictions.
You acknowledge that the export of the Software is governed by the export
control laws of the United States of America and other countries. You agree to
comply with all such export control laws.
If you are a unit of the Department of Defense, you acknowledge that the
Software is provided as "commercial computer software" under the terms and
conditions of this Agreement, as Licensor's standard software license agreement,
in accordance with clause 252.211 of the Federal Acquisition Regulations and its
successors. If you are a civilian agency, you acknowledge that the Software is
"restricted computer software", is licensed only with "restricted rights" and
use, reproduction or disclosure is subject to restrictions set forth in
subparagraphs (a) through (d) of clause 52.227-19 of the Federal Acquisition
Regulations and its successors, and for purposes of subparagraph (d) thereof,
you further acknowledge that the Software is unpublished and all rights are
reserved under the copyright laws of the United States.
-12-
<PAGE> 13
EXHIBIT B - PRODUCT SPECIFICATIONS
ISIS Drivers object code shall be that machine readable code which performs the
following functions and/or meets the following specifications:
1. The drivers conform to the ISIS Specification as documented in the latest
revisions of the ISIS Application Developer's Toolkit Manual and the ISIS
Scanner Driver Developer's Toolkit Manual.
2. The drivers pass the test suite "SCANTEST".
3. The drivers have reasonable performance which is not inferior to the
performance exhibited as of the effective date of this Agreement.
4. The drivers must not, in and of themselves, cause the scanner to start and
stop if such starting and stopping causes reduced image quality.
5. The drivers must not use more than 64K of memory for code and data.
6. The drivers will follow the internationalization guidelines of the applicable
operating environment and will include source code as necessary to allow
internationalization.
7. The drivers must support the following scanners and image formats: In the
Windows environment version:
Abaton Transcribe 300
Abaton 300/S
Abaton 300/GS
Abaton 300/Color
Apple One Scanner
Canon IX-12
Canon IX-12F
Canon IX-30
Chinon DS-3000
Complete PC Page Scanner
Complete PC Flatbed Scanner (HP)
Datacopy 730
Datacopy 730 GS
Datacopy 830
Datacopy GS Plus
Datacopy Jetreader
Dest PC Scan+
Dest PC Scan 1000
Dest 2000
Dest 3000
Epson ES-300C/GT-6000
Epson ES-600C/GT-6500
Epson ES-800C/GT-8000
Epson GT-4000
Fujitsu Scan Partner 10 (w/Adaptec)
Fujitsu 3093E (w/Kofax 9200)
-13-
<PAGE> 14
Fujitsu 3096E+ (w/Kofax 9200)
Fujitsu 3096G (w/ Adaptec)
Hewlett-Packard ScanJet
Hewlett-Packard ScanJet Plus
Hewlett-Packard IIc
Hewlett-Packard IIp
Hewlett-Packard Accupage 1.0
Howtek Personal Color Scanner
IBM 3119 (MCA only)
Microtek MS-300A
Microtek MS-300C
Microtek MSF-300A
Microtek MSF-300C
Microtek MSF-300G
Microtek MSF-300Q
Microtek MSF-300Z (no color support)
Microtek MS-400G
Microtek MS-II
Panasonic FX-RS307
Panasonic FX-RS505
Panasonic FX-RS506
Pentax (HP)
Princeton Graphics LS300
Ricoh IS 50
Ricoh IS 60
Ricoh IS 410
Ricoh IS 510
Ricoh IS 520
Sharp JX-320
Sharp JX-610
Tamarac TS-6000C
Tamarac TS-8000C
UMAX UG-630
UMAX UC-630
UMAX UC-840
UMAX OA-1
UMAX 1200-C
TIFF Raw (8-bit and 16-bit)
TIFF Packbits
TIFF CCITT Group 3
TIFF CCITT Group 3 modified
TIFF CCITT Group 4
PCX
PDA Raw
PDA CCITT Group 3
PDA CCITT Group 4
In the DOS environment version:
Abaton Transcribe 300
Abaton 300 / S
-14-
<PAGE> 15
Abaton 300 / GS
Abaton 300 / Color
Apple One Scanner
Canon IX-12
Canon IX-12F
Canon IX-30
Chinon DS-3000
Complete PC Page Scanner
Complete PC Flatbed Scanner (HP)
Datacopy 730
Datacopy 730 GS
Datacopy 830
Datacopy GS Plus
Datacopy Jetreader
Dest PC Scan+
Dest PC Scan 1000
Dest 2000
Dest 3000
Epson ES-300C/GT-6000
Epson ES-600C/GT-6500
Epson ES-800C/GT-8000
Epson GT-4000
Fujitsu Scan Partner 10 (w/Adaptec)
Fujitsu 3096G (w/Adaptec)
Hewlett-Packard ScanJet
Hewlett-Packard ScanJet Plus
Hewlett-Packard IIc
Hewlett-Packard IIp
Howtek Personal Color Scanner
IBM 3119 (MCA only)
Microtek MS-300A
Microtek MS-300C
Microtek MSF-300A
Microtek MSF-300C
Microtek MSF-300G
Microtek MSF-300Q
Microtek MSF-300Z (no color support)
Microtek MS-400G
Microtek MS-II
Panasonic FX-RS307
Panasonic FX-RS505
Panasonic FX-RS506
Pentax (HP)
Princeton Graphics LS300
Ricoh IS 50
Ricoh IS 60
Ricoh IS 410
Ricoh IS 510
Ricoh IS 520
Sharp JX-320
Sharp JX-610
-15-
<PAGE> 16
Tamarac TS-6000C
Tamarac TS-8000C
UMAX UG-630
UMAX UC-630
UMAX UC-840
UMAX OA-1
UMAX 1200-C
TIFF Raw (8-bit and 16-bit)
TIFF Packbits
TIFF CCITT Group 3
TIFF CCITT Group 3 modified
TIFF CCITT Group 4
PCX
PDA Raw
PDA CCITT Group 3
PDA CCITT Group 4
-16-
<PAGE> 17
MODIFICATION TO SOFTWARE LICENSE AGREEMENT
THIS AGREEMENT is entered into effective as of July 1, 1995 by and between Pixel
Translations, Inc., a California corporation ("Pixel") and Kofax Image Products,
a California corporation ("Kofax") to modify the Software License Agreement
between the parties dated June 1, 1993 as follows:
The following Schedules and Exhibits shall be replaced by those Schedules and
Exhibits which are attached to and part of this Agreement:
Schedule 1 - Object Code Licenses
Schedule 3 - License and Support Fees
Exhibit B - Product Specifications
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in their
respective names and by their duly authorized officers.
Pixel Translations, Inc.
3031 Tisch Way, Suite 310
San Jose, CA 95128
USA
By: /s/
--------------------------------------
Title: Director, Sales & Marketing
-----------------------------------
Kofax Image Products
3 Jenner Street
Irvine, CA 92718
USA
By: /s/
--------------------------------------
Title: Director Marketing
-----------------------------------
-1-
CONFIDENTIAL TREATMENT
<PAGE> 18
SCHEDULE 1
OBJECT CODE LICENSES
ISIS Drivers for Windows 3.X.
ISIS Drivers for Kodak Imagelink Scanners for Windows 3.X.
-2-
<PAGE> 19
SCHEDULE 3
LICENSE AND SUPPORT FEES
Binary License fees for ISIS Drivers
Within thirty days of the end of each calendar quarter, any portion of which
falls within the term of the Agreement, Kofax shall notify Pixel of the number
of copies of the Product distributed by Kofax during the calendar quarter, both
in each of the "single driver" categories and in the "driver set" categories for
each licensed environment. This report shall indicate all copies of the Products
which have been distributed, including indicating any copies as to which
a royalty is not due pursuant to the provisions hereof, whether because it is a
promotional copy or a product upgrade as to which a license fee was previously
paid.
License fees due under this Agreement will be determined by one of the two
following schedules. Any licenses granted in excess of those prepaid prior to
their shipment shall be paid for under the "Quarterly Schedule" and shall be
paid for at the time of the quarterly notification either in cash or by
allocation of a previously granted Discount Allowance. Kofax may also, at any
time, elect to prepay some number of licenses under the "Prepay Schedule".
Prepayment at the time of such election may also be made either in cash or by
allocation of a previously granted Discount Allowance.
PREPAY Schedule
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Quantity 10 50 100 250 500 1,000-- 2,500 5,000 10,000
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Level 1 Driver [*] [*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
Level 2 Driver [*] [*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
Level 3 Driver [*] [*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
Set: All Level 1 [*] [*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
Set: All Drivers [*] [*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
</TABLE>
QUARTERLY Schedule
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Quantity 1-9 10- 50- 100- 250- 500- 1,000- 2,500- 5,000- 10,000-
49 99 249 499 999 2,499 4,999 9,999 24,999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Level 1 Driver [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------------------
Level 2 Driver [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------------------
Level 3 Driver [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------------------
Set: All Level 1 [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------------------
Set: All Drivers [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Level 1 scanner drivers are most drivers listed in Exhibit B except:
Level 2 drivers: Ricoh IS410, Fujitsu 3096G/3097G, Kofax Xionics Simplex,
Panasonic sheetfed
Level 3 drivers: Ricoh IS510/520, Fujitsu 3099A/G/AG, Bell & Howell (SCSI),
Kofax/Xionics Duplex, Canofile, TDC 2610W
ISIS "Sets" include the ISIS drivers for file i/c; otherwise, each file driver
is considered a Level I driver.
