1
Exhibit 10.3
METASTREAM CORPORATION
AMENDED AND RESTATED SERIES A
PREFERRED STOCK PURCHASE AGREEMENT
AMENDED AND RESTATED SERIES A PREFERRED STOCK PURCHASE AGREEMENT, dated
as of June 12, 2000 (this "Agreement"), among METASTREAM CORPORATION, a Delaware
corporation (the "Company"), METACREATIONS CORPORATION, a Delaware corporation
(the "Parent") and AMERICA ONLINE, INC., a Delaware corporation (the "Purchaser"
or "AOL").
SECTION 1
AUTHORIZATION AND SALE OF THE SECURITIES
1.1 Authorization. The Company is authorized to sell hereunder
1,500,000 shares (the "Shares") of its Series A Convertible Preferred Stock,
$0.00001 par value per share ("Series A Preferred Stock"), which shares are
convertible into common stock, par value $0.00001 per share ("Common Stock"), of
the Company.
1.2 Amended and Restated Certificate of Incorporation. The Company
shall file with the Secretary of State of the State of Delaware an Amended and
Restated Certificate of Incorporation in the form attached hereto as Exhibit A
(the "Restated Certificate").
1.3 Sale of the Securities. At the Closing (as defined below), and
subject to the terms and conditions hereof, the Company shall sell to the
Purchaser, and the Purchaser shall purchase from the Company the Shares, at the
purchase price of $6.6667 per share, payable as set forth in Section 2.2 of this
Agreement.
SECTION 2
CLOSING DATES; DELIVERIES
2.1 Closing. The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall take place at the offices of Milbank, Tweed,
Xxxxxx & XxXxxx LLP, Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxx Xxxx, XX 00000, at 10:00
a.m., as soon as reasonably practicable after the satisfaction of the conditions
described in Section 6 hereof (the "Closing Date").
2.2 Deliveries. At the Closing, the parties shall make the following
deliveries:
(a) Certificates and Purchase Price. The Company shall deliver
to the Purchaser a certificate representing the Shares, which shall be delivered
and accepted against payment of the purchase price therefor by wire transfer of
same day funds to an account designated by the Company.
2
(b) Exchange Agreement. The Company, the Parent and the
Purchaser, as initial holder of the Series A Preferred Stock, shall execute and
deliver the Exchange Agreement in substantially the form of Exhibit B hereto
(the "Exchange Agreement").
(c) Registration Rights Agreement. The Company, the Parent and
the Purchaser shall execute and deliver the Registration Rights Agreement in
substantially the form of Exhibit C hereto (the "Registration Rights Agreement"
and, together with the Exchange Agreement, the "Ancillary Agreements").
(d) Restated Certificate. The Company shall deliver to the
Purchaser a certified copy of the Restated Certificate, certified by the
Secretary of State of the State of Delaware.
(e) Vice President's Certificates. Each of the Company and the
Parent shall deliver to the Purchaser a certificate executed by their respective
Vice Presidents, certifying, as appropriate, to (i) resolutions adopted by the
Board of Directors of the Company and the Parent authorizing the transactions
contemplated by this Agreement and the Ancillary Agreements, (ii) the Restated
Certificate, and (iii) the Bylaws of the Company and (iv) such other proceedings
relating to the authorization, execution and delivery of this Agreement and the
Ancillary Agreements as may be reasonably requested by the Purchaser.
(f) Disclosure Schedule. The Company and the Parent shall
deliver to the Purchaser a Disclosure Schedule setting forth exceptions and
certain other information with respect to the representations and warranties of
the Company and the Parent made in Section 3 and Section 4 hereof (the
"Disclosure Schedule"), which Disclosure Schedule shall be acceptable to
Purchaser in its sole discretion.
(g) Consents and Approvals. The Company and the Parent are
each delivering to the Purchaser copies of all consents, permits and waivers, if
any, necessary or appropriate to effect the transactions contemplated hereby.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser that,
except as will be set forth on the Disclosure Schedule:
3.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to own, lease and
operate its assets, properties and business and to carry on its business as it
is now being conducted or proposed to be conducted. The Company is duly
qualified as a foreign corporation to transact business, and is in good
standing, in each jurisdiction where it owns or leases real property or
maintains employees or where the nature of its activities make such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the business, assets, condition (financial or
otherwise) of the
2
3
Company and its Subsidiaries taken as a whole (it being understood that the
Company does not have any subsidiaries as of the date hereof) (a "Material
Adverse Effect" and having, when used with respect to the Parent, a correlative
meaning).
3.2 Bylaws. The Company has delivered to the Purchaser a true, correct
and complete copy of the Company's Bylaws, as amended through the date hereof.
3.3 Corporate Power. The Company has all requisite legal and corporate
power and authority to execute and deliver this Agreement and the Ancillary
Agreements, to issue and sell the Shares hereunder, and to carry out and perform
its obligations under the terms of this Agreement and each of the Ancillary
Agreements.
3.4 Subsidiaries. The Company has no direct or indirect Subsidiaries
(as defined in Section 8.11).
3.5 Capitalization. Effective immediately upon filing of the Restated
Certificate, the authorized capital stock of the Company shall consist of
80,000,000 shares, of which 75,000,000 are designated as Common Stock and
5,000,000 are designated as Preferred Stock, $0.00001 par value per share
("Preferred Stock"). Upon consummation of the transactions contemplated by this
Agreement, the capitalization of the Company will be as set forth in Section 3.5
of the Disclosure Schedule. The Company shall, as promptly as practicable
following the date hereof, reserve Shares of the authorized Common Stock for
issuance as follows: (i) 1,500,000 of the authorized shares of Common Stock will
be reserved for issuance upon conversion of the Series A Preferred Stock, and
(ii) 6,000,000 of the authorized shares of Common Stock will be reserved for
issuance to employees, officers, directors and consultants of the Company upon
the exercise of options pursuant to the Company's stock option plan. As of the
Closing, all issued and outstanding shares of the Company's capital stock will
have been duly authorized and validly issued and outstanding, will be fully paid
and nonassessable and will be owned of record by the stockholders in the amounts
set forth in Section 3.5 of the Disclosure Schedule. As of the date of any
conversion of the Shares, the shares of Common Stock issued upon such conversion
will be duly and validly issued and outstanding and fully paid and nonassessable
with no personal liability attaching to the ownership thereof and not subject to
preemptive or similar rights of stockholders of the Company or others. The
Shares and any shares of Common Stock issued on such conversion will be free of
any liens, claims or encumbrances of the Company and free of restrictions on
transfer other than as set forth in this Agreement or the Ancillary Agreements
or under applicable state and federal securities laws. Except as set forth in
Section 3.5 of the Disclosure Schedule or as provided in the Ancillary
Agreements (a) there are no options, warrants or conversion privileges presently
outstanding to purchase or otherwise acquire any authorized but unissued shares
of the capital stock or other securities of the Company, (b) there are no
outstanding rights or obligations of the Company to repurchase, redeem or
otherwise acquire any securities of the Company, and (c) there are no
stockholder agreements, voting trusts or other agreements or understandings to
which the Company is a party or, to the knowledge of the Company, between or
among stockholders of the Company.
3.6 Authorization. All corporate action on the part of the Company and
its stockholders necessary for the authorization, execution, delivery, and
performance of this
3
4
Agreement and the Ancillary Agreements by the Company, the authorization, sale,
issuance and delivery of the Shares and the performance of the Company's
obligations hereunder and under the Ancillary Agreements have been taken. This
Agreement and each of the Ancillary Agreements, when executed and delivered by
the Company, will constitute a valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms, except to
the extent limited by bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or affecting creditors' rights generally and by general
equity principles regardless of whether such enforceability is considered in a
proceeding in equity or at law.
3.7 Title to Properties and Assets. The Company owns no real property.
The Company has good title to or a valid leasehold interest in all of the
material tangible personal property or assets used by it free and clear of all
liens, restrictions and encumbrances other than liens for current taxes not yet
due and payable, and other minor liens and encumbrances which have arisen in the
ordinary course of business and which do not, in any one case or in the
aggregate, detract in any material respect from the value of the property
subject thereto or impair in any material respect the operations of the Company.
