Exhibit 5.2
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT, dated as of August 10, 2001,
between Travelers Insurance Company, a Connecticut corporation (the "Holder"),
and On2 Technologies, Inc., a Delaware corporation (the "Company").
WHEREAS, the parties entered into a Unit Purchase Agreement, dated as
of July 18, 2001 (the "July Purchase Agreement") and an Investor Rights
Agreement, dated as of July 18, 2001 (the "July Investor Rights Agreement");
WHEREAS, pursuant to the July Purchase Agreement, Travelers invested $2
million and received 3,571,429 units, each of which consists of (i) one share of
common stock, par value $0.01 per share of the Company, and (ii) one warrant to
purchase 1.5 shares of common stock of the Company at an exercise price of $0.56
per unit; and
The Holder has acquired 3,571,429 shares of the Company's Series C-VI
Preferred Stock, par value $0.01 (the "PREFERRED STOCK"), and warrants (the
"WARRANTS") to acquire 5,357,143 shares of the Company's Common Stock, par value
$0.01 per share, pursuant to the Preferred Stock Subscription Agreement (the
"SUBSCRIPTION AGREEMENT"), dated as of August 10, 2001, between the Company and
the Holder.
WHEREAS, pursuant to the Subscription Agreement, the parties desire to
amend the July Investor Rights Agreement with this Agreement, and in the event
of any conflict of terms, this Agreement shall prevail.
WHEREAS, the Company desires to grant to the Holder the registration
rights set forth herein with respect to the Common Stock underlying the
Preferred Stock and the Warrants (such Common Stock collectively, the
"Securities") and the other rights set forth herein;
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. REGISTRABLE SECURITIES. As used herein the term
"Registrable Security" means the Securities until (i) all Securities have
been disposed of pursuant to the Registration Statement (as defined herein),
(ii) all Securities have been sold under circumstances under which all of the
applicable conditions of Rule 144 (or any similar provision then in force)
("Rule 144") under the Securities Act of 1933, as amended (the "Securities
Act"), are met, (iii) all Securities have been otherwise transferred to
persons who may trade such Securities without restriction under the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such Securities not bearing a restrictive legend or
(iv) such time as, in the opinion of counsel to the Company, all Securities
may be sold without any time, volume or manner limitations pursuant to Rule
144(k) (or any similar provision then in effect) under the Securities Act.
The term "Registrable Securities" means any and/or all of the securities
falling within the foregoing definition of a "Registrable Security." In the
event of any merger, reorganization, consolidation, recapitalization or other
change in corporate structure affecting the Common Stock, such adjustment
shall be deemed to be made in the definition of "Registrable
Security" as is appropriate in order to prevent any dilution or enlargement
of the rights granted pursuant to this Agreement.
Section 2. RESTRICTIONS ON TRANSFER. The Holder acknowledges and
understands that in the absence of an effective Registration Statement
authorizing the resale of the Securities as provided herein, the Securities are
"restricted securities" as defined in Rule 144. The Holder understands that no
disposition or transfer of the Securities may be made by Holder in the absence
of (i) an opinion of counsel to the Holder, in form and substance reasonably
satisfactory to the Company, that such transfer may be made without registration
under the Securities Act or (ii) such registration.
With a view to making available to the Holder the benefits of
Rule 144, the Company agrees to:
comply with the provisions of paragraph (c)(1) of Rule
144; and
file with the Securities and Exchange Commission (the
"Commission") in a timely manner all reports and other documents required to be
filed by the Company pursuant to Section 13 or 15(d) under the Exchange Act;
and, if at any time it is not required to file such reports but in the past had
been required to or did file such reports, it will, upon the request of the
Holder, make available other information as required by, and so long as
necessary to permit sales of, its Registrable Securities pursuant to Rule 144.
Each certificate representing the Securities 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 SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND 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
PLEDGED, SOLD, ASSIGNED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT
TO REGISTRATION UNDER THE SECURITIES ACT OR AN AVAILABLE EXEMPTION FROM
REGISTRATION.
THE SALE, ASSIGNMENT, TRANSFER, PLEDGE AND OTHER DISPOSITION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE INVESTOR RIGHTS AGREEMENT
(THE "INVESTOR RIGHTS AGREEMENT"), DATED AUGUST 10, 2001. A COPY OF THE INVESTOR
RIGHTS AGREEMENT IS ON FILE WITH THE CORPORATE SECRETARY AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE COMPANY. A COPY THEREOF MAY BE OBTAINED AT NO COST UPON
WRITTEN REQUEST THEREFOR MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
CORPORATE SECRETARY AT THE PRINCIPAL OFFICES OF THE COMPANY.