-3-
* Such portions are filed under an application for confidential treatment.
<PAGE> 20
Kofax shall have the right to distribute, royalty free, Products included as
part of Kofax products which are Promotional Distributions. For these purposes,
"Promotional Distributions" shall include only distributions of the Products,
integrated with Kofax's products, for demonstration or promotional purposes,
when the price charged is equal to or less than the actual cost of the goods
distributed, plus reasonable shipping and handling charges. However, Products
which are distributed at such a price as part of an offer or promotion including
any other Kofax product which is not being distributed at a price equal to or
less than the actual cost of the goods distributed, plus reasonable shipping and
handling charges, shall not be considered Promotional Distributions.
Kofax shall have the right to distribute, royalty free, Product Updates and
Product Enhancements as product upgrades to Kofax's customers who have been
previously licensed to use the Product which is so upgraded and for which a
license fee has previously been paid pursuant to this Agreement.
A maximum of [*] will be due for actual licenses granted during any four
consecutive calendar quarters for each Kofax product in each licensed
environment. Prepayments for licenses used beyond the period in question will
not be included for purposes of applying this maximum.
SUPPORT FEES FOR ISIS DRIVERS
Within 30 days of each annual renewal of this Agreement, whether or not such
renewal is automatic, Kofax shall pay $995 for Support Fees for ongoing Product
Updates, Product Enhancements, and telephone support for each licensed
environment.
Notwithstanding the foregoing, if License Fees for ISIS drivers due and paid in
the previous 12 months for a given environment exceed [*] then no Support Fees
shall be due.
BINARY LICENSE FEES FOR ISIS DRIVERS FOR KODAK IMAGELINK SCANNERS
Prior to the shipment, or within 30 days of the shipment, of any Product, Kofax
shall pay Pixel license fees according to the following schedule:
Scanner 1-5 units 6-10 units
Imagelink 500 [*] [*]
Imagelink 900, 923, 990 [*] [*]
Kofax shall have the right to distribute, royalty free, Product Updates and
Product Enhancements as product upgrades to Kofax's customers who have been
previously licensed to use the Product which is so upgraded and for which a
license fee has previously been paid pursuant to this schedule.
SUPPORT FEES FOR ISIS DRIVERS FOR KODAK IMAGELINK SCANNERS
Within 30 days of each annual renewal of this Agreement, whether or not such
renewal is automatic, Kofax shall pay [*] for Support Fees for ongoing Product
Updates, Product Enhancements, and telephone support for each licensed
environment.
Notwithstanding the foregoing, if License Fees for ISIS drivers for Kodak
Imagelink scanners due and paid in the previous 12 months for a given
environment exceed [*] then no Support Fees shall be due.
-4-
* Such portions are filed under an application for confidential treatment.
<PAGE> 21
EXHIBIT B - PRODUCT SPECIFICATIONS
ISIS Drivers object code shall be that machine readable code which performs the
following functions and/or meets the following specifications:
1. The drivers conform to the ISIS Specification as documented in the latest
revisions of the ISIS Application Developer's Toolkit Manual and the ISIS
Scanner Driver Developer's Toolkit Manual.
2. The drivers pass the test suite "SCANTEST".
3. The drivers have reasonable performance which is not inferior to the
performance exhibited as of the effective date of this Agreement.
4. The drivers must not, in and of themselves, cause the scanner to start and
stop if such starting and stopping causes reduced image quality.
5. The drivers must not use more than 64K of memory for code and data.
6. The drivers will follow the internationalization guidelines of the applicable
operating environment and will include source code as necessary to allow
internationalization.
7. The drivers must support the following scanners and image formats:
In the Windows environment version:
Agfa ARCUS
Agf& ARCUS Plus
Agfa StudioScan
Agfa StudioScan II
Apple One Scanner
Bell & Howell 2135 (Adaptec)
Bell & Howell 2137/A (Adaptec)
Bell & Howell 2138 (Adaptec)
Bell & Howell 3238 (Adaptec)
Bell & Howell 3338/A (Kofax 9200, Xionics Turbo)
Bell & Howell 3338/A (Adaptec)
Bell & Howell 6338 (Kofax 9200, Xionics Turbo)
Bell & Howell 6338 (Adaptec)
Canon IX-12
Canon IX-12F
Canon IX-30
Canon IX-3010 (SI40/Adaptec)
Canon IX-4015 (SI40/Adaptec) Chinon DS-3000
Complete PC Flatbed (HP)
Envisions 6100, 8100, 24 Pro
Epson ES-300C/GT-6000
Epson ES-600C/GT-6500
Epson ES-800C/GT-8000
Epson ES-1200C/GT-9000
Epson 300GS
-5-
<PAGE> 22
Fujitsu Scan Partner Jr.
Fujitsu Scan Partner 10
Fujitsu 3093E (Kofax 9200, Xionics Turbo)
Fujitsu 3096E+ (Kofax 9200, Xionics Turbo)
Fujitsu 3096G (Adaptec)
Fujitsu 3097E+ (Kofax 9200, Xionics Turbo)
Fujitsu 3097G (Adaptec)
Fujitsu 3096GX
Fujitsu 3099 A/AG (Adaptec, Kofax 9275)
Hewlett-Packard ScanJet
Hewlett-Packard ScanJet Plus
Hewlett-Packard ScanJet IIc
Hewlett-Packard ScanJet IIcx
Hewlett-Packard ScanJet IIp
Hewlett-Packard ScanJet IIIp
Hewlett-Packard Accupage 1.0
IBM 2456
Microtek MS-300A
Microtek MS-300C
Microtek MSF-300A
Microtek MSF-300C
Microtek MSF-300G
Microtek MSF-300Q
Microtek MSF-300Z
Microtek MS-400G
Microtek MS-II
Microtek SM 600GS
Microtek SM 600ZS
Microtek ScanMaker II, IIG, IIHR, IISP
Microtek ScanMaker III
Nikon Scantouch
Okidata DocIT 3000, 4000
Panasonic KV-SP 505 (Kofax 9200)
Panasonic KV-SS50, KV-SS60
Panasonic KV-SS55, KV-SS65
Pentax (HP)
Relisys Office 2400
Ricoh FS2
Ricoh IS50
Ricoh IS60
Ricoh IS410
Ricoh IS510/520
Ricoh 530 digital copier
Sharp JX-320
Sharp JX-325
Sharp JX-330
Sharp JX-610
TDC 2610 (Kofax 9200, Xionics Turbo)
UMAX UG-630
UMAX UC-630
-6-
<PAGE> 23
UMAX UC-840
UMAX UC-1200S
UMAX OA-1
UMAX 1200-C
TIFF Raw
TIFF 32771
TIFF Packbits
TIFF CCITT G3, G3 modified
TIFF CCITT Group 4
PCX
DCX
LZW
GIF
BMP
CALS Type 1
PDA Raw, G3, G4
ISIS Drivers for Kodak Imagelink Scanners object code shall be that machine
readable code which performs the following functions and/or meets the following
specifications:
1. The drivers conform to the ISIS Specification as documented in the latest
revisions of the PixTools/Scan Manual and the ISIS Scanner Driver Developer's
Toolkit Manual.
2. The drivers pass the test suite "SCANTEST".
3. The drivers have reasonable performance which is not inferior to the
performance exhibited as of the effective date of this Agreement.
4. The drivers will follow the internationalization guidelines of the applicable
operating environment and will include source code as necessary to allow
internationalization.
5. The drivers must support the following scanners, including the features of
those scanners which were supported as of January 1, 1995:
In the Windows environment version:
Kodak Imagelink 500
Kodak Imagelink 900
Kodak Imagelink 923
Kodak Imagelink 990
-7-
<PAGE> 24
MODIFICATION TO SOFTWARE LICENSE AGREEMENT
THIS AGREEMENT is entered into effective as of June 1, 1996 by and between Pixel
Translations, Inc., a California corporation ("Pixel") and Kofax Image Products,
a California corporation ("Kofax") to modify the Software License Agreement
between the parties dated June 1, 1993 as follows:
The following Schedules and Exhibits shall be replaced by those Schedules and
Exhibits which are attached to and part of this Agreement:
Schedule 1 - Object Code Licenses
Schedule 3 - License and Support Fees
Exhibit B - Product Specifications
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in their
respective names and by their duly authorized officers.
Pixel Translations, Inc.
3031 Tisch Way, Suite 310
San Jose, CA 95128
USA
By: [SIG]
--------------------------------------
Title: Business Unit Partner
-----------------------------------
Kofax Image Products
3 Jenner Street
Irvine, CA 92718
USA
By: [SIG]
--------------------------------------
Title: VP Marketing
-----------------------------------
-1-
<PAGE> 25
SCHEDULE 1
OBJECT CODE LICENSES
16 Bit ISIS Drivers for Windows 3.X and Windows 95.
32 Bit ISIS Drivers for Windows NT.
16 Bit ISIS Drivers for Kodak Imagelink Scanners for Windows 3.X.
-2-
<PAGE> 26
SCHEDULE 3
LICENSE AND SUPPORT FEES
BINARY LICENSE FEES FOR ISIS DRIVERS
Within thirty days of the end of each calendar quarter, any portion of which
falls within the term of the Agreement, Kofax shall notify Pixel of the number
of copies of the Product distributed by Kofax during the calendar quarter, both
in each of the "single driver" categories and in the "driver set" categories for
each licensed environment. This report shall indicate all copies of the Products
which have been distributed, including indicating any copies as to which a
royalty is not due pursuant to the provisions hereof, whether because it is a
promotional copy or a product upgrade as to which a license fee was previously
paid.