3.8 Permits; Compliance with Applicable Law. The Company has all
material franchises, permits, licenses, authorizations, and approvals
("Permits") necessary for the conduct of its business as now being conducted or
as proposed to be conducted by it. The Company is not in violation in any
material respect of, or default in any material respect under, any such Permits.
To the knowledge of the Company, the conduct of the business of the Company is
in conformity with applicable federal, state and other governmental and
regulatory requirements, except where such nonconformity or noncompliance would
not, in any one case or in the aggregate, have a Material Adverse Effect.
3.9 Intellectual Property. (a) Section 3.9(a) of the Disclosure
Schedule shall set forth, for the Intellectual Property owned by the Company or
its Subsidiaries, a complete and accurate list of all United States and foreign
(i) patents and patent applications; (ii) trademark registrations (including
Internet domain registrations) and applications and material unregistered
trademarks; (iii) copyright registrations and applications, and material
unregistered copyrights, indicating for each, the applicable jurisdiction,
registration number (or application number), and date issued (or date filed).
(b) Section 3.9(b) of the Disclosure Schedule shall set forth
a complete and accurate list of all written and material oral license agreements
granting any right to use or practice any rights under any Intellectual
Property, whether the Company is the licensee or licensor thereunder, and any
assignments, consents, forbearances to xxx, judgments, orders, settlements or
similar obligations relating to any Intellectual Property to which the Company
is a party or otherwise bound (other than off-the-shelf software applications
programs having an acquisition price of less than $5,000) (collectively, the
"License Agreements"), indicating for each the title, the parties, date
executed, whether or not it is exclusive and the Intellectual Property covered
thereby. The License Agreements are valid and binding obligations of Company,
enforceable against the Company in accordance with their terms, and there exists
no event or condition which will result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default by
the Company under any such License Agreement.
4
5
(c) No royalties, honoraria or other fees are payable to any
third parties for the use of or right to use any Intellectual Property except
pursuant to the License Agreements which shall be set forth on Section 3.9(c) of
the Disclosure Schedule.
(d) Except as shall be set forth in Section 3.9(d) of the
Disclosure Schedule:
(i) the Company or its Subsidiaries exclusively own,
free and clear of all liens, all owned Intellectual Property, or have a valid,
enforceable right to use all of the licensed Intellectual Property;
(ii) the Company has taken reasonable steps to
protect the Intellectual Property;
(iii) to the knowledge of the Company, the conduct of
the Company's business as currently conducted or planned to be conducted does
not infringe upon any Intellectual Property rights (other than patents) of or
controlled by any third party nor, to the knowledge of the Company, infringe any
patent owned by or controlled by any third party;
(iv) there is no litigation pending, or to the
knowledge of the Company, threatened (A) alleging that the Company's activities
or the conduct of its businesses or that of any of its Subsidiaries infringes
upon, violates, or constitutes the unauthorized use of the Intellectual Property
rights of any third party or (B) challenging the ownership, use, validity or
enforceability of any Intellectual Property;
(v) to the knowledge of the Company, no third party
is misappropriating, infringing, diluting, or violating any Intellectual
Property owned by the Company and no such claims have been brought against any
third party by the Company; and
(vi) the consummation of the transactions
contemplated hereby will not result in the loss or impairment of the Company's
right to own or use any of the Intellectual Property, nor will they require the
consent of any United States or foreign governmental authority or third party in
respect of any such Intellectual Property.
(e) Except as shall be set forth in Section 3.9(e) of the
Disclosure Schedule, (i) all trademarks material to the conduct of the business
of the Company have been in continuous use by the Company and (ii) to the
knowledge of the Company, there has been no prior use of such trademarks by any
third party which would confer upon said third party superior rights in such
trademarks; and the registered trademarks have been continuously used in the
form appearing in, and in connection with the goods and services listed in,
their respective registration certificates or identified in their respective
pending applications.
(f) Except as shall be set forth in Section 3.9(f) of the
Disclosure Schedule, the Company has taken reasonable steps in accordance with
normal industry practice to protect the Company's rights in trade secrets of the
Company. It is the Company's intention to implement a policy of requiring each
employee, consultant and contractor to execute customary proprietary
information, confidentiality and assignment agreements. To the Company's
knowledge, there has been no disclosure of any Company confidential information
or trade secrets the disclosure of which could reasonably be expected to have a
Material Adverse Effect.
5
6
As used herein, the term "Intellectual Property Rights" means all industrial and
intellectual property rights, including, without limitation, Proprietary
Technology, patents, patent applications, patent rights, trademarks, trademark
applications, trade names, service marks, service xxxx applications, copyrights,
copyright registration, copyright application, know-how, certificates of public
convenience and necessity, franchises, licenses, databases, Internet domain
names and applications therefor (and all interest therein), computer programs
and other computer software, user interfaces, customer lists, trade secrets,
proprietary processes and formulae. As used herein, "Proprietary Technology"
means all source and object code, algorithms, architecture, structure, display
screens, layouts, processes, inventions, trade secrets, know-how, instructions,
templates, marketing materials, trade dress, logos, designs, development tools
and other proprietary rights owned by the Company pertaining to any product or
service manufactured, marketed or sold, or proposed to be manufactured, marketed
or sold (as the case may be), by the Company or used, employed or exploited in
the development, license, sale, marketing, distribution or maintenance thereof,
and all documentation and media constituting, describing or relating to the
above, including, without limitation, manuals, memoranda, know-how, notebooks,
patents and patent applications, trademarks and trademark applications,
copyrights and copyright applications, records and disclosures.
3.10 Material Adverse Changes. Since the date of the Balance Sheet (as
defined below) there has not been any change in the properties, assets,
liabilities, prospects, financial condition or operating results of the Company
from that reflected in the Financial Statements (as defined below), except
changes in the ordinary course of business that have not been, in any one case
or in the aggregate, materially adverse.
3.11 Absence of Undisclosed Liabilities. Except as reflected or
reserved against in the Balance Sheet, as shall be disclosed in the Disclosure
Schedule or the Ancillary Agreements, or as are incurred in the ordinary course
of its business, the Company does not have, and the Company does not know of,
any liabilities (fixed or contingent, including without limitation any tax
liabilities due or to become due) which would be required to be disclosed under
generally accepted accounting principles and which are, either individually or
in the aggregate, material.
3.12 Absence of Conflicts. The execution, delivery, and performance of,
and compliance with this Agreement and the Ancillary Agreements, the issuance of
the Shares and the issuance of Common Stock upon conversion of the Shares, and
the consummation of the transactions contemplated hereby and thereby, have not
and will not: (i) violate, conflict with or result in a breach of any provision
of or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in the creation of any lien
upon any of the material assets, properties or business of the Company under,
any of the terms, conditions or provisions of (x) the Restated Certificate or
the Bylaws of the Company, or (y) any indenture, loan agreement or other
contract of the Company; or (ii) violate any judgment, ruling, order, writ,
injunction, award, decree, or any law or rule of any federal, state, county or
local government or any other governmental, regulatory or administrative agency
or authority which is applicable to the Company or any of its assets, properties
or businesses; or (iii) result in the suspension, revocation, impairment,
forfeiture, or non-renewal of any Permit that is material to the Company, which
in any
6
7
one case or in the aggregate as to the items set forth in clauses (i), (ii) and
(iii) above would have a Material Adverse Effect.
3.13 Contracts. Except for this Agreement, the Ancillary Agreements and
the agreements set forth in Section 3.13 of the Disclosure Schedule (the
"Material Agreements"), the Company does not have and is not bound by any
contract, agreement, lease, commitment or other arrangement, written or oral,
absolute or contingent, other than (i) contracts for the purchase of supplies
and services that were entered into in the ordinary course of business and that
do not involve more than $50,000, and do not extend for more than one (1) year
beyond the date hereof, (ii) sales and services contracts entered into in the
ordinary course of business, and (iii) contracts terminable at will by the
Company on no more than thirty (30) days' notice without cost or liability to
the Company. For the purpose of this paragraph, employment and consulting
contracts and contracts with labor unions, and license agreements and any other
agreements relating to the Company's acquisition or disposition of patent,
copyright, trade secret or other proprietary rights or technology (other than
standard end-user license agreements, consulting or development agreements)
shall not be considered to be contracts entered into in the ordinary course of
business. Each Material Agreement is in full force and effect and is valid,
binding and enforceable in accordance with its terms as to the Company and, to
the knowledge of the Company, as to each party thereto. There exists no material
breach or material default (or event that with notice or lapse of time would
constitute a material breach or material default) on the part of the Company or,
to the knowledge of the Company, on the part of any other party under any
Material Agreement. The Company has not received a written notice of termination
or default under any Material Agreement. As of the date of this Agreement, no
party to an agreement under which the Company acquired a substantial portion of
its assets has asserted any claim for indemnification under such agreement.