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The Holder consents to the Company's making a notation on its
records and giving instructions to any transfer agent of the Securities in order
to implement the restrictions on transfer established in this Agreement.
Section 3. REGISTRATION RIGHTS WITH RESPECT TO THE SECURITIES.
(a) PIGGYBACK REGISTRATION.
(i) NOTICE. If at any time or from time to time the Company
shall determine to register any shares of Common Stock
for its own account or the account of any person who
holds securities of the Company that are "restricted
securities" under Rule 144, other than (A) a registration
on Form S-4 or S-8 or another form not generally
available for registering the Restricted Securities for
sale to the public or (B) any registration comprised in
whole or in substantial part of shares underlying stock
options or restricted shares issued under an incentive
compensation plan that has been adopted by the Company or
its predecessor, the Company will give to the Holder
notice as soon as practicable prior to filing the
registration statement and include in such registration
all Registrable Securities specified in one or more
written requests which have been made within 30 business
days after receipt of such written notice from the
Company by the Holder, except as set forth in Section
3(a)(ii).
(ii) REGISTERED PUBLIC OFFERING INVOLVING AN UNDERWRITING. If
the registration of shares of Common Stock is for a
registered public offering involving an underwritten
offering, the Company shall so advise the Holder as a
part of the written notice given pursuant to Section
3(a)(i). In such event, the right of the Holder to
registration pursuant to this section shall be
conditioned upon its participation in such underwriting
and the inclusion of its Registrable Securities in the
underwriting to the extent provided herein. If the Holder
proposes to distribute its securities through such
underwriting, the Holder shall (together with the Company
and the other holders of Common Stock distributing their
securities through such underwriting) enter into an
underwriting agreement in customary form with the
underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any
provision of Section 3(a)(ii), if the managing
underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten,
the managing underwriter may limit the number of
Registrable Securities to be included in the underwriting
or may limit the number of Registrable Securities to be
included in such registration. The Company shall so
advise the Holder, and the number of shares of
Registrable Securities and other securities that may be
included in the registration and underwriting shall be
allocated in the following priority: (1) if the
registration is a primary offering of Common Stock by the
Company, then first to the Company, and second, among the
Holder and all other holders of Common Stock that hold
rights granted by the Company to cause shares of Common
Stock held by them
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to be included in such registration or underwriting, in
proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by the Holder and
each other such holder that are requested to be included
in the registration or underwriting and (2) if the
registration is an offering by holders of Common Stock
exercising their "demand" registration rights, then first
to such holders of Common Stock exercising such demand
registration rights, and second, among the Holder and all
other holders of Common Stock that hold rights granted by
the Company to cause shares of Common Stock held by them
to be included in such registration or underwriting, in
proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by the Holder and
each other such holder that are requested to be included
in the registration or underwriting. To facilitate the
allocation of shares in accordance with the above
provisions, the underwriter may round the number of
shares allocated to the stockholders to the nearest one
hundred shares. If the Holder disapproves of the terms of
any such underwriting, it may elect to withdraw therefrom
by written notice to the Company. In the event of any
such withdrawal, the Company will include in any such
registration in lieu thereof, on a pro rata basis, any
additional shares of Common Stock which were requested to
be included by any other piggyback right holders, which
were excluded pursuant to the above-described underwriter
limitation, up to the maximum set by such underwriter.