NOTWITHSTANDING THE FOREGOING, KOFAX MAY COMBINE LICENSED ENVIRONMENTS IN THE
FOLLOWING SPECIFIC WAY: IF KOFAX HAS PREPAID "SET: ALL DRIVERS" PLUS A
THIRTY PERCENT PREMIUM OVER THE LICENSE FEES IN THE "SET: ALL DRIVERS"
PREPAY SCHEDULE BELOW, THEN KOFAX MAY SHIP 16 BIT PRODUCTS THAT RUN ON THE
WINDOWS 3.1/WINDOWS 95 ENVIRONMENT AND 32 BIT PRODUCTS THAT RUN ON EITHER
THE WINDOWS NT OR WINDOWS 95 ENVIRONMENT, AND APPLY THOSE PREPAID LICENSE
FEES TOWARDS BOTH THE 16 BIT UNITS AND THE 32 BIT UNITS SHIPPED.
SUPPORT FEES SHALL BE DUE ON THE WINDOWS NT ENVIRONMENT UNLESS OTHER LICENSE
FEES IN ADDITION TO THE ARRANGEMENT ABOVE EXCEED THE MINIMUMS STATED BELOW.
License fees due under this Agreement will be determined by one of the two
following schedules. Any licenses granted in excess of those prepaid prior to
their shipment shall be paid for under the "Quarterly Schedule" and shall be
paid for at the time of the quarterly notification either in cash or by
allocation of a previously granted Discount Allowance. Kofax may also, at any
time, elect to prepay some number of licenses under the "Prepay Schedule".
Prepayment at the time of such election may also be made either in cash or by
allocation of a previously granted Discount Allowance.
PREPAY Schedule
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
QUANTITY 10 50 100 250 500 1,000 2,500 5,000 10,000
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LEVEL 1 DRIVER [*] [*] [*] [*] [*] [*] [*] [*] [*]
- -----------------------------------------------------------------------------------------------------------------
LEVEL 2 DRIVER [*] [*] [*] [*] [*] [*] [*] [*] [*]
- -----------------------------------------------------------------------------------------------------------------
LEVEL 3 DRIVER [*] [*] [*] [*] [*] [*] [*] [*] [*]
- -----------------------------------------------------------------------------------------------------------------
SET: ALL LEVEL 1 [*] [*] [*] [*] [*] [*] [*] [*] [*]
- -----------------------------------------------------------------------------------------------------------------
SET: ALL DRIVERS [*] [*] [*] [*] [*] [*] [*] [*] [*]
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
QUARTERLY Schedule
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
QUANTITY 1-9 10- 50- 100- 250- 500- 1,000- 2,500- 5,000- 10,000
49 99 249 499 999 2,499 4,999 9,999 24,999
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LEVEL 1 DRIVER [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
- -----------------------------------------------------------------------------------------------------------------
LEVEL 2 DRIVER [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
- -----------------------------------------------------------------------------------------------------------------
LEVEL 3 DRIVER [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
- -----------------------------------------------------------------------------------------------------------------
SET: ALL LEVEL 1 [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
- -----------------------------------------------------------------------------------------------------------------
SET: ALL DRIVERS [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
* Such portions are filed under an application for confidential treatment.
<PAGE> 27
Level I scanner drivers are most drivers listed in Exhibit B except:
Level 2 drivers: Ricoh IS410, Fujitsu 3096G/3097G, Kofax/Xionics Simplex,
Panasonic sheetfed
Level 3 drivers: Ricoh IS510/520, Fujitsu 3099A/G/AG, Bell & Howell (SCSI),
Kofax/Xionics Duplex, Canofile, TDC 2610W
ISIS "Sets" include the ISIS drivers for file i/o; otherwise, each file driver
is considered a Level 1 driver.
Kofax shall have the right to distribute, royalty free, Products included as
part of Kofax products which are Promotional Distributions. For these purposes,
"Promotional Distributions" shall include only distributions of the Products,
integrated with Kofax's products, for demonstration or promotional purposes,
when the price charged is equal to or less than the actual cost of the goods
distributed, plus reasonable shipping and handling charges. However, Products
which are distributed at such a price as part of an offer or promotion including
any other Kofax product which is not being distributed at a price equal to or
less than the actual cost of the goods distributed, plus reasonable shipping and
handling charges, shall not be considered Promotional Distributions.
Kofax shall have the right to distribute, royalty free, Product Updates and
Product Enhancements as product upgrades to Kofax's customers who have been
previously licensed to use the Product which is so upgraded and for which a
license fee has previously been paid pursuant to this Agreement.
A maximum of [*] will be due for actual licenses granted during any four
consecutive calendar quarters for each Kofax product in each licensed
environment. Prepayments for licenses used beyond the period in question will
not be included for purposes of applying this maximum.
SUPPORT FEES FOR ISIS DRIVERS
Within 30 days of each annual renewal of this Agreement, whether or not such
renewal is automatic, Kofax shall pay [*] for Support Fees for ongoing Product
Updates, Product Enhancements, and telephone support for each licensed
environment.
Notwithstanding the foregoing, if License Fees for ISIS drivers due and paid in
the previous 12 months for a given environment exceed [*] then no Support
Fees shall be due.
BINARY LICENSE FEES FOR ISIS DRIVERS FOR KODAK IMAGELINK SCANNERS
Prior to the shipment, or within 30 days of the shipment, of any Product, Kofax
shall pay Pixel license fees according to the following schedule:
Scanner 1-5 units 6-10 units
Imagelink 500 [*] [*]
Imagelink 900, 923, 990 [*] [*]
Kofax shall have the right to distribute, royalty free, Product Updates and
Product Enhancements as product upgrades to Kofax's customers who have been
previously licensed to use the Product which is so upgraded and for which a
license fee has previously been paid pursuant to this schedule.
SUPPORT FEES FOR ISIS DRIVERS FOR KODAK IMAGELINK SCANNERS
-4-
* Such portions are filed under an application for confidential treatment.
<PAGE> 28
Within 30 days of each annual renewal of this Agreement, whether or not such
renewal is automatic, Kofax shall pay [*] for Support Fees for ongoing Product
Updates, Product Enhancements, and telephone support for each licensed
environment.
Notwithstanding the foregoing, if License Fees for ISIS drivers for Kodak
Imagelink scanners due and paid in the previous 12 months for a given
environment exceed [*] then no Support Fees shall be due.
-5-
* Such portions are filed under an application for confidential treatment.
<PAGE> 29
EXHIBIT B - PRODUCT SPECIFICATIONS
ISIS Drivers object code shall be that machine readable code which performs the
following functions and/or meets the following specifications:
1. The drivers conform to the ISIS Specification as documented in the latest
revisions of the ISIS Application Developer's Toolkit Manual and the ISIS
Scanner Driver Developer's Toolkit Manual.
2. The drivers pass the test suite "SCANTEST".
3. The drivers have reasonable performance which is not inferior to the
performance exhibited as of the effective date of this Agreement.
4. The drivers must not, in and of themselves, cause the scanner to start and
stop if such starting and stopping causes reduced image quality.
5. The drivers must not use more than 64K of memory for code and data.
6. The drivers will follow the internationalization guidelines of the applicable
operating environment and will include source code as necessary to allow
internationalization.
7. The drivers must support the following scanners and image formats:
In the Windows environment version:
Agfa ARCUS
Agfa ARCUS Plus
Agfa StudioScan
Agfa StudioScan II
Apple One Scanner
Bell & Howell 2135 (Adaptec)
Bell & Howell 2137/A (Adaptec)
Bell & Howell 2138 (Adaptec)
Bell & Howell 3238 (Adaptec)
Bell & Howell 3338/A (Kofax 9200, Xionics Turbo)
Bell & Howell 3338/A (Adaptec)
Bell & Howell 6338 (Kofax 9200, Xionics Turbo)
Bell & Howell 6338 (Adaptec)
Canon IX-12
Canon IX-12F
Canon IX-30
Canon IX-3010 (SI40/Adaptec)
Canon IX-4015 (SI40/Adaptec)
Chinon DS-3000
Complete PC Flatbed (HP)
Envisions 6100, 8100, 24 Pro
Epson ES-300C/GT-6000
Epson ES-600C/GT-6500
Epson ES-800C/GT-8000
Epson ES-1200C/GT-9000
Epson 300GS
-6-
<PAGE> 30
Fujitsu Scan Partner Jr.