3.14 Year 2000. The proprietary products offered for sale or licensed
by the Company or used in the Company's internal systems are Year 2000 Compliant
and the proprietary products currently contemplated to be offered for sale or
license by the Company will, upon their sale or license to a third party, be
Year 2000 Compliant, except for any failure of such products to be Year 2000
Compliant that would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. The Company has obtained customary Year 2000
representations and warranties from third parties with respect to third party
products used by the Company in its internal systems or internally in connection
with its proprietary products. As used herein, "Year 2000 Compliant" or "Year
2000 Compliance" means that products, when used in accordance with associated
documentation, will record, store, process, present, recognize, retrieve, access
and manipulate calendar dates falling on or after December 31, 1999 and any date
based, date dependent or date related data in the same manner and in all
material respects with the same functionality as such products record, store,
process, present, recognize, retrieve, access and manipulate calendar dates
falling before December 31, 1999 and any date based, date dependent or date
related data; provided that all third party software, hardware, products,
services and applications used with or using the products properly exchange date
data with it. The Company has not received any written notice from any third
party alleging, and to the Company's knowledge, there is no reason to believe,
that such third party's software, hardware, products, services or applications
when used with the Company's products (a) do not properly exchange date data
with the Company's products or (b) will cause the Company's products not to be
Year
7
8
2000 Compliant. Except as specifically set forth herein, the Company is not
responsible and makes no representations or warranties with respect to Year 2000
Compliance of software and hardware provided by third parties.
3.15 Litigation. There are no claims, actions, suits, proceedings, or
investigations pending or, to the Company's knowledge, threatened against the
Company or any of its properties before any court or governmental agency, which,
if determined adversely to the Company, would have a Material Adverse Effect.
3.16 Governmental Consent. No consent, approval, authorization,
declaration, notification, or filing with any governmental authority on the part
of the Company is required in connection with the execution, delivery and
performance of this Agreement or any of the Ancillary Agreements, the offer,
sale, or issuance of the Shares or the consummation of any other transaction
contemplated hereby or by the Ancillary Agreements, except the qualification (or
the taking of such action as may be necessary to secure an exemption from
qualification, if available) of the offer and sale of the Shares and the shares
of Common Stock issuable on conversion thereof under applicable state "blue sky"
securities laws, which filings and qualifications, if required, will be
accomplished in a timely manner; provided, however, that solely with respect to
state "blue sky" securities laws, the representations and warranties provided in
this Section 3.16 shall be subject to the accuracy of the representations of the
Purchaser set forth in Section 5 hereof.
3.17 ERISA. The Company does not sponsor, maintain, have any obligation
to contribute to, have any liability under, or otherwise is not a party to, any
Benefit Plan. For purposes of this Agreement, "Benefit Plan" means any plan,
fund, program, policy, arrangement or contract, whether formal or informal,
which is in the nature of (i) an employee pension benefit plan (as defined in
Section 3(2) of ERISA) or (ii) an employee welfare benefit plan (as defined in
Section 3(1) of ERISA).
3.18 Environmental and Safety Laws. The Company is not in violation in
any material respect of any applicable statute, law or regulation relating to
the environment or occupational health and safety.
3.19 Offering. Subject to the truth and accuracy of Purchaser's
representations and warranties set forth in this Agreement, the offer, sale and
issuance of the Shares as contemplated by this Agreement and the Ancillary
Agreements are exempt from the registration requirements of the Securities Act
and any applicable state securities laws.
3.20 Disclosure. No representation or warranty of the Company contained
in this Agreement, the Disclosure Schedule, the Ancillary Agreements, or any
certificate furnished or to be furnished to the Purchaser at the Closing
contains an untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made.
3.21 Brokers or Finders. The Company has not incurred and will not
incur, directly or indirectly, as a result of any action taken by the Company,
any liability for brokerage or finders'
8
9
fees or agents' commissions or any similar charges in connection with this
Agreement or the transactions contemplated hereby.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PARENT
The Parent hereby represents and warrants to the Purchaser that, except
as will be set forth on the Disclosure Schedule:
4.1 Organization and Qualification. The Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to own, lease and
operate its assets, properties and business and to carry on its business as it
is now being conducted or proposed to be conducted. The Parent is duly qualified
as a foreign corporation to transact business, and is in good standing, in each
jurisdiction where it owns or leases real property or maintains employees or
where the nature of its activities make such qualification necessary, except
where the failure to be so qualified would not have a Material Adverse Effect.
4.2 Certificate of Incorporation and Bylaws. The Parent has delivered
to the Purchaser true, correct, and complete copies of the Restated Certificate
and the Parent's Bylaws, as amended through the date hereof.
4.3 Corporate Power. The Parent has all requisite corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements to
which it is a party and to carry out and perform its obligations under the terms
of this Agreement and each of the Ancillary Agreements to which it is a party.
4.4 Capitalization. The authorized capital stock of the Parent
consists, or will consist immediately prior to the Closing, of 80,000,000
shares, of which 75,000,000 are designated as Common Stock, $0.001 par value per
share ("Parent Common Stock"), and of which 5,000,000 are designated as
Preferred Stock, $0.001 par value per share ("Preferred Stock"). Upon
consummation of the transactions contemplated by this Agreement, the
capitalization of the Parent shall be as set forth in Section 4.5 of the
Disclosure Schedule. Shares of the authorized Common Stock have been reserved as
follows: (i) not less than 850,000 of the authorized shares of Parent Common
Stock have been reserved for issuance upon exchange of Series A Preferred Stock
(the "Exchanged Shares"), and (ii) as of February 29, 2000, 6,269,886 of the
authorized shares of Parent Common Stock have been reserved for issuance to
employees, officers, directors and consultants of the Parent upon the exercise
of options pursuant to the Parent's stock option plans. As of the date of any
exchange of Series A Preferred Stock for Parent Common Stock as set forth in the
Exchange Agreement, the Exchanged Shares will be duly and validly issued and
outstanding, will be fully paid and nonassessable with no personal liability
attaching to the ownership thereof, will not be subject to preemptive or similar
rights of stockholders of the Parent or others, will be free of any liens,
claims or encumbrances of the Parent and free of restrictions on
9
10
transfer other than as set forth in this Agreement or the Ancillary Agreements
or under applicable state and federal securities laws.
4.5 Authorization. All corporate action on the part of the Parent and
its stockholders necessary for the authorization, execution, delivery, and
performance of this Agreement and the Ancillary Agreements by the Parent, the
authorization, issuance, exchange and delivery of the Exchanged Shares and the
performance of all of the Parent's obligations hereunder and under the Ancillary
Agreements have been taken. This Agreement and each of the Ancillary Agreements,
when executed and delivered by the Parent, will constitute a valid and legally
binding obligation of the Parent, enforceable against the Parent in accordance
with its terms, except to the extent limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting creditors'
rights generally and by general equity principles regardless of whether such
enforceability is considered in a proceeding in equity or at law.
4.6 Financial Information. Copies of the Parent's audited balance
sheet, dated December 31, 1999 (the "Balance Sheet"), and the related statements
of operations and cash flows for the period from January 1, 1999 through
December 31, 1999 (collectively, the "Financial Statements") have been delivered
to the Purchaser, (i) present fairly the financial position, results of
operations and cash flow of the Parent as of such date and for such period, (ii)
have been compiled from the books and records of the Parent and its
Subsidiaries, and (iii) have been prepared in accordance with generally accepted
accounting principles, consistently applied.
