Exhibit 5.1
ON2 TECHNOLOGIES, INC.
PREFERRED STOCK SUBSCRIPTION AGREEMENT
THIS PREFERRED STOCK SUBSCRIPTION AGREEMENT (this "AGREEMENT") is
entered into as of August 10, 2001, by and among On2 Technologies, Inc., a
Delaware corporation (the "COMPANY"), and The Travelers Insurance Company, a
Connecticut corporation ("TRAVELERS, INVESTOR").
WHEREAS, concurrently herewith, and with a Designation of Powers which
has been filed accordingly, the parties hereto are entering into an Investor
Rights Agreement (the "INVESTOR RIGHTS AGREEMENT"), substantially in the form of
EXHIBIT A hereto, Preferences and Rights of Series C-VI Preferred Stock
substantially in the form of Exhibit C hereto,
WHEREAS, the parties entered into a Unit Purchase Agreement, dated as
of July 18, 2001 (the "July Purchase Agreement") and an Investor Rights
Agreement, dated as of July 18, 2001 (the "July Investor Rights Agreement");
WHEREAS, pursuant to the July Purchase Agreement, Travelers invested $2
million and received 3,571,429 units (the "Units"), each of which consists of
(i) one share of common stock, par value $0.01 per share of the Company, and
(ii) one warrant to purchase 1.5 shares of common stock of the Company at an
exercise price of $0.56 per unit; and
WHEREAS, the parties desire to amend the July Purchase Agreement,
whereby the proceeds paid to the Company in respect of the July Purchase
Agreement are hereby applied to the purchase of the Preferred Shares and the
Warrants pursuant to this Agreement, and the Units are delivered to the Company
and cancelled. The remainder of the July Purchase Agreement is replaced by the
terms of this Agreement, and in the event of any conflict of terms this
Agreement shall prevail;
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties and covenants set forth in this Agreement, the parties to this
Agreement agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
(a) The Company has duly authorized for sale, issue and delivery
to the Investor an aggregate of 3,571,429 shares of its Series C-VI Preferred
Stock, no par value (the "PREFERRED SHARES"), having the rights, preferences and
limitations set forth in the Designation of Powers, Preferences and Rights of
Series C-VI Preferred Stock (the "CERTIFICATE OF DESIGNATIONS") attached as
EXHIBIT C and convertible as provided therein into shares of the Company's
Common Stock, par value $.01 per share (the "COMMON STOCK"), and has further
authorized for sale, issue and delivery to the Investor warrants (the
"WARRANTS") to acquire 5,357,143 shares of Common Stock during the period
ending three years after the date of issuance thereof. The form of the Warrants
is attached to this Agreement as EXHIBIT B.
(b) Subject to the terms of this Agreement, Travelers agrees to
the exchange of the proceeds paid via the Purchase Agreement to apply to the
purchase of the Preferred Shares and the Warrants as described herein, and the
Company agrees to apply the proceeds received to the purchase of the Preferred
Shares and the Warrants. The parties further agree that upon such exchange and
purchase the Units shall be retired and cancelled.
(c) The purchase and sale of the Preferred Shares shall take
place concurrently with the execution of this Agreement (the "CLOSING"). At the
Closing, the Company shall deliver to the Investor (i) an executed counterpart
to this Agreement and the Investor Rights Agreement and (ii) a share certificate
that represents the number of Preferred Shares being purchased by the Investor
and warrant certificates that represent the Warrants being purchased by the
Investor, in all cases against delivery to the Company by the Investor of (i) an
executed counterpart to this Agreement and the Investor Rights Agreement and
(ii) the aggregate purchase price of the Preferred Shares being purchased by
such Investor, as set forth in Section 1(b) hereof, by bank wire transfer of
immediately available funds to an account designated in writing by the Company.
2. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor hereby
represents and warrants to the Company as follows:
(a) The Investor is acquiring the Preferred Shares and the
Warrants (collectively, the "SECURITIES") for the Investor's own account, not as
nominee or agent, for investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act of 1933, as amended (the "SECURITIES ACT"). By executing
this Agreement, the Investor further represents that the Investor does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to any such person or to any third person, with
respect to the Securities.
(b) The Investor understands that (i) the Securities have not
been registered under either the Securities Act or the securities laws of any
state of the United States by reason of specific exemptions therefrom, (ii) the
Securities must be held by the Investor indefinitely, and, therefore, the
Investor must bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the Securities Act and the
securities laws of any applicable state or is exempt from such registrations;
(iii) each certificate that represents the Securities will be endorsed with
legends as required by the Investor Rights Agreement; and (iv) the Company will
instruct any transfer agent not to register the transfer of any of the
Securities unless the conditions specified in the foregoing legend are
satisfied.
(c) The Investor has been furnished with such materials and has
been given access to such information relating to the Company as the Investor or
the Investor's
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qualified representative has requested. The Investor has been afforded the
opportunity to ask questions regarding the Company and the Securities as such
Investor has found necessary to make an informed investment decision. The
Investor has been solely responsible for its own due diligence investigation of
the Company and its business, for its own analysis of the merits and risks of
its investment made pursuant to this Agreement and for its own analysis of the
terms of its investment.