Fujitsu Scan Partner 10
Fujitsu 3093E (Kofax 9200, Xionics Turbo)
Fujitsu 3096E+ (Kofax 9200, Xionics Turbo)
Fujitsu 3096G (Adaptec)
Fujitsu 3097E+ (Kofax 9200, Xionics Turbo)
Fujitsu 3097G (Adaptec)
Fujitsu 3096GX
Fujitsu 3099 A/AG (Adaptec, Kofax 9275)
Hewlett-Packard ScanJet
Hewlett-Packard ScanJet Plus
Hewlett-Packard ScanJet IIc
Hewlett-Packard ScanJet IIcx
Hewlett-Packard ScanJet IIp
Hewlett-Packard ScanJet IIIp
Hewlett-Packard Accupage 1.0
IBM 2456
Microtek MS-300A
Microtek MS-300C
Microtek MSF-300A
Microtek MSF-300C
Microtek MSF-300G
Microtek MSF-300Q
Microtek MSF-300Z
Microtek MS-400G
Microtek MS-II
Microtek SM 600GS
Microtek SM 600ZS
Microtek ScanMaker II, IIG, IIHR, IISP
Microtek ScanMaker III
Nikon Scantouch
Okidata, DocIT 3000, 4000
Panasonic KV-SP 505 (Kofax 9200)
Panasonic KV-SS50, KV-SS60
Panasonic KV-SS55, KV-SS65
Pentax (HP)
Relisys Office 2400
Ricoh FS2
Ricoh IS50
Ricoh IS60
Ricoh IS410
Ricoh IS510/520
Ricoh 530 digital copier
Sharp JX-320
Sharp JX-325
Sharp JX-330
Sharp JX-610
TDC 2610 (Kofax 9200, Xionics Turbo)
UMAX UG-630
UMAX UC-630
-7-
<PAGE> 31
UMAX UC-840
UMAX UC-1200S
UMAX OA-1
UMAX 1200-C
TIFF Raw
TIFF 32771
TIFF Packbits
TIFF CCITT G3, G3 modified
TIFF CCITT Group 4
PCX
DCX
LZW
GIF
BMP
CALS Type 1
PDA Raw, G3, G4
In the Windows NT environment version:
Fujitsu Scan Partner Jr.
Fujitsu Scan Partner 10
Fujitsu 3096G (Adaptec)
Fujitsu 3097G (Adaptec)
Hewlett-Packard ScanJet
Hewlett-Packard ScanJet Plus
Hewlett-Packard ScanJet IIc
Hewlett-Packard ScanJet IIcx
Hewlett-Packard ScanJet IIp
Hewlett-Packard ScanJet IIIp
IBM 2456
Ricoh FS2
Ricoh IS50
Ricoh IS60
Ricoh IS410
Ricoh IS510/520
TIFF Raw
TIFF 32771
TIFF Packbits
TIFF CCITT G3, G3 modified
TIFF CCITT Group 4
PCX
BMP
PDA Raw, G3, G4
ISIS Drivers for Kodak Imagelink Scanners object code shall be that machine
readable code which performs the following functions and/or meets the following
specifications:
-8-
<PAGE> 32
1. The drivers conform to the ISIS Specification as documented in the latest
revisions of the PixTools/Scan Manual and the ISIS Scanner Driver Developer's
Toolkit Manual.
2. The drivers pass the test suite "SCANTEST".
3. The drivers have reasonable performance which is not inferior to the
performance exhibited as of the effective date of this Agreement.
4. The drivers will follow the internationalization guidelines of the applicable
operating environment and will include source code as necessary to allow
internationalization.
5. The drivers must support the following scanners, including the features of
those scanners which were supported as of January 1, 1995:
In the Windows environment version:
Kodak Imagelink 500
Kodak Imagelink 900
Kodak Imagelink 923
Kodak Imagelink 990
<PAGE> 1
EXHIBIT 10.23
[LOGO]
MIDCONTINENT BUSINESS SYSTEMS, INC.
- --------------------------------------------------------------------------------
SERVICES CONTRACT
THIS AGREEMENT made this TWENTY-FIFTH DAY OF SEPTEMBER, 1995, by and between
MIDCONTINENT BUSINESS SYSTEMS, INC., hereinafter referred to as "MBS," and
KOFAX IMAGE PRODUCTS, hereinafter referred to as "Client,"
WITNESSETH:
WHEREAS, Client has purchased ImagePlus software and desires to have MBS
prepare customized changes to such software;
NOW, THEREFORE, in consideration of the mutual covenants and premises contained
herein, the parties hereto agree as follows:
1. Compensation. MBS has previously delivered to Client a "Statement of
Work" for the proposed Project. A copy of such Statement of Work is
attached and details the tasks to be performed by MBS and also
represents a cost for such services. MBS hereby agrees to perform all
work related to the Statement of Work for the sum of [ * ] [
* ] AS A GUARANTEED PRE-PAYMENT OF ROYALTY FEES AT [*]] PER ASCENT
SCAN STATION LICENSE FOR THE FIRST 60 LICENSES, AND [*] PER ASCENT
SCAN STATION LICENSE FOR ALL LICENSES THEREAFTER.
2. Test and Acceptance of Project.
a. At such time as MBS has completed the Project, it shall so
inform Client. Client shall thereafter, within twenty (20) business
days, complete such acceptance testing as Client desires to determine
the functionality, performance and conformance of the Project to the
specification of the High Level Design Document, hereinafter referred
to as "Requirements." Client bears the full responsibility of assuring
that the Project has been completed in accordance with the
Requirements and to the levels of functionality, performance, and
other specifications as are established in the Requirements. FAILURE
OF THE CLIENT TO PERFORM SUCH TESTS SHALL PRECLUDE THE CLIENT FROM
RAISING ISSUES OF FUNCTIONALITY, PERFORMANCE AND NON CONFORMANCE TO
THE SPECIFICATIONS ESTABLISHED IN THE REQUIREMENTS IN THE EVENT OF ANY
DISPUTE BETWEEN CLIENT AND MBS.
b. Upon completion of Client's pre-acceptance testing, Client
shall either give MBS a written letter of acceptance or a written
letter specifying deficiencies in the Project. Such deficiencies shall
refer with specificity to particular sections of the Requirements. In
the event of any deficiencies, MBS shall proceed as rapidly as
feasible to correct such deficiencies. After such deficiencies have
been corrected by MBS, Client shall again run such pre-acceptance
tests as it desires and thereupon deliver to MBS either a letter of
acceptance or list of additional deficiencies. This procedure shall be
repeated until Client has accepted the Project.
3. Source Code and Customized Code. MBS will provide Client with a copy
of the source code in order to facilitate Client's use of the Project.
However, MBS shall retain all ownership rights of both the source code
and all customized codes prepared by MBS in connection with the
Project. This customized code shall be licensed to Client as set forth
below. MBS does not permit
* Such portions are filed under an
application for confidential treatment.
CONFIDENTIAL TREATMENT
<PAGE> 2
modification of the customized code except that if the Client
determines to modify the code, the following provisions apply.
a. All warranties made by MBS pursuant to this Agreement shall
immediately terminate.
b. Client agrees that it will provide MBS with a copy of the
modified source code.
4. Changes in the Requirements. To the extent that the Client, during
the course of the Project, determines that it wishes to change the
Requirements for the project, Client shall provide MBS with a proposed
change order specifying the changes in the Requirements. Upon receipt
of the proposed change order, MBS shall then provide Client with a
letter amendment to this Agreement indicating the adjustment of
acceptance of the change order on the compensation to be paid to MBS
pursuant to this Agreement. If MBS accepts the change order and the
Client accepts the adjustment in the compensation to MBS, the parties
shall enter into a written amendment of this Agreement accepting the
change order and adjusting the compensation.
5. Software to be Licensed. In addition to completion of the Project,
the parties desire to enter into a License Agreement whereby Client
will receive a limited license to utilize the custom programming
prepared by MBS for Client pursuant to this Agreement. As used
hereafter, the term Project Software Package includes all custom
programming including custom codes and source codes utilized by MBS in
modifying Client's environment to meet the specifications set forth in
the Requirements.
6. Grant of License and Restrictions of License.
a. MBS hereby grants to Client, subject to the limitations of
this Agreement, a non-exclusive license to use and market the Project
Software Package.
b. This license is limited by the following conditions:
(1) Unless terminated by MBS due to a breach of this
Agreement by Client, Client's license under this Agreement shall
be perpetual.
7. Protection of MBS's Proprietary Rights. To protect MBS's proprietary
rights to the Project Software Package, Client agrees to adhere to the
conditions listed in Section 6 above. Further, Client agrees to
instruct all of its employees who may use or have access to the
Project Software package of the conditions listed in Section 6. Client
also agrees that it will take all such steps as are necessary to
prevent any third party from having access to or using or duplicating
the Project Software Package.
8. Maintenance. MBS shall provide defect only support, directly to the
client, for the Project Software Package as part of the royalty
payment to MBS. This support shall remain in effect as long as the
client's customers maintain a valid support contract with the client.
Any support which is necessitated by any alterations, tampering or
repairs performed on the Project Software Package by Client or any
third party shall be at additional charge to a Client.
9. Payments and Special Charges. Client shall promptly pay all invoices
sent to Client by MBS in accordance with this Agreement. All charges
shall be due and payable by Client within thirty (30) days after
billing by MBS. After that time, a finance charge of 1.5% per month
will be charged to the outstanding balance.
10. Additional Duties of Client. Client shall promptly report to MBS any
suspected malfunctions or defects in the Project Software Package.