(b) DEMAND REGISTRATION
(i) NOTICE OF REGISTRATION. At any time after February 11,
2002, the Holder may demand that a registration statement be
filed with the Commission within 30 days after the date on
which the Company has received such request, subject to the
provisions of this Section 3(b) and Section 3(e), or, unless,
due to circumstances not within the Company's direct control,
the audit of the Company's financial statements or of the
financial statements of any entity or business acquired or to
be acquired by the Company is not complete, in which case the
Company shall have a sufficient amount of time for the
completion of such audit within which to file such
registration statement. Subject to the terms and conditions
set forth below in this Section 3(b), Section 3(f) and Section
5, upon the Company's receipt from the Holder of a written
request that the Company effect a registration under the
Securities Act with respect to any of its Registrable
Securities, the Company will use its diligent best efforts to
effect any such registration (including, without limitation,
the execution of an undertaking to file post-effective
amendments and appropriate qualifications and approvals under
the laws and regulations applicable to the Company of any
applicable governmental agencies and authorities, including
applicable blue sky or other state securities laws) as may be
so requested and as would permit or facilitate the sale and
distribution of all of the Registrable Securities as are
specified in such request, provided, that (a) the Holder may
not make its request within 180 days following the
effectiveness of any registered public offering of Common
Stock, unless
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permitted by applicable securities laws; (b) before filing any
such registration statement or any amendments or supplements
thereto, the Company will (i) furnish to the Holder copies of
all such documents proposed to be filed, which documents will
be subject to the review of the Holder and its counsel, and
(ii) give the Holder and its representatives the opportunity
to conduct a reasonable investigation of the records and
business of the Company and to participate in the preparation
of any such registration statement or any amendments or
supplements thereto; and (c) the Company shall not be
obligated to take any action to effect such registration
pursuant to this Section 3(b)(i) after the Company has
effected one such registration pursuant to this Section
3(b)(i); provided, that such registrations have been declared
or ordered effective by the Commission and, if the method of
distribution is a registered public offering involving an
underwritten offering, all such shares registered thereby
shall have been sold pursuant thereto. With respect to any
registration requested pursuant to this Section 3(b)(i), the
Company may include in such registration any other shares of
Common Stock, subject to the restrictions set forth in Section
3(b)(ii), as to which it is obligated to include such shares
pursuant to agreements requiring such registration.
(ii) REGISTERED PUBLIC OFFERING INVOLVING AN UNDERWRITING. If
the Holder intends to distribute the Registrable Securities
covered by its request under Section 3(b)(i) by means of an
underwriting, it shall so advise the Company as a part of its
request made pursuant to Section 3(b)(i). In such event, the
Holder shall negotiate in good faith with a nationally
recognized underwriter or underwriters selected by the Holder
and reasonably satisfactory to the Company with regard to the
underwriting of such requested registration. The Company shall
(together with the Holder and all holders of Common Stock
proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected
pursuant to this Section 3(b)(ii). Notwithstanding any other
provision of this Section 3(b), if the underwriter determines
that marketing factors require a limitation on the number of
shares to be underwritten, the underwriter may (subject to the
allocation priority set forth below) limit the number of
Registrable Securities to be included in the registration and
underwriting. The Company shall so advise all holders of
securities requesting registration, and the number of shares
of securities that are entitled to be included in the
registration and underwriting shall be allocated in the
following priority: first, among the Holder's Registrable
Securities; and second, among all other stockholders in
proportion, as nearly as practicable, to the respective
amounts of securities which they had requested to be included
in such registration at the time of filing the registration
statement. To facilitate the allocation of shares in
accordance with the above provisions, the underwriter may
round the number of shares allocated to the stockholders to
the nearest one hundred shares.
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(c) LOCKUP AGREEMENT. In consideration for the Company's
performance of its obligations under this Agreement, the Holder will, in
connection with any registration of any Restricted Securities in an underwritten
offering, at the request of the Company or the underwriters managing any
underwritten offering of the Company's securities, agree not to sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any Restricted Securities (other than those included in the registration)
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed 90 days) from the effective
date of such registration as the Company and the underwriters may specify, so
long as stockholders holding more than five percent (5%) of the Common Stock are
bound by a comparable obligation.