(d) The Investor is in a financial position to hold the
Securities and is able to bear the economic risk and withstand a complete loss
of the Investor's investment in the Securities. The Investor recognizes that the
Securities involve a high degree of risk. The Investor understands and
acknowledges that there can be no assurance that the Company will be able to
meet its projected goals and that the Company will need significant additional
capital to be successful, which capital may not be available readily.
(e) The Investor acknowledges hereby that the Investor has been
advised to obtain and has obtained, to the extent the Investor deems necessary,
professional (including legal) advice with respect to the risks inherent in the
investment in the Securities, the condition of the Company, the suitability of
the investment in the Securities in light of Investor's condition and investment
needs, and the terms and conditions of this Agreement and documents relating to
the investment in the Securities. The Investor is a sophisticated investor, is
able to fend for itself in the transaction contemplated by this Agreement, and
has such knowledge and experience in financial and business matters that the
Investor is capable of evaluating the merits and risks of the prospective
investment in the Securities.
(f) The investment in the Securities is suitable for the Investor
based upon the Investor's investment objectives and financial needs, and the
Investor has adequate net worth and means for providing for its current
financial needs and contingencies and has no need for liquidity of the
investment with respect to the Securities. The Investor's overall commitments to
investments that are illiquid or not readily marketable are not disproportionate
to the Investor's net worth, and investment in the Securities will not cause
such overall commitment to become excessive.
(g) For purposes of the application of state securities laws, the
Investor represents that the Investor is a bona fide resident of, and is
domiciled in, the state or other jurisdiction set forth in such Investor's
address on the signature pages hereto.
(h) (i) The Investor has the requisite corporate power and
corporate authority to enter into and perform its obligations under this
Agreement and the Investor Rights Agreement, pursuant to their respective terms,
(ii) the execution and delivery of this Agreement and the Investor Rights
Agreement by the Investor and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Investor or its
Board of Directors or stockholders is required, and (iii) each of this Agreement
and the Investor Rights Agreement has been duly executed and delivered by the
Investor and constitutes a valid and binding obligation of the Investor,
enforceable against the Investor in accordance with its terms, except, in each
case, as such enforceability may be limited
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by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Investor as follows:
(a) ORGANIZATION, GOOD STANDING AND POWER. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate authority to own,
lease and operate its properties and assets and to carry on its business as now
being conducted. The Company is duly qualified to do business and is in good
standing as a foreign corporation in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, other than those in which the failure so to qualify would not have
any adverse effect on the business, operations, properties, or financial
condition of the Company that is material and adverse to the Company and its
subsidiaries, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise materially interfere with the ability of the
Company to perform any of its material obligations under this Agreement or the
Investor Rights Agreement (hereinafter, a "MATERIAL ADVERSE EFFECT").
(b) AUTHORIZATION, ENFORCEMENT. (i) The Company has the requisite
corporate power and corporate authority to enter into and perform its
obligations under this Agreement and the Investor Rights Agreement, pursuant to
their respective terms, (ii) the execution and delivery of this Agreement and
the Investor Rights Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required, and (iii) each of
this Agreement and the Investor Rights Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except,
in each case, as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application. The Company has duly and validly authorized and reserved for
issuance shares of Common Stock sufficient in number for the issuance of the
Securities.
(c) CAPITALIZATION. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock of which approximately 33,561,000
shares are issued and outstanding and 20,000,000 shares of preferred stock, par
value $0.01 per share, of which 400,000 shares of Series A Preferred Stock are
issued and outstanding, 34,100 shares of Series B Preferred Stock are issued and
outstanding, 1,644,304 shares of Series C Preferred Stock are issued and
outstanding, 924,527 shares of Series C-II Preferred Stock are issued and
outstanding and 2,049,839 shares of Series C-III Preferred Stock are issued and
outstanding. All of the outstanding shares of the Company's
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Common Stock have been duly and validly authorized and are fully paid and
non-assessable, except as set forth in the SEC Documents. Except as set forth in
this Agreement and the Investor Rights Agreement and as set forth in the SEC
Documents, no shares of Common Stock are entitled to preemptive rights or
Investor Rights and there are no outstanding options, warrant, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth in this Agreement and as set forth in
the SEC Documents, there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. The Company is not a
party to any agreement granting registration rights to any person with respect
to any of its equity or debt securities. The Company is not a party to, and it
has no knowledge of, any agreement restricting the voting or transfer of any
shares of the capital stock of the Company. Except as set forth in the SEC
Documents, the offer and sale of all capital stock, convertible securities,
rights, warrants, or options of the Company issued prior to the Closing complied
with all applicable federal and state securities laws, and no stockholder has a
right of rescission or damages with respect thereto which would have a Material
Adverse Effect on the Company's financial condition or operating results. The
Company has made available to the Investor true and correct copies of the
Company's articles or certificate of incorporation as in effect on the date
hereof (the "CHARTER"), and the Company's bylaws as in effect on the date hereof
(the "BYLAWS"). The Company has not received any notice from the AMEX
questioning or threatening the continued inclusion of the Common Stock on such
market.