11. Enhancements; Modifications. If Client desires any modifications in
the Project Software Package, MBS shall make such modifications, if
feasible, at a price to be determined by MBS.
<PAGE> 3
12. Default. Either party shall be in default under this Agreement if it
fails to timely perform or observe any of the terms or conditions of
this Agreement.
13. Remedies. In the event of a default under this Agreement by a party,
the other party shall have the right to terminate this Agreement upon
written notice thereof to the defaulting party. In the event of a
default by MBS, Client's remedies shall be limited to the right to
recover from MBS the amount of any sums actually paid to MBS under
this Agreement. If either party terminates this Agreement due to
default by the other before delivery, acceptance and payment of the
license fee, Client shall immediately return the Project Software
package and any other property of MBS which it may have to MBS. In the
event of a default by Client, MBS shall have any and all rights
available under law and at equity, including the right to sue for all
damages incurred and to sue for specific performance. Client agrees
that upon the occurrence of any actual or threatened breach by Client
of the restrictions upon the use, sale, transfer, or disclosure of the
Software Package contained in Section 8 herein, monetary damages alone
shall not be sufficient remedy or protection for MBS, and MBS shall be
entitled to such injunctive or other equitable relief as may be deemed
proper or necessary by a court of competent jurisdiction. Except as
provided herein, all available rights and remedies shall be cumulative
and the exercise of any right or remedy shall not be deemed exclusive.
MBS SHALL IN NO EVENT BE LIABLE FOR ANY INCIDENTAL, SPECIAL, INDIRECT
OR CONSEQUENTIAL DAMAGES, AND CLIENT'S RIGHT TO DAMAGES SUFFERED BY
REASON OF A DEFAULT HEREUNDER SHALL BE LIMITED TO THE REFUND OF NO
MORE THAN ANY CHARGES PAID HEREUNDER.
14. Limitations of MBS's Warranties. MBS warrants only that the Project
Software package shall function as specified by the Requirements and
that MBS has the right to grant the license contained in this
Agreement. MBS MAKES NO OTHER WARRANTIES OR REPRESENTATIONS, WHETHER
EXPRESS OR IMPLIED, REGARDING THE PROJECT SOFTWARE PACKAGE OR ITS
FUNCTIONS OR CAPABILITIES, INCLUDING NO WARRANTY REGARDING THE FITNESS
OF THE PROJECT SOFTWARE PACKAGE FOR CLIENT'S INTENDED USE(S) OR
CLIENT'S EQUIPMENT. Notwithstanding anything herein to the contrary,
however, MBS shall have no duty to correct, repair, redesign or
otherwise perform services for the Project Software package (i) once
Client has accepted the Project Software package, or (ii) if Client
has in any way modified or tampered with the Project Software Package.
In addition, MBS shall have no liability for claims concerning
installation, performance specifications, or capability of the Project
Software Package unless such claims are made in writing within one
year after delivery of the Project Software Package by MBS.
15. General Provisions. Any waiver by either party of any term or
condition of this Agreement or a default hereunder shall not be
constructed as a waiver of any subsequent performance due under that
term or condition or any other term or condition of any subsequent
default. The provisions of this Agreement are severable and in the
event that any provision hereof is held by any court to be voidable or
unenforceable, such provisions shall be deemed stricken from this
Agreement and all other terms and conditions shall remain in full
force and effect, and the parties agree to remain bound by and perform
in accordance with the terms hereof, as so amended. This Agreement
constitutes the entire agreement between the parties and supersedes
any previous written, between the parties. This Agreement may not be
amended or altered except by a writing signed by both parties.
16. Governing Law, Jurisdiction, and Venue. This Agreement shall be
deemed to be an agreement entered into in the State of South Dakota.
The laws of the State of south Dakota shall govern this agreement.
Upon request of MBS, any dispute arising under or in connection with
this agreement may be submitted to binding arbitration in Sioux Falls,
SD, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association.
<PAGE> 4
17. Exclusivity. MBS agrees that under the terms of this agreement, it
will develop proprietary and confidential information for and on
behalf of Kofax. In consideration of the foregoing, MBS agrees that
for a period of 2 years following the date of this agreement, it will
not contract to develop a Windows, Unix or OS/2-based document capture
system releasing to, or integrated with, IBM's ImagePlus/400 system on
behalf of any of the following direct competitors of Kofax:
Conerstone Imaging, Intrafed, Micro Systems, File Net (includes
Watermark), Dakota Imaging, Wang Laboratories, Avitar, and Xionics.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date set
forth above.
Midcontinent Business Systems, Inc. KOFAX Image Products
1803 Research Blvd. 3 Jenner Street
Suite 501 Irvine, CA 92718-3807
Rockville, MD 20850
Name: Mark Addink Name: Kevin Drum
------------------------ ---------------------
Signature: /s/ MARK ADDINK Signature: /s/ KEVIN DRUM
------------------------ ---------------------
Title: Branch Manager Title: VP Marketing
------------------------ ---------------------
Date: 10/30/92 Date: 10/16/95
------------------------ ---------------------
<PAGE> 1
EXHIBIT 10.24
[MIDCONTINENT BUSINESS SYSTEMS, INC. LETTERHEAD]
LICENSE CONTRACT
THIS AGREEMENT made this 1st day of July, 1996, by and between MIDCONTINENT
BUSINESS SYSTEMS, INC., hereinafter referred to as "MBS," and KOFAX IMAGE
PRODUCTS, hereinafter referred to as "Client,"
WITNESSETH:
WHEREAS, Client desires to have MBS prepare customized computer software; NOW,
THEREFORE, in consideration of the mutual covenants and premises contained
herein, the parties hereto agree as follows;
1. Compensation. MBS hereby agrees to provide the customized computer
software, hereinafter referred to as the "Software Package," developed
by MBS and described in Exhibit A, for the sum of [ * ] PLUS
ADDITIONAL ROYALTIES as described in Exhibit A.
2. Source Code and Customized Code. MBS will provide Client with a copy
of the source code in order to facilitate Client's use of the Software
Package. However, MBS shall retain all ownership rights of both the
source code and all customized codes prepared by MBS in connection
with the Software Package. This customized code shall be licensed to
Client as set forth below. MBS does not permit modification of the
customized code except that if the Client determines to modify the
code, the following provisions apply.
a. All warranties made by MBS pursuant to this Agreement shall
immediately terminate.
b. Client agrees that it will provide MBS with a copy of the
modified source code.
3. Changes in the Software Package. To the extent that the Client
determines that it wishes to change the Software Package, Client shall
provide MBS with a proposed change order specifying the changes. Upon
receipt of the proposed change order. MBS shall then provide Client
with a letter amendment to this Agreement indicating acceptance of the
change order and adjustment in the compensation to be paid to MBS
pursuant to this Agreement. If MBS accepts the change order and the
Client accepts the adjustment in the compensation to MBS, the parties
shall enter into a written amendment to this Agreement accepting the
change order and adjusting the compensation.
4. Software to be Licensed. The parties desire to enter into a License
Agreement whereby Client will receive a limited license to utilize the
Software Package prepared by MBS for Client pursuant to this
Agreement.
5. Grant of License and Restrictions of License.
a. MBS hereby grants to Client, subject to the limitations of this
Agreement, a non-exclusive license to use and market the Software
Package.
b. This license is limited by the following conditions:
(1) Unless terminated by MBS due to a breach of this Agreement
by Client, Client's license under this Agreement shall be
perpetual.
* Such portions are filed under
an application for confidential
treatment. CONFIDENTIAL TREATMENT
Page 1 of 4
<PAGE> 2
6. Protection of MBS's Proprietary Rights. To protect MBS's proprietary
rights to the Software Package, Client agrees to adhere to the
conditions listed in Section 5 above. Further, Client agrees to
instruct all of its employees who may use or have access to the
Software Package of the conditions listed in Section 5. Client also
agrees that it will take all such steps as are necessary to prevent
any third party from having access to or using or duplicating the
Software Package.
7. Maintenance. MBS shall provide defect only support, directly to the
Client, for the Software package as part of the royalty payment to
MBS. Any support which is necessitated by any alterations, tampering,
or repairs performed on the Software Package by Client or any third
party shall be at additional charge to a Client.
8. Payments and Special Charges. Client shall promptly pay all invoices
sent to Client by MBS in accordance with this Agreement. All charges
shall be due and payable by Client within thirty (30) days after
billing by MBS. After that time, a finance charge of 1.5% per month
will be charged to the outstanding balance.
9. Additional Duties of Client. Client shall promptly report to MBS any
suspected malfunctions or defects in the Software Package.
10. Enhancements and Modifications. If Client desires any modifications in
the Software Package, MBS shall make such modifications, if feasible,
at a price to be determined by MBS.
11. Default. Either party shall be in default under this Agreement if it
fails to timely perform or observe any of the terms or conditions of
this Agreement.