(d) All fees, disbursements and out-of-pocket expenses
and costs incurred by the Company in connection with the preparation and filing
of the Registration Statement under subparagraphs 3(a) and in complying with
applicable securities and Blue Sky laws (including, without limitation, all
attorneys' fees of the Company) shall be borne by the Company. The Holder shall
bear the cost of underwriting and/or brokerage discounts, fees and commissions,
if any, applicable to the Securities being registered and the fees and expenses
of its counsel. The Holder and its counsel shall have a reasonable period to
review the proposed Registration Statement or any amendment thereto, prior to
filing with the Commission, and the Company shall provide the Holder with copies
of any comment letters received from the Commission with respect thereto within
two (2) business days of receipt thereof. The Company shall make reasonably
available for inspection by Holder, any underwriter participating in any
disposition pursuant to the Registration Statement, and any attorney, accountant
or other agent retained by the Holder or any such underwriter all relevant
financial and other records, pertinent corporate documents and properties of the
Company and its subsidiaries, and cause the Company's officers, directors and
employees to supply all information reasonably requested by the Holder or any
such underwriter, attorney, accountant or agent in connection with the
Registration Statement, in each case, as is customary for similar due diligence
examinations; PROVIDED, HOWEVER, that all records, information and documents
that are designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material non-public information shall be kept
confidential by the Holder and any such underwriter, attorney, accountant or
agent, unless such disclosure is made pursuant to judicial process in a court
proceeding (after first giving the Company an opportunity promptly to seek a
protective order or otherwise limit the scope of the information sought to be
disclosed) or is required by law, or such records, information or documents
become available to the public generally or through a third party not in
violation of an accompanying obligation of confidentiality; and PROVIDED FURTHER
that, if the foregoing inspection and information gathering would otherwise
disrupt the Company's conduct of its business, such inspection and information
gathering shall, to the maximum extent possible, be coordinated on behalf of the
Holder and the other parties entitled thereto by one firm of counsel designated
by and on behalf of the majority in interest of Holder and other parties. The
Company shall qualify any of the securities for sale in such states as the
Holder reasonably designates and shall furnish indemnification in the manner
provided in Section 6 hereof. However, the Company shall not be required to
qualify in any state which will require an escrow or other restriction relating
to the Company and/or the sellers, or which will require the Company to qualify
to do business in such state or require the Company to file therein any general
consent to service of process. The Company at its expense will supply the Holder
with copies of the
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Registration Statement and the prospectus included therein and other related
documents in such quantities as may be reasonably requested by the Holder.
(e) The Company shall not be required by this Section 3
to include the Holder's Securities in any Registration Statement which is to be
filed if, in the opinion of counsel for both the Holder and the Company (or,
should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holder and the Company) the
proposed offering or other transfer as to which such registration is requested
is exempt from applicable federal and state securities laws and would result in
all Holders or transferees obtaining securities which are not "restricted
securities", as defined in Rule 144 under the Securities Act.
(f) The Company's obligation to file a registration
statement under Section 3(a) or Section 3(b), or to cause a registration
statement to become and remain effective under such sections, shall be suspended
for a period not to exceed 90 days (and for periods not exceeding, in the
aggregate, 120 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 Board of Directors of the Company, should not be disclosed.
Section 4. COOPERATION WITH COMPANY. The Holder will cooperate
with the Company in all respects in connection with this Agreement, including
timely supplying all information reasonably requested by the Company (which
shall include all information regarding the Holder and proposed manner of sale
of the Registrable Securities required to be disclosed in the Registration
Statement) and executing and returning all documents reasonably requested in
connection with the registration and sale of the Registrable Securities and
entering into and performing its obligations under any underwriting agreement,
if the offering is an underwritten offering, in usual and customary form, with
the managing underwriter or underwriters of such underwritten offering.
Section 5. REGISTRATION PROCEDURES. If and whenever the Company
is required by any of the provisions of this Agreement to effect the
registration of any of the Registrable Securities under the Securities Act, the
Company shall (except as otherwise provided in this Agreement), as expeditiously
as possible, subject to the Holder's assistance and cooperation as reasonably
required:
(a) prepare and file with the Commission, a registration
statement (on Form S-3 and/or S-1, or other appropriate form of registration
statement) under the Securities Act (the "Registration Statement"), so as to
permit a public offering and resale of the Registrable Securities under the
Securities Act by Holder. The Company shall use its best efforts to cause the
Registration Statement to become effective within one hundred twenty (120) days
(or one hundred fifty (150) days in the event of a "full review" by the
Commission) of the date such Registration Statement is filed or five (5) days
after clearance by the Commission and will within said five (5) days request
acceleration of effectiveness. The Company will notify Holder of the
effectiveness of the Registration Statement within one business day of such
event. The Company will maintain the Registration Statement or post-effective
amendment filed under this Section 5 hereof effective under the Securities Act
until the earliest of (i) the date that all of the
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Registrable Securities have been sold pursuant to the Registration Statement, or
(ii) 120 days after the effective date of such Registration Statement.