4.7 Absence of Conflicts. The execution, delivery, and performance of,
and compliance with this Agreement and the Ancillary Agreements, the issuance
and exchange of the Exchanged Shares, and the consummation of the transactions
contemplated hereby and thereby, have not and will not: (i) violate, conflict
with or result in a breach of any provision of or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the performance required
by, or result in the creation of any lien upon any of the material assets,
properties or business of the Parent under, any of the terms, conditions or
provisions of (x) the Certificate of Incorporation or the Bylaws of the Parent,
or (y) any material indenture, loan agreement or other contract of the Parent;
or (ii) violate any judgment, ruling, order, writ, injunction, award, decree, or
any law or rule of any federal, state, county or local government or any other
governmental, regulatory or administrative agency or authority which is
applicable to the Parent or any of its assets, properties or businesses; or
(iii) result in the suspension, revocation, impairment, forfeiture, or
non-renewal of any Permit that is material to the Parent, which individually or
in the aggregate as to the items set forth in clauses (i), (ii) or (iii) above
would have a Material Adverse Effect.
4.8 Governmental Consent. No consent, approval, authorization,
declaration, notification, or filing with any governmental authority on the part
of the Parent is required in connection with the execution, delivery and
performance of this Agreement or any of the Ancillary Agreements, or the
issuance and exchange of the Exchanged Shares or the consummation of any other
transaction contemplated hereby or by the Ancillary Agreements, except the
qualification (or the taking of such action as may be necessary to secure an
exemption from qualification, if available) of the offer and sale of the
Exchanged Shares under applicable state "blue sky" securities laws, which
filings and qualifications, if required, will be accomplished in a timely
manner;
10
11
provided, however, that solely with respect to federal and state "blue sky"
securities laws, the representations and warranties provided in this Section 4.8
shall be subject to the accuracy of the representations of the Purchaser set
forth in Section 5 hereof.
4.9 Offering. Subject to the truth and accuracy of Purchaser's
representations and warranties set forth in this Agreement, the offer of the
Exchanged Shares as contemplated by the Exchange Agreement is exempt from the
registration requirements of the Securities Act and any applicable state
securities laws.
4.10 Disclosure. No representation or warranty of the Parent contained
in this Agreement, the Disclosure Schedule, the Ancillary Agreements, or any
certificate furnished or to be furnished to the Purchaser at the Closing
contains an untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which they were made.
4.11 SEC Reports. The Parent will deliver to the Purchaser, prior to
the Closing Date, a true and complete copy of each form, report (including but
not limited to the Annual Report of the Parent on SEC Form 10-K for the period
ending December 31, 1999), schedule, registration statement, definitive proxy
statement and other document (together with all amendments thereof and
supplements thereto) filed by the Company or any of its Subsidiaries with the
SEC during the period from January 1, 2000 through and including the day
immediately prior to the Closing Date (as such documents have since the time of
their filing been amended or supplemented, the "Company SEC Reports"), which are
all the documents (other than preliminary material) that the Parent and its
Subsidiaries were required to file with the SEC since January 1, 2000. As of
their respective dates, the Company SEC Reports (i) complied as to form in all
material respects with the requirements of the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "Securities Act"), or the
Exchange Act, as the case may be, and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company and the
Parent as follows:
5.1 Investment. The Purchaser is, and will be, acquiring the Shares and
the Common Stock or Exchanged Shares issued on conversion or exchange of the
Shares for investment for its own account, not as a nominee or agent, and not
with the view to, or for resale in connection with, any distribution thereof.
The Purchaser understands that the Shares and any shares of Common Stock or
Parent Common Stock issued on conversion or exchange of the Shares have not
been, and will not be, registered under the Securities Act or the securities
laws of any state by reason of exemptions from the registration provisions of
the Securities Act and such laws which depend
11
12
upon, among other things, the bona fide nature of the investment intent and the
accuracy of the Purchaser's representations as expressed herein.
5.2 Access to Data. The Purchaser has had an opportunity to discuss the
Company's and the Parent's respective business, management, and financial
affairs with the Company's and the Parent's respective management and has had
the opportunity to review the Company's and the Parent's respective facilities
and business plans. The Purchaser has also had an opportunity to ask questions
of officers of the Company and the Parent, which questions were answered to the
Purchaser's satisfaction. The Purchaser acknowledges that it has had an
opportunity to conduct its own independent due diligence investigation of the
Company and the Parent.
5.3 Authorization. This Agreement and the Ancillary Agreements, when
executed and delivered by the Purchaser, will constitute valid and legally
binding obligations of the Purchaser, enforceable in accordance with their
respective terms, subject to (i) laws of general application relating to
bankruptcy, insolvency, and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief, or other equitable remedies.
The Purchaser has full power and authority to enter into and to perform its
obligations under this Agreement and the Ancillary Agreements to which it is a
party in accordance with their respective terms.
5.4 Brokers or Finders. The Company and the Parent have not incurred
and will not incur, directly or indirectly, through the Purchaser, any liability
for brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
SECTION 6
CONDITIONS TO OBLIGATIONS OF THE PARTIES
6.1 Conditions to Obligations of Purchaser. The obligations of the
Purchaser to purchase the Shares and to perform any of its obligations hereunder
are subject to the fulfillment of each the following conditions (all of which
may be waived in whole or in part by Purchaser in its sole discretion):
(a) the filing of the Restated Certificate by the Company with
the Secretary of State of the State of Delaware;
(b) the delivery by the Company and the Parent of the
Disclosure Schedule (which shall be acceptable to Purchaser in its sole
discretion) the Ancillary Agreements, the certificates described in Section
2.2(e) hereof and the consents, permits and waivers, if any, described in
Section 2.2(g) hereof;
(c) the delivery by the Company of the Restated Certificate;
12
13
(d) the truth and accuracy in all material respects as of the
Closing Date of the representations and warranties of the Company and the Parent
set forth in Sections 3 and 4 hereof; and
(e) receipt by the Purchaser of the opinion of Milbank, Tweed,
Xxxxxx & XxXxxx LLP, counsel to the Company, in customary form and relating to,
among other things, the Company's organization, existence and authority to
execute this Agreement, the enforceability of this Agreement and the
Registration Rights Agreement, and the issuance of the Preferred Shares.
6.2 Conditions to the Obligations of the Company and the Parent. The
obligations of the Company and the Parent to perform any of their respective
obligations hereunder are subject to (a) the delivery by the Purchaser of the
Ancillary Agreements and (b) the truth and accuracy in all material respects as
of the Closing Date of the representations and warranties of the Purchaser set
forth in Section 5 hereof.
SECTION 7
POST CLOSING COVENANTS
The parties hereto agree as follows with respect to the period
following the Closing and prior to closing of a Qualified Public Offering (as
such term is defined in the Restated Certificate):
7.1 Basic Information Rights. (a) For so long as AOL owns at least a
majority of the Shares originally purchased hereunder and the Company is a
Subsidiary of the Parent, the Parent shall furnish to AOL:
(i) as soon as available, and in any event within 90 days
after the end of each fiscal year of the Parent, a copy of the audited
consolidated balance sheet of the Parent and its Subsidiaries as of the
end of such year and the related consolidated statements of income and
cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous year, all in reasonable
detail; and
(ii) as soon as available, and in any event within 45 days of
each of the first three fiscal quarters of each year, the unaudited
consolidated balance sheet of the Parent and its Subsidiaries and the
related consolidated statements of income and cash flow for such
quarter and for the period commencing on the first day of the fiscal
year and ending on the last day of such quarter.
(b) For so long as AOL owns at least a majority of the Shares
originally purchased hereunder, the Company shall, in the event that the
financial statements of the Company are not consolidated with the financial
statements of the Parent, furnish to AOL:
(i) as soon as available, and in any event within 90 days
after the end of each fiscal year of the Company, a copy of the audited
consolidated balance sheet of the Company as of the end of such year
and the related consolidated statements of income
13
14
and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous year, all in reasonable
detail;
(ii) as soon as available, and in any event within 45 days of
each of the first three fiscal quarters of each year, the unaudited
consolidated balance sheet of the Company and the related consolidated
statements of income and cash flow for such quarter and for the period
commencing on the first day of the fiscal year and ending on the last
day of such quarter; and
(iii) as soon as available, and in any event within 15 days of
the end of each month, the unaudited consolidated balance sheet of the
Company and the related consolidated statements of income and cash flow
for such month and for the period commencing on the first day of the
fiscal year and ending on the last day of such month.
