THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.
 
WARRANT TO PURCHASE STOCK
 
Corporation:
 
DOCUMENT CAPTURE TECHNOLOGIES, INC.
Number of Shares:
 
68,027
Class of Stock:
 
Common
Initial Exercise Price:
 
$0.588
Issue Date:
 
September 2, 2009
Expiration Date:
  
September 2, 2016

 
This Warrant Certifies That, for good and valuable consideration, the receipt of
which is hereby acknowledged, Bridge Bank N.A. or its assignee (“Holder”) is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the “Shares”) of the corporation (the “Company”) at the
initial exercise price per Share (the “Warrant Price”) all as set forth above
and as adjusted pursuant to Article 2 of this warrant, subject to the provisions
and upon the terms and conditions set forth in this warrant.
 
ARTICLE 1

 
EXERCISE
 
1.1           Method of Exercise.  Holder may exercise this warrant by
delivering this warrant and a duly executed Notice of Exercise in substantially
the form attached as Appendix 1 to the principal office of the Company.  Unless
Holder is exercising the conversion right set forth in Section 1.2, Holder shall
also deliver to the Company a check for the aggregate Warrant Price for the
Shares being purchased.
 
1.2           Conversion Right.  In lieu of exercising this warrant as specified
in Section 1.1, provided there is not an effective registration statement
covering the resale of the Shares, Holder may from time to time convert this
warrant, in whole or in part, into a number of Shares determined by dividing (a)
the aggregate fair market value of the Shares or other securities otherwise
issuable upon exercise of this warrant minus the aggregate Warrant Price of such
Shares by (b) the fair market value of one Share.  The fair market value of the
Shares shall be determined pursuant to Section 1.3.

 
1.

--------------------------------------------------------------------------------

 

1.3           Fair Market Value.  If the Shares are traded regularly in a public
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company’s stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company.  If the Shares are not regularly traded
in a public market, the Board of Directors of the Company shall determine fair
market value in its reasonable good faith judgment.  The foregoing
notwithstanding, if Holder advises the Board of Directors in writing that Holder
disagrees with such determination, then the Company and Holder shall promptly
agree upon a reputable investment banking firm to undertake such valuation.  If
the valuation of such investment banking firm is greater than that determined by
the Board of Directors, then all fees and expenses of such investment banking
firm shall be paid by the Company.  In all other circumstances, such fees and
expenses shall be paid by Holder.
 
1.4           Delivery of Certificate and New Warrant.  Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new warrant representing the
Shares not so acquired.
 
1.5           Replacement of Warrants.  On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
 
ARTICLE 2

 
ADJUSTMENTS TO THE SHARES
 
2.1           Stock Dividends, Splits, Etc.  If the Company declares or pays a
dividend on its common stock payable in common stock, or other securities, or
subdivides the outstanding common stock into a greater amount of common stock,
then upon exercise of this Warrant, for each Share acquired, Holder shall
receive, without cost to Holder, the total number and kind of securities to
which Holder would have been entitled had Holder owned the Shares of record as
of the date the dividend or subdivision occurred.
 
2.2           Reclassification, Exchange or Substitution.  Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event.  Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company’s Certificate of
Incorporation upon the closing of a registered public offering of the Company’s
common stock.  The Company or its successor shall promptly issue to Holder a new
warrant for such new securities or other property.  The new warrant shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 2 including, without
limitation, adjustments to the Warrant Price and to the number of securities or
property issuable upon exercise of the new warrant.  The provisions of this
Section 2.2 shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events.

 
2.

--------------------------------------------------------------------------------

 

2.3           Adjustments for Mergers, Combinations, Etc.  If the outstanding
Shares are combined or consolidated, by reclassification or otherwise, into a
lesser number of shares, the Warrant Price shall be proportionately
increased.  If the outstanding Shares are combined or consolidated, by
reclassification or otherwise, into a greater number of shares, the Warrant
Price shall be proportionately decreased. Upon the closing of any acquisition of
all or substantially all of Holder’s assets or capital stock, the successor
entity shall assume the obligations of this Warrant, and this Warrant shall be
exercisable for the same securities, cash, and property as would be payable for
the Shares issuable upon exercise of the unexercised portion of this Warrant as
if such Shares were outstanding on the record date for the acquisition and
subsequent closing.  The Warrant Price shall be adjusted accordingly.
 