(d) ISSUANCE OF PREFERRED SERIES C-VI STOCK. The Preferred Series
C-VI Stock to be issued under this Agreement has been duly authorized by all
necessary corporate action and, when paid for and issued in accordance with the
terms hereof, the Preferred Series C-VI Stock issued hereunder shall be validly
issued and outstanding, fully paid and non-assessable, and the Investor shall be
entitled to all rights accorded to a holder of Preferred Series C-VI Stock. When
issued upon due conversion of the Preferred Shares in accordance with the
Certificate of Designations, the Underlying Common Stock that underlies the
Preferred Shares will be validly authorized and, when issued upon the conversion
of the Preferred Shares, will be fully paid and nonassessable. When issued upon
due exercise of the Warrants and upon payment of the exercise price thereunder
as required by the Warrants, the Underlying Common Stock that underlies the
Warrants will be validly authorized, duly issued and fully paid and
nonassessable shares of the Company. To the Company's knowledge, all outstanding
shares of capital stock of the Company have been issued in compliance with all
applicable federal and state securities laws.
(e) NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated herein do not and will not (i) violate any provision of the
Company's Charter or Bylaws, (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage,
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deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party, (iii) create or impose a lien,
charge or encumbrance on any property of the Company under any agreement or any
commitment to which the Company is a party or by which the Company is bound or
by which any of its respective properties or assets are bound, or (iv) result in
a violation of any federal, state, or local statute, rule, regulation, order,
judgment or decree (including any federal or state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries are bound or
affected, except, in all cases, for such conflicts, defaults, termination,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. To the
knowledge of the Company, the business of the Company and its subsidiaries is
not being conducted in violation of any laws, ordinances or regulations of any
governmental entity, except for possible violations which singularly or in the
aggregate do not and will not have a Material Adverse Effect. The Company is not
required under any federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement, or issue and sell the Securities in
accordance with the terms hereof (other than any filings which may be required
to be made by the Company with the SEC or state securities administrators
subsequent to the Closing and any registration statement which may be filed
pursuant hereto); provided that, for purpose of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investor herein.
(f) SEC DOCUMENTS, FINANCIAL STATEMENTS. Certain of the Common
Stock of the Company is registered pursuant to Section 12(g) of the Exchange
Act, and, except as disclosed in the SEC Documents, the Company has timely filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the Exchange
Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange
Act (all of the foregoing including filings incorporated by reference therein
being referred to herein as the "SEC DOCUMENTS"). The Company has delivered or
made available to the Investor true and complete copies of the SEC Documents
filed with the SEC since June 16, 1999. As of their respective filing dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as applicable, and the rules and regulations
of the SEC promulgated thereunder applicable to such documents, and, as of their
respective filing dates, none of the SEC Documents contained any untrue
statement of a material fact or omitted 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. The financial
statements of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements under the United
States Generally Accepted Accounting Principles, as those conventions, rules and
procedures are determined by the Financial Accounting Standards Board ("GAAP"),
and the published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto
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or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements), and fairly present
in all material respects the financial position of the Company and its
subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(g) SUBSIDIARIES. The SEC Documents set forth each subsidiary of
the Company, showing the jurisdiction of its incorporation or organization and
showing the percentage of the Company's ownership of the outstanding stock or
other interests of such subsidiary. For the purposes of this Agreement,
"subsidiary" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interests having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries. All of the
issued and outstanding shares of capital stock of each subsidiary have been duly
authorized and validly issued, and are fully paid and non-assessable. There are
no outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any subsidiary for the purchase
or acquisition of any shares of capital stock of any subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any
subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence. Neither the Company nor any subsidiary is a party to,
nor has any knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of any subsidiary.
(h) NO MATERIAL ADVERSE EFFECT. Since the date of the financial
statement contained in the most recently filed Form 10-Q or Form 10-K, whichever
is most current, no Material Adverse Effect has occurred or exists with respect
to the Company, except as disclosed in the SEC Documents.
(i) NO UNDISCLOSED LIABILITIES. Except as disclosed in the SEC
Documents, neither the Company nor any of its subsidiaries has any liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) that would be required to
be disclosed on a balance sheet of the Company or any subsidiary (including the
notes thereto) in conformity with GAAP which are not disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company's or
its subsidiaries' respective businesses since such date and which, individually
or in the aggregate, do not or would not have a Material Adverse Effect on the
Company or its subsidiaries.
(j) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since the date of the
financial statement contained in the most recently filed Form 10-Q or Form 10-K,
whichever is most current, no event or circumstance has occurred or exists with
respect to the Company or its businesses, properties, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the
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date hereof by the Company but which has not been so publicly announced or
disclosed in the SEC Documents.