7.2 Access and Additional Information Rights. The Company will permit
AOL and its employees, advisors and other authorized representatives, so long as
AOL owns at least a majority of the Shares originally purchased hereunder, to
visit and inspect any of the properties of the Company, including its books of
account and other records (and make copies thereof and take extracts therefrom),
and to discuss its affairs, finances and accounts with the Company's officers
and its independent auditors, all at such reasonable times during normal
business hours and as often as AOL may reasonably request. For so long as AOL
owns at least a majority of the Shares originally purchased hereunder, the
Company shall promptly notify the Purchaser of any material adverse change in
the business, prospects, assets or condition, financial or otherwise, of the
Company and of any actual litigation or governmental proceeding or investigation
brought in writing against the Company by a third party with a bona fide dispute
with the Company, or against any officer, director or key employee of the
Company which, if adversely determined, would have a Material Adverse Effect;
provided, however, that such notification shall be limited to the existence of
such action and specifically shall not include the advice of counsel or any
other information protected by the attorney-client privilege or work-product
doctrine.
7.3. Right to Consent to Certain Future Common Stock Issuances;
Transfer Restrictions. So long as AOL is the holder of a majority of the Series
A Preferred Stock originally purchased hereunder, the Company or the Parent, as
the case may be, shall not, without the prior written consent of AOL, sell to a
single purchaser securities constituting or convertible into 35% or more of the
Common Stock of the Company (a "Significant Sale of Securities") on a Fully
Diluted Basis provided such purchaser has been reasonably identified in writing
to the Company by the President of AOL Investments as, in the good faith
judgment thereof, having a material business conflict with AOL with respect to
AOL's investment in the Company. As used herein, the term "Fully Diluted Basis"
means on the basis of all outstanding shares of capital stock of the Company and
all options (whether vested or unvested), warrants, rights, calls, commitments
or agreements of any character to which the Company is a party or by which it is
bound calling for the issuance of shares of capital stock of the Company or any
securities convertible into or exercisable or exchangeable for, or representing
the right to purchase or otherwise receive, directly or indirectly, any such
capital stock, or other arrangement to acquire, at any time or under any
circumstance, capital stock of the Company or any such other securities. Other
than in connection with a public offering effected in accordance with the
14
15
Registration Rights Agreement or pursuant to a merger or consolidation of the
Company, AOL shall not, without the Company's prior written consent, voluntarily
transfer any Shares or shares of Common Stock issuable on conversion thereof to
any Person reasonably identified by the Chairman of the Board of Directors of
the Company as, in the good faith judgment thereof, a material competitor of the
Company. Notwithstanding anything herein to the contrary, AOL shall have the
right to transfer the Shares or any shares of Common Stock issuable upon
conversion thereof to any parent company, Subsidiary or affiliate of AOL without
the prior written consent of the Company. For purposes of giving effect to the
rights granted hereunder, (a) the Company or the Parent (as the case may be)
shall give AOL 20 days' prior written notice of its intention to make a
Significant Sale of Securities, which notice shall identify the prospective
purchaser and (b) AOL shall give the Company 20 days' prior written notice of
its intention to make a transfer of any Shares or shares of Common Stock
issuable on conversion thereof to any Person other than a parent company,
Subsidiary or affiliate of AOL, which notice shall identify the prospective
transferee.
7.4. Preemptive Right. If the Company or, in the event that Parent and
the Company enter into a Restructuring Merger (as defined in the Exchange
Agreement), Parent shall enter into an agreement providing for the private sale
or issuance of Additional Stock (as defined in the Restated Certificate) to a
third party, AOL shall have a right to subscribe for and purchase the number of
shares of Common Stock as will permit AOL to maintain its then current equity
interest in the Company or Parent (as the case may be) at the same price and on
the same terms and conditions as the proposed sale to such third party (the
"Preemptive Right"); provided, however, that the Preemptive Right shall expire
and be of no further force and effect on the date after which the market
capitalization of the Company or, in the event that Parent and the Company enter
into a Restructuring Merger (as defined in the Exchange Agreement), Parent is
equal to or greater than $600,000,000 for a consecutive thirty (30) trading day
period.
7.5. Board Observer Rights. So long as AOL is the holder of a majority
of the Preferred Shares originally purchased hereunder, AOL shall have the right
to desigate an observer to attend meetings of the Board of Directors of the
Company.
SECTION 8
GENERAL PROVISIONS
8.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
conflicts of laws principles thereof (other than New York General Obligations
Law Section 5-1401).
8.2 Successors and Assigns; Third Party Beneficiaries. Except as
otherwise expressly limited herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors and assigns of the parties
hereto. Nothing in this Agreement, expressed or implied, is intended to confer
upon any party other than the parties hereto and their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement.
15
16
8.3 Entire Agreement; Amendment and Waiver. This Agreement, the
Disclosure Schedule and the Ancillary Agreements constitute the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof and thereof and supersede all prior agreements among the parties,
if any. Any term of this Agreement may be amended, and the observance of any
term hereof may be waived (either generally or in a particular instance) only
with the written consent of each of the Purchaser and the Company and, to the
extent affected thereby, the Parent. Any amendment or waiver effected in
accordance with this Section 8.3 shall be binding upon each of the parties
hereto.
8.4 Survival. The representations and warranties made herein shall
survive any investigation made by the Purchaser and the Closing for a period of
eighteen (18) months, except that the representations and warranties in Sections
3.3, 3.5, 3.6, 4.3, 4.4, and 4.5 shall survive indefinitely.
8.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be (i) by facsimile, (ii)
mailed by registered or certified mail, postage prepaid, (iii) delivered by
reliable overnight courier service, or (iv) otherwise delivered by hand or by
messenger, addressed (A) if to the Purchaser, to America Online, Inc., c/o AOL
Investments, 00000 XXX Xxx, Xxxxxx, Xxxxxxxx 00000, Attention: Lennert J. Leader
or Xxx Xxxxx (Fax No.: 000-000-0000) with a copy to America Online, Inc., c/o
AOL Investments, 00000 XXX Xxx, Xxxxxx, Xxxxxxxx 00000, Attention: Xxxx Xxxxxxxx
(Fax No.: 000-000-0000) and to America Online, Inc., 00000 XXX Xxx, Xxxxxx,
Xxxxxxxx 00000, Attention: General Counsel or at such other address as the
Purchaser shall have furnished to the Company in writing with a copy to the same
address separate copies to the attention of , (B) if to the Company, to
Metastream Corporation, 000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, N.Y. 10018,
Attention: President (Fax No.: 000-000-0000) with a copy to Metastream
Corporation, 000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, N.Y. 10018, Attention:
General Counsel (Fax No.: 000-000-0000) or at such other address as the Company
shall have furnished to the Purchaser in writing, and (C) if to the Parent, to
MetaCreations Corporation, 0000 Xxxxxxxxxxx Xxxxxx, Xxxxxxxxxxx, XX, Attention:
President (Fax No.: 000-000-0000) with a copy to MetaCreations Corporation, 000
Xxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, N.Y. 10018, Attention: General Counsel
(Fax No.: 000-000-0000) or at such other address as the Parent shall have
furnished to the Purchaser in writing. All such notices and communications shall
be effective (x) on the date of transmission if delivered by facsimile with
transmission confirmed by telecopier-generated receipt and followed by mail
delivery in accordance with clause (ii) above, (y) on the day of delivery if
delivered by hand or by registered or certified mail, and (z) on the day
following deposit thereof with a reliable overnight courier service if delivered
thereby.
8.6 Delays or Omissions. No delay or omission to exercise any right,
power, or remedy accruing to any party upon any breach or default under this
Agreement shall be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent, or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing.
16
17
8.7 References. Unless the context otherwise requires, any reference to
a "Section" refers to a section of this Agreement. Any reference to "this
Section" refers to the whole number section in which such reference is
contained.
8.8 Severability. If any provision of this Agreement is held to be
unenforceable under applicable law, then such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms. The court in its discretion may substitute for the excluded provision an
enforceable provision which in economic substance reasonably approximates the
excluded provision.