2.4           Adjustments for Diluting Issuances.  The Exercise Price and the
number of Shares issuable upon exercise of this Warrant or, if Shares are
Preferred Stock, the number of shares of common stock issuable upon conversion
of Shares, shall be subject to adjustment, from time to time in the manner set
forth on Exhibit A in the event of Diluting Issuances (as defined on Exhibit A).
 
2.5           No Impairment.  The Company shall not, by amendment of its
Certificate of Incorporation or through a 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 under this Warrant by the Company, but
shall at all times in good faith assist in carrying out all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder’s rights under this Article against impairment.
 
2.6           Certificate as to Adjustments.  Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is
based.  The Company shall, upon written request, furnish Holder a certificate
setting forth the Warrant Price in effect upon the date thereof and the series
of adjustments leading to such Warrant Price.
 
2.7           Fractional Shares.  No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the Number of Shares to be issued
shall be rounded down to the nearest whole Share.  If a fractional share
interest arises upon any exercise or conversion of the Warrant, the Company
shall eliminate such fractional share interest by paying Holder amount computed
by multiplying the fractional interest by the fair market value of a full Share.

 
3.

--------------------------------------------------------------------------------

 
 
ARTICLE 3
 
REPRESENTATIONS AND COVENANTS OF THE COMPANY
 
3.1          Representations and Warranties.  The Company hereby represents and
warrants to the Holder as follows:
 
(a)           The initial Warrant Price referenced on the first page of this
Warrant is not greater than the fair market value of the Shares as of the date
of this Warrant.
 
(b)           All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
 
(c)           The Company’s capitalization table attached to this Warrant is
true and complete as of the Issue Date.
 
3.2          Notice of Certain Events.  If the Company proposes at any time (a)
to declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; or (d)
to merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up, then, in connection with each such event, the Company shall
give Holder (1) at least 20 days prior written notice of the date on which a
record will be taken for such dividend, distribution, or subscription rights
(and specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (a) and (b) above; and (2) in the case of the matters referred to
in (c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event).
 
3.3          Information Rights.  So long as the Holder holds this Warrant
and/or any of the Shares, the Company shall deliver to the Holder (a) promptly
after mailing, copies of all communiques to the shareholders of the Company, (b)
within ninety (90) days after the end of each fiscal year of the Company, the
annual audited financial statements of the Company certified by independent
public accountants of recognized standing and (c) within forty-five (45) days
after the end of each of the first three quarters of each fiscal year, the
Company’s quarterly, unaudited financial statements.
 
3.4          Registration Rights.  Company agrees that Shares or, if Shares are
convertible into common stock of Company, such common stock, shall have the
registration rights set forth on Exhibit B.

 
4.

--------------------------------------------------------------------------------

 
 
ARTICLE 4
 
MISCELLANEOUS
 
4.1           Term: Exercise Upon Expiration.  This Warrant is exercisable in
whole or in part, at any time and from time to time on or before the Expiration
Date set forth above.  If this Warrant has not been exercised prior to the
Expiration Date, provided there is not an effective registration statement
covering the resale of the Shares, this Warrant shall be deemed to have been
automatically exercised on the Expiration Date by “cashless” conversion pursuant
to Section 1.2.
 
4.2           Legends.  This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:
 
“THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.”
 
4.3           Compliance with Securities Laws on Transfer.  This Warrant and the
Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee.
 
4.4           Transfer Procedure.  Subject to the provisions of Section 4.3,
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder, if applicable).
 
4.5           Notices.  All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time.  All notices to the Holder shall be addressed as follows:
 
5.