(b) prepare and file with the Commission such amendments
and supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the sale or other disposition of all securities covered by such registration
statement whenever the Holder of such Registrable Securities shall desire to
sell or otherwise dispose of the same (including prospectus supplements with
respect to the sales of securities from time to time in connection with a
registration statement pursuant to Rule 415 promulgated under the Securities
Act) and (ii) take all lawful action such that each of (A) the Registration
Statement and any amendment thereto does not, when it becomes effective, contain
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 (B) the prospectus forming part of the Registration Statement, and any
amendment or supplement thereto, does not at any time during the period that the
registration statement is effective on the date thereof 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, in light of the
circumstances under which they were made, not misleading.
(c) prior to the filing with the Commission of any
Registration Statement (including any amendments thereto) and the distribution
or delivery of any prospectus (including any supplements thereto), provide draft
copies thereof to the Holder and reflect in such documents all such comments as
the Holder (and its counsel) reasonably may propose and (ii) furnish to the
Holder such numbers of copies of a prospectus including a preliminary prospectus
or any amendment or supplement to any prospectus, as applicable, in conformity
with the requirements of the Securities Act, and such other documents, as the
Holder may reasonably request in order to facilitate the public sale or other
disposition of the securities owned by the Holder;
(d) register and qualify the Registrable Securities
covered by the Registration Statement under state blue sky laws (subject to the
limitations set forth in Section 3(d) above), and do any and all other acts and
things which may be reasonably necessary or advisable to enable the Holder to
consummate the public sale or other disposition in such jurisdiction of the
securities owned by the Holder, except that the Company shall not for any such
purpose be required to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified or to file therein any general
consent to service of process or to subject itself to taxation in any such
jurisdiction;
(e) list such Registrable Securities on the AMEX, and any
other exchange on which the Common Stock of the Company is then listed, if the
listing of such Registrable Securities is then permitted under the rules of such
exchange;
(f) notify the Holder at any time when a prospectus
relating thereto covered by the Registration Statement is required to be
delivered under the Securities Act, of the happening of any event of which it
has knowledge as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
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omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing, and the Company shall prepare and file a curative amendment under
Section 5(b) as quickly as commercially possible;
(g) as promptly as practicable after becoming aware of
such event, notify the Holder who holds Registrable Securities being sold (or,
in the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission or any state authority of any stop order or other
suspension of the effectiveness of the Registration Statement at the earliest
possible time and take all lawful action to effect the withdrawal, recission or
removal of such stop order or other suspension;
(h) cooperate with the Holder to facilitate the timely
preparation and delivery of certificates for the Registrable Securities to be
offered pursuant to the Registration Statement and enable such certificates
for the Registrable Securities to be in such denominations or amounts, as the
case may be, as the Holder reasonably may request and registered in such
names as the Holder may request; and, within three (3) business days after a
Registration Statement which includes Registrable Securities is declared
effective by the Commission, deliver and cause legal counsel selected by the
Company to deliver to the transfer agent for the Registrable Securities (with
copies to the Holder whose Registrable Securities are included in such
Registration Statement) an appropriate instruction and, to the extent
necessary, an opinion of such counsel;
(i) take all such other lawful actions reasonably
necessary to expedite and facilitate the disposition by the Holder of its
Registrable Securities in accordance with the intended methods therefor provided
in the prospectus which are customary for issuers to perform under the
circumstances;
(j) in the event of an underwritten offering, promptly
include or incorporate in a prospectus supplement or post-effective amendment to
the Registration Statement such information as the managing underwriters
reasonably agree should be included therein and to which the Company does not
reasonably object and make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable after it is notified of the
matters to be included or incorporated in such prospectus supplement or
post-effective amendment; and
(k) maintain a transfer agent for its Common Stock.
Section 6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Holder and its directors, officers, employees and agents and each person, if
any, who controls the Holder within the meaning of the Securities Act
(collectively, the "Holder Indemnified Parties") against any losses, claims,
damages or liabilities, joint or several (which shall, for all purposes of this
Agreement, include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees), to which the Holder
Indemnified Parties 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
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statement of any material fact contained in the Registration Statement, or any
related preliminary prospectus, final prospectus or amendment or supplement
thereto, in each case as of the respective dates 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, in each case as of the respective dates thereof; PROVIDED, HOWEVER,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, preliminary prospectus, final prospectus or
amendment or supplement thereto in reliance upon, and in conformity with,
written information furnished to the Company by the Holder Indemnified Parties
specifically for use in the preparation thereof. This Section 6(a) shall not
inure to the benefit of any Distributing Holder with respect to any person
asserting such loss, claim, damage or liability who purchased the Registrable
Securities which are the subject thereof if the Distributing Holder failed to
send or give (in violation of the Securities Act or the rules and regulations
promulgated thereunder) a copy of the prospectus contained in such Registration
Statement to such person at or prior to the written confirmation to such person
of the sale of such Registrable Securities, where the Distributing Holder was
obligated to do so under the Securities Act or the rules and regulations
promulgated thereunder. This indemnity agreement will be in addition to any
liability that the Company may otherwise have.