(k) INDEBTEDNESS. The SEC Documents reflect all outstanding
secured and unsecured Indebtedness of the Company or any subsidiary, or for
which the Company or any subsidiary has commitments. For the purposes of this
Agreement, "INDEBTEDNESS" shall mean (A) any liabilities for borrowed money or
amounts owed in excess of $250,000 (other than trade accounts payable incurred
in the ordinary course of business), (B) all guaranties, endorsements and
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(C) the present value of any lease payments in excess of $250,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
nor any subsidiary is in material default with respect to any Indebtedness.
(l) TITLE TO ASSETS. Each of the Company and the subsidiaries has
good and marketable title to all of its real and personal property reflected in
the SEC Documents, free of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those indicated in the SEC Documents
or such that do not cause a Material Adverse Effect. All said leases of the
Company and each of its subsidiaries are valid and subsisting and in full force
and effect.
(m) ACTIONS PENDING. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any subsidiary which questions the validity of
this Agreement or the transactions contemplated hereby or any action taken or to
be taken pursuant hereto or thereto. Except as set forth in the SEC Documents,
there is no material action, suit, claim, investigation or proceeding pending
or, to the knowledge of the Company, threatened, against or involving the
Company, any subsidiary or any of their respective properties or assets. There
are no outstanding orders, judgments, injunctions, awards or decrees of any
court, arbitrator or governmental or regulatory body against the Company or any
subsidiary.
(n) COMPLIANCE WITH LAW. The Company and each of its subsidiaries
have all franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals necessary for the conduct of their
respective businesses as now being conducted by them unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(o) TAXES. The Company and each subsidiary has filed all material
Tax Returns which it is required to file under applicable laws; all such Tax
Returns are true and accurate in all material respects and have been prepared in
compliance with all applicable laws; the Company has paid all material Taxes due
and owing by it or any subsidiary (whether or not such Taxes are required to be
shown on a Tax Return) and has
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withheld and paid over to the appropriate taxing authorities all material Taxes
which it is required to withhold from amounts paid or owing to any employee,
stockholder, creditor or other third parties; and since December 31, 1999, the
charges, accruals and reserves for material Taxes with respect to the Company
(including any provisions for deferred income taxes) reflected on the books of
the Company are adequate to cover any Tax liabilities of the Company if its
current tax year were treated as ending on the date hereof.
No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that the Company or any subsidiary
is or may be subject to taxation by that jurisdiction. To the knowledge of the
Company, there are no foreign, federal, state or local tax audits or
administrative or judicial proceedings pending or being conducted with respect
to the Company or any subsidiary; no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority; and, except
as disclosed above, no written notice indicating an intent to open an audit or
other review has been received by the Company or any subsidiary from any
foreign, federal, state or local taxing authority. The Company (A) has not
executed or entered into a closing agreement pursuant to ss. 7121 of the
Internal Revenue Code or any predecessor provision thereof or any similar
provision of state, local or foreign law; and (B) has not agreed to or is
required to make any adjustments pursuant to ss. 481 (a) of the Internal Revenue
Code or any similar provision of state, local or foreign law by reason of a
change in accounting method initiated by the Company or any of its subsidiaries
or has any knowledge that the IRS has proposed any such adjustment or change in
accounting method, or has any application pending with any taxing authority
requesting permission for any changes in accounting methods that relate to the
business or operations of the Company. The Company has not been a United States
real property holding corporation within the meaning of ss. 897(c)(2) of the
Internal Revenue Code during the applicable period specified in ss.
897(c)(1)(A)(ii) of the Internal Revenue Code.
The Company has not made an election under ss. 341(f) of the Internal
Revenue Code. The Company is not liable for the Taxes of another person that is
not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
not obligated to make payments nor is it a party to an agreement that could
obligate it to make any payments that would not be deductible under ss. 280G of
the Internal Revenue Code.
For purposes of this Section 3(o):
"IRS" means the United States Internal Revenue Service.
"TAX" or "TAXES" means federal, state, county, local, foreign, or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind
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whatsoever (including, without limitation, deficiencies, penalties, additions to
tax, and interest attributable thereto) whether disputed or not.
"TAX RETURN" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
(p) CERTAIN FEES. No brokers, finders or financial advisory fees
or commissions will be payable by the Company or any subsidiary with respect to
the transactions contemplated by this Agreement.
(q) DISCLOSURE. To the best of the Company's knowledge, neither
this Agreement or the schedules hereto nor any other documents, certificates or
instruments furnished to the Investor by or on behalf of the Company or any
subsidiary by an authorized officer of the Company or such subsidiary in
connection with the transactions contemplated by this Agreement contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements made herein or therein, in the light of the
circumstances under which they were made herein or therein, not misleading.
(r) OPERATION OF BUSINESS. The Company and each of the
subsidiaries owns or possesses all patents, trademarks, service marks, trade
names, copyrights, licenses and authorizations as set forth in the SEC
Documents, and all rights with respect to the foregoing, which are necessary for
the conduct of its business as now conducted without any conflict to the
knowledge of the Company with the rights of others.
(s) INSURANCE. Except as disclosed in the SEC Documents, the
Company carries or will have the benefit of insurance in such amounts and
covering such risks as is adequate for the conduct of its business and the value
of its properties.