--------------------------------------------------------------------------------

 
                                Bridge Bank N.A.
                                55 Almaden Blvd.
                                San Jose, CA 95113
                                Attn: Karla Conzelman
 
4.6           Amendments.  This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
 
4.7           Attorneys’ Fees.  In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys’ fees.
 
4.8           Governing Law.  This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
 
DOCUMENT CAPTURE TECHNOLOGIES, INC.
 
By:
  
 
Name:
  
 
Title:
  

 
6.

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Appendix 1
 
NOTICE OF EXERCISE
 
1.           The undersigned hereby elects to purchase ______________ shares of
the ______________ stock of DOCUMENT CAPTURE TECHNOLOGIES, INC. pursuant to the
terms of the attached warrant, and tenders herewith payment of the purchase
price of such shares in full.
 
2.           The undersigned hereby elects to convert the attached warrant into
shares in the manner specified in the warrant.  This conversion is exercised
with respect to ______________ of the shares covered by the warrant.
 
[Strike paragraph that does not apply.]
 
3.           Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
 
Bridge Bank N.A.

 
4.           The undersigned represents it is acquiring the shares solely for
its own account and not as a nominee for any other party and not with a view
toward the resale or distribution thereof except in compliance with applicable
securities laws.
 
Bridge Bank N.A. or Registered Assignee
 
  
(Signature)
 
  
(Date)

 
 

--------------------------------------------------------------------------------

 

EXHIBIT A
Anti-Dilution Provisions

 
In the event of the issuance (a "Diluting Issuance") by Company, at any time
during the twelve month period following the Issue Date of the Warrant, of
Common Stock (or options or other rights to subscribe thereto or securities
convertible into or exchangeable for Common Stock) at a price per share less
than the Exercise Price at the date of such issuance, then the number of Shares
issuable upon exercise of the Warrant and the Exercise Price, shall be adjusted
as a result of Diluting Issuances in accordance with the following (provided
that under no circumstances shall the aggregate Exercise Price payable by Holder
upon exercise of the Warrant increase as a result of any adjustment arising from
a Diluting Issuance):
 
1.           Definitions.  As used in these Antidilution Provisions, the
following terms have the following respective meanings:
 
(a)           "Option" means any right, option, or warrant to subscribe for,
purchase, or otherwise acquire common stock or Convertible Securities.
 
(b)           "Convertible Securities" means any evidences of indebtedness,
shares of stock, or other securities directly or indirectly convertible into or
exchangeable for common stock.
 
(c)           "Issue", means to grant, issue, sell, assume, or fix a record date
for determining persons entitled to receive, any security (including Options),
whichever of the foregoing is the first to occur.  Any variation of the term
"Issue" including, without limitation, "Issuable", "Issuance" or "Issued" shall
have the same meaning as set forth in this section 1(c).
 
(d)           "Additional Common Shares" means all common stock (including
reissued shares) issued (or deemed to be issued pursuant to Section 2) after the
date of the Warrant.  Additional Common Shares does not include, however, any
common stock issued in a transaction described in Sections 2.1 and 2.2 of the
Warrant; any common stock Issued upon conversion of preferred stock outstanding
on the date of the Warrant; any common stock issued upon conversion or exercise
of any warrants, options or other securities convertible into common stock which
are outstanding on the date of the Warrant; the Shares; or any Option or common
stock Issued as incentive or in a nonfinancing transaction to employees,
officers, directors, or consultants to Company.
 
(e)           The shares of common stock ultimately Issuable upon exercise of an
Option (including the shares of common stock ultimately Issuable upon conversion
or exercise of a Convertible Security Issuable pursuant to an Option) are deemed
to be Issued when the Option is Issued.  The shares of common stock ultimately
Issuable upon conversion or exercise of a Convertible Security (other than a
Convertible Security Issued pursuant to an Option) shall be deemed Issued upon
Issuance of the Convertible Security.

 
1.