12. Remedies. In the event of a default under this Agreement by a party,
the other party shall have the right to terminate this Agreement upon
written notice thereof to the defaulting party. In the event of a
default by MBS, Client's remedies shall be limited to the right to
recover from MBS the amount of any sums actually paid to MBS under
this Agreement. If either party terminates this Agreement due to
default by the other before delivery, acceptance and payment of the
license fee, Client shall immediately return the Software Package and
any other property of MBS which it may have to MBS. In the event of a
default by Client, MBS shall have any and all rights available under
law and at equity, including the right to sue for all damages incurred
and to sue for specific performance. Client agrees that upon the
occurrence of any actual or threatened breach by Client of the
restrictions upon the use, sale, transfer, or disclosure of the
Software Package contained in Section 8 herein, monetary damages alone
shall not be sufficient remedy or protection for MBS, and MBS shall be
entitled to such injunctive or other equitable relief as may be deemed
proper or necessary by a court of competent jurisdiction. Except as
provided herein, all available rights and remedies shall be cumulative
and the exercise of any right or remedy shall not be deemed exclusive.
MBS SHALL IN NO EVENT BE LIABLE FOR ANY INCIDENTAL, SPECIAL, INDIRECT
OR CONSEQUENTIAL DAMAGES, AND CLIENTS RIGHT TO DAMAGES SUFFERED BY
REASON OF A DEFAULT HEREUNDER SHALL BE LIMITED TO THE REFUND OF NO
MORE THAN ANY CHARGES PAID HEREUNDER.
13. Limitations of MBS's Warranties. MBS warrants only that the Software
Package shall function as specified by the Requirements and that MBS
has the right to grant the license contained in this Agreement. MBS
MAKES NO OTHER WARRANTIES OR REPRESENTATIONS, WHETHER EXPRESS OR
IMPLIED, REGARDING THE SOFTWARE PACKAGE OR ITS FUNCTIONS OR
CAPABILITIES, INCLUDING NO WARRANTY REGARDING THE FITNESS OF THE
SOFTWARE PACKAGE FOR CLIENT'S INTENDED USE(S) OR CLIENT'S EQUIPMENT.
Notwithstanding anything herein to the contrary, however, MBS shall
have no duty to correct, repair, redesign or otherwise perform
services for the Software Package (i) once Client has accepted the
Software Package, or (ii) if Client has in any way modified or
tampered with the Software Package. In addition, MBS shall have no
liability for claims concerning installation, performance
specifications, or capability of the Software Package unless such
claims are made in writing within one year after delivery of the
Software Package by MBS.
Page 2 of 4
<PAGE> 3
14. General Provisions. Any waiver by either party of any term or
condition of this Agreement or a default hereunder shall not be
constructed as a waiver of any subsequent performance due under that
term or condition or any other term or condition of any subsequent
default. The provision of this Agreement are severable and in the
event that any provision hereof is held by any court to be voidable or
unenforceable, such provisions shall be deemed stricken from this
Agreement and all other terms and conditions shall remain in full
force and effect, and the parties agree to remain bound by and perform
in accordance with the terms hereof, as so amended. This Agreement
constitutes the entire agreement between the parties and supersedes
any previous written, between the parties. This Agreement may not be
amended or altered except by a writing signed by both parties.
15. Governing Law, Jurisdiction, and Venue. This Agreement shall be deemed
to be an agreement entered into in the State of South Dakota. The laws
of the State of South Dakota shall govern this agreement. Upon request
of MBS, any dispute arising under or in connection with this agreement
may be submitted to binding arbitration in Sioux Falls, SD, in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date set
forth above.
MIDCONTINENT BUSINESS SYSTEMS, INC. KOFAX IMAGE PRODUCTS
7900 XERXES AVENUE SOUTH, SUITE 1100 3 JENNER STREET
MINNEAPOLIS, MN 55431 IRVINE, CA 92718-3807
Signature: /s/ DAVID FETTERS Signature: /s/ KEVIN DRUM
-------------------------- ----------------------
Name: David Fetters Name: Kevin Drum
Title: Vice President/General Manager Title: VP Marketing
Date: 7/15/96 Date: 7/8/96
Page 3 of 4
<PAGE> 4
EXHIBIT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Item Total*
- --------------------------------------------------------------------------------
<S> <C>
MBS Tiff to MO:DCA Conversion Utility [ * ]
================================================================================
TOTAL* [ * ]
- --------------------------------------------------------------------------------
</TABLE>
* All monetary amounts are in U.S. Dollars
** This amount represents a guaranteed pre-payment of royalty fees for the
first 50 licenses sold at [ * ] per license. For every license over 50 sold,
an additional royalty fee of [ * ] will be due and payable by Client to MBS.
Under the terms of this agreement, a license is considered to have been sold
each time that Client sells an Ascent Capture Scan Station license. Sales by
Client of multiple Ascent Capture Scan Station licenses to a single Client
customer constitute the sale of multiple licenses of the Software Package
described in the table above.
Page 4 of 4
* Such portions are filed under an
application for confidential treatment.
<PAGE> 1
EXHIBIT 10.25
- --------------------------------------------------------------------------------
NOVELL, INC.
NEST SDK Developer Product Distribution License Exhibit
- --------------------------------------------------------------------------------
This NEST SDK Developer Product Distribution License Exhibit (the "Exhibit") to
the NEST SDK 1. x Supplement (the "Supplement") and the Novell Embedded Systems
Technology Master Agreement (the "Agreement") is entered into by Novell and
Developer. This Exhibit is effective as of July 31st, 1996 ("Distribution
License Effective Date").
1. INTRODUCTION. The purpose of this Exhibit is to allow Developer, subject to
the restrictions contained in this Exhibit and the Agreement, to
sublicense, duplicate, and distribute Qualifying Developer Products
developed under the Agreement between Novell and Developer. All terms and
conditions of the Agreement are incorporated herein by reference and shall
have full force and effect between the parties in the interpretation of
this Exhibit.
2. DEFINITIONS. Capitalized terms in this Exhibit have the meanings stated
below or defined in the Agreement.
2.1 "Software" means binary code and Program Tools or binary code produced
from Program Tools that are linked or included in Developer Product
pursuant to the Supplement and is subject to all terms and conditions
of that Supplement.
2.2 "Sublicense" means an executed agreement or shrink-wrap agreement or
electronic license that an end user consents to by performing a
physical act (e.g., pushing a button on a keyboard) before utilizing
the Qualifying Developer Product which at minimum provides the
following or equivalent protection to Novell:
2.2.1 restricts the number of copies of the Software to one operating
copy per Qualifying Developer Product;
2.2.2 permits only those number of copies of the Software as are
essential to back up or archival use of the Software;
2.2.3 states that no title to the intellectual property contained in
the Software is transferred to the sublicensee and it is
retained by Novell;
2.2.4 represents that the human readable code of the Software (source
code) is not sublicensed to the sublicensee;
2.2.5 restricts sublicensees from de-compiling and reverse assembling
the software to discover the source code; and
2.2.6 prohibits time-sharing, lease, rental, distribution, transfer,
sublicense, and unauthorized use of the Software, without prior
written consent.
3. LICENSES AND RESTRICTIONS.
3.1 Distribution License. Subject to the terms and conditions of this
Exhibit and the Agreement, Novell grants to Developer, and Developer
accepts, a non-exclusive, non-transferable, world-wide license to
reproduce and distribute (directly or indirectly) the Qualifying
Developer Products, being the Developer Products identified below that
are found to meet the Qualifying Developer Product requirements, but
only under a Sublicense between Developer and its end users or, in the
case of distribution through Developer's OEM customer, Developer must
obtain binding contractual assurances that Developer's OEM customers
will only distribute the Qualifying Developer Products under a
Sublicense between Developer's OEM customer and its end users.
Developer Product Title: NetScan(TM)
---------------------------------------
NEST Components Licensed: IPX/SPX, Nest Requester
--------------------------------------
Developer Product Title:
---------------------------------------
NEST Components Licensed:
--------------------------------------
Developer Product Title:
---------------------------------------
PAGE 1
<PAGE> 2
- --------------------------------------------------------------------------------
NEST Components Licensed:
-------------------------------
Product names identified in this Section are solely to assist Novell
in program administration, but not for trademark licensing purposes.
Novell reserves the right to take action in the event any Developer
Product name violates Novell rights.
4. CONSIDERATION. In exchange for the rights granted by Novell to Developer
under this Exhibit, Developer agrees to pay Novell a per copy royalty per
the number of copies of the Qualifying Developer Products it transfers,
sells, sublicenses or authorizes for use. A non-refundable royalty payment
("Non-refundable Royalty Payment") is set forth in the Royalty Schedule
section below. Notwithstanding the foregoing, Developer will report all
such royalties due to Novell on a monthly basis using calendar quarters.
4.1 Monthly Royalty. In addition, Developer shall pay to Novell a royalty
based upon the number of copies of each Qualifying Developer Product
transferred, sold or licensed by Developer. Royalties shall accrue
upon transfer, sale or license of Qualifying Developer Products by
Developer and shall be paid to Novell no later than forty-five (45)
days after the end of each month.
4.2 Minimum Royalty. Developer shall pay to Novell a guaranteed annual
minimum royalty of [ * ] [ * ] for the Qualifying Developer
Product that includes the NEST Client Requester and/or NetWare IPX/SPX
Modules. In addition, should Qualifying Developer Products also
include the NPrinter modules, Developer shall pay to Novell a
guaranteed annual minimum royalty of [ * ] [ * ].
4.3 Audit. Developer shall maintain complete and accurate accounting
records, in accordance with generally accepted accounting practices,
to support and document royalty amounts due under this Exhibit and
shall retain such records for three (3) years after payment is made.