(t) BOOKS AND RECORDS. To the knowledge of the Company, the
records and documents of the Company and its subsidiaries accurately reflect in
all material respects the information relating to the business of the Company
and the subsidiaries, the location and collection of their assets, and the
nature of all transactions giving rise to the obligations or accounts receivable
of the Company or any subsidiary.
(u) MATERIAL AGREEMENTS. Except as set forth in the SEC
Documents, neither the Company nor any subsidiary is a party to any written or
oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, a copy of which would be required to be filed with the SEC as an
exhibit to a registration statement on Form S-1 or other applicable form
(collectively, "MATERIAL AGREEMENTS") if the Company or any subsidiary were
registering securities under the Securities Act. The Company and each of its
subsidiaries has in all material respects performed all the obligations required
to be performed by them to date under the foregoing agreements, have received no
notice of default and, to the best of the Company's knowledge are not in default
under any Material Agreement now in effect, the result of which could cause a
Material Adverse Effect. Except as set forth in the SEC Documents, no written or
oral contract, instrument, agreement, commitment, obligation, plan or
arrangement of the
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Company or of any subsidiary limits or shall limit the payment of dividends on
the Company's Common Stock.
(v) TRANSACTIONS WITH AFFILIATES. Except as set forth in the SEC
Documents, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing
transactions exceeding $250,000 between (A) the Company, any subsidiaries or, to
the Company's knowledge, any of their respective material customers or suppliers
on the one hand, and (B) on the other hand, any officer, employee, consultant or
director of the Company, or any of its subsidiaries, or, to the Company's
knowledge, any person owning 5% or more of the capital stock of the Company or
any subsidiary or, to the Company's knowledge, any member of the immediate
family of such officer, employee, consultant, director, stockholder or, to the
Company's knowledge, any corporation or other entity controlled by any such
officer, employee, consultant, director or stockholder, or a member of the
immediate family of such officer, employee, consultant, director or stockholder.
(w) EMPLOYEES. Neither the Company nor any subsidiary has any
collective bargaining arrangements or agreements covering any of its employees,
except as set forth in the SEC Documents. Except as set forth in the SEC
Documents, neither the Company nor any subsidiary is in breach of any employment
contract, agreement regarding proprietary information, noncompetition agreement,
nonsolicitation agreement, confidentiality agreement, or any other similar
contract or restrictive covenant, relating to the right of any officer, employee
or consultant to be employed or engaged by the Company or such subsidiary. Since
the date of the December 31, 1999 Form 10-KSB, no officer, consultant or key
employee of the Company or any subsidiary whose termination, either individually
or in the aggregate, could have a Material Adverse Effect, has terminated or, to
the knowledge of the Company, has any present intention of terminating his or
her employment or engagement with the Company or any subsidiary.
(x) ABSENCE OF CERTAIN DEVELOPMENTS. Except as provided in SEC
Documents, since the date of the financial statement contained in the most
recently filed Form 10-QSB or Form 10-KSB, whichever is most current, neither
the Company nor any subsidiary has:
(i) issued any stock, bonds or other corporate securities
or any rights, options or warrants with respect thereto;
11
(ii) borrowed any amount or incurred or become subject to
any liabilities (absolute or contingent) except current liabilities incurred in
the ordinary course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's or such subsidiary's business;
(iii) discharged or satisfied any lien or encumbrance or
paid any obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash
or other property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any shares of its
capital stock;
(v) sold, assigned or transferred any other tangible
assets, or canceled any debts or claims, except in the ordinary course of
business;
(vi) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of business
or to the Investor or its representatives;
(vii) suffered any material losses or waived any rights of
material value, whether or not in the ordinary course of business, or suffered
the loss of any material amount of prospective business;
(viii) made any changes in employee compensation except in
the ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor
that aggregate in excess of $500,000;
(x) entered into any other material transaction, whether
or not in the ordinary course of business;
(xi) suffered any material damage, destruction or casualty
loss, whether or not covered by insurance;
(xii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment; or
(xiii) effected any two or more events of the foregoing
kind which in the aggregate would be material to the Company or its
subsidiaries.
4. INDEMNITY. For a period of one year from the Closing, the Company
agrees to indemnify and hold harmless the Investor and each of its respective
directors, officers, affiliates, agents, successors and assigns ("INVESTOR
INDEMNIFIED PARTIES") from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorney's fees, charges and disbursements) incurred by the Investor
Indemnified Parties as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein. For a
period of one year from the Closing, the Investor agrees to indemnify and hold
harmless the
12
Company and its directors, officers, affiliates, agents, successors and assigns
("COMPANY INDEMNIFIED PARTIES") from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys fees, charges and disbursements) incurred by
the Company Indemnified Parties as result of any inaccuracy in or breach of the
representations, warranties or covenants made by such Investor herein.