8.9 Pronouns. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.
8.10 Counterparts; Facsimile Execution. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original and
enforceable against the parties actually executing such counterpart, and all of
which, when taken together, shall constitute one instrument. Facsimile execution
and delivery of this Agreement shall be legal, valid and binding execution and
delivery for all purposes.
8.11 Certain Definitions. As used in this Agreement, the following
terms shall have the following meanings unless the context otherwise required:
(a) "Person" means any individual, corporation, general or
limited partnership, limited liability company, limited liability partnership,
firm, joint venture, association, enterprise, joint stock company, trust,
business trust, unincorporated organization or other entity.
(b) "Subsidiary" means any Person as to which the Company or
the Parent, as the case may be, directly or indirectly, owns or has the power to
vote, or to exercise a controlling influence with respect to, fifty percent
(50%) or more of the securities of any class of such person, the holders of
which class are entitled to vote for the election of directors (or persons
performing similar functions) of such person.
8.12 Restrictive Legends. (a) Each certificate representing (i) Shares,
(ii) any securities issued upon conversion or exchange of the Shares, and (iii)
any other securities issued or issuable, directly or indirectly, in respect of
any of the Shares or any shares issued upon conversion or exchange of the
Shares, upon any stock split, stock dividend, recapitalization, merger,
consolidation, share exchange or similar event, shall (unless otherwise
permitted by the provisions of this Section 8.12) be stamped or otherwise
imprinted with a legend in substantially the following form to the extent
applicable (in addition to any legend(s) required under any Ancillary Agreements
or applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT
BE SOLD OR
17
18
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT. THE TRANSFER OF SUCH
SECURITIES IS ALSO RESTRICTED PURSUANT TO THE SERIES A
PREFERRED STOCK PURCHASE AGREEMENT DATED AS OF JUNE 12, 2000,
AS AMENDED FROM TIME TO TIME, INCLUDING SECTION 7.3 THEREOF.
The Purchaser and any subsequent holder of the Shares consents to the
Company making a notation on its records and giving instructions to any transfer
agent of the Shares in order to implement the restrictions on transfer described
in this Section 8.12.
(b) The Company or the Parent, as the case may be, shall reissue
promptly certificates without the foregoing legend at the request of any holder
thereof if the holder shall have obtained an opinion of counsel (which counsel
may be counsel to the Company or the Parent, as the case may be) reasonably
acceptable to the Company or the Parent, as the case may be, to the effect that
the securities proposed to be disposed of may lawfully be so disposed of without
registration, qualification or legend or, as to the second sentence thereof, the
applicable provisions of this Agreement have terminated and no longer require
such legend. Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company or the Parent, as the
case may be, of an order of the appropriate blue sky authority authorizing such
removal or an opinion of counsel reasonably satisfactory to the Company or the
Parent, as the case may be, to the effect that any such applicable state
securities legends or stop-transfer instructions are not required and may be
removed.
8.13 Confidentiality. The Purchaser agrees to keep confidential any
confidential or proprietary information provided to it by the Company or the
Parent pursuant to this Agreement or the Ancillary Agreements, in the Disclosure
Schedule or otherwise, and further agrees that it will use such information
solely for purposes related to its investment in the Company; provided, however,
that (i) any of such information may be disclosed to the Purchaser's partners,
directors, officers, employees, investment advisor, attorneys, accountants,
consultants and other professionals who need to know such information (it being
understood that such partners, directors, officers, employees, investment
advisor, attorneys, accountants, consultants and other professionals shall be
informed by the Purchaser of the confidential nature of such information and
shall be directed to treat such information confidentially), (ii) any of such
information may be disclosed, to any prospective purchaser of any Shares of the
Company owned by a Purchaser as long as such prospective purchaser agrees in
writing to be bound by the confidentiality provisions of this Section, (iii) any
such information may be disclosed following prior notice if (A) required by
subpoena, applicable law, regulation, regulatory body, administrative order,
stock exchange rules or any listing or trading agreement, and (iv) disclosure of
such information may be made with respect to which the Company consents in
writing. The provisions of this Section 8.13 shall not apply to information
which (x) is already known to the Purchaser, (y) is or becomes generally
available to the public other than as a result of disclosure by the partners,
directors, officers, employees, agents or advisors of the Purchaser, or (z)
becomes available to the Purchaser on a non-confidential basis from a source
other than the Company, provided that such source is not known
18
19
by the Purchaser to be bound by an obligation of confidentiality or secrecy to
the Company or the Parent, as the case may be.
8.14 Legal Fees and Expenses. Each party hereto shall bear its own
expenses and legal fees incurred on its behalf with respect to the negotiation
of this Agreement and the transactions contemplated hereby.
8.15 Termination. Unless the term of this Agreement is extended upon
the written consent of the parties hereto, this Agreement shall terminate and be
of no further force and effect at any time after June 12, 2000 upon notification
of the non-terminating party by the terminating party if the Closing shall not
have occurred on or before such date.
[signature page follows]
19
20
IN WITNESS WHEREOF, the parties hereto have caused this Series A
Preferred Stock Purchase Agreement to be executed by their duly authorized
officers as of the date first set forth above.
METASTREAM CORPORATION
By:
-------------------------------------
Name:
Title:
METACREATIONS CORPORATION
By:
-------------------------------------
Name:
Title:
AMERICA ONLINE, INC.
By:
-------------------------------------
Name:
Title:
20
21
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT, dated as of June 12, 2000 (this "Agreement"), among
METASTREAM CORPORATION, a Delaware corporation (the "Company"), METACREATIONS
CORPORATION, a Delaware corporation (the "Parent") and AMERICA ONLINE, INC., a
Delaware corporation (the "Holder"), with reference to the following:
A. Parent owns 80% of the outstanding common stock, par value $0.00001 per
share, of the Company ("Company Common Stock"), which investment
represents Parent's principal asset.
B. On the date hereof, Holder purchased 1,500,000 shares (the "Preferred
Shares") of Series A Convertible Preferred Stock of the Company
("Series A Preferred Stock") pursuant to that certain Series A
Preferred Stock Purchase Agreement (the "Purchase Agreement"), which
shares are, under certain circumstances, convertible into Company
Common Stock in accordance with the provisions of the Amended and
Restated Certificate of Incorporation of the Company.