Developer shall, upon written request of Novell, provide audit access
to such records to Novell. If Developer so decides, a mutually
acceptable independent accounting firm may conduct the audit at
Developer's expense. Such access shall be granted only during normal
business hours and no more frequently than once in each calendar year.
All information received during the audit shall be held in confidence
by the parties.
4.4 Royalty Schedule
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Item Base Price Discount Schedule
- --------------------------------------------------------------------------------
Units Percentage
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
IPX/SPX [ * ] [ * ] [ * ]
NEST Requester [ * ] [ * ] [ * ]
PServer/NPrinter [ * ] [ * ] [ * ]
NEST Autoroute [ * ] [ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
</TABLE>
- --------------------------------------------------------------------------------
* Such portions are filed under an
application for confidential treatment
PAGE 2
<PAGE> 3
- --------------------------------------------------------------------------------
5. DEVELOPER'S DUTIES.
5.1 Qualifying Developer Products. Qualifying Developer Products may only
be sublicensed and distributed according to the terms and conditions
of this Exhibit.
5.2 Operating System Companies. Notwithstanding any other provision(s) of
this Agreement, Developer agrees that it may not authorize the
distribution of all or any portion of the Qualifying Developer
Products through companies that design, develop, or market computer
operating systems without the prior written consent of an authorized
Novell representative.
5.3 Protection. Developer agrees to take all reasonable steps to protect
the Program Tools and related Documentation Tools from unauthorized
copying or use. The source code of the Program Tools provided in
binary form represents and embodies trade secrets of Novell which are
not licensed to Developer. Developer agrees not to reverse assemble or
reverse compile this binary code to discover the source code.
5.4 Documentation. Developer agrees to include a conspicuous statement in
its documentation identifying Developer as the primary support contact
for the Qualifying Developer Products distributed by Developer. Upon
request, Developer agrees to provide Novell with three copies of its
then current documentation.
5.5 End-user support. Developer agrees to provide all technical support
for all aspects of the Qualifying Developer Product.
5.6 Yes Logo. Developer agrees to prominently display the Yes Logo on
Qualifying Developer Product, and all marketing materials, product
packaging, and advertising material related to Qualifying Developer
Product; to emphasize the Yes Logo in at least one Qualifying
Developer Product advertisement, Qualifying Developer Product line
advertisement, or corporate positioning advertisement in an
appropriate national publication; and provide appropriate product and
program descriptions in all materials bearing the Yes Logo.
6. TERM AND TERMINATION.
6.1 Term. The term of this Exhibit shall be one year from the Distribution
License Effective Date of and shall automatically renew for successive
one year periods unless either party provides thirty (30) days or more
prior written notice of its intent to terminate this Exhibit.
6.2 Termination for Convenience. Either party may terminate this Exhibit
and the licenses granted by Novell under the Licenses and Restrictions
Section of this Exhibit at any time without cause by giving 180
calendar days' prior written notice to the other party. In the case
that Novell exercises its right to terminate for convenience,
Developer may distribute Qualifying Developer Product then in
inventory for which Developer has already paid royalties.
7. SIGNATURES.
NOVELL, INC. (DEVELOPER) Kofax Image Products
----------------------------
Signature: /s/ JAMES T. SULLIVAN Signature: /s/ KEVIN DRUM
------------------------- -----------------------------
Name: James T. Sullivan Name: Kevin Drum
Title: VP OEM Sales Title: Vice President-Marketing
Date: 17 October 1996 Date: July 31, 1996
- -------------------------------------------------------------------------------
PAGE 3
<PAGE> 1
EXHIBIT 10.26
EXECUTION ORIGINAL
- --------------------------------------------------------------------------------
TEMPORARY DISTRIBUTION LICENSE
This Agreement is between Novel, Inc. ("Novell"), a corporation organized
and existing under the laws of the State of Delaware, with its principal place
of business at 122 East 1700 South, Provo, Utah 84606, and Kofax Image
products with an office at 3 Jenner Street, Irvine, California 92618.
1. Purpose. Novell has developed, or otherwise has authority to license, the
software programs identified in Exhibit A ("Licensed Works"). These
Licensed Works are components of Novell products. Release versions of the
Licensed Works, which are modified from time to time, are not made
available in the current versions of Novell products, although they are
made available through the NetWire(R) Information service and other sources
readily available to developers. Company develops products that depend on
the current version of the Licensed Works in order to interoperate with
Novell products ("Company Products"). Purchasers of Company Products need
an easy way to obtain the current version of the Licensed Works.
Accordingly, Novell and Company desire to make the Licensed Works available
with the Company Products. This Agreement sets forth the terms and
conditions under which Company may distribute the Licensed Works with
Company Products.
2. Definitions. For the purposes of this Agreement, the following are defined
terms:
2.1 The term "Licensed Works" means the computer programs described in
Exhibit A and the Documentation associated with the computer programs.
The term "Licensed Works" shall not include maintenance modifications
or enhancements of the computer programs, unless provided by Novell.
2.2 The term "Client Software" means the portions of the Licensed Works
which operate on an intelligent, single-user device, and which allow
the device to use the services of a Communications Network.
2.3 The term "Communications Network" means a data communications system
which allows a number of independent data devices to communicate with
each other, but which is limited by a single Network Host, its
internal bridges, and the workstations physically attached to it.
2.4 The term "Documentation" means the manual(s) and any other printed
material provided by Novell with the Licensed Works.
2.5 The term "Host Software" means the portions of the Licensed Works
which operate on a computer system and which provide resources to a
Communications Network.
2.6 The term "Licensed Machine" means a single computer with a single
central processing unit.
2.7 The term "Network Host" or "Network Server" means the single
computing device on which Host Software executed. Use on additional
devices or on a device having more than the number of processing
unit(s) identified in the associated Documentation is prohibited. If
the Documentation does not reference multiple processing units, use of
the Software is limited to one processing unit.
2.8 The term "NetWare Loadable Module Software" or "NLM Software" means
one or more software modules which represent a single program that is
dynamically loaded into the memory of a Network Host.
2.9 The term "VAP" means one or more software modules which is loaded on
a Network Host.
3. License. Each of the Licensed Works to this Agreement is identified in
Exhibit A. Additional Licensed works may be added to this Agreement
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EXECUTION ORIGINAL
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upon the mutual agreement of the parties. Each item on Exhibit A is
identified by a program category, e.g., "Network Programs." Based upon the
applicable category, one of the following licenses applies:
3.1 Network Programs. With respect to Licensed Works identified as
"Network Programs," Novell grants to Company, a nonexclusive,
temporary nontransferable right to duplicate such Licensed Works and
to sublicense to Company's customers the nontransferable right to (i)
use each sublicensed copy of Host Software on a single Network Server,
(ii) use each sublicensed copy of NLM software or VAP software on a
single Network Server, and (iii) to use each sublicensed copy of the
Client Software, and to, reproduce and use copies of such Client
Software in support of the related Host Software provided no direct
monetary or commercial benefit, for the reproduction or use is
received by Company's customers.
3.2 Single Copy Programs. With respect to software programs identified as
"Single Copy Programs," Novell grants to Company a nontransferable,
nonexclusive right to duplicate such Licensed Works and to sublicense
to Company's customers the nontransferable right to use each
sublicensed copy of such Licensed Works on a Single Licensed Machine.
Each of the foregoing licenses shall terminate upon the earlier of (i)
either party's written notice of termination of this Agreement for material
breach, (ii) general availability of the applicable Licensed Work from
Novell, either directly or indirectly, or (iii) thirty (30) days of written
notice for convenience. In addition, either party may terminate this
Agreement in its entirety upon thirty (30) days written notice for material
breach or for convenience. Sublicenses granted to end users in compliance
with this Agreement prior to the effective termination of any such license
right shall remain unaffected by termination.
4. Current Version and "Smart" Installation. Novell modifies and updates the
Licensed Works from time to time; Company shall distribute only the most
current version of the Licensed Works. Further, Company shall distribute
the Licensed Works in such a manner that they can only be installed through
a "smart" installation program developed by Company that will not install
the Licensed Works unless installation will result in the replacement of an
older version of the Licensed Works.
5. Protection. Company agrees to take all reasonable steps to protect the
Licensed Works from unauthorized copying or use. Company acknowledges that
the source code of the Licensed Works is not licensed to Company or
Company's customers. Company agrees not to disassemble or reverse compile
any executable code or object subject to this Agreement in order to
discover the associated source code.
6. Copies and Adaptations. Except as otherwise provided in this Agreement,
Company agrees not to make, or authorize the making of copies or
adaptations of any Licensed Works except as an essential step in the
utilization of the software, or for archival purposes or to backup use of
the software. In making copies or authorizing its customers to make copies,
Company agrees to faithfully reproduce, or require its customers to
faithfully reproduce all proprietary rights notices contained in the
Licensed Works. Company agrees not to copy the Documentation or authorize
any of its customers to copy the Documentation.
7. Ownership. Ownership of, and title to, the Licensed Works (including any
adaptations or copies) shall be held by Novell and/or its licensors. Copies
acquired under sublicense shall be construed solely to allow the sublicense
to exercise its rights under the sublicense.
