EXHIBIT 99.2
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT, dated as of July 18, 2001, between
Travelers Indemnity Company, a Connecticut corporation (the "Purchaser"), and
On2 Technologies, Inc., a Delaware corporation (the "Company").
WHEREAS, the parties hereto have entered into a Unit Purchase
Agreement, dated as of July 18, 2001 (the "Purchase Agreement"). Terms not
defined herein shall have the meanings ascribed to them in the Purchase
Agreement. Pursuant to the Purchase Agreement, the Purchaser has agreed to
purchase the Purchased Shares and Warrants;
WHEREAS, the Company desires to grant to the Purchaser the
registration rights set forth herein with respect to the Purchased Shares and
the Common Stock underlying the Warrants (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 Purchaser 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 Purchaser understands that
no disposition or transfer of the Securities may be made by Purchaser in the
absence of (i) an opinion of counsel to the Purchaser, 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 Purchaser 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
Purchaser, 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 JULY 18, 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.
The Purchaser 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 Purchaser
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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 Purchaser, 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 Purchaser as a part of the written
notice given pursuant to Section 3(a)(i). In such event, the
right of the Purchaser 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
Purchaser proposes to distribute its securities through such
underwriting, the Purchaser 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 Purchaser, 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
Purchaser 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
Purchaser 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 Purchaser 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 Purchaser 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
Purchaser disapproves of the terms of any such underwriting,
it may elect to withdraw therefrom by written notice to the
Company. In the event of
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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 the date hereof, the
Purchaser 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 Purchaser 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 Purchaser
may not make its request within 180 days following the
effectiveness of any registered public offering of Common
Stock, unless 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 Purchaser copies of all such documents proposed
to be filed, which documents will be subject to the review of
the Purchaser and its counsel, and (ii) give the Purchaser 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
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which it is obligated to include such shares pursuant to
agreements requiring such registration.
(ii) REGISTERED PUBLIC OFFERING INVOLVING AN UNDERWRITING. If the
Purchaser 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
Purchaser shall negotiate in good faith with a nationally
recognized underwriter or underwriters selected by the
Purchaser and reasonably satisfactory to the Company with
regard to the underwriting of such requested registration. The
Company shall (together with the Purchaser 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 Purchaser'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.
(c) LOCKUP AGREEMENT. In consideration for the Company's
performance of its obligations under this Agreement, the Purchaser 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 Purchaser
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 Purchaser and its counsel shall have a
reasonable period to review the
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proposed Registration Statement or any amendment thereto, prior to filing with
the Commission, and the Company shall provide the Purchaser 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 Purchaser, any underwriter participating in any disposition
pursuant to the Registration Statement, and any attorney, accountant or other
agent retained by the Purchaser 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 Purchaser 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 Purchaser 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
Purchaser and the other parties entitled thereto by one firm of counsel
designated by and on behalf of the majority in interest of Purchaser and other
parties. The Company shall qualify any of the securities for sale in such states
as the Purchaser 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 Purchaser with copies of the Registration Statement and the prospectus
included therein and other related documents in such quantities as may be
reasonably requested by the Purchaser.
(e) The Company shall not be required by this Section 3 to
include the Purchaser's Securities in any Registration Statement which is to be
filed if, in the opinion of counsel for both the Purchaser and the Company (or,
should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Purchaser 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 purchasers 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.
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Section 4. COOPERATION WITH COMPANY. The Purchaser 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 Purchaser 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 Purchaser'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 Purchaser. 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 Purchaser 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 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 Purchaser 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.
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(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 Purchaser and reflect in such documents all such comments
as the Purchaser (and its counsel) reasonably may propose and (ii) furnish to
the Purchaser 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 Purchaser may reasonably request in order to facilitate the
public sale or other disposition of the securities owned by the Purchaser;
(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 Purchaser to consummate
the public sale or other disposition in such jurisdiction of the securities
owned by the Purchaser, 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 Purchaser 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
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 Purchaser 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 Purchaser 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 Purchaser reasonably may request and registered in such names as
the Purchaser 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 Purchaser whose Registrable Securities are included in
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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 Purchaser 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
Purchaser and its directors, officers, employees and agents and each person, if
any, who controls the Purchaser within the meaning of the Securities Act
(collectively, the "Purchaser 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 Purchaser
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, 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 Purchaser Indemnified
Parties specifically for use in the preparation thereof. This Section 6(a) shall
not inure to the benefit of any Distributing Purchaser 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
Purchaser 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 Purchaser 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.
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(b) The Purchaser 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 Purchaser
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Purchaser may otherwise have.
Notwithstanding anything to the contrary herein, the Purchaser shall not be
liable under this Section 6(b) for any amount in excess of the gross proceeds to
the Purchaser 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 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
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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 Purchaser 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 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 Purchaser
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 Purchaser
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 Purchaser be required to undertake liability to any person under this
Section 7 for any amounts in
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excess of the dollar amount of the gross proceeds received by the Purchaser from
the sale of the Purchaser'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 July
___, 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
Purchaser, 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 Purchaser from any liability for any breach under
this Agreement, or to impair the rights of the Company and the Purchaser to
compel specific performance by the other party of its obligations under this
Agreement.
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 Purchaser: Citigroup Investments Inc.
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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
Purchaser or the Company hereunder may be assigned by either party to any other
person without the other party's prior written consent.
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 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 Purchaser
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
13
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
Purchaser makes any representations, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
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IN WITNESS WHEREOF, the parties hereto have caused this Investor
Rights Agreement to be duly executed, on this ___ day of July, 2001.
ON2 TECHNOLOGIES, INC.
By:
-------------------------------
Name:
Title:
TRAVELER'S INDEMNITY COMPANY
By:
-------------------------------
Name:
Title:
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