--------------------------------------------------------------------------------

 

2.           Deemed Issuance of Additional Common Shares.  The shares of common
stock ultimately Issuable upon exercise of an Option (including the shares of
common stock ultimately Issuable upon conversion or exercise of a Convertible
Security Issuable pursuant to an Option) are deemed to be Issued when the Option
is Issued.  The shares of common stock ultimately Issuable upon conversion or
exercise of a Convertible Security (other than a Convertible Security Issued
pursuant to an Option) shall be deemed Issued upon Issuance of the Convertible
Security.  The maximum amount of common stock Issuable is determined without
regard to any future adjustments permitted under the instrument creating the
Options or Convertible Securities.
 
3.           Adjustment of Exercise Price for Diluting Issuances
 
3.1                  Weighted Average Adjustment.  If Company issues Additional
Common Shares during the period that is twelve months after the date of the
Warrant and the consideration per Additional Common Share (determined pursuant
to Section 9) is less than the Exercise Price in effect immediately before such
Issue, the Exercise Price shall be reduced, concurrently with such Issue, to a
price (calculated to the nearest hundredth of a cent) determined by multiplying
the Exercise Price by a fraction:
 
(a)           the numerator of which is the amount of such common stock
outstanding immediately before such Issue plus the amount of common stock that
the aggregate consideration received by Company for the Additional Common Shares
would purchase at the Exercise Price in effect immediately before such Issue,
and
 
(b)           the denominator of which is the amount of common stock outstanding
immediately before such Issue plus the number of such Additional Common Shares.
 
3.2                  Adjustment of Number of Shares.  Upon each adjustment of
the Exercise Price, the number of Shares issuable upon exercise of the Warrant
shall be increased to equal the quotient obtained by dividing (a) the product
resulting from multiplying (i) the number of Shares issuable upon exercise of
the Warrant and (ii) the Exercise Price, in each case as in effect immediately
before such adjustment, by (b) the adjusted Exercise Price.
 
3.3                  Securities Deemed Outstanding.  For the purpose of this
Section 3, all securities issuable upon exercise of any outstanding Convertible
Securities or Options, warrants, or other rights to acquire securities of
Company shall be deemed to be outstanding.
 
4.           No Adjustment for Issuances Following Deemed Issuances.  No
adjustment to the Exercise Price shall be made upon the exercise of Options or
conversion of Convertible Securities.
 
5.           Adjustment Following Changes in Terms of Options or Convertible
Securities.  If during the twelve month period following the date of the Warrant
the consideration payable to, or the amount of common stock Issuable by, Company
increases or decreases, respectively, pursuant to the terms of any outstanding
Options or Convertible Securities, the Exercise Price shall be recomputed to
reflect such increase or decrease.  The recomputation shall be made as of the
time of the Issuance of the Options or Convertible Securities.  Any changes in
the Exercise Price that occurred after such Issuance because other Additional
Common Shares were Issued or deemed Issued shall also be recomputed.

 
2.

--------------------------------------------------------------------------------

 

6.           Recomputation Upon Expiration of Options or Convertible
Securities.  The Exercise Price computed upon the original Issue of any Options
or Convertible Securities, and any subsequent adjustments based thereon, shall
be recomputed when any Options or rights of conversion under Convertible
Securities expire without having been exercised.  In the case of Convertible
Securities or Options for common stock, the Exercise Price shall be recomputed
as if the only Additional Common Shares Issued were the shares of common stock
actually Issued upon the exercise of such securities, if any, and as if the only
consideration received therefor was the consideration actually received upon the
Issue, exercise or conversion of the Options or Convertible Securities.  In the
case of Options for Convertible Securities, the Exercise Price shall be
recomputed as if the only Convertible Securities Issued were the Convertible
Securities actually Issued upon the exercise thereof, if any, and as if the only
consideration received therefor was the consideration actually received by
Company (determined pursuant to Section 9), if any, upon the Issue of the
Options for the Convertible Securities.
 
7.           Limit on Readjustments.  No readjustment of the Exercise Price
pursuant to Sections 5 or 6 shall increase the Exercise Price more than the
amount of any decrease made in respect of the Issue of any corresponding Options
or Convertible Securities.
 