8. Indemnification. Novell shall indemnify, defend and hold Company harmless
from any and all damages, liabilities, costs and expenses incurred as a
result of any claims, judgments or adjudication against Licensee that the
Licensed Works infringe any patent, trade secret or copyright of any third
party, provided: (i) Customer shall promptly notify Novell in writing of
such claim; and (ii) Novell shall have the sole control of the defense of
any such action and all negotiations for its settlement and compromise.
9. Restrictions. Except as expressly authorized in this Agreement, Company
agrees not to rent,
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EXECUTION ORIGINAL
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lease, sublicense, distribute, transfer, copy, reproduce, display, modify
or time share the Licensed Works or Documentation. Moreover, Company agrees
to incorporate similar restrictions in its sublicenses.
10. Sublicenses. Company agrees to License each copy of the Licensed Works to
its sublicensees by means of a written sublicense, which may include a
"shrink-wrapped," "box-top" or equivalent license. Each such sublicense
shall contain provisions consistent with the provisions of this Agreement.
11. Disclaimer of Warranties. NOVELL MAKES NO WARRANTY, REPRESENTATION OR
PROMISE NOT EXPRESSLY SET FORTH IN THIS SECTION 10 OF THIS AGREEMENT.
NOVELL DISCLAIMS AND EXCLUDES ANY AND ALL IMPLIED WARRANTIES OF
MERCHANTABILITY, TITLE AND FITNESS FOR A PARTICULAR PURPOSE. NOVELL DOES
NOT WARRANT THAT THE LICENSED WORKS WILL SATISFY COMPANY'S REQUIREMENTS OR
THOSE OF ITS CUSTOMERS OR THAT THE LICENSED WORKS ARE WITHOUT DEFECT OR
ERROR OR THAT THE OPERATION OF THE LICENSED WORKS WILL BE UNINTERRUPTED.
12. Limitation of Liability. NOVELL'S AGGREGATE LIABILITY ARISING FROM OR
RELATING TO THIS AGREEMENT OR THE LICENSED WORKS IS LIMITED TO $100,000.
NOVELL SHALL NOT IN ANY CASE BE LIABLE FOR ANY SPECIAL INCIDENTAL,
CONSEQUENTIAL, INDIRECT OR PUNITIVE DAMAGES EVEN IF NOVELL HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES. NOVELL IS NOT RESPONSIBLE FOR LOST
PROFITS OR REVENUE, LOSS OF USE OF THE LICENSED WORKS, LOSS OF DATA, COSTS
OF RE-CREATING LOST DATA, THE COST OF ANY SUBSTITUTE EQUIPMENT OR PROGRAM,
OR CLAIMS BY ANY PARTY OTHER THAN COMPANY.
13. GENERAL PROVISIONS
13.1 Notice. Unless otherwise agreed to by the parties, all notices
required under this Agreement shall be deemed effective when received
and made in writing by either (i) registered mail, (ii) certified
mail, return receipt requested, or (iii) overnight mail, addressed and
sent to the attention:
Novell, Inc.
1555 North Technology Way
Oram, Utah 84057
Attn: General Counsel
--------------------------------------
--------------------------------------
--------------------------------------
Attn:
---------------------------------
13.2 Construction.
13.2.1 Headings. The headings of this Agreement are provided for
reference only and shall not be used as a guide to
Interpretation.
13.2.2 Singular, Plural and Gender. When used in this Agreement, the
singular includes the plural, the plural includes the singular
and gender related pronouns include the feminine, masculine
and neuter.
13.3 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the substantive laws of the State of Utah.
The parties agree that any action relating to ownership of software
provided by Novell under this Agreement shall be instituted and
prosecuted exclusively in the courts of competent jurisdiction of the
State of Utah.
13.4 Force Majeure. If either party shall be prevented from performing any
portion of this Agreement by causes beyond its control, including
labor disputes, civil commotion, war, governmental regulations or
controls, casualty, inability to obtain materials or services or acts
of God, the defaulting party shall be excused from performance for the
period of the delay and for a reasonable time thereafter.
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13.5 Survival of Terms. The provisions of this Agreement which by their
nature extend beyond the expiration or termination of this Agreement
will survive and remain in effect until all obligations are satisfied.
13.6 Waiver. No waiver of any right or remedy on one occasion by either
party shall be deemed a waiver of the right or remedy on any other
occasion.
13.7 Superior Agreement. This Agreement, including all exhibits referenced
herein, sets forth the entire agreement and understanding between the
parties as to the subject matter and merges all prior discussions.
Neither of the parties shall be bound by any conditions, definitions,
warranties, understandings or representations with respect to the
subject matter other than as expressly provided under this Agreement.
This Agreement may not be modified by usage of trade, course of
dealing or otherwise. This Agreement is subject to amendment or
modification only by a writing duly signed by both parties.
13.8 Assignment. Any attempted assignment without written consent shall be
null and void. Where required, neither party shall unreasonably
withhold consent.
13.9 Severability. If any provision of this Agreement is held invalid,
illegal, or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or
impaired thereby, and shall be interpreted, to the extent possible,
to achieve the purpose of this Agreement as originally expressed with
the invalid, illegal or unenforceable provision.
13.10 Independent Contractors. Both parties to this Agreement are
independent contractors and each agrees not to represent itself as
an agent or legal representative of the other party.
13.11 Compliance with Laws. Company shall comply, at Company's own expense,
with all statutes, regulations, rules, ordinances, and orders of any
governmental body, department or agency which apply to or result from
Company's obligations under this Agreement. Company hereby agrees that
it and its subsidiaries and affiliates do not intend and will not
knowingly, without prior written consent, if required, of the office
of Export Administration of the U.S. Department of Commerce,
Washington D.C. 20230, export or transmit directly or indirectly the
technology to any country in group Q, S, W, Y, or Z country specified
in of the Export Administration Regulations issued by the U.S.
Department of Commerce or to any country to which transmission is
restricted by applicable regulations or statutes.
14. Signatures. This Agreement shall become effective on the latter of the
date signed by an authorized representative of Novell or Company.
Company: Kofax Image Products
Signature: /s/ KEVIN DRUM
-----------------------
Name: Kevin Drum
Title: Vice President-Marketing
Date: July 24, 1996
Novell, Inc.
Signature: /s/ JAMES T. SULLIVAN
-----------------------
Name: James T. Sullivan
Title: VP OEM Sales
Date: 17 October 1996
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EXECUTION ORIGINAL
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EXHIBIT A
CATEGORIES OF SOFTWARE
NETWORK PROGRAMS: To Be Added
- ----------------
NWCALLS.DLL
NWIPXSPX.DLL
SINGLE COPY PROGRAMS: To Be Added
- --------------------
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EXHIBIT 11.1
COMPUTATION OF PRO FORMA NET INCOME PER SHARE
<TABLE>
<S> <C>
Weighted average common shares 1,319,126
Conversion of Preferred Stock to Common Stock 2,667,002
Options issued within one year of the initial filing date of the S-1
Registration Statement using the treasury stock method 88,009(1)
All other options outstanding using the treasury stock method 210,495(2)
----------
Total weighted average shares outstanding 4,291,717
Net income $4,284,632
----------
Pro forma net income per share $ .50
==========
</TABLE>
- ---------------
<TABLE>
<S> <C>
(1) Options issued in one year window: 161,350(a)
Exercise price x $5.00
---------
Gross proceeds $ 806,750
Repurchase price / $11.00
---------
Shares repurchased 73,341(b)
=========
Net shares (a)-(b) 88,009
=========
(2) All other options: 269,238(a)
Weighted average exercise price x $2.40
---------
Gross proceeds $ 646,171
Repurchase price $ 11
---------
Shares repurchased 58,743(b)
=========
Net shares (a)-(b) 210,495
=========
</TABLE>
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To the Board of Directors and Stockholders of
Kofax Image Products, Inc.
Irvine, CA
We consent to the use in this Registration Statement relating to 2,000,000
shares of Common Stock of Kofax Image Products, Inc. on Form S-1 of our report
dated July 29, 1997 (except for Note 14 as to which the date is August 27,
1997), appearing in the Prospectus, which is a part of this Registration
Statement, and to the references to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of Kofax Image Products, Inc.,
listed in Item 16(b). This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
Deloitte & Touche LLP
Costa Mesa, California
August 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 801,500
<SECURITIES> 4,602,900
<RECEIVABLES> 4,556,700
<ALLOWANCES> 422,900
<INVENTORY> 2,011,700
<CURRENT-ASSETS> 12,321,100
<PP&E> 6,005,300
<DEPRECIATION> 4,040,100
<TOTAL-ASSETS> 16,326,900
<CURRENT-LIABILITIES> 3,645,500
<BONDS> 427,100
7,146,200
0
<COMMON> 172,000
<OTHER-SE> 4,936,100
<TOTAL-LIABILITY-AND-EQUITY> 16,326,900
<SALES> 0
<TOTAL-REVENUES> 29,265,700
<CGS> 0
<TOTAL-COSTS> 7,720,100
<OTHER-EXPENSES> 18,153,700
<LOSS-PROVISION> 41,400
<INTEREST-EXPENSE> 106,783
<INCOME-PRETAX> 3,461,200
<INCOME-TAX> 1,325,900
<INCOME-CONTINUING> 2,135,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,135,300
<EPS-PRIMARY> 0
<EPS-DILUTED> .50
</TABLE>