(b) The Holder agrees that it will indemnify and hold
harmless the Company and its directors, officers, employees and agents and each
person, if any, who controls the Company within the meaning of the Securities
Act (collectively, the "Company Indemnified Parties"), against any losses,
claims, damages or liabilities (which shall, for all purposes of this Agreement,
include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees) to which the Company
Indemnified Parties 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 the Registration Statement, or any
related preliminary prospectus, final prospectus or amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, but in each case only to the extent
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, preliminary prospectus, final
prospectus or amendment or supplement thereto in reliance upon, and in
conformity with, written information furnished to the Company by the Holder
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Holder may otherwise have.
Notwithstanding anything to the contrary herein, the Holder shall not be liable
under this Section 6(b) for any amount in excess of the gross proceeds to the
Holder as a result of the sale of Registrable Securities pursuant to the
Registration Statement.
(c) Promptly after receipt by an indemnified party under
this Section 6 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 6, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
the indemnifying party from any liability which it may have to any indemnified
party except to the extent of actual prejudice demonstrated by the indemnifying
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party. In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, assume the defense
thereof, subject to the provisions herein stated and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section 6 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless the indemnifying party shall not
pursue the action to its final conclusion. The indemnified party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party and the indemnified party shall
have been advised by such counsel that there may be one or more legal defenses
available to the indemnifying party different from or in conflict with any legal
defenses which may be available to the indemnified party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party, it being understood, however, that the
indemnifying party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the indemnified party,
which firm shall be designated in writing by the indemnified party and be
reasonably approved by the indemnifying party). No settlement of any action
against an indemnified party shall be made without the prior written consent of
the indemnified party, which consent shall not be unreasonably withheld.
All fees and expenses of the indemnified party (including
reasonable costs of defense and investigation in a manner not inconsistent with
this section and all reasonable attorneys' fees and expenses) shall be paid to
the indemnified party, as incurred, within ten (10) business days of written
notice thereof and reasonable supporting documentation has been submitted to the
indemnifying party; provided, that the indemnifying party may require such
indemnified party to undertake to reimburse all such fees and expenses to the
extent it is finally judicially determined that such indemnified party is not
entitled to indemnification hereunder.
Section 7. CONTRIBUTION. In order to provide for just and
equitable contribution under the Securities Act in any case in which (i) the
indemnified party makes a claim for indemnification pursuant to Section 6 hereof
but is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express provisions of
Section 6 hereof provide for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any indemnified party,
then the Company Indemnified Parties and the Holder Indemnified Parties shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (which shall, for all purposes of this Agreement, include, but
not be limited to, all
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reasonable costs of defense and investigation and all reasonable attorneys'
fees), in either such case (after contribution from others) on the basis of
relative fault as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company Indemnified Parties on the one hand or the Holder Indemnified Parties on
the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company Indemnified Parties and the Holder Indemnified Parties agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in this
Section 7. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section 7 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
Notwithstanding any other provision of this Section 7, in no
event shall the Holder be required to undertake liability to any person under
this Section 7 for any amounts in excess of the dollar amount of the gross
proceeds received by the Holder from the sale of the Holder's Registrable
Securities pursuant to any Registration Statement under which such Registrable
Securities are registered under the Securities Act.
Section 8. TERMINATION.
(a) Unless otherwise terminated in accordance with
Section 8(b) hereof, the term of this Agreement shall be from the date hereof
until August 10, 2005; PROVIDED, HOWEVER, that the termination will not affect
any obligations arising prior to the date of such termination.