8.           30 Day Options.  In the case of any Options that expire by their
terms not more than 30 days after the date of Issue thereof, no adjustment of
the Exercise Price shall be made until the expiration or exercise of all such
Options, except as otherwise set forth herein.
 
9.           Computation of Consideration.  The consideration received by
Company for the Issue of any Additional Common Shares shall be computed as
follows:
 
(a)           Cash  shall be valued at the amount of cash received by Company,
excluding amounts paid or payable for accrued interest or accrued dividends.
 
(b)           Property.  Property other than cash shall be computed at the fair
market value thereof at the time of the Issue as determined in good faith by the
Board of Directors of Company.
 
(c)           Mixed Consideration.  The consideration for Additional Common
Shares Issued together with other property of Company for consideration that
covers both shall be determined in good faith by the Board of Directors of
Company.
 
(d)           Options and Convertible Securities.  The consideration per
Additional Common Share for Options and Convertible Securities shall be
determined by dividing:
 
(i) the total amount, if any, received or receivable by Company for the Issue of
the Options or Convertible Securities, plus the minimum amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to Company upon exercise of the Options or conversion of
the Convertible Securities, by
 
(ii) the maximum amount 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) ultimately Issuable upon the exercise of
such Options or the conversion of such Convertible Securities.
 
 
3.

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EXHIBIT B
 
REGISTRATION RIGHTS AGREEMENT
 
This REGISTRATION RIGHTS AGREEMENT, dated as of September 2, 2009, is between
Bridge Bank, National Association ("Lender") and the Company whose name appears
on the last page of this Agreement.
 
RECITALS
 
A.           Concurrently with the execution of this Agreement, Lender is
purchasing from Company a Warrant to Purchase Stock (the "Warrant") pursuant to
which Lender has the right to acquire from Company the Shares (as defined in the
Warrant).
 
B.           By this Agreement, Lender and Company desire to set forth the
registration rights of the Shares all as provided herein.
 
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto agree as follows:
 
1.           Registration Rights.
 
1.1          Definitions.  For purposes of this Section 1:
 
(a)           The term "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and the declaration or ordering of effectiveness of such
registration statement or document;
 
(b)           The term "Registrable Securities" means (i) the Shares (if Common
Stock) or all shares of Common Stock of Company issuable or issued upon
conversion of the Shares and (ii) any Common Stock of Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, any stock referred to in (i).
 
(c)           The terms "Holder" or "Holders" means Lender or qualifying
transferees under subsection 1.8 hereof who hold Registrable Securities.
 
(d)           The term "SEC" means the Securities and Exchange Commission.
 
1.2          Company Registration.
 
(a)           Registration.  If at any time or from time to time, Company shall
determine to register any of its securities, for its own account or the account
of any of its shareholders, other than a registration on Form S-1 or S-8
relating solely to employee stock option or purchase plans, or a registration on
Form S-4 relating solely to an SEC Rule 145 transaction, or a registration on
any other form (other than Form S-1, S-2, S-3 or S-18, or their successor forms)
or any successor to such forms, which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities, Company will:
 

 
1.

--------------------------------------------------------------------------------

 

 
 (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 compliance), and in any
underwriting involved therein, all Registrable Securities specified in a written
request or requests, made within 30 days after receipt of such written notice
from Company, by any Holder or Holders, except as set forth in subsection 1.2(b)
below.
 
(b)           Underwriting.  If the registration of which Company gives notice
is for a registered public offering involving an underwriting, Company shall so
advise Holders as a part of the written notice given pursuant to subsection
1.2(a)(i).  In such event the right of any Holder to registration pursuant to
this subsection 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 to the extent provided herein.  All Holders proposing to
distribute their securities through such underwriting shall (together with
Company and the other shareholders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by Company.
 
1.3              Expenses of Registration.  All expenses incurred in connection
with any registration, qualification or compliance pursuant to this Section 1
including without limitation, all registration, filing and qualification fees,
printing expenses, fees and disbursements of counsel for Company and expenses of
any special audits incidental to or required by such registration, shall be
borne by Company except Company shall not be required to pay underwriters' fees,
discounts or commissions relating to Registrable Securities.  All expenses of
any registered offering not otherwise borne by Company shall be borne pro rata
among Holders participating in the offering and Company.
 