5. INDEMNIFICATION PROCEDURE. Promptly after receipt by an indemnified
party under this Article VI of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Article VI, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve the indemnifying party from any liability which it may have to any
indemnified party except to the extent of actual prejudice demonstrated by the
indemnifying party. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and assume the defense
thereof, subject to the provisions herein stated and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Article VI for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation, unless the indemnifying party shall not
pursue the action to its final conclusion. The indemnified party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party and the indemnified party shall
have been advised by such counsel that there may be one or more legal defenses
available to the indemnifying party different from or in conflict with any legal
defenses which may be available to the indemnified party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party, it being understood, however, that the
indemnifying party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the indemnified party,
which firm shall be designated in writing by the indemnified party and be
approved by the indemnifying party). No settlement of any action against an
indemnified party shall be made without the prior written consent of the
indemnified party, which consent shall not be unreasonably withheld.
All fees and expenses of the indemnified party (including reasonable costs of
defense and investigation in a manner not inconsistent with this section and all
reasonable attorneys' fees and expenses) shall be paid to the indemnified party,
as incurred, within ten (10)
13
Trading Days of written notice thereof to the indemnifying party; provided, that
the indemnifying party may require such indemnified party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such indemnified party is not entitled to indemnification
hereunder.
6. MISCELLANEOUS.
(a) FEES AND EXPENSES. Each party shall pay all of its own fees
and expenses related to the transactions contemplated by this Agreement.
(b) SPECIFIC ENFORCEMENT. The Company and the Investor
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
(c) ENTIRE AGREEMENT; AMENDMENT. This Agreement, together with
the Investor Rights Agreement, contains the entire understanding of the parties
with respect to the matters covered hereby and, except as specifically set forth
herein, neither the Company nor the Investor make any representations, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by a written instrument signed by
the party against whom enforcement of any such amendment or waiver is sought.
(d) NOTICES. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (i) upon hand delivery or facsimile at the address or
number designated on the signature pages hereof (if delivered on a business day
during normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (ii) on the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such communications
shall be as set forth on the signature pages hereof. Any party hereto may from
time to time change its address for notices by giving written notice of such
changed address to the other parties hereto in accordance herewith.
(e) WAIVERS. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
(f) HEADINGS. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
14
(g) NO THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(h) GOVERNING LAW/ARBITRATION.This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York,
without giving effect to the choice of law provisions. The Company and the
Investor agrees to submit itself to the IN PERSONAM jurisdiction of the state
and federal courts situated within the Southern District of the State of New
York with regard to any controversy arising out of or relating to this
Agreement. Any dispute under this Agreement shall be submitted to arbitration
under the American Arbitration Association (the "AAA") in New York City, New
York, and shall be finally and conclusively determined by the decision of a
board of arbitration consisting of three (3) members (hereinafter referred to as
the "BOARD OF ARBITRATION") selected as according to the rules governing the
AAA. The Board of Arbitration shall meet on consecutive business days in New
York City, New York, and shall reach and render a decision in writing (concurred
in by a majority of the members of the Board of Arbitration) with respect to the
amount, if any, which the losing party is required to pay to the other party in
respect of a claim filed. In connection with rendering its decisions, the Board
of Arbitration shall adopt and follow the laws of the State of New York. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. The Board of Arbitration shall
be authorized and is directed to enter a default judgment against any party
refusing to participate in the arbitration proceeding within thirty days of any
deadline for such participation. Any decision made by the Board of Arbitration
(either prior to or after the expiration of such thirty (30) calendar day
period) shall be final, binding and conclusive on the parties to the dispute,
and entitled to be enforced to the fullest extent permitted by law and entered
in any court of competent jurisdiction. The prevailing party shall be awarded
its costs, including attorneys' fees, from the non-prevailing party as part of
the arbitration award. Any party shall have the right to seek injunctive relief
from any court of competent jurisdiction in any case where such relief is
available. The prevailing party in such injunctive action shall be awarded its
costs, including attorney's fees, from the non-prevailing party.
(i) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. Execution may be made by delivery by
facsimile.
(j) PUBLICITY. The Company and the Investor may agree upon a
press release to be issued by the Company immediately upon execution of this
Agreement describing this Agreement and the transactions contemplated hereby.
Thereafter, either party may make a public statement or announcement with
respect to this Agreement or the transactions contemplated hereby or the
existence of this Agreement; provided, however, that prior to issuing any such
press release, making any such public statement
15
or announcement, such party must obtain the prior consent of the other party,
which consent shall not be unreasonably withheld or delayed.
(k) SEVERABILITY. The provisions of this Agreement are severable
and, in the event that The Board of Arbitration or any court or officials of any
regulatory agency of competent jurisdiction shall determine that any one or more
of the provisions or part of the provisions contained in this Agreement shall,
for any reason, be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision or part of a provision of this Agreement and this Agreement shall be
reformed and construed as if such invalid or illegal or unenforceable provision,
or part of such provision, had never been contained herein, so that such
provisions would be valid, legal and enforceable to the maximum extent possible,
so long as such construction does not materially adversely effect the economic
rights of either party hereto.
(l) FURTHER ASSURANCES. From and after the date of this
Agreement, upon the request of the Investor or the Company, each of the Company
and the Investor shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
[Signature Page Follows]
16
This Preferred Stock Subscription Agreement has been executed as of the
date and year first written above.
ON2 TECHNOLOGIES, INC.