(b) Either party may terminate this Agreement (i) if the
other party makes a general assignment for the benefit of creditors, file a
voluntary petition in bankruptcy or for reorganization or arrangement under the
bankruptcy laws, if a petition in bankruptcy is filed against such party, or if
a receiver or trustee is appointed for all or any part of its property or
assets, or (ii) by giving written notice to the other party in the event of a
breach of a material term or condition this Agreement by the other party, unless
such breach may be, and is, cured within thirty (30) days after the breaching
party's receipt of notice of breach from the nonbreaching party.
(c) In the event of termination by the Company or the
Holder, written notice thereof shall forthwith be given to the other party and
the transactions contemplated by this Agreement shall be terminated without
further action by either party. Nothing in this Section 8 shall be deemed to
release the Company or the Holder from any liability for any breach under this
Agreement, or to impair the rights of the Company and the Holder to compel
specific performance by the other party of its obligations under this Agreement.
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Section 9. NOTICES. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Company: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
With a copy to: General Counsel
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Holder: Citigroup Investments Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇
Any party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other party hereto in accordance
herewith.
Section 10. ASSIGNMENT. Neither this Agreement nor any rights of
the Holder or the Company hereunder may be assigned by either party to any other
person without the other party's prior written consent, provided that without
such consent the Holder's rights may be assigned to an entity controlling,
controlled by or under common control with the Holder.
Section 11. COUNTERPARTS/FACSIMILE. This Agreement may be
executed in two or more counterparts, each of which shall constitute an
original, but all of which, when together shall constitute but one and the same
instrument, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other party. In lieu of the
original, a facsimile transmission or copy of the original shall be as effective
and enforceable as the original.
Section 12. REMEDIES AND SEVERABILITY. The remedies provided in
this Agreement are cumulative and not exclusive of any remedies provided by law.
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and
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declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
those that may be hereafter declared invalid, illegal, void or unenforceable.
Section 13. HEADINGS. The headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 14. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. The Company and the Holder agree
to submit itself to the IN PERSONAM jurisdiction of the state and federal courts
situated within the Southern District of the State of New York with regard to
any controversy arising out of or relating to this Agreement. Any party shall
have the right to seek injunctive relief from any court of competent
jurisdiction in any case where such relief is available. Any dispute under this
Agreement shall be submitted to arbitration under the American Arbitration
Association (the "AAA") in New York City, New York, and shall be finally and
conclusively determined by the decision of a board of arbitration consisting of
three (3) members (hereinafter referred to as the "Board of Arbitration")
selected as according to the rules governing the AAA. The Board of Arbitration
shall meet on consecutive business days in New York City, New York, and shall
reach and render a decision in writing (concurred in by a majority of the
members of the Board of Arbitration) with respect to the amount, if any, which
the losing party is required to pay to the other party in respect of a claim
filed. In connection with rendering its decisions, the Board of Arbitration
shall adopt and follow the laws of the State of New York. To the extent
practical, decisions of the Board of Arbitration shall be rendered no more than
thirty (30) calendar days following commencement of proceedings with respect
thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. The Board of Arbitration shall
be authorized and is directed to enter a default judgment against any party
refusing to participate in the arbitration proceeding within thirty days of any
deadline for such participation. Any decision made by the Board of Arbitration
(either prior to or after the expiration of such thirty (30) calendar day
period) shall be final, binding and conclusive on the parties to the dispute,
and entitled to be enforced to the fullest extent permitted by law and entered
in any court of competent jurisdiction. The prevailing party shall be awarded
its costs, including attorneys' fees, from the non-prevailing party as part of
the arbitration award. Any party shall have the right to seek injunctive relief
from any court of competent jurisdiction in any case where such relief is
available. The prevailing party in such injunctive action shall be awarded its
costs, including attorney's fees, from the non-prevailing party.
Section 15. WAIVERS. No waiver by either party of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 16. ENTIRE AGREEMENT; AMENDMENT. This Agreement contains
the entire understanding of the parties with respect to the matters covered
hereby and, except as specifically set forth herein, neither the Company nor the
Holder makes any representations, warranty, covenant or undertaking with respect
to such matters. No provision of this Agreement
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may be waived or amended other than by a written instrument signed by the party
against whom enforcement of any such amendment or waiver is sought.
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IN WITNESS WHEREOF, the parties hereto have caused this
Investor Rights Agreement to be duly executed, as of the date first written
above.
ON2 TECHNOLOGIES, INC.
By:
-----------------------------------
Name:
Title:
TRAVELERS INSURANCE COMPANY
By:
-----------------------------------
Name:
Title:
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