C. In order to induce Holder to purchase the Shares, Parent is willing to
exchange all, but not less than all, of the Preferred Shares for newly
issued shares of common stock, par value $0.001 per share, of Parent
("Parent Common Stock") in accordance with and subject to the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the obligations and agreements
contained herein and in the Purchase Agreement, the parties hereto agree as
follows:
1. Exchange of Securities. (a) Subject to and upon compliance with the
provisions of this Agreement, the Parent shall, upon the election of the Holder
by delivery of a notice of exercise during the Exchange Period in accordance
with Section 2(a) below, issue and deliver to the Holder in exchange for each
Preferred Share such number of fully paid and nonassessable shares of Parent
Common Stock as is determined by dividing $6.6667 by the Exchange Price in
effect at the time of the exchange. The term "Exchange Price" as used herein
means 0.87 multiplied by the lesser of (a) $6.67 and (b) the average of the last
per share sales price of Parent Common Stock as reported in the National
Association of Securities Dealers Automated Quotation System during the 15
consecutive trading days immediately prior to the date upon which notice of the
election to exchange is delivered to the Parent and the Company in accordance
with Section 2 hereof; provided, however, that the Exchange Price shall be
subject to adjustment as provided in Section 3 below. The term "Exchange Period"
as used herein means the period beginning on the date hereof and ending on the
date on which the earliest of the following occurs: (a) the date on which the
Company files a registration statement relating to the initial public offering
of Company Common Stock, provided that if such initial public offering is not
consummated within two hundred seventy (270) days of such filing, then the
Holder's rights under
22
this exchange agreement shall be reinstated subject to the provisions hereof;
(b) the exercise by the Holder of any of its conversion rights under the Series
A Preferred Stock or the automatic conversation thereof; (c) the merger or
consolidation of the Parent and the Company in which the surviving corporation
is subject to the reporting requirements of the Securities Exchange Act of 1934,
as amended, provided, with respect to this clause (c) only, that Parent is
immediately prior thereto and has been at all times since the date hereof the
owner of a majority of the voting capital stock of the Company and continues to
elect the majority of the Board of Directors or other governing body of the
Company and provided further that the Parent has not merged into or consolidated
with another corporation or other entity or sold all or substantially all of its
assets or capital stock, in each case under circumstances in which the holders
of the majority in voting power of the outstanding capital stock of the Parent,
immediately prior to such merger, consolidation or sale own less than the
majority in voting power of the outstanding capital stock of the Parent or the
surviving or resulting corporation or acquirer, as the case may be, immediately
following such merger, consolidation or sale (such a merger or consolidation of
the Parent and the Company as described in this clause (c), a "Restructuring
Merger"); (d) the exercise by Parent of its right under Section 1(b) below; and
(e) June 12, 2005. Parent and the Company shall give the Holder 30 days' written
notice prior to the occurrence of any of the events set forth in clauses (a)-(c)
of this Section 1. The Series A Preferred Stock may be exchanged in whole but
not in part. If the Parent shall sell, assign or transfer to a third party a
number of shares of Company Common Stock representing a majority in voting power
of the outstanding capital stock of the Company (other than in a transaction in
which paragraph 3(c) below is applicable), provision shall be made so that the
Holder will be entitled to exchange the Preferred Shares for shares of common
stock of such third party upon the same terms and conditions as the terms and
conditions hereof except that the price at which shares of such third party's
common stock shall be exchangeable for the Preferred Shares shall be
appropriately adjusted to reflect the fair market value of such common stock, as
determined in good faith by the Board of Directors of Parent provided, however,
that if the Holder objects in writing (an "Objection Notice") to such a
determination of fair market value of the Board of Directors within 15 days
after notice of such determination has been sent to the Holder, then the Parent
and the Holder shall attempt to resolve such dispute within 10 days following
the Parent's receipt of the Objection Notice. If the Parent and the Holder are
unable to resolve such dispute within such 10-day period, then such
determination shall be made by a nationally recognized independent investment
banking firm mutually agreed upon by the Parent and the Holder (the expense of
which firm or appraiser shall be born by the Parent). The determination of such
firm shall be final and binding on the Parent and the Holder. If the parties
cannot agree on the investment banking firm to make the determination
contemplated by this section within 20 days after the Parent's receipt of the
Objection Notice, then the Parent and the Holder shall each designate an
investment bank, and such two firms shall agree upon and designate a third
investment bank, which firm shall thereupon make such determination.
(b) In the event that the Parent and the Company enter into an
agreement governing a Restructuring Merger ("Restructuring Merger Agreement"),
the Holder shall, upon the election of the Parent by delivery of a notice of
exercise in accordance with Section 2(b) below, transfer, assign and deliver the
Preferred Shares to the Parent, in exchange for such number of fully paid and
nonassessable shares of Parent Common Stock as is equal to the greater of (i)
the number of shares of Parent Common Stock deliverable to the Holder if the
Holder had exercised its rights under Section 1(a) hereof or (ii) the number of
shares of Parent Common Stock that would have been deliverable to the Holder
pursuant to the Restructuring Merger Agreement if the Holder had
2
23
exercised its right to convert the Preferred Shares to Company Common Stock
immediately prior to the Restructuring Merger (the "Original Exchange");
provided, however, that if the Restructuring Merger is not consummated within
forty-five (45) days of the date of the Restructuring Merger Agreement (the
"Merger Period"), the Holder shall have the right and the Company and Parent
shall be obligated if such right is exercised to rescind the Original Exchange
and restore the parties rights and obligations as they existed immediately prior
to the Original Exchange such that Company and Parent shall re-exchange the
shares of Parent Common Stock received by the Holder pursuant to this Section
1(b) for the Preferred Shares and, if the Holder exercises its right to effect
such recission hereunder, the Holder's rights under the Amended and Restated
Certificate of Incorporation of the Company as in effect on the date thereof,
this Agreement, the Purchase Agreement and the Registration Rights Agreement
shall be reinstated in full force and effect without any further action on the
part of the Company, the Parent or the Holder. Parent and the Company, jointly
and severally agree to indemnify and hold harmless the Holder and its officers,
directors, employees, stockholders, successors and assigns from and against any
federal, state and local taxes (including any interest or penalties thereon) or
other costs incurred by the Holder resulting from the transactions contemplated
by the proviso in the first sentence of this Section 1(b). Any indemnification
payment shall be made within thirty (30) days from the date that the Holder
makes written demand therefor.
2. Method of Exchange. (a) In order to exercise its exchange rights
hereunder, the Holder shall surrender the certificate or certificates
representing the Preferred Shares duly endorsed, at the office of the Parent or
of any transfer agent for Parent Common Stock, and shall give 15 days' advance
written notice by mail, postage prepaid, to the Parent and the Company at their
respective principal corporate offices of the election to exchange the same,
stating therein the name or names in which the certificate or certificates for
shares of Parent Common Stock are to be issued. Subject to Section 2(c) below,
the Parent shall, no later than the end of such 15-day period, issue and deliver
to the Holder, or to the Person designated in such notice, (i) a certificate or
certificates for the number of shares of Parent Common Stock issuable thereto in
accordance with the terms and conditions hereof and (ii) a certificate of the
Parent signed by its President setting forth customary representations and
warranties of Parent (including with respect to valid issuance of the shares of
Parent Common Stock under corporate law and relevant securities laws,
authorization, Securities Act filings of Parent and capitalization of Parent).
Subject to Section 2(c) below, such exchange shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
certificate or certificates representing the Preferred Shares and the person or
entity entitled to receive the shares of Parent Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Parent Common Stock as of such date.
(b) In order to exercise its exchange rights hereunder, the Parent
shall issue a certificate or certificates representing the shares of Parent
Common Stock issuable hereunder duly endorsed, at the office of the Parent or of
any transfer agent for Parent Common Stock, and shall give 10 days' advance
written notice by mail, postage prepaid, to the Holder at its principal
corporate offices of the election to exchange the same. The Holder shall, no
later than the end of such 10-day period, deliver to the Parent a certificate or
certificates representing the Preferred Shares together with a stock power
endorsed by the Holder. Such exchange shall be deemed to have been made
immediately prior to the close of business on the date of the delivery of the
3
24
certificate or certificates representing the Preferred Shares and the Parent
shall be treated for all purposes as the record holder or holders of the
Preferred Shares as of such date.
(c) In the event that Parent is required to obtain shareholder approval
pursuant to the rules and/or regulations promulgated by the Securities and
Exchange Commission or any securities exchange on which its securities are then
trading in order to issue shares of Parent Common Stock in accordance with this
agreement, Parent shall not be obligated to exchange the Preferred Shares
pursuant to Section 1 until such shareholder approval is obtained.
Notwithstanding the foregoing, in connection with an exchange pursuant to
Section 1(b), if such stockholder approval is not obtained prior to the end of
the Merger Period, then Parent and the Company shall be required to re-exchange
the Preferred Shares to the Holder in accordance with Section 1(b).
3. Adjustment. The Exchange Price shall be subject to adjustment from
time to time as follows:
(a) Split; Subdivision or Combination. If the Parent shall,
after the date hereof and prior to the termination of the Exchange
Period, effect a split or subdivision of the outstanding shares of
Parent Common Stock, then, as of the record date for such split or
subdivision (or as of the date of such split or subdivision if no
record date is fixed), the Exchange Price shall be appropriately
decreased and the number of shares of Parent Common Stock issuable on
exchange of each share of Series A Preferred Stock shall be increased
in proportion to such increase in the number of outstanding shares of
Parent Common Stock. If the number of shares of Parent Common Stock
outstanding during the Exchange Period is decreased by a combination of
the outstanding shares of Parent Common Stock, then, following the
record date of such combination (or as of the date of such combination
if no record date is fixed), the Exchange Price shall be appropriately
increased in proportion to such decrease in the number of outstanding
shares of Parent Common Stock.
(b) Stock Dividends. If the Parent shall, during the Exchange
Period, pay a dividend with respect to Parent Common Stock in shares of
Parent Common Stock, then, following the payment date of such dividend,
the Exchange Price shall be appropriately adjusted so that the Holder
shall be entitled to receive upon exchange of the Preferred Shares the
number of shares of Parent Common Stock which the Holder would have
owned immediately following such dividend had the Holder exchanged the
Preferred Shares immediately prior thereto.