1.4              Registration Procedures.  In the case of each registration,
qualification or compliance effected by Company pursuant to this Registration
Rights Agreement, Company will keep each Holder participating therein advised in
writing as to the initiation of each registration, qualification and compliance
and as to the completion thereof.  Except as otherwise provided in
subsection 1.3, at its expense Company will:
 
(a)           Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of Holders of
a majority of Registrable Securities registered thereunder, keep such
registration statement effective for up to 120 days.
 
(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
Securities Act with respect to the disposition of all securities covered by such
registration statement.

 
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(c)           Furnish to Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities 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 Holders, provided that
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 Securities Act or the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
 
1.5              Indemnification.
 
 (a)           Company will indemnify each Holder of Registrable Securities and
each of its officers, directors and partners, and each person controlling such
Holder, with respect to which such registration, qualification or compliance has
been effected pursuant to this Registration Rights Agreement, and each
underwriter, if any, and each person who controls any underwriter of Registrable
Securities held by or issuable to such Holder, against all claims, losses,
expenses, damages and liabilities (or actions in respect thereto) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, offering circular or other document (including
any related registration statement, notification or the like) incident to any
such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statement therein not misleading, or any violation or
alleged violation by Company of the Securities Act, the Securities Exchange Act
of 1934, as amended, ("Exchange Act") or any state securities law applicable to
Company or any rule or regulation promulgated under the Securities Act, the
Exchange Act or any such state law and relating to action or inaction required
of Company in connection with any such registration, qualification of
compliance, and will reimburse each such Holder, each of its officers, directors
and partners, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, within a reasonable amount of
time after incurred for any reasonable legal and any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action; provided, however, that the indemnity agreement
contained in this subsection 1.5(a) shall not apply to amounts paid in
settlement of any such claim, loss, damage, liability, or action if such
settlement is effected without the consent of Company (which consent shall not
be unreasonably withheld); and provided further, that Company will not be liable
in any such case to the extent that any such claim, loss, damage or liability
arises out of or is based on any untrue statement or omission based upon written
information furnished to Company by an instrument duly executed by such Holder
or underwriter specifically for use therein.
 
 
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(b)           Each Holder will, if Registrable Securities held by or issuable to
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify Company, each of its
directors and officers, each underwriter, if any, of Company's securities
covered by such a registration statement, each person who controls Company
within the meaning of the Securities Act, and each other such Holder, each of
its officers, directors and partners and each person controlling such Holder,
against all claims, losses, expenses, 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
Company, such Holders, such directors, officers, partners, persons or
underwriters for any reasonable legal or any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to Company by an instrument duly executed by such Holder specifically
for use therein; provided, however, that the indemnity agreement contained in
this subsection 1.5(b) shall not apply to amounts paid in settlement of any such
claim, loss, damage, liability or action if such settlement is effected without
the consent of Holder, (which consent shall not be unreasonably withheld); and
provided further, that the total amount for which any Holder shall be liable
under this subsection 1.5(b) shall not in any event exceed the aggregate
proceeds received by such Holder from the sale of Registrable Securities held by
such Holder in such registration.
 
(c)           Each party entitled to indemnification under this subsection 1.5
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for Indemnifying Party,
who shall conduct the defense of such claim or litigation, shall be approved by
Indemnified Party (whose approval shall not be unreasonably withheld), and
Indemnified Party may participate in such defense at such party's expense; and
provided further, that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
hereunder, unless such failure resulted in prejudice to Indemnifying Party; and
provided further, that an Indemnified Party (together with all other Indemnified
Parties which may be represented without conflict by one counsel) shall have the
right to retain one separate counsel, with the fees and expenses to be paid by
Indemnifying Party, if representation of such Indemnified Party by the counsel
retained by Indemnifying Party would be inappropriate due to actual or potential
differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding.  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
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.

