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Exhibit 10.2
METASTREAM CORPORATION
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
SERIES B PREFERRED STOCK PURCHASE AGREEMENT, dated as of July 18, 2000
(this "Agreement"), among METASTREAM CORPORATION, a Delaware corporation (the
"Company"), METACREATIONS CORPORATION, a Delaware corporation (the "Parent") and
ADOBE SYSTEMS INCORPORATED, a Delaware corporation (the "Purchaser" or "Adobe").
SECTION 1
AUTHORIZATION AND SALE OF THE SECURITIES
1.1 Authorization. The Company is authorized to sell hereunder
1,500,000 shares (the "Shares") of its Series B Convertible Preferred Stock,
$0.00001 par value per share ("Series B Preferred Stock"), which shares are
convertible into common stock, par value $0.00001 per share ("Common Stock"), of
the Company.
1.2 Certificate of Designation. The Company shall file with the
Secretary of State of the State of Delaware a Certificate of Designation of
Series B Convertible Preferred Stock substantially in the form attached hereto
as Exhibit A (the "Certificate of Designation").
1.3 Sale of the Securities. At the Closing (as defined below), and
subject to the terms and conditions hereof, the Company shall sell to the
Purchaser, and the Purchaser shall purchase from the Company the Shares, at the
purchase price of $6.6667 per share, payable as set forth in Section 2.2 of this
Agreement.
SECTION 2
CLOSING DATES; DELIVERIES
2.1 Closing. The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall take place at the offices of Milbank, Tweed,
Hadley & McCloy LLP, One Chase Manhattan Plaza, New York, NY 10005, at 10:00
a.m., on the date hereof (the "Closing Date").
2.2 Deliveries. At the Closing, the parties shall make the
following deliveries:
(a) Certificates and Purchase Price. The Company shall
deliver to the Purchaser a certificate representing the Shares, which shall be
delivered and accepted against
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payment of the purchase price therefor by wire transfer of same day funds to an
account designated by the Company.
(b) Registration Rights Agreement. The Company, the
Parent and the Purchaser shall execute and deliver the Registration Rights
Agreement in substantially the form of Exhibit B hereto (the "Registration
Rights Agreement" and, together with the Exchange Agreement, the "Ancillary
Agreements").
(c) Certificate of Designation. The Company shall deliver
to the Purchaser a certified copy of the Certificate of Designation, certified
by the Secretary of State of the State of Delaware.
(d) Vice President's Certificates. Each of the Company
and the Parent shall deliver to the Purchaser a certificate executed by their
respective Vice Presidents, certifying to (i) resolutions adopted by the Board
of Directors of the Company and the Parent authorizing the transactions
contemplated by this Agreement and the Ancillary Agreements, (ii) the
Certificate of Designation, (iii) the Bylaws of the Company, (iv) the Amended
and Restated Certificate of Incorporation and (v) such other proceedings
relating to the authorization, execution and delivery of this Agreement and the
Ancillary Agreements as may be reasonably requested by the Purchaser.
(e) Disclosure Schedule. The Company and the Parent shall
deliver to the Purchaser a Disclosure Schedule setting forth exceptions and
certain other information with respect to the representations and warranties of
the Company made in Section 3 hereof (the "Disclosure Schedule"), which
Disclosure Scedule shall be acceptable to the Purchaser in its sole discretion.
(f) Consents and Approvals. The Company and the Parent
shall each deliver to the Purchaser copies of all consents, permits and waivers,
if any, necessary or appropriate to effect the transactions contemplated hereby.
(g) Legal Opinion. The Company shall deliver to the
Purchaser an opinion addressed to them from legal counsel to the Company, dated
as of the Closing Date, in substantially the form attached hereto as Exhibit C.
(h) Board of Directors. Upon the Closing, the authorized
size of the Board of Directors of the Company shall be eight (8) members and the
Board shall consist of Dr. Howard Morgan, as Chairman, Robert E. Rice, Samuel
Jones, William Lane, Alexander Migdal, Tommy Bennett, Anders Vinberg and one
representative elected by Adobe.
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(a) Exchange Agreement. The Company, the Parent and the
Purchaser, as initial holder of the Series B Preferred Stock, shall execute and
deliver the Exchange Agreement in substantially the form of Exhibit D hereto
(the "Exchange Agreement").
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser that,
except as will be set forth on the Disclosure Schedule:
3.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to own,
lease and operate its assets, properties and business and to carry on its
business as it is now being conducted or proposed to be conducted. The Company
is duly qualified as a foreign corporation to transact business, and is in good
standing, in each jurisdiction where it owns or leases real property or
maintains employees or where the nature of its activities make such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the business, assets, condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole (it being
understood that the Company does not have any subsidiaries as of the date
hereof) (a "Material Adverse Effect" and having, when used with respect to the
Parent, a correlative meaning).
3.2 Bylaws. The Company has delivered to the Purchaser a true,
correct and complete copy of the Company's Bylaws, as amended through the date
hereof.
3.3 Corporate Power. The Company has all requisite legal and
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements, to issue and sell the Shares hereunder, and to carry out
and perform its obligations under the terms of this Agreement and the Ancillary
Agreements.
3.4 Subsidiaries. The Company has no direct or indirect
Subsidiaries (as defined in Section 8.11). The Company does not own or control
any equity security or other interest of any other corporation, limited
partnership or other business entity. The Company is not a participant in any
joint venture, partnership or similar arrangement.
3.5 Capitalization. Effective immediately upon filing of the
Certificate of Designation, the authorized capital stock of the Company shall
consist of 80,000,000 shares, of which (i)
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75,000,000 are designated as Common Stock, par value of $0.00001 per share,
24,050,000 shares of which are issued and outstanding, and (ii) 5,000,000 shares
of Preferred Stock par value $0.00001 per share ("Preferred Stock"), 1,500,000
of which are designated "Series A Preferred Stock," 1,500,000 of which are
issued and outstanding, and 1,500,000 of which are designated "Series B
Preferred Stock," none of which are issued and outstanding. Upon consummation of
the transactions contemplated by this Agreement, the capitalization of the
Company will be as set forth in Section 3.5 of the Disclosure Schedule. Shares
of the authorized Common Stock will be reserved for issuance as follows: (i)
1,500,000 of the authorized shares of Common Stock will be reserved for issuance
upon conversion of the Series A Preferred Stock, (ii) 1,500,000 of the
authorized Shares of Common Stock will be reserved for issuance upon conversion
of the Series B Preferred Stock and (iii) 6,000,000 of the authorized shares of
Common Stock will be reserved for issuance to employees, officers, directors and
consultants of the Company upon the exercise of options pursuant to the
Company's stock option plan. As of the Closing, all issued and outstanding
shares of the Company's capital stock will have been duly authorized and validly
issued and outstanding, will be fully paid and nonassessable and will be owned
of record by the stockholders in the amounts set forth in Section 3.5 of the
Disclosure Schedule. As of the date of any conversion of the Shares, the shares
of Common Stock issued upon such conversion will be duly and validly issued and
outstanding and fully paid and nonassessable with no personal liability
attaching to the ownership thereof and not subject to preemptive or similar
rights of stockholders of the Company or others. The Shares and any shares of
Common Stock issued on such conversion will be free of any liens, claims or
encumbrances of the Company and free of restrictions on transfer other than as
set forth in this Agreement or the Registration Rights Agreement or under
applicable state and federal securities laws. Except as set forth in Section 3.5
of the Disclosure Schedule, (a) there are no options, warrants or conversion
privileges presently outstanding to purchase or otherwise acquire any authorized
but unissued shares of the capital stock or other securities of the Company, (b)
there are no outstanding rights or obligations of the Company to repurchase,
redeem or otherwise acquire any securities of the Company, and (c) there are no
stockholder agreements, voting trusts or other agreements or understandings to
which the Company is a party or, to the knowledge of the Company, between or
among stockholders of the Company.
3.6 Authorization. All corporate action on the part of the Company
and its stockholders necessary for the authorization, execution, delivery, and
performance of this Agreement and the Ancillary Agreements by the Company, the
authorization, sale, issuance and delivery of the Shares and the performance of
the Company's obligations hereunder and under the Ancillary Agreements have been
taken. This Agreement and the Ancillary Agreements, when executed and delivered
by the Company, will constitute a valid and legally binding obligation of the
Company, enforceable against the Company in accordance with their respective
terms, except to the extent limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating
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to or affecting creditors' rights generally and by general equity principles
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
3.7 Title to Properties and Assets. The Company owns no real
property. The Company has good title to or a valid leasehold interest in all of
the material tangible personal property or assets used by it free and clear of
all liens, restrictions and encumbrances other than liens for current taxes not
yet due and payable, and other minor liens and encumbrances which have arisen in
the ordinary course of business and which do not, in any one case or in the
aggregate, detract in any material respect from the value of the property
subject thereto or impair in any material respect the operations of the Company.
3.8 Permits; Compliance with Applicable Law. The Company has all
material franchises, permits, licenses, authorizations, and approvals
("Permits") necessary for the conduct of its business as now being conducted or
as proposed to be conducted by it. The Company is not in violation in any
material respect of, or default in any material respect under, any such Permits.
To the knowledge of the Company, the conduct of the business of the Company is
in conformity with applicable federal, state and other governmental and
regulatory requirements, rules, orders and restrictions, except where such
nonconformity or noncompliance would not, in any one case or in the aggregate,
have a Material Adverse Effect.
3.9 Intellectual Property. (a) Section 3.9(a) of the Disclosure
Schedule shall set forth, for the Intellectual Property owned by the Company or
its Subsidiaries, a complete and accurate list of all United States and foreign
(i) patents and patent applications; (ii) trademark registrations (including
Internet domain registrations) and applications and material unregistered
trademarks; (iii) copyright registrations and applications, and material
unregistered copyrights, indicating for each, the applicable jurisdiction,
registration number (or application number), and date issued (or date filed).
(b) Section 3.9(b) of the Disclosure Schedule shall set
forth a complete and accurate list of all written and material oral license
agreements granting any right to use or practice any rights under any
Intellectual Property, whether the Company is the licensee or licensor
thereunder, and any assignments, consents, forbearances to sue, judgments,
orders, settlements or similar obligations relating to any Intellectual Property
to which the Company is a party or otherwise bound (other than off-the-shelf
software applications programs having an acquisition price of less than $5,000)
(collectively, the "License Agreements"), indicating for each the title, the
parties, date executed, whether or not it is exclusive and the Intellectual
Property covered thereby. The License Agreements are valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, and there exists no event or condition which will result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default by the Company under any such License Agreement.
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(c) No royalties, honoraria or other fees are payable to
any third parties for the use of or right to use any Intellectual Property
except pursuant to the License Agreements which shall be set forth on Section
9(c) of the Disclosure Schedule.
(d) Except as shall be set forth in Section 9(d) of the
Disclosure Schedule:
(i) the Company or its Subsidiaries exclusively
own, free and clear of all liens, all owned Intellectual Property, or have a
valid, enforceable right to use all of the licensed Intellectual Property;
(ii) the Company has taken reasonable steps to
protect the Intellectual Property;
(iii) to the knowledge of the Company, the conduct
of the Company's business as currently conducted or planned to be conducted does
not infringe upon any Intellectual Property rights (other than patents) of or
controlled by any third party nor, to the knowledge of the Company, infringe any
patent owned by or controlled by any third party;
(iv) there is no litigation pending, or to the
knowledge of the Company, threatened (A) alleging that the Company's activities
or the conduct of its businesses or that of any of its Subsidiaries infringes
upon, violates, or constitutes the unauthorized use of the Intellectual Property
rights of any third party or (B) challenging the ownership, use, validity or
enforceability of any Intellectual Property;
(v) to the knowledge of the Company, no third
party is misappropriating, infringing, diluting, or violating any Intellectual
Property owned by the Company and no such claims have been brought against any
third party by the Company; and
(vi) the consummation of the transactions
contemplated hereby will not result in the loss or impairment of the Company's
right to own or use any of the Intellectual Property, nor will they require the
consent of any United States or foreign governmental authority or third party in
respect of any such Intellectual Property.
(e) Except as shall be set forth in Section 9(e) of the
Disclosure Schedule, (i) all trademarks material to the conduct of the business
of the Company have been in continuous use by the Company and (ii) to the
knowledge of the Company, there has been no prior use of such trademarks by any
third party which would confer upon said third party superior rights in such
trademarks; and the registered trademarks have been continuously used in the
form appearing in, and in connection with the goods and services listed in,
their respective registration certificates or identified in their respective
pending applications.
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(f) Except as shall be set forth in Section 9(f) of the
Disclosure Schedule, the Company has taken reasonable steps in accordance with
normal industry practice to protect the Company's rights in trade secrets of the
Company. It is the Company's intention to implement a policy of requiring each
employee, consultant, contractor and officer to execute customary proprietary
information, confidentiality and assignment agreements in substantially the form
attached hereto as Exhibit E. The Company is not aware that any of its employees
is obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgement, decree or order of
any court or administrative agency, that would interfere with their duties to
the Company or that would conflict with the Company's business as presently
proposed to be conducted. No former or current employee, officer or consultant
of the Company has excluded works or inventions made prior to his or her
employment with the Company from his or her assignment of inventions pursuant to
such employee, officer or consultant's proprietary information and inventions
agreement. To the Company's knowledge, there has been no disclosure of any
Company confidential information or trade secrets the disclosure of which could
reasonably be expected to have a Material Adverse Effect.
(g) Neither the execution nor delivery of this Agreement
or the Ancillary Agreements, nor the carrying on of the Company's business by
the employees of the Company, nor the conduct of the Company's business as
presently proposed, will, to the Company's knowledge, conflict with or result in
a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any employee is now
obligated.
As used herein, the term "Intellectual Property Rights" means all industrial and
intellectual property rights, including, without limitation, Proprietary
Technology, patents, patent applications, patent rights, trademarks, trademark
applications, trade names, service marks, service mark applications, copyrights,
copyright registration, copyright application, know-how, certificates of public
convenience and necessity, franchises, licenses, databases, Internet domain
names and applications therefor (and all interest therein), computer programs
and other computer software, user interfaces, customer lists, trade secrets,
proprietary processes and formulae. As used herein, "Proprietary Technology"
means all source and object code, algorithms, architecture, structure, display
screens, layouts, processes, inventions, trade secrets, know-how, instructions,
templates, marketing materials, trade dress, logos, designs, development tools
and other proprietary rights owned by the Company pertaining to any product or
service manufactured, marketed or sold, or proposed to be manufactured, marketed
or sold (as the case may be), by the Company or used, employed or exploited in
the development, license, sale, marketing, distribution or maintenance thereof,
and all documentation and media constituting, describing or relating to the
above, including, without limitation, manuals, memoranda, know-
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how, notebooks, patents and patent applications, trademarks and trademark
applications, copyrights and copyright applications, records and disclosures.
3.10 Material Adverse Changes. Since December 31, 1999 there has
not been any change in the properties, assets, liabilities, prospects, financial
condition or operating results of the Company from that reflected in the audited
balance sheet, dated December 31, 1999 (the "Balance Sheet"), and the related
statements of operations and cash flows for the period from January 1, 1999 to
December 31, 1999, of the Parent, except changes in the ordinary course of
business that have not been, in any one case or in the aggregate, materially
adverse.
3.11 Absence of Undisclosed Liabilities. Except as reflected or
reserved against in the Balance Sheet, as shall be disclosed in the Disclosure
Schedule or the Ancillary Agreements, or as are incurred in the ordinary course
of its business, the Company does not have, and the Company does not know of,
any liabilities (fixed or contingent, including without limitation any tax
liabilities due or to become due) which would be required to be disclosed under
generally accepted accounting principles and which are, either individually or
in the aggregate, material.
3.12 Absence of Conflicts. The execution, delivery, and performance
of, and compliance with this Agreement and the Ancillary Agreements, the
issuance of the Shares and the issuance of Common Stock upon conversion of the
Shares, and the consummation of the transactions contemplated hereby and
thereby, have not and will not: (i) violate, conflict with or result in a breach
of any provision of or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in the
creation of any lien upon any of the material assets, properties or business of
the Company under, any of the terms, conditions or provisions of (x) the
Certificate of Incorporation or the Bylaws of the Company, or (y) any indenture,
loan agreement or other contract of the Company; or (ii) violate any judgment,
ruling, order, writ, injunction, award, decree, or any law or rule of any
federal, state, county or local government or any other governmental, regulatory
or administrative agency or authority which is applicable to the Company or any
of its assets, properties or businesses; or (iii) result in the suspension,
revocation, impairment, forfeiture, or non-renewal of any Permit that is
material to the Company, which in any one case or in the aggregate as to the
items set forth in clauses (i), (ii) and (iii) above would have a Material
Adverse Effect.
3.13 Contracts. Except for this Agreement, the Ancillary Agreements
and the agreements set forth in Section 3.13 of the Disclosure Schedule (the
"Material Agreements"), the Company does not have and is not bound by any
contract, agreement, lease, commitment or other arrangement, written or oral,
absolute or contingent, other than (i) contracts for the purchase of supplies
and services that were entered into in the ordinary course of business and that
do not
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involve more than $50,000, and do not extend for more than one (1) year beyond
the date hereof, (ii) sales and services contracts entered into in the ordinary
course of business, and (iii) contracts terminable at will by the Company on no
more than thirty (30) days' notice without cost or liability to the Company. The
Company has no collective bargaining agreements with any of its employees. There
is no labor union organizing activity pending or, to the Company's knowledge,
threatened with respect to the Company. For the purpose of this paragraph,
employment and consulting contracts, and license agreements and any other
agreements relating to the Company's acquisition or disposition of patent,
copyright, trade secret or other proprietary rights or technology (other than
standard end-user license agreements, consulting or development agreements)
shall not be considered to be contracts entered into in the ordinary course of
business. Each Material Agreement is in full force and effect and is valid,
binding and enforceable in accordance with its terms as to the Company and, to
the knowledge of the Company, as to each party thereto. There exists no material
breach or material default (or event that with notice or lapse of time would
constitute a material breach or material default) on the part of the Company or,
to the knowledge of the Company, on the part of any other party under any
Material Agreement. The Company has not received a written notice of termination
or default under any Material Agreement. As of the date of this Agreement, no
party to an agreement under which the Company acquired a substantial portion of
its assets has asserted any claim for indemnification under such agreement.
3.14 Year 2000. The proprietary products offered for sale or
licensed by the Company or used in the Company's internal systems are Year 2000
Compliant and the proprietary products currently contemplated to be offered for
sale or license by the Company will, upon their sale or license to a third
party, be Year 2000 Compliant, except for any failure of such products to be
Year 2000 Compliant that would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. The Company has obtained customary Year
2000 representations and warranties from third parties with respect to third
party products used by the Company in its internal systems or internally in
connection with its proprietary products. As used herein, "Year 2000 Compliant"
or "Year 2000 Compliance" means that products, when used in accordance with
associated documentation, will record, store, process, present, recognize,