(c) Mergers; Recapitalizations. If the Parent is, after the
date hereof and prior to the termination of the Exchange Period, a
party to a transaction (including a merger, consolidation, sale of all
or substantially all of the Parent's assets (other than such
transaction in which the Holder exercises its rights under Section 5
hereof) or a reclassification or recapitalization of the Parent Common
Stock), in which the previously outstanding shares of Parent Common
Stock shall be changed into or, pursuant to the operation of law or the
terms of the transaction to which the Parent is a party, exchanged for
different securities of the Parent or securities of another corporation
or interests in a non-corporate entity or other property (including
cash) or any combination of any of the
4
25
foregoing, then, provision shall be made so that each holder of shares
of Series A Preferred Stock shall be entitled, upon exchange, to an
amount per share of Series A Preferred Stock equal to (1) the aggregate
amount of stock, securities, cash or any other property (payable in
kind), as the case may be, into which or for which each share of Parent
Common Stock is changed, exchanged or reclassified times (2) the number
of shares of Parent Common Stock into which a share of Series A
Preferred Stock is exchangeable immediately prior to the consummation
of such transaction.
(d) Fractional Shares. No fractional shares of Parent Common
Stock shall be issued upon the exchange of the Preferred Shares, and,
in lieu of fractional shares, the Parent shall, as soon as practicable,
pay the holder an amount in cash equal to such fraction multiplied by
the then current fair market value of one share of Parent Common Stock.
4. Reservation of Stock Issuable Upon Exchange; Increase in Authorized
Capital. The Parent shall at all times reserve and keep available out of its
authorized but unissued shares of Parent Common Stock, solely for the purpose of
effecting the exchange of the Preferred Shares, such number of shares of Parent
Common Stock as shall from time to time be sufficient to effect the exchange of
the Preferred Shares. If at any time the number of authorized but unissued
shares of Parent Common Stock shall not be sufficient to effect the exchange of
all the Preferred Shares, then, in addition to such other remedies as shall be
available to the Holder, the Parent will take such corporate action as may be
necessary to increase its authorized but unissued shares of Parent Common Stock
to such number of shares as shall be sufficient for such purposes.
5. Put Right. Unless prohibited by the Delaware General Corporation Law
and subject to and upon material compliance by the Holder with the provisions of
this Agreement, the Holder shall have the right (the "Put Right") at any time
from the date hereof to June 12, 2002 to require the Parent or the Company (or a
third party if applicable as described herein) to purchase, in such proportions
as the Holder may elect, all but not less than all of the shares of Series A
Preferred Stock held by Holder at the time of exercise of the Put Right, for an
amount per share equal to the purchase price per share pursuant to the Purchase
Agreement plus an amount equal to interest thereon at a rate per annum equal to
5.5%, calculated from the date hereof and compounded quarterly (the "Put
Amount"). In order to exercise the Put Right hereunder, the Holder shall give 15
days' advance written notice to the Parent and the Company of Holder's election
to exercise its rights hereunder. If the Parent shall sell, assign or transfer
to a third party a number of shares of Company Common Stock representing a
majority in voting power of the outstanding capital stock of the Company,
provision shall be made so that Holder will be entitled to require such third
party, in addition to the Parent and the Company, to purchase the Preferred
Shares upon the same terms and conditions as the terms and conditions hereof.
The Company and Parent undertake that the agreement with such third party shall
provide, among other things, that Parent, the Company and such third party shall
be jointly and severally liable for the obligations set forth in this Section
and the Holder shall be entitled to seek payment for the Put Amount from Parent,
the Company and such third party.
6. Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
conflicts of laws principles thereof (other than New York General Obligations
Law section 5-1401) except to the extent
5
26
application of the law of the state of incorporation of the Parent shall be
mandatory with respect thereto.
7. Successors and Assigns; Third Party Beneficiaries. Except as
otherwise expressly limited herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors and assigns of the parties
hereto, including a subsequent holder of all, but not less than all, of the
shares of Series A Preferred Stock issued pursuant to the Purchase Agreement.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party other than the parties hereto and their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement.
8. Entire Agreement; Amendment and Waiver. This Agreement, the Purchase
Agreement and the Registration Rights Agreement constitute the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof and thereof and supersede all prior agreements among the parties,
if any. Any term of this Agreement may be amended, and the observance of any
term hereof may be waived (either generally or in a particular instance) only
with the written consent of each of the Holder and the Parent and, to the extent
affected thereby, the Company. Any amendment or waiver effected in accordance
with this Section 8 shall be binding upon each of the parties hereto.
9. Notices, etc. All notices and other communications pursuant to this
Agreement shall be made in accordance with the Purchase Agreement at the
addresses or facsimile numbers as set forth therein.
10. Delays or Omissions. No delay or omission to exercise any right,
power, or remedy accruing to any party upon any breach or default under this
Agreement shall be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent, or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. In no event shall the
Holder's rights be terminated by a failure of either the Parent or the Company
to perform their respective obligations hereunder.
11. References. Unless the context otherwise requires, any reference to
a "Section" refers to a section of this Agreement. Any reference to "this
Section" refers to the whole number section in which such reference is
contained.
12. Severability. If any provision of this Agreement is held to be
unenforceable under applicable law, then such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms. The court in its discretion may substitute for the excluded provision an
enforceable provision which in economic substance reasonably approximates the
excluded provision.
13. Pronouns. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.
6
27
14. Counterparts; Facsimile Execution. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original and
enforceable against the parties actually executing such counterpart, and all of
which, when taken together, shall constitute one instrument. Facsimile execution
and delivery of this Agreement shall be legal, valid and binding execution and
delivery for all purposes.
15. Definitions. As used in this Agreement, "Person" means any
individual, corporation, general or limited partnership, limited liability
company, limited liability partnership, firm, joint venture, association,
enterprise, joint stock company, trust, business trust, unincorporated
organization or other entity.
16. Restrictive Legends. (a) Each certificate representing any shares
issued upon exchange of the Preferred Shares, and (b) any other securities
issued or issuable, directly or indirectly, in respect of any of the Preferred
Shares or any shares issued upon exchange of the Preferred Shares in respect of
any stock split, stock dividend, recapitalization, merger, consolidation, share
exchange or similar event, shall (unless otherwise permitted by the provisions
of this Section 16) be stamped or otherwise imprinted with a legend in
substantially the following form to the extent applicable (in addition to any
legend(s) required under the Purchase Agreement, the Registration Rights
Agreement or applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT.
The Holder and any subsequent holder of the Preferred Shares consents
to the Parent making a notation on its records and giving instructions to any
transfer agent of the Shares in order to implement the restrictions on transfer
described in this Section 16.
(b) The Parent shall reissue promptly certificates without the
foregoing legend at the request of any holder thereof if the holder shall have
furnished to Parent an opinion of counsel (which counsel may be counsel to the
Parent) reasonably acceptable to the Parent to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend. Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Parent of an order of
the appropriate blue sky authority authorizing such removal or an opinion of
counsel reasonably satisfactory to the Parent to the effect that any such
applicable state securities legends or stop-transfer instructions are not
required and may be removed.
17. Legal Fees and Expenses. Each party hereto shall bear its own
expenses and legal fees incurred on its behalf with respect to the negotiation
of this Agreement and the transactions contemplated hereby.
7
28
18. Specific Performance. The covenants and agreements contained in
this Agreement, are unique and any breach thereof on the part of Parent or the
Company (as the case may be) may not be fully compensable in damages and the
breach or threatened breach of the provisions of this Agreement would cause the
Holder irreparable harm. Accordingly, in addition to and not in limitation of
any other remedies available to the Holder for a breach or threatened breach of
this Agreement, the Holder will be entitled to seek specific performance of this
Agreement upon any breach by Parent or the Company and to seek an injunction
restraining any such party from such breach or threatened breach.
[signature page follows]
8
29
IN WITNESS WHEREOF, the parties hereto have caused this Exchange
Agreement to be executed by their duly authorized officers as of the date first
set forth above.
METASTREAM CORPORATION
By:
-----------------------------------
Name:
Title:
METACREATIONS CORPORATION
By:
-----------------------------------
Name:
Title:
AMERICA ONLINE, INC.
By:
-----------------------------------
Name:
Title:
9