By:
--------------------------------------
Name:
Title:
Address: 000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial
Officer with a copy to
General Counsel
INVESTOR:
THE TRAVELERS INSURANCE
COMPANY
By:
--------------------------------------
Name:
Title:
Address: Xxx Xxxxx Xxxxxx, 00XX
Xxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx
Copy to:
Citigroup Investments Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxx
17
EXHIBIT A
---------
FORM OF INVESTOR RIGHTS AGREEMENT
18
EXHIBIT B
---------
FORM OF WARRANT
THIS WARRANT AND ANY SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), NOR UNDER ANY
STATE SECURITIES LAW AND SUCH SECURITIES MAY NOT BE PLEDGED, SOLD, ASSIGNED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR COUNSEL
TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE PLEDGED, SOLD,
ASSIGNED, HYPOTHECATED, OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS.
THE SALE, ASSIGNMENT, TRANSFER, PLEDGE AND OTHER DISPOSITION OF THIS WARRANT AND
THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT ARE RESTRICTED BY THE
INVESTOR RIGHTS AGREEMENT (THE "INVESTOR RIGHTS AGREEMENT"), DATED AUGUST 10,
2001. A COPY OF THE INVESTOR RIGHTS AGREEMENT IS ON FILE WITH THE CORPORATE
SECRETARY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY. A COPY THEREOF MAY
BE OBTAINED AT NO COST UPON WRITTEN REQUEST THEREFOR MADE BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE CORPORATE SECRETARY AT THE PRINCIPAL OFFICES
OF THE COMPANY.
ON2 TECHNOLOGIES, INC.
WARRANT TO PURCHASE 5,357,143 SHARES OF COMMON STOCK,
PAR VALUE $0.01 PER SHARE
W-_____ August 10, 2001
THIS CERTIFIES that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, The Travelers Insurance Company, a
Connecticut corporation (the "Holder"), is entitled to subscribe for and
purchase from On2 Technologies, Inc., a Delaware corporation (the "Company"),
upon the terms and conditions set forth herein, at any time or from
19
time to time, during the period commencing six months after the date set forth
above and expiring at 5:00 p.m. (New York City time) on August 10, 2005 (the
"Expiration Date"), Five Million Three Hundred Fifty Seven One Hundred Forty
Three (5,357,143) shares of the Company's Common Stock, par value $0.01 per
share (the "Common Stock"), at an exercise price (the "Exercise Price") per
share equal to $0.56. As used herein, the term this "Warrant" shall mean and
include this Warrant and any Warrant or Warrants hereafter issued as a
consequence of the exercise or transfer of this Warrant in whole or in part. As
used herein, the term "Holder" shall include any transferee to whom this Warrant
has been transferred in accordance with the terms hereof. The number of shares
of Common Stock issuable upon exercise of this Warrant (the "Warrant Shares")
and the Exercise Price may be adjusted from time to time as hereinafter set
forth in Section 6.
1. Other than in the event of (i) a liquidation, dissolution or winding up
of the Company, (ii) a Liquidating Transaction (as defined in the terms of the
Company's Series C-VI Preferred Stock) or (iii) a change of control of the
Company (any such event, an "Early Exercise Event'), this Warrant may not be
exercised prior to February 11, 2002. Commencing on the earlier of February 11,
2002 or an Early Exercise Event, this Warrant may be exercised until 5:00 p.m.
(New York City time) on the Expiration Date, as to the whole or any lesser
number of whole Warrant Shares, by transmission by telecopy of the Election to
Exercise, followed within three (3) business days by the surrender of this
Warrant (with the Election to Exercise attached hereto duly executed) to the
Company at its office at 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such
other place as is designated in writing by the Company, together with a
certified or bank cashier's check payable to the order of the Company in an
amount equal to the product of the Exercise Price and the number of Warrant
Shares for which this Warrant is being exercised (the "Aggregate Exercise
Price").
2. Upon each exercise of the Holder's rights to purchase Warrant Shares,
the Holder shall be deemed to be the holder of record of the Warrant Shares
issuable upon such exercise, notwithstanding that the transfer books of the
Company shall then be closed or certificates representing such Warrant Shares
shall not then have been actually delivered to the Holder. Within five (5)
business days after each such exercise of this Warrant and receipt by the
Company of this Warrant, the Election to Exercise and the Aggregate Exercise
Price, the Company shall issue and deliver to the Holder a certificate or
certificates for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder or its designee. If this Warrant should be exercised in
part only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the right of the Holder to purchase
the balance of the Warrant Shares (or portions thereof) subject to purchase
hereunder.
3. Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a Warrant register (the
"Warrant Register") as they are issued. The Company shall be entitled to treat
the
20
registered holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration of transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge of the general counsel of the
Company that a fiduciary or nominee is committing a breach of trust in
requesting such registration of transfer. In all cases of transfer by an
attorney, executor, administrator, guardian, or other legal representative, duly
authenticated evidence of his or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Warrant or Warrants to
the person entitled thereto. This Warrant may be exchanged, at the request of
the Holder thereof, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares (or portions thereof), upon surrender
to the Company or its duly authorized agent. Notwithstanding anything contained
herein to the contrary, the Company shall have no obligation to cause Warrants
to be transferred on its books to any person if, in the opinion of counsel to
the Company, such transfer does not comply with the provisions of the Act and
the rules and regulations thereunder.
4. The Company, until the expiration or termination of this Warrant, shall
reserve and keep available out of its authorized and unissued common stock,
solely for the purpose of providing for the exercise of the rights to purchase
all Warrant Shares granted pursuant to this Warrant, such number of shares of
common stock as shall, from time to time, be sufficient therefor. The Company
covenants that all shares of stock issuable upon exercise of this Warrant, upon
receipt by the Company of the full Exercise Price therefor, shall be validly
issued, fully paid, nonassessable, and free of preemptive rights.
5. The issuance of any Warrant, Warrant Shares or other securities upon
the exercise of this Warrant, and the delivery of certificates or other
instruments representing such Warrant Shares or other securities, except as
otherwise required by law, shall be made without charge to the Holder for any
tax or other charge in respect of such issuance, other than applicable transfer
taxes. Notwithstanding anything contained herein, all applicable transfer taxes
shall be borne by the Holder.
6. The number of Warrant Shares and the Exercise Price shall be subject to
adjustment from time to time as provided in this Section.
6.1 If during the period commencing August 10, 2001, and ending on the
earlier of the date on which this Warrant has been exercised in full or prior to
the Expiration Date, the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company in Common Stock, the
number of Warrant Shares shall be increased by multiplying such number of shares
by a fraction of which the denominator shall be the number of shares of
21
Common Stock outstanding at the close of business on the day immediately
preceding the date of such distribution, and the numerator shall be the sum of
(a) such number of shares and (b) the total number of shares constituting such
dividend or other distribution, such increase to become effective immediately
after the opening of business on the date following such distribution.
6.2 If prior to the Expiration Date, the outstanding shares of Common Stock
shall be subdivided into a greater number of shares of Common Stock, the number
of Warrant Shares at the opening of business on the day following the day upon
which such subdivision or combination becomes effective shall be proportionately
increased, and, conversely, if outstanding shares of Common Stock shall each be
combined into a smaller number of shares of Common Stock, the number of Warrant
Shares at the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately decreased, such increase
or decrease, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such subdivision or
combination becomes effective.
6.3 The reclassification of Common Stock into securities (other than Common
Stock) and/or cash and/or other consideration shall be deemed to involve a
subdivision or combination, as the case may be, of the number of shares of
Common Stock outstanding immediately prior to such reclassification into the
number or amount of securities and/or cash and/or other consideration
outstanding immediately thereafter, and the effective date of such
reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective,"
as the case may be, within the meaning of Section 6.1.
7. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses and, if reasonably requested, an indemnity reasonably
acceptable to the Company, the Company shall execute and deliver to the Holder
thereof a new Warrant of like date, tenor, and denomination.
8. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
9. This Warrant shall be governed by and construed in accordance with the
laws of the State of Delaware, without giving effect to the rules governing the
conflicts of laws.
10. NOTICES. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be
22
in writing and shall be effective (a) upon hand delivery or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
If to the Company: 000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Chief Financial Officer
With a copy to: General Counsel
Tel: (000) 000-0000
Fax: (000) 000-0000
If to Holder: Citigroup Investments Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxx
Any party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other party hereto in accordance
herewith.
11. The parties hereby irrevocably consent to the jurisdiction of the
courts of the State of New York and of any federal court located in such State
in connection with any action or proceeding arising out of or relating to this
Warrant, any document or instrument delivered pursuant to, in connection with,
or simultaneously with this Warrant, or a breach of this Warrant.
IN WITNESS WHEREOF, the undersigned has caused this Warrant to be duly
executed by its officers thereunto duly authorized as of the date and year set
forth below.
Dated: August 10, 2001
ON2 TECHNOLOGIES, INC.
By:
---------------------------------
Name:
Title:
23
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ________________________________________ hereby sells,
assigns, and transfers unto __________________ a Warrant to purchase __________
shares of Common Stock, par value $0.01 per share, of On2 Technologies, Inc.
(the "Company"), together with all right, title, and interest therein, and does
hereby irrevocably constitute and appoint _________ attorney to transfer such
Warrant on the books of the Company, with full power of substitution.
Dated:
--------------------
Signature:
-------------------
Signature Guaranteed:
-----------------------
NOTICE
The signature on the foregoing Assignment must correspond to the name as written
upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
24
To: On2 Technologies, Inc.
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
ELECTION TO EXERCISE
The undersigned hereby exercises its rights to purchase _______ Warrant Shares
covered by the within Warrant and tenders payment herewith [in the amount of
$_________] in accordance with the terms thereof, certifies that it owns this
Warrant free and clear of any and all claims, liens and/or encumbrances and
requests that certificates for such securities be issued in the name of, and
delivered to:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:
--------------------
Name:
---------------------------
(Print)
Address:
------------------------------------------------------------------------
Name:
----------------------------------
(Signature)
25