 
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1.6              Information by Holder.  Any Holder or Holders of Registrable
Securities included in any registration shall promptly furnish to Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to herein.
 
1.7              Rule 144 Reporting.  With a view to making available to Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of Registrable Securities to the public without registration, Company shall
at all times:
 
(a)           make and keep public information available, as those terms are
understood and defined in SEC Rule 144, after 90 days after the effective date
of the first registration filed by 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  Company under the Securities Act and the Exchange Act (at
any time after it has become subject to such reporting requirements); and
 
(c)           so long as a Holder owns any Registrable Securities, to furnish to
such Holder forthwith upon request a written statement by Company as to its
compliance with the reporting requirements of said Rule 144 (at any time after
90 days after the effective date of the first registration statement filed by
Company for an offering of its securities to the general public), and of the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly
report of Company, and such other reports and documents so filed by Company as
Holder may reasonably request in complying with any rule or regulation of the
SEC allowing Holder to sell any such securities without registration.
 
1.8              Transfer of Registration Rights.  Holders' rights to cause
Company to register their securities and keep information available, granted to
them by Company under subsections 1.2 and 1.7 may be assigned to a transferee or
assignee of a Holder's Registrable Securities not sold to the public, provided,
that 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.  Company may prohibit the transfer of
any Holders' rights under this subsection 1.8 to any proposed transferee or
assignee who Company reasonably believes is a competitor of Company.
 
5.

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2.         General.
 
2.1              Waivers and Amendments.  With the written consent of the record
or beneficial holders of at least a majority of the Registrable Securities, the
obligations of Company and the rights of Holders of Registrable Securities under
this agreement may be waived (either generally or in a particular instance,
either retroactively or prospectively, and either for a specified period of time
or indefinitely), and with the same consent Company, when authorized by
resolution of its Board of Directors, may enter into a supplementary agreement
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement; provided, however, that no
such modification, amendment or waiver shall reduce the aforesaid percentage of
Registrable Securities without the consent of all of the Holders of  Registrable
Securities.  Upon the effectuation of each such waiver, consent, agreement of
amendment or modification, Company shall promptly give written notice thereof to
the record holders of Registrable Securities who have not previously consented
thereto in writing.  This Agreement or any provision hereof may be changed,
waived, discharged or terminated only by a statement in writing signed by the
party against which enforcement of the change, waiver, discharge or termination
is sought, except to the extent provided in this subsection 2.1.
 
2.2               Governing Law.  This Agreement shall be governed in all
respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
 
2.3               Successors and Assigns.  Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
 
2.4               Entire Agreement.  Except as set forth below, this Agreement
and the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
 
2.5               Notices, etc.  All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by first class
mail, postage prepaid, certified or registered mail, return receipt requested,
addressed (a) if to Holder, at such Holder's address as set forth below, or at
such other address as such Holder shall have furnished to the Company in
writing, or (b) if to the Company, at Company's address set forth below, or at
such other address as Company shall have furnished to Holder in writing.
 
2.6               Severability.  In case any provision of this Agreement shall
be invalid, illegal, or unenforceable, the validity, legality and enforceability
of the remaining provisions of this Agreement or any provision of the other
Agreement s shall not in any way be affected or impaired thereby.
 
2.7               Titles and Subtitles.  The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
 
2.8               Counterparts.  This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
 
 
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered by their duly authorized officers as of the date first above written.
 
COMPANY:
 
LENDER:
DOCUMENT CAPTURE TECHNOLOGIES,
INC.
 
BRIDGE BANK, NATIONAL
ASSOCIATION
     
By:
   
By:
       
Name:
 
Name:
       
Title:
 
Title:
 
Address for Notices:
 
Address for Notices:
Attn:  Carolyn Ellis, CFO
 
Attn:  Mike Field
1798 Technology Drive, Suite 178
 
55 Almaden Boulevard
San Jose, CA 95110
 
Suite 100
Email:  cellis@docucap.com
 
San Jose, California  95113
   
Tel:  (408) 556-6501
   
Fax:  (408) 282-1681

 
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