EXHIBIT 10.11
SECURITIES PURCHASE AGREEMENT
By and Between
ON2 TECHNOLOGIES, INC.
and
DEEP TALENT INVESTMENTS LIMITED
Dated as of July 21, 2003
TABLE OF CONTENTS
PAGE
1. Purchase and Sale of Units........................................ 1
2. Representations and Warranties of the Investor.................... 1
3. Representations and Warranties of the Company..................... 3
4. Conditions of Investor's Obligations at the Closing............... 6
5. Conditions of the Company's Obligations at the Closing............ 6
6. Covenants of the Investor......................................... 7
7. Covenants of the Company.......................................... 8
8. Indemnity by the Investor......................................... 8
9. Indemnity by the Company.......................................... 9
10. Confidentiality................................................... 9
11. Definitions....................................................... 10
12. Miscellaneous..................................................... 11
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT") is entered into as
of July 21, 2003 by and between ON2 TECHNOLOGIES, INC. (the "COMPANY"), a
Delaware corporation, and Deep Talent Investments Limited (the "INVESTOR"), an
entity formed under the laws of the British Virgin Islands. Certain capitalized
terms used in this Agreement without definition shall have the meanings given
them in Section 11.
In consideration of the mutual promises, representations, warranties and
covenants set forth in this Agreement, the Company and the Investor hereby agree
as follows:
1. Purchase and Sale of Units.
(a) The Company has duly authorized for issue, sale and delivery to
the Investor an aggregate of 1,800,000 shares (the "INVESTOR SHARES") of its
Common Stock, par value $0.01 per share (the "COMMON STOCK"), at a per share
purchase price of U.S. $0.675 (the "PER SHARE PURCHASE Price"). The Company has
further authorized for issue, sale and delivery to the Investor a warrant (the
"WARRANT") to acquire 700,000 shares of Common Stock during the period ending
three years after the date of issuance thereof having an exercise price equal to
the Per Share Purchase Price. The form of the Warrant is attached to this
Agreement as Exhibit A.
(b) The aggregate purchase price (the "AGGREGATE PURCHASE PRICE") to
be paid by the Investor for the Investor Shares and the Warrant is U.S.
$1,215,000.
(c) The closing (the "CLOSING") of the purchase and sale of the
Securities shall take place at the offices of McGuireWoods LLP, ▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, at 10:00 a.m. (New York City time) on
August 8, 2003 or at such earlier time and place as the Company and the Investor
may agree in writing (the "CLOSING DATE"). At the Closing, the Company shall
deliver to the Investor one or more share certificates that represent the
Investor Shares and one or more warrant certificates that represent the Warrant,
in all cases against delivery to the Company by the Investor by bank wire
transfer of the Aggregate Purchase Price by the Investor.
2. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to, the Company as follows:
(a) The Investor is acquiring 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. 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. The Investor understands that its rights with respect to the offer,
sale or other disposition of the Securities are set forth in and governed by the
Investor's Rights Agreement.
(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 the Securities are registered under the
Securities Act and the securities laws of any applicable state or are exempt
from such registrations; (iii) each certificate that represents the Securities
will be endorsed with legends as required by the Investor's' 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 is a corporation duly organized under the laws of
the British Virgin Islands.
(d) The Investor has the requisite corporate power and corporate
authority to enter into and perform its obligations under this Agreement and the
Investor's Rights Agreement, pursuant to their respective terms. The execution
and delivery of this Agreement and the Investor's 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. This 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, and the
Investor's Rights Agreement will be duly executed and delivered by the Investor
at the Closing and will constitute a valid and binding obligation of the
Investor, enforceable against the Investor in accordance with its terms, except
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.
(e) The Investor is able to bear the financial risks associated with
an investment in the Securities and that it has been given full access to such
records of the Company and to the officers of the Company as it has deemed
necessary or appropriate to conduct its due diligence investigation. The
Investor is capable of evaluating the risks and merits of an investment in the
Securities by virtue of its experience as an investor and its knowledge,
experience, and sophistication in financial and business matters and the
Investor is capable of bearing the entire loss of its investment in the
Securities.
(f) The Investor is not a resident in, or incorporated or organized
under the laws of, the United States, and certifies that the Investor (i) is not
a "U.S. person" within the meaning of SEC Rule 902 of Regulation S promulgated
under the Securities Act, and that the Investor is not acquiring the Securities
for the account or benefit of any such U.S. person, (ii) will resell the
Securities only in accordance with the provisions of Regulation S, pursuant to
registration under the Securities Act, or pursuant to an available exemption
from registration, (iii) agrees that any certificates for any Securities issued
to the Investor shall contain a legend to the effect that transfer is prohibited
except in accordance with the provisions of Regulation S, pursuant to
registration under the Securities Act or pursuant to an available exemption from
registration and that hedging transactions involving the Securities may not be
conducted unless in compliance with the Securities Act, and (iv) agrees that the
Company is hereby required to refuse to register any transfer of any Securities
issued to the Investor not made in accordance with the provisions of Regulation
S, pursuant to registration under the Securities Act, or pursuant
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to an available exemption from registration. The Investor will deliver to the
Company a true and complete Form W-9 together with such other documentation as
reasonably requested by the Company in connection with documentation of U.S. tax
matters.
(g) The Investor is not an officer, director or Affiliate of the
Company.
(h) At no time was the Investor presented with or solicited by or
through any leaflet, public promotional meeting, television advertisement or any
other form of general solicitation or advertising.
(i) Other than the consents of any Governmental Authority or Person
that governs the Investor that are set forth on the Investor's Schedule of
Exceptions (as the same is updated and amended for the Closing), which shall be
delivered to the Company at the Closing (the "Investor's Schedule of
Exceptions"), the Investor is not required to obtain any order, consent,
approval or authorization of, or make any declaration or filing with, any
Governmental Authority or other Person (as defined below) in connection with (i)
the negotiation, execution, delivery and performance of this Agreement, the
Warrant or the Investor's Rights Agreement, (ii) the offer, issuance, sale and
delivery to the Investor of the Investor Shares, or (iii) the consummation of
any of the transactions contemplated by this Agreement, the Warrant or the
Investor's Rights Agreement.
(j) All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by the Investor directly without the
intervention of any person on behalf of the Investor in such manner as to give
rise to any valid claim by any person against the Investor, the Company or any
Subsidiary for a finder's fee, brokerage commission or similar payment.
(k) The Investor understands that the representations, warranties,
covenants and acknowledgements set forth in this Section 2 constitute a material
inducement to the Company entering into this Agreement.
3. Representations and Warranties of the Company. As used herein, (i) any
reference to any event, change or effect being "material" with respect to the
Company or any Subsidiary (as defined in this Agreement) means an event, change
or effect which is material in relation to the financial condition, properties,
business, operations, assets or results of operations of the Company and each
Subsidiary, taken as a whole, and (ii) the term "Material Adverse Effect" on the
Company means a material adverse effect on the financial condition, properties,
business, operations, assets, results of operations or prospects of the Company
and its Subsidiaries, taken as a whole. As of the Closing, the Company hereby
represents and warrants to, and covenants with, the Investor, except as set
forth on the Company's Schedule of Exceptions (as the same is updated and
amended for the Closing), which shall be delivered to such Investor at the
Closing (the "Company's Schedule of Exceptions"), which exceptions shall be
deemed to be representations and warranties as if made hereunder, as follows:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of Delaware, has all requisite power and
authority to own, lease and operate its properties and to carry on its
businesses as now being conducted, and is duly
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qualified and in good standing to do business in each jurisdiction in which a
failure to so qualify would have a material adverse effect on the business
condition of the Company or would prevent the Company from performing any of its
obligations under this Agreement. Each of the subsidiaries of the Company (the
"SUBSIDIARIES") is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite power and authority to own, lease and operate its properties and to
carry on its businesses as now being conducted, and is duly qualified and in
good standing to do business in each jurisdiction in which a failure to so
qualify would have a material adverse effect on the business condition of such
subsidiary.
(b) The authorized capital stock of the Company consists of
100,000,000 shares of Common Stock, of which 63,597,125 shares are issued and
outstanding as of June 30, 2003, and 31,292,571 shares are reserved as of such
date for issuance upon the conversion of outstanding convertible securities and
the exercise of outstanding warrants and options, and 20,000,000 shares of
preferred stock, $0.01 par value, and of which 400,000 shares have been issued
and are outstanding as Series A Preferred Stock, par value $0.01 per share, and
a total of 9,520,164 shares have been issued and are outstanding as Series C-IV,
V and VI Preferred Stock, par value $0.01 per share, as of June 30, 2003. All
outstanding shares of the Common Stock are validly issued, fully paid, and
nonassessable and not subject to any preemptive rights, or to any agreement to
which the Company is a party or by which the Company may be bound. Except as set
forth in the Company's consolidated quarterly financial statements as of
December 31, 2002 (the "2002 FINANCIAL STATEMENTS"), including the notes
thereto, and except as set forth on the Company's Schedule of Exceptions, there
are no options, warrants, calls, conversion rights, commitments, agreements,
contracts, understandings, restrictions, arrangements or rights of any character
to which the Company is a party or by which the Company may be bound obligating
the Company to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of the Company, or obligating the Company
to grant, extend or enter into any such option, warrant, call, conversion right,
commitment, agreement, contract, understanding, restriction, arrangement or
right.
(c) The execution, delivery, and performance by the Company of this
Agreement, the Warrant, and the Investor's Right Agreement have been duly
authorized by all necessary corporate action of the Board of Directors of the
Company. The Company has duly and validly executed and delivered this Agreement,
the Warrant, and the Investor's Right Agreement, and this Agreement, the
Warrant, and the Investor's Right Agreement each constitute a valid, binding,
and enforceable obligation of the Company in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles. When issued upon due exercise of
the Warrant and upon payment of the exercise price thereunder as required by the
Warrant, the Warrant Shares will be validly authorized, duly issued and fully
paid and nonassessable shares of the Company.
(d) The Company has made available to the Investor a true, correct,
and complete copy of the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2002, and its Quarterly Report on Form 10-QSB for the quarter
ended March 31, 2003 as filed with SEC (collectively, the "COMPANY SEC
REPORTS"). As of their respective filing dates, the Company SEC Reports (i)
complied as to form in all material respects with the requirements
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of the SEC 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 the light of the circumstances under
which they were made not misleading. The financial statements (including the
notes thereto) included in the Company SEC Reports complied as to form in all
material aspects with the published rules and regulations of the SEC. Since June
16, 1999, the Company has filed all required reports, schedules, forms,
statements and other documents with the SEC as and when any such documents were
required to be filed and no Company SEC Reports were filed after the filing
deadline therefor (after giving effect to all extensions) or otherwise in an
untimely manner.
(e) Neither the Company nor any of its Subsidiaries has violated any
Requirement of Law, which violation would reasonably be expected to have a
Material Adverse Effect, and neither the Company nor any of its Subsidiaries has
received notice of any such violation.
(f) Other than such U.S. federal or state securities filings as may
be necessary, which filings will be timely effected after the relevant Closing,
except for filings required to be made with any Governmental Authority or Person
that governs the Investor, the Company is not required to obtain any order,
consent, approval or authorization of, or make any declaration or filing with,
any Governmental Authority or other Person in connection with (i) the
negotiation, execution, delivery and performance of this Agreement, the Warrant
or the Investor's Rights Agreement, (ii) the offer, issuance, sale and delivery
to the Investor of the Investor Shares, or (iii) the consummation of any of the
transactions contemplated by this Agreement, the Warrant or the Investor's
Rights Agreement.
(g) Except as set forth in the Company's Schedule of Exceptions and
in the Company's SEC filings, there are no agreements in effect between the
Company and any holders or class of holders of securities of the Company
relating to such securities.
(h) Subject to the truth and accuracy of the Investor's
representations set forth in Section 2 of this Agreement, the offer, sale and
issuance of the Securities as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act and will not result in a
violation of the qualification or registration requirements of the applicable
U.S. state securities laws, and neither the Company nor any authorized agent
acting on its behalf will take any action hereafter that would cause the loss of
such exemption.
(i) All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by the Company directly without the
intervention of any person on behalf of the Company in such manner as to give
rise to any valid claim by any person against the Investor, the Company or any
Subsidiary for a finder's fee, brokerage commission or similar payment.
(j) The Company understands that the representations, warranties,
covenants and acknowledgements set forth in this Section 3 constitute a material
inducement to the Investor entering into this Agreement.
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4. Conditions of Investor's Obligations at the Closing. The obligations of
the Investor to the Company are subject to the fulfillment on or before the
Closing of each of the following conditions by the Company:
(a) Representations and Warranties. The representations and
warranties of the Company contained in Section 3 shall be true, in all material
respects, on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date.
(b) Covenants. The Company shall have performed and complied with
all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
(c) Compliance Certificate. The President or any Vice President of
the Company shall deliver to the Investor at the Closing a certificate stating
that the conditions specified in Sections 4(a) and 4(b) have been fulfilled and
stating that there shall have been no change in the financial condition or in
any material agreement of the Company from the date hereof to the Closing Date
which has had or could reasonably be expected to have a Material Adverse Effect.
(d) Qualifications. All authorizations, approvals, or permits, if
any, of any Governmental Authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
(e) Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Investor's counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
(f) Investor's' Rights Agreement. The Company and the Investor shall
have entered into the Investor's' Rights Agreement.
(g) Opinion of Company Counsel. The Investor shall have received
from McGuireWoods LLP, counsel for the Company, an opinion, dated as of the
Closing, in substantially the form attached hereto as Exhibit B.
5. Conditions of the Company's Obligations at the Closing. The obligations
of the Company to the Investor are subject to the fulfillment on or before the
Closing, of each of the following conditions by the Investor:
(a) Representations and Warranties. The representations and
warranties of the Investor contained in Section 2 shall be true, in all material
respects, on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date.
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(b) Qualifications. All authorizations, approvals or permits, if
any, of any Governmental Authority of the British Virgin Islands, of the United
States of America or of any state that are required in connection with the
lawful issuance and sale of the Securities pursuant to this Agreement shall be
duly obtained and effective as of the Closing Date.
(c) Other Closing Documents. The Investor shall have delivered to
the Company at or prior to the Closing such other documents as the Company may
reasonably request in order to enable the Company to determine whether the
conditions to its obligations under this Agreement have been met and otherwise
to carry out the provisions of this Agreement.
(d) Legal Action. There shall not have been instituted or threatened
any legal proceeding relating to, or seeking to prohibit or otherwise challenge
the consummation of, the transactions contemplated by this Agreement or to
obtain substantial damages with respect thereto.
6. Covenants of the Investor. To induce the Company to enter into this
Agreement, the Investor hereby agrees as follows:
(a) At no time will the Investor or its Affiliates acquire
additional shares of the Common Stock such that, after the acquisition thereof,
the sum of the number of shares of Common Stock beneficially owned by the
Investor and its Affiliates would result in beneficial ownership by the Investor
and its Affiliates of more than 5.0% of the then outstanding shares of Common
Stock. For purposes of the immediately preceding sentence, beneficial ownership
shall be determined in accordance with Section 13(d) of the Exchange Act. The
Investor will not form or join with or become a member of a "group" that would
be required to make any filing pursuant to Regulation 13d-5 promulgated under
the Exchange Act.
(b) At no time will the Investor or its Affiliates engage, directly
or indirectly, in short sales of, or other hedging transactions that involve or
relate to, the Common Stock.
(c) At no time will the Investor or its Affiliates engage, directly
or indirectly, in any contest, effort or undertaking to nominate or elect any
directors of the Company, except to the extent set forth in Section 7(a).
(d) The Investor will attend, in person or by proxy, all meetings of
the stockholders of the Company at which directors are to be elected and shall
vote thereat all shares held by it thereat in favor of the election of all
persons nominated by the Company to serve as members of the Company's Board of
Directors; provided that the Company has complied with its obligation to
nominate one person designated by the Investor as provided in Section 7(a).
(e) From and after the Closing, the Investor shall at all times
timely comply with all SEC filings required by any of the provisions of the
Exchange Act, including Form 4 and 5, Schedule 13D and any other form (or
amendment thereto) that reports its beneficial ownership of shares of the
Company.
(f) The Investor agrees that the Company may disclose any of the
information contained in this Agreement, the Warrant and the Investor's Rights
Agreement, including without limitation by way of filing with the SEC of a Form
8-K which may contain counterparts
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of all or certain of the Agreement, the Warrant and the Investor's Rights
Agreement, and hereby grants the Company permission to make any such public
disclosure of such information.
(g) The Investor shall not enter into any agreement or arrangement,
the terms of which would restrictor impair the ability of the Investor to
perform its obligations under this Agreement. The Investor will: (i) use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement and the
agreements related hereto, including the obtaining of any and all permits
required by any Governmental Authority; (ii) execute any documents, instruments
or conveyances of any kind that may be reasonably necessary or advisable to
carry out any of the transactions contemplated hereunder and thereunder; and
(iii) to cooperate with the Company in connection with the foregoing.
7. Covenants of the Company. To induce the Investor to enter into this
Agreement, the Company hereby agrees as follows:
(a) So long as the Investor owns or controls not less than 60% of
the Investor Shares purchased by the Investor at the Closing, the Company will
nominate a person designated by the Investor as a nominee to be elected to the
Company's Board of Directors at each annual meeting or other meeting of the
stockholders of the Company at which directors are to be elected; provided, that
the Investor's nominee shall at the time of nomination be an officer or director
of the Investor.
(b) The Company will make all necessary filings in connection with
the sale of the Securities to the Investor required under any United States laws
and regulations applicable to it, or by any domestic securities exchange or
trading market on which the Company's shares of capital stock are listed or
eligible for trading, and to provide a copy thereof to the Investor promptly
after such filing if so requested by the Investor.
(c) The Company will list the Investor Shares and the Warrant Shares
pursuant to the rules and regulations of the AMEX.
(d) The Company shall not enter into any agreement or arrangement,
the terms of which would restrict or impair the ability of the Company to
perform its obligations under this Agreement, the Warrant or the Investor's
Rights Agreement. The Company will: (i) use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement, the Warrant or the Investor's Rights Agreement,
including the obtaining of any and all permits required by any Governmental
Authority; (ii) execute any documents, instruments or conveyances of any kind
that may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder and thereunder; and (iii) to cooperate with
the Investor in connection with the foregoing.
8. Indemnity by the Investor. The Investor will indemnify and hold
harmless the Company and its officers, directors and agents for any costs,
liabilities or losses caused by any misstatement of material fact by the
Investor with respect to the representations and warranties contained in Section
2 or any other written information furnished to the Company by the Investor
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in connection with the investment contemplated by this Agreement, or a breach of
any covenant or obligation of Investor set forth on this Agreement.
9. Indemnity by the Company. The Company will indemnify and hold harmless
the Investor for any costs, liabilities or losses caused by any misstatement of
material fact by the Company with respect to the representations and warranties
contained in Section 3 or any other written information furnished to the
Investor by the Company in connection with the investment contemplated by this
Agreement, or a breach of any covenant or any obligation of the Company set
forth in this Agreement.
10. Confidentiality.
(a) The Investor shall not divulge or communicate to any person
(other than (i) as required by law or by any regulatory or governmental
authority or (ii) to its officers, employees or advisors on a need-to-know basis
for the purposes of reporting, evaluating, reviewing or assessing the
performance, acquisition, holding, management, divestment of its interest in the
Company or any other purposes substantially similar therewith) or use or exploit
for any purpose whatsoever the trade secrets, patents, intellectual property,
financial information, matters relating to the Company's business and operations
or other confidential and/or proprietary knowledge or information of the Company
which the Investor may receive or obtain as a result of entering into this
Agreement, and the Investor shall use its reasonable endeavors to prevent its
officers, employees or advisors from so doing. This restriction shall apply to
the Investor until three years from the date the Investor ceases to hold any
securities in the Company, but shall not apply to: (a) information or knowledge
which may properly come into the public domain through no fault of the Investor;
or (b) a disclosure for a specific purpose which is approved by resolution of
the Board of Directors prior to such disclosure being made (which approval shall
not be unreasonably withheld).
(b) Notwithstanding the foregoing, Section 10(a) of this Agreement
shall not apply to: (a) information which the Investor learns from a third party
having the right to make the disclosure, provided the Investor complies with any
restrictions imposed by the third party; (b) information which is in the
Investor's possession prior to the time of disclosure by the Company and not
acquired by the Investor under a confidentiality obligation; (c) information
which the Investor is required to disclose by law or a governmental or
regulatory authority (which, for the purposes of this Agreement, shall be deemed
to include disclosure by an Investor of the nature of the Investor's investment
in filings and submissions with the SEC and the securities regulatory agencies
of other applicable jurisdictions); or (d) information which the Investor is
required to disclose by court order or other legal process. With respect to a
disclosure required by law, any governmental or regulatory authority or pursuant
to a court order or other legal process, prior to making such disclosure, the
Investor shall (i) use all reasonable efforts to limit the scope of such
disclosure and to request and pursue confidential treatment of such disclosure
to the extent available and (ii) unless prohibited or restricted by law, a
governmental or regulatory authority or pursuant to a court order or other legal
process, notify the Company of the pending disclosure as soon as practicable so
that the Company may seek appropriate redress.
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11. Definitions. As used in this Agreement, the following terms shall have
the following respective meanings:
(a) "AFFILIATE" has the meaning given it by Rule 405 of the Rules
and Regulations promulgated under the Securities Act.
(b) "CLOSING DATE" means the date of the Closing.
(c) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time.
(d) "GOVERNMENTAL AUTHORITY" means the respective governments of the
United States of America and the British Virgin Islands, or any province,
district, state, county or parish, city, locality or other political subdivision
of any thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or capital
ownership or otherwise, by any of the foregoing.
(e) "INVESTOR'S RIGHTS AGREEMENT" means the Investor's Rights
Agreement, to be dated the Closing Date, between the Investor and the Company,
substantially in the form of Exhibit C.
(f) "PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
(g) "REQUIREMENT OF LAW" means, with respect to the Company or any
Subsidiary, its articles or certificate of incorporation, formation or
organization, partnership or operating agreements and bylaws or other
organizational or governing documents, and any law, treaty, rule, regulation,
right, privilege, qualification, license or franchise or determination of an
arbitrator or a court or other Governmental Authority (as defined below), in
each case applicable to or binding upon the Company or any of its Subsidiaries
or any of its or their property or to which the Company or any Subsidiary or any
of its or their property is subject or pertaining to any or all the transactions
contemplated or referred to herein.
(h) "SEC" means the Securities and Exchange Commission.
(i) "SECURITIES" means the Investor Shares, the Warrant and the
Warrant Shares.
(j) "SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time.
(k) "WARRANT SHARES" means the shares of Common Stock issuable upon
the exercise of the Warrant.
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12. Miscellaneous.
(a) Expenses. Each party will bear its own expenses in respect of the
transactions contemplated by this Agreement, whether or not the Closing occurs.
(b) Notices. Any notice or other communication required or permitted to
be delivered under this Agreement shall be in writing and shall be deemed
effectively given: (i) upon personal delivery to the party to be notified; (ii)
when sent by confirmed telex or facsimile if sent during normal business hours
of the recipient, if not, then on the next business day; (iii) seven (7) days
after having been sent by registered or certified air mail, return receipt
requested, postage prepaid; or (iv) three (3) days after deposit with an
internationally recognized express courier, specifying highest priority
delivery, with written verification of receipt, to the address or facsimile
number set forth beneath the name of each party on the signature page of this
Agreement (or to such other address or facsimile number as such party may
designate by ten (10) days advance written notice to the other party hereto).
Each person making a communication hereunder by facsimile shall promptly confirm
by telephone to the person to whom such communication was addressed each
communication made by it by facsimile pursuant hereto but the absence of such
confirmation shall not affect the validity of any such communication.
(c) Waiver. No waiver of any provision of this Agreement will be
binding unless it is in writing. No indulgence or forbearance by a party will
constitute a waiver of the other party's right to insist on performance in full
and in a timely manner of all covenants in this Agreement. Waiver of any
provision will not be deemed to waive the same provision thereafter or any other
provision of this Agreement at any time.
(d) Amendment. This Agreement may be amended only by written agreement
executed by the parties.
(e) Assignability. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any
rights, duties or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other party hereto.
(f) Severability. If any provision or part of any provision contained
in this Agreement is found by a court of competent jurisdiction to be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions or portions thereof, will not be in
any way affected or impaired thereby.
(g) Execution by Counterparts and Facsimile. This Agreement, and any
amendment, supplement, restatement or termination of any provision, may be
executed and delivered in counterparts by facsimile.
(h) Arbitration, Dispute Resolution and Choice of Law. This Agreement
shall be interpreted, construed, and enforced in all respects in accordance with
the laws of the State of New York. Any dispute arising out of or in connection
with this Agreement, including any question regarding its existence, validity or
termination, shall be referred to and finally resolved by arbitration under the
London Court of International Arbitration Rules, which Rules are deemed to be
incorporated by reference into this clause. The number of arbitrators shall be
one.
-11-
The seat, or legal place, of arbitration shall be London, UK. All papers,
documents, evidence (whether written or oral) and other information and
materials filed with or presented to the arbitrators will be in the English
language and will constitute confidential information, and neither the parties
nor the arbitrators will disclose any such information or materials except as
necessary in connection with the arbitration or as required by applicable law.
Any demand for arbitration, requests for discovery and other notices in
connection with the arbitration may be served in the English language in
accordance with the notice provisions of this Agreement, and each party waives
any right to any other form of notice, other means of delivery or translation
into any other language. The parties will be entitled to discover all
information and materials reasonably necessary for a full understanding of any
issues reasonably raised in the arbitration. They may use all methods of
discovery permitted under the U.S. federal rules as applied in the Southern
District of New York, including, without limitation, depositions, requests for
admissions, interrogatories and requests for production of documents. The time
period for compliance will be set by the arbitrators. The arbitrators will have
the authority to award any remedy or relief that a U.S. federal court could
order or grant, including, without limitation, monetary damages, injunctive or
other equitable relief, and sanctions for abuse or frustration of the
arbitration process, provided that the arbitrators shall not have the authority
to award punitive damages. The arbitrators will issue a written explanation of
the reasons for the award, and a full statement of the facts found and rules of
law applied in reaching their decision. Notwithstanding the foregoing, each
party will have the right to a preliminary injunction or other interim relief,
pending a final award by the arbitrators, in any court of competent jurisdiction
in connection with any arbitrable claim or controversy, but only to the extent
that such interim relief is intended to preserve the adequacy or sufficiency of
any final award granted by the arbitrators.
(i) Binding Effect. Except as herein otherwise expressly stipulated to
the contrary, this Agreement shall be binding upon and inure to the benefit of
the parties signatory hereto, and their respective successors and permitted
assigns.
(j) Entire Agreement. This Agreement constitutes the entire agreement
between the parties pertaining to the specific subject matter herein and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, express or implied.
-12-
This Securities Purchase Agreement has been executed as of the date and
year first written above.
ON2 TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
Address: ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ OF AMERICA
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ and ▇▇▇-▇▇▇-▇▇▇▇
INVESTOR
DEEP TALENT INVESTMENTS LIMITED
By: /s/ Bai Nian En
------------------
Name: Bai Nian En
Title: Director
Address: Shanghai Industrial Investment ▇▇▇▇
▇▇ ▇▇▇, ▇/▇
▇▇-▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇
Facsimile: (▇▇▇)▇▇▇▇▇▇▇▇
-13-
EXHIBIT A
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES
ACT"), NOR UNDER ANY STATE SECURITIES LAW AND SUCH SECURITIES MAY NOT BE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
THE SECURITIES ACT.
THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON UNLESS
REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
THE SALE, ASSIGNMENT, TRANSFER, PLEDGE AND OTHER DISPOSITION OF THIS WARRANT AND
THE SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT ARE RESTRICTED BY THE
INVESTOR'S RIGHTS AGREEMENT (THE "INVESTOR'S RIGHTS AGREEMENT"), DATED AUGUST
__, 2003 (THE "INVESTOR'S RIGHTS AGREEMENT"). THE INVESTOR'S 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 700,000 SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE
No.W- __ August __, 2003
THIS CERTIFIES that, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, DEEP TALENT
INVESTMENTS LIMITED (the "Holder"), is entitled to subscribe for and
purchase from ON2 TECHNOLOGIES, INC., a
14
Delaware corporation (the "Company"), upon the terms and conditions set
forth herein, at any time or from time to time, during the period
commencing on the date set forth above and expiring at 5:00 p.m. on
August __, 2006 (the "Exercise Period"), seven hundred thousand
(700,000) shares of the Company's Common Stock, par value $.01 per
share (the "Common Stock"), at an exercise price (the "Exercise Price")
per share equal to U.S. $0.675. 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 to be issued upon exercise of this
Warrant (the "Warrant Shares") may be adjusted from time to time as hereinafter
set forth in Section 6.
1. This Warrant may be exercised during the Exercise Period, as to the
whole or any lesser number of whole Warrant Shares, by transmission by telecopy
of the Election to Exercise, followed within three business days by the
surrender of this Warrant (with the Election to Exercise attached hereto duly
executed) to the Company at its office at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ 12065, United States of America, 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
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 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
15
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 Securities Act and the rules and
regulations thereunder or any applicable state securities law.
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 shall be subject to adjustment from
time to time as provided in this Section.
6.1 If, during the period commencing on the date of issuance of this
Warrant and ending on the earlier of the last day of the Exercise
Period and the date on which this Warrant has been exercised in full,
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 remaining to be issued hereunder shall be increased by
multiplying such number of shares by a fraction of which the
denominator shall be the number of shares of 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
16
distribution, such increase to become effective immediately after the
opening of business on the date following such distribution.
6.2 If, during the period commencing on the date of issuance of this
Warrant and ending on the earlier of the last day of the Exercise
Period and the date on which this Warrant has been exercised in full,
the outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the number of Warrant Shares
remaining to be issued hereunder 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
remaining to be issued hereunder 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 6.2.
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 New York, without giving effect to the rules governing the
conflicts of laws.
10. 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
17
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 officer thereunto duly authorized as of the date and year set
forth below.
Dated: August __, 2003
ON2 TECHNOLOGIES, INC.
By:
----------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
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 $.01 per share, of On2 Technologies, Inc. (the
"Company"), a Delaware corporation, 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.
To: On2 Technologies, Inc.
ELECTION TO EXERCISE
The undersigned hereby exercises his or 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 he 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:
------------------------------------------------------------------------
(Signature)
EXHIBIT B
Opinion of McGuireWoods LLP
August ___, 2003
Investor
RE: SECURITIES PURCHASE AGREEMENT
Ladies and Gentlemen:
We have acted as special counsel to On2 Technologies, Inc. ("On2"), a
Delaware corporation, in connection with the negotiation, execution and delivery
of the Securities Purchase Agreement (collectively, with the schedules and
exhibits annexed thereto, the "Securities Purchase Agreement"), dated July 22,
2003, between On2 and [Investor] (the "Investor"), together with:
a) the warrant (the "Warrant") to purchase shares of the Common Stock,
dated July 22, 2003; and
b) the Investor's Rights Agreement (the "Investor's Rights Agreement"),
dated July 22, 2003, between On2 and the Investor.
This opinion is rendered to you in compliance with Section 4(g) of the
Securities Purchase Agreement. The Securities Purchase Agreement, the Warrant
and the Investor's Rights Agreement are collectively referred to in this opinion
as the "Transaction Agreements." All other capitalized terms used herein and not
otherwise defined shall have the respective meanings ascribed to them in the
Securities Purchase Agreement.
In connection with this opinion, we have examined copies of the
Transaction Agreements and in addition, we have examined executed originals or
copies, certified or otherwise identified to our satisfaction as being true
copies, of: (a) the certificate of incorporation and by-laws of On2 as in effect
as of the date hereof; (b) certain resolutions adopted by the board of directors
of On2 on or prior to the date hereof relative to the transactions contemplated
by the Securities Purchase Agreement; and (c) such other documents as we deemed
necessary or appropriate as a basis for the opinions set forth below.
As to various questions of fact material to our opinion, we have relied
upon the representations and warranties made in the Transaction Agreements by
the parties thereto other than On2, and upon the certificates of On2 and of such
government officials as we have deemed necessary, and we have made such other
inquires as we have deemed appropriate.
In rendering our opinion we have assumed, without investigation, the
genuineness of all signatures of, and the incumbency, authority and legal right
and power under all applicable laws and regulations of, the officers and other
persons signing the Transaction Agreements as or on behalf of the parties
thereto other than On2, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to us
as conformed, certified or photostatic copies and the authenticity of the
originals of such documents. We have also assumed the valid authorization,
execution and delivery by all parties other than On2 of the Transaction
Agreements to which they are a party.
We do not purport to be experts in, or to express any opinion herein
concerning, the law of any jurisdiction other than the laws of the State of New
York, the General Corporation Law of the State of Delaware (the "DGCL") and the
federal law of the United States of America. This opinion is limited to the
matters stated herein, and no opinion is implied or may be inferred beyond the
matters expressly stated herein.
The opinions hereinafter expressed are subject to the following
additional limitations, qualifications and exceptions:
(a) the enforceability of the Transaction Agreements may be limited by
(i) applicable bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting the rights of creditors generally and (ii) the
discretion of the court before which any proceeding therefor may be brought;
(b) the enforceability of the Transaction Agreements may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or law); and
(c) public policy considerations may limit the right of On2 to obtain
indemnification and the remedy of specific performance.
Based on and subject to the foregoing, and subject to the limitations,
exceptions, assumptions and qualifications set forth herein, we are of the
opinion that:
On2 is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
own its assets and property and to carry on its business as currently conducted.
On2 is duly qualified to do business and is in good standing as a foreign
corporation in each state or other jurisdiction where qualification as a foreign
corporation is required, other than those jurisdictions in which the failure to
so qualify would not have a Material Adverse Effect.
On2 has full corporate power and authority to enter into, execute, deliver and
perform the Transaction Agreements, to carry out its obligations thereunder and
to consummate the transactions contemplated thereby. On2 has taken all corporate
action required to be taken by law, by its certificate of incorporation and by
its by-laws to authorize the execution, delivery and performance of the
Transaction Agreements, and to consummate the transactions contemplated thereby,
including the authorization and issuance by On2 of (i) the Common Stock to be
issued pursuant to the Securities Purchase Agreement, and (ii) the shares of On2
Common Stock issuable upon exercise of the Warrant (collectively, the
"Transaction Securities").
On2 has duly executed and delivered the Transaction Agreements, and each of the
Transaction Agreements constitutes a valid and binding obligation of On2
enforceable against On2 in accordance with its terms.
None of the execution and delivery of the Transaction Agreements, the
performance of their respective terms and the consummation of the transactions
contemplated thereunder and the issuance by On2 of the Transaction Securities
(i) conflict with or result in a violation of the certificate of incorporation
or by-laws of On2, (ii) violate or conflict with any federal or laws or
regulations which are applicable to On2 and its business as, to our knowledge,
it is currently conducted, (iii) to our knowledge, violate or contravene any
judgment, decree, injunction or order of any federal or state court, or any
arbitrator or governmental agency or authority, having jurisdiction over On2 or
its properties or by which On2 may be bound, or (iv) to our knowledge,
constitute a material breach of, or result in a material default under, any term
or provision of any agreement, instrument, order, writ, judgment or decree known
to us to which On2 is a party or is subject.
No consents, approvals or authorizations or filing with any Governmental
Authority of the State of Delaware or the United States are required or
necessary on the part of On2 in connection with the execution or delivery by On2
of the Transaction Agreements and the consummation by On2 of the transactions
contemplated thereunder.
To our knowledge, there are no actions pending or threatened against or
affecting On2, or any properties or rights of On2, before any court, arbitrator,
or administrative or governmental body, which question or challenge the validity
of any of the Transaction Agreements or any action taken or proposed to be taken
by On2 pursuant to the Transaction Agreements and/or the transactions
contemplated thereby.
Upon issuance and receipt of payment therefor, the Transaction Securities are,
and will be, validly issued, fully paid and nonassessable shares of On2's
capital stock.
As used in this opinion, the phrases "to our knowledge" or "known to
us" mean to the best of our actual knowledge, which knowledge is based solely on
inquiry within our firm and review of the representations and warranties in the
Securities Purchase Agreement and the other documents delivered or to be
delivered in connection therewith, without other inquiry or investigation.
This opinion may be relied upon by you only in connection with the
Transaction Agreements and the transactions contemplated therein and may not be
used or relied upon by you or any other person for any other purpose whatsoever
without, in each instance, our prior written consent.
Very truly yours,
McGuireWoods LLP
EXHIBIT C
INVESTOR'S RIGHTS AGREEMENT
BY AND AMONG
ON2 TECHNOLOGIES, INC.
AND
DEEP TALENT INVESTMENTS LIMITED
Dated as of July __, 2003
TABLE OF CONTENTS
PAGE
1. Restrictions on Transferability ......................................... 1
2. Restrictive Legend ...................................................... 1
2.1 Shares of Stock ................................................... 1
2.2 Warrant Certificate ............................................... 2
2.3 Stop Transfer Instructions ........................................ 2
3. Notice and Other Requirements of Transfer ............................... 2
4. Demand Registration ..................................................... 3
4.1 Notice from Holders ............................................... 3
4.2 Registered Public Offering Involving An Underwriter ............... 3
4.3 Limitation On Holder's Right ...................................... 4
4.4 Obligations of the Company ........................................ 5
5. Nonpublic Information ................................................... 7
6. Expenses of Registration ................................................ 7
7. Indemnification ......................................................... 7
7.1 Indemnity by the Company .......................................... 7
7.2 Indemnity by the Holder ........................................... 8
7.3 Notice by the Indemnified Party ................................... 8
7.4 Underwriting Agreement ............................................ 8
7.5 Contribution ...................................................... 9
7.6 Survival of Indemnity ............................................. 9
8. Lockup Agreement ........................................................ 9
9. Holder's Cooperation .................................................... 9
9.1 Information Regarding Holder ...................................... 9
9.2 Obligations of the Holder ......................................... 9
10. Rule 144 ................................................................ 10
11. Definitions ............................................................. 10
12. Miscellaneous ........................................................... 11
12.1 Amendments ....................................................... 11
12.2 Execution by Counterparts and Facsimile .......................... 12
12.3 Notices, Etc ..................................................... 12
12.4 Severability ..................................................... 13
-i-
TABLE OF CONTENTS
(Continued)
12.5 Waiver................................................................. 13
12.6 Entire Agreement....................................................... 13
12.7 Governing Law.......................................................... 13
12.8 Arbitration, Dispute Resolution and Choice of Law...................... 13
-ii-
INVESTOR'S RIGHTS AGREEMENT
This Investor's Rights Agreement (this "AGREEMENT") is made July ___,
2003, by and among ON2 TECHNOLOGIES, INC. (the "COMPANY"), a Delaware
corporation having its principal address at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, and Deep Talent Investments Limited, an entity formed
under the laws of the British Virgin Islands. Certain capitalized terms used in
this Agreement without definition shall have the meanings given them in Section
11.
PREAMBLE
The Holder has acquired 1,800,000 shares (the "INVESTOR SHARES") of the
Company's Common Stock, par value $0.01 per share (the "COMMON STOCK"), and a
Warrant (the "WARRANT") to acquire 700,000 shares of Common Stock, pursuant to
the Securities Purchase Agreement (the "SECURITIES PURCHASE AGREEMENT"), dated
as of July 21, 2003, between the Company and the Holder.
Pursuant to the Securities Purchase Agreement, the Company and the Holder
have entered into this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth herein, the Company and the Holder agree as follows:
1.Restrictions on Transferability. None of the Restricted Securities nor
the Warrant may be sold, assigned, transferred, pledged or otherwise disposed
of, whether or not for value, except in compliance with the terms and conditions
of this Agreement. At such time as the Restricted Securities cease to be
Restricted Securities under the terms of this Agreement, the provisions of this
Agreement shall no longer apply to the shares of the Common Stock that
theretofore were Restricted Securities.
2. Restrictive Legend.
2.1 Shares of Stock. Each certificate representing Restricted
Securities that are shares of Common Stock shall be stamped or otherwise
imprinted with a legend substantially in the following form (in addition to any
legend required under applicable state securities laws or otherwise):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "SECURITIES ACT"). THESE SHARES MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT.
THE SALE, ASSIGNMENT, TRANSFER, PLEDGE AND OTHER DISPOSITION OF THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE
INVESTOR'S RIGHTS AGREEMENT (THE "INVESTOR'S RIGHTS AGREEMENT"),
DATED JULY ____, 2003, BETWEEN THE COMPANY AND THE SECURITYHOLDER
NAMED THEREIN. A COPY OF THE INVESTOR'S 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.
2.2 Warrant Certificate. The certificate representing the Warrant shall
bear a legend substantially in the following form (in addition to any legend
required under applicable state securities laws or otherwise):
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), NOR UNDER ANY STATE SECURITIES LAW AND
SUCH SECURITIES MAY NOT BE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT.
THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON
UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
THE SALE, ASSIGNMENT, TRANSFER, PLEDGE AND OTHER DISPOSITION OF THIS
WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE OF THIS
WARRANT ARE RESTRICTED BY THE INVESTOR'S RIGHTS AGREEMENT, DATED
JULY ___, 2003 (THE "INVESTOR'S RIGHTS AGREEMENT"). THE INVESTOR'S
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.
2.3 Stop Transfer Instructions. The Holder consents to the Company's
making a notation on its records and giving instructions to any transfer agent
of the Restricted Securities in order to prevent a transfer that is prohibited
by this Agreement.
3. Notice and Other Requirements of Transfer. The Holder will be permitted
to sell, assign, transfer, pledge or otherwise dispose of any Restricted
Securities or the Warrant if and only if:
(a) the intended sale, assignment, transfer, pledge or other
disposition is permitted by the other provisions of this Agreement; or
(b) there is in effect a registration statement under the Securities
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(c) (i) the proposed sale, assignment, transfer, pledge or other
disposition is to an Affiliate of the Holder, and (ii) the Affiliate transferee,
as a condition to the effectiveness of such sale, assignment, transfer, pledge
or other disposition, has executed a counterpart of this Agreement expressly
assuming the obligations of the Holder under this Agreement; or
(d) during the first year after the date of this Agreement, the
intended sale, assignment, transfer, pledge or other disposition is to a
non-U.S. person, and as a condition to the effectiveness of such disposition,
such non-U.S. person has executed a counterpart of this Agreement expressly
assuming the obligations of the Holder under this Agreement.
4. Demand Registration.
4.1 Notice from Holders. If, at any time after the date that is ninety
(90) days after the date of this Agreement, the Company receives a written
request from all of the Holders of all of the Restricted Securities that the
Company file a registration statement under the Act or other Offering Document
covering the registration of all, but not less all, of the Restricted
Securities, then the Company will promptly, and in no event later than fifteen
(15) days of the receipt thereof, Subject to the limitations of Sections 4.2 and
4.3, will use its best efforts to, as expeditiously as possible, take such
actions to register with, or otherwise seek such approvals of, the SEC or any
Governmental Authority as are necessary or appropriate in order to permit the
public offer and sale of the Restricted Securities within 180 days after the
receipt of such notice.
4.2 Registered Public Offering Involving An Underwriter. If the Holders
intend to distribute the Restricted Securities covered by their request by means
of an underwriting, the Holders will notify the Company of such desire and prior
to such distribution the Company and the Holders will mutually agree in writing
to the rules and procedures that shall govern such distribution.
4.3 Limitation On Holder's Right. In addition, the Company will not be
required to effect a registration pursuant to Section 4.1:
(a) after the Company has effected one (1) registration pursuant to
this Section 4 and such registrations have been declared or ordered effective;
(b) if the Company furnishes to Holders requesting a registration
pursuant to Section 4.1, a certificate signed by the Company's Chief Executive
Officer and Chairman of the Board stating that the Board of Directors of the
Company has determined that it would be
seriously detrimental to the Company and its stockholders for such registration
to be effected at such time, in which event the Company will have the right to
defer such filing for a period of not more than one hundred twenty (120) days
after receipt of the notice of the Holder or Holders given pursuant to Section
4.1; provided, that such right to delay a request pursuant to this Section will
be exercised by the Company not more than once in any twelve (12)-month period;
and provided further, that the Company will give the Holders 15 days notice
prior to such deferral.
(c) in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, unless the Company is already subject to service in such
jurisdiction and except as may be required under the Securities Act.
4.4 Obligations of the Company. Whenever required under this Section 4
to effect the registration of any Restricted Security, the Company will, as
expeditiously as possible:
(a) prepare and file with the Commission (or any other equivalent
governmental authority in a jurisdiction outside of the United States
responsible for the regulation and oversight of such jurisdiction's securities
laws (a "Governmental Authority")) Offering Documents with respect to such
Restricted Securities and use its best efforts to cause such Offering Documents
to become effective as expeditiously as possible, and, upon the request of the
Holders, keep such Offering Documents effective for a period of up to one
hundred twenty (120) days in the case of registration under Section 4 or, if
earlier, until the distribution contemplated in the Offering Document has been
completed or until all Restricted Securities covered by such Offering Document
can be sold in any ninety (90) day period without registration in compliance
with Rule 144 of the Securities Act; provided, that, such one hundred twenty
(120)-day period will be extended for a period of time equal to the period any
Holder refrains from selling any securities included in such registration at the
request of an underwriter of the Common Stock (or other securities) of the
Company;
(b) notify each Holder whose securities are to be registered of the
effectiveness of the Offering Documents and the effectiveness or final approval
of any post-effective amendment to any Offering Document; and prepare and file
with the Commission or a Governmental Authority such amendments and supplements
to such Offering Documents as may be necessary to comply with the provisions of
the Securities Act and any other applicable laws with respect to the disposition
of all Restricted Security covered by such Offering Documents;
(c) furnish to each Holder (i) a draft copy of the Offering Documents,
and (ii) such numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act and other
applicable laws, and such other documents as it may reasonably request in order
to facilitate the disposition of Restricted Security owned by it;
(d) use its best efforts to (i) register and qualify the securities
covered by such Offering Documents under such other securities or "blue sky"
laws of such states or jurisdictions as may be reasonably requested by the
Holders, but in any event in no more than five (5) states and jurisdictions, and
do all other acts and things that may be necessary or desirable to enable the
Holders to consummate their public sale or other disposition of the Restricted
Security in such states or jurisdictions; provided, that the Company will not be
required in connection therewith
or as a condition thereto to qualify to do business, where not otherwise
required, or to file a general consent to service of process in any such states
or jurisdictions, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act and (ii) cause
such Restricted Security to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the disposition of such
Restricted Security;
(e) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering;
(f) notify each Holder of Restricted Security covered by such Offering
Document, at any time when a prospectus relating thereto is required to be
delivered, of (i) the issuance of any stop order or equivalent order by the
Commission or any Governmental Authority suspending the effectiveness of such
Offering Document or the initiation of any proceedings by any person to such
effect (a "Stop Order"), and use commercially reasonable efforts to obtain the
release of such suspension as soon as reasonably practicable, (ii) any
communication from the Commission or any Governmental Authority threatening the
issuance of a Stop Order and (iii) the happening of any event as a result of
which the Offering Documents, as then in effect, include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading and promptly furnish
to each Holder one or more copies of each supplement or amendment of such
Offering Documents as may be necessary to correct such misstatement or omission;
(g) cause all such Restricted Security registered pursuant hereunder to
be listed on each securities exchange on which similar securities issued by the
Company are then listed;
(h) provide a transfer agent and registrar for all Restricted Security
registered pursuant hereunder and a CUSIP number for all such Restricted
Security, in each case not later than the effective date of such registration
and use its best efforts to cause the transfer agent to remove restrictive
legends on the securities covered by such registration; and
(i) use its best efforts to furnish, at the request of any Holder
requesting registration of Restricted Security pursuant to this Section, on the
date that such Restricted Security are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 4, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the Offering Document with respect to
such securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters and to the Holders
requesting registration of Restricted Security, and (ii) a "comfort" letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters and to the Holders requesting
registration of Restricted Security.
5. Nonpublic Information. Notwithstanding any other provision of this
Agreement, the Company's obligation to file a registration statement under
Section 4.1, or to cause such registration statement to become and remain
effective, shall be suspended for a period not to exceed 90 days (and for
periods not exceeding, in the aggregate, 180 days in any 12-month period) if
there exists at the time material non-public information relating to the Company
which, in the reasonable opinion of the Company, should not be disclosed.
6. Expenses of Registration. The Company will bear all reasonable expenses
incurred in connection with registrations pursuant to Section 4, including,
without limitation, all registration, filing and qualification fees, printing
expenses, fees and disbursements of counsel for the Company and independent
accountants for the Company and expenses of any special audits of the Company's
financial statements incidental to or required by such registration, fees of the
National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars' fees, but the Company will not pay underwriters'
fees, discounts or commissions relating to the Restricted Securities or any fees
or expenses of legal counsel for any of the Holders.
7. Indemnification.
7.1 Indemnity by the Company. If the Company registers any Restricted
Securities pursuant to Section 4, the Company will indemnify and hold harmless
each Holder, and each other person, if any, who controls each Holder, against
any losses, claims, damages or liabilities, joint or several, to which each
Holder, or such controlling persons may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement (or
alleged untrue statement) of any material fact contained in any registration
statement under which such Restricted Securities were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act or any state securities law applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, and will reimburse each Holder, its
officers, directors and partners, and each person controlling each Holder, for
any reasonable legal and any other expenses incurred in connection with
investigating, defending or settling any such claim, loss, damage, liability or
action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage or liability arises out of or is based
on any untrue statement or omission based upon written information furnished to
the Company by an instrument duly executed by each Holder specifically for use
therein.
7.2 Indemnity by the Holder. Each Holder will, if Restricted Securities
held by or issuable to each Holder are included in the securities as to which
such registration is being effected, indemnify and hold harmless the Company,
each of its directors, each officer who signs the registration statement, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company and each underwriter within the
meaning of the Securities Act, against all claims, losses, expenses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document made in writing by such Holder,
or any omission (or alleged omission) by such Holder to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company, such directors, officers,
partners, persons or underwriters for any reasonable legal or any other expenses
incurred by them in connection with investigating, defending or settling any
such claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder specifically for use therein; provided, that the
total amount for which such Holder, shall be liable under this Section 7.2 shall
not in any event exceed the proceeds (net of underwriting discounts and
commissions) received by such Holder from the sale of Restricted Securities sold
by such Holder in such registration.
7.3 Notice by the Indemnified Party. Each party entitled to
indemnification under this Section 7 (the "INDEMNIFIED PARTY") shall give notice
to the party required to provide indemnification (the "INDEMNIFYING PARTY")
promptly after such Indemnified Party has actual knowledge of any claims as to
which indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim or any litigation resulting therefrom; provided,
that counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose approval
shall not be unreasonably withheld), and the Indemnified Party may participate
in such defense at such party's expense, and provided further that the failure
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations hereunder, unless such failure resulted in
actual detriment to the Indemnifying Party. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect of such claim or litigation.
7.4 Underwriting Agreement. Notwithstanding the foregoing, to the
extent that the provisions on indemnification contained in the underwriting
agreements entered into among the Holders, the Company and the underwriters in
connection with the underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall be
controlling as to the Restricted Securities included in the public offering;
provided, that if, as a result of this Section 7.4, the Holder, and any person
controlling the Holder, are held liable for an amount which exceeds the
aggregate proceeds received by the Holder from the sale of Restricted Securities
included in a registration, as provided in Section 7.2, pursuant to such
underwriting agreement (the "EXCESS LIABILITY"), the Company shall reimburse any
such Holder for such Excess Liability.
7.5 Contribution. If the indemnification provided for in this Section
is held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other
hand in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the Indemnifying Party and the Indemnified
Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the amount that the Holder shall be obligated to
contribute pursuant to this Section 7.5 shall be limited to an amount equal to
the proceeds to the Holder of the Restricted Securities sold pursuant to the
registration statement which gives rise to such obligation to contribute (less
the aggregate amount of any damages which the Holder has otherwise been required
to pay in respect of such loss, claim, damage, liability or action or any
substantially similar loss, claim, damage, liability or action arising from the
sale of such Restricted Securities).
7.6 Survival of Indemnity. The indemnification and contribution
provided by this Section shall be a continuing right to indemnification and
shall survive the registration and sale of any securities by any person entitled
to indemnification under this Agreement.
8. Lockup Agreement. In the event that the Holders desire to engage in an
underwritten offering, the Holder will agree to reasonable and customary lockup
provisions prior to the commencement of such offering.
9. Holder's Cooperation.
9.1 Information Regarding Holder. It is a condition precedent to the
obligations of the Company to take any action pursuant to Section 4 with respect
to the Restricted Securities of any Holder that such Holder furnish to the
Company such information regarding itself, the Restricted Security held by it,
and the intended method of disposition of such securities as is reasonably
requested by the Company in order to comply with applicable law or by the
managing underwriter, if any, in order to satisfy the requirements applicable to
such registration of such Holder's Restricted Securities.
9.2 Obligations of the Holder. Each Holder will not (until further
notice by the Company) effect sales thereof (or deliver a prospectus to any
purchaser) after receipt of telegraphic or written notice from the Company to
suspend sales to permit the Company to correct or update a registration
statement or prospectus. At the end of the period during which the Company is
obligated to keep any registration statement filed under Section 4 current and
effective as required by applicable law, each Holder shall discontinue sales of
shares pursuant to such registration statement upon receipt of notice from the
Company of its intention to remove from registration the shares of Restricted
Securities covered by such registration statement that remain unsold, and each
Holder shall notify the Company of the number of such shares registered that
remain unsold immediately upon receipt of such notice from the Company.
10. Rule 144. With a view to making available to the Holder the benefits
of certain rules and regulations of the Commission which may permit the sale of
the Restricted Securities to the public without registration, the Company agrees
to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144; and
(b) use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Exchange Securities Act.
11. Definitions. As used in this Agreement, the following terms shall have
the following meanings:
(a) "AFFILIATE" shall have the meaning given to it under Rule 405 of
the Securities Act.
(b) "COMMISSION" shall mean the U. S. Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act.
(c) "COMMON STOCK" shall mean shares of the Company's Common Stock, par
value $0.01 per share.
(d) "EXCHANGE ACT" shall mean the Securities Exchange Securities Act of
1934, as amended, or any similar United States statute and the rules and
regulations thereunder, all as the same shall be in effect at the time.
(e) "HOLDER" shall mean the person that has executed this Agreement
(other than the Company) and any other person who holds Restricted Securities
and who has assumed the obligations of the Holder under this Agreement pursuant
to Section 3(c).
(f) "OFFERING DOCUMENTS" means any application, offering memoranda,
prospectuses, registration statements or other documents necessary or
appropriate in order to effect any offer or sale of Restricted Security in the
manner set forth herein.
(g) "REGISTER," "registered" and "registration" shall refer to (i) a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement, and compliance with applicable
state securities laws of such states in which any of the Holders notifies the
Company of his intention to offer Restricted Securities, or (ii) in the case of
an offer and sale outside of the United States, the preparation and filing of
the relevant Offering Documents with any applicable Governmental Authority and
the declaration or ordering of effectiveness of such Offering Documents.
(h) "RESTRICTED SECURITIES" shall mean the Investor Shares and the
shares of Common Stock issuable upon due exercise of the Warrant, in each case
only to the extent the same have not been sold to the public. As to any
particular Restricted Securities, such securities shall cease to be Restricted
Securities when (i) a registration statement with respect to the sale of
such securities shall have become effective under the Securities Act and such
securities shall have been disposed of under such registration statement, (ii)
such securities shall have become eligible for resale pursuant to Rule 144(k)
and any restrictive legend on certificates representing such securities shall
have been removed, (iii) such securities shall have been otherwise transferred
or disposed of, and (x) new certificates therefor not bearing a legend
restricting further transfer shall have been delivered by the Company, and (y)
subsequent transfer or disposition of them shall not require their registration
or qualification under the Securities Act or any similar state law then in force
or compliance with Rule 144, or (iv) such securities shall have ceased to be
outstanding. Notwithstanding the foregoing, Restricted Securities shall not
include otherwise Restricted Securities (i) sold by a person in a transaction in
which his rights under this Agreement are not properly assigned; or (ii) (A)
sold to or through a broker or dealer or underwriter in a public distribution or
a public securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions, and restrictive legends
with respect thereto, if any, are removed upon the consummation of such sale or
(C) the registration rights associated with such securities have been terminated
pursuant to Section 12.
(i) "RULE 144" shall mean Rule 144 under the Securities Act or any
successor or similar rule as may be enacted by the Commission from time to time.
(j) "RULE 145" shall mean Rule 145 under the Securities Act or any
successor or similar rule as may be enacted by the Commission from time to time.
(k) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
or any similar United States statute and the rules and regulations thereunder,
all as the same shall be in effect at the time.
12. Miscellaneous.
12.1 Amendments. This Agreement may be amended only by a written
instrument executed by the Holder and the Company.
12.2 Execution by Counterparts and Facsimile. This Agreement, and any
amendment, supplement, restatement or termination of any provision, may be
executed and delivered in counterparts by facsimile.
12.3 Notices, Etc. Any notice or other communication required or
permitted to be delivered under this Agreement shall be in writing and shall be
deemed effectively given: (i) upon personal delivery to the party to be
notified; (ii) when sent by confirmed telex or facsimile if sent during normal
business hours of the recipient, if not, then on the next business day; (iii)
seven (7) days after having been sent by registered or certified air mail,
return receipt requested, postage prepaid; or (iv) three (3) days after deposit
with an internationally recognized express courier, specifying highest priority
delivery, with written verification of receipt, to the address or facsimile
number set forth beneath the name of each party as stated below (or to such
other address or facsimile number as such party may designate by ten (10) days
advance written notice to the other party hereto). Each person making a
communication hereunder by facsimile shall promptly confirm by telephone to the
person to whom such communication was addressed each
communication made by it by facsimile pursuant hereto but the absence of such
confirmation shall not affect the validity of any such communication.
All notices should be distributed as follows:
If to the Company:
On2 Technologies, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: CEO
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇ and ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
McGuireWoods LLP
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▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Holder:
Shanghai Industrial Investment ▇▇▇▇
▇▇ ▇▇▇, ▇/▇
▇▇-▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇
Facsimile: (▇▇▇)▇▇▇▇▇▇▇▇
12.4 Severability. If any provision or part of any provision contained
in this Agreement is found by a court of competent jurisdiction to be invalid,
illegal, or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions or portions thereof, will not be in
any way affected or impaired thereby.
12.5 Waiver. No waiver of any provision of this Agreement will be
binding unless it is in writing. No indulgence or forbearance by a party will
constitute a waiver of the other party's right to insist on performance in full
and in a timely manner of all covenants in this Agreement. Waiver of any
provision will not be deemed to waive the same provision thereafter or any other
provision of this Agreement at any time.
12.6 Entire Agreement. This Agreement constitutes the entire agreement
between the parties pertaining to the specific subject matter herein and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, express or implied.
12.7 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York without regard to principles of conflict
of law.
12.8 Arbitration, Dispute Resolution and Choice of Law. Any dispute
arising out of or in connection with this Agreement, including any question
regarding its existence, validity or termination, shall be referred to and
finally resolved by arbitration under the London Court of International
Arbitration Rules, which Rules are deemed to be incorporated by reference into
this clause. The number of arbitrators shall be one. The seat, or legal place,
of arbitration shall be London, UK. All papers, documents, evidence (whether
written or oral) and other information and materials filed with or presented to
the arbitrators will be in the English language and will constitute confidential
information, and neither the parties nor the arbitrators will disclose any such
information or materials except as necessary in connection with the arbitration
or as required by applicable law. Any demand for arbitration, requests for
discovery and other notices in connection with the arbitration may be served in
the English language in accordance with the notice provisions of this Agreement,
and each party waives any right to any other form of notice, other means of
delivery or translation into any other language. The parties will be entitled to
discover all information and materials reasonably necessary for a full
understanding of any issues reasonably raised in the arbitration. They may use
all methods of discovery permitted under the U.S. federal rules as applied in
the Southern District of New York, including, without limitation, depositions,
requests for admissions, interrogatories and requests for production of
documents. The time period for compliance will be set by the arbitrators. The
arbitrators will have the authority to award any remedy or relief that a U.S.
federal court could order or grant, including, without limitation, monetary
damages, injunctive or other equitable relief, and sanctions for abuse or
frustration of the arbitration process, provided that the arbitrators shall not
have the authority to award punitive damages. The arbitrators will issue a
written explanation of the reasons for the award, and a full statement of the
facts found and rules of law applied in reaching their decision. Notwithstanding
the foregoing, each party will have the right to a preliminary injunction or
other interim relief, pending a final award by the arbitrators, in any court of
competent jurisdiction in connection with any arbitrable claim or controversy,
but only to the extent that such interim relief is intended to preserve the
adequacy or sufficiency of any final award granted by the arbitrators.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written above.
THE COMPANY:
ON2 TECHNOLOGIES, INC.
By:
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
THE HOLDER:
DEEP TALENT INVESTMENTS LIMITED
By:
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Name: Bai Nian En
Title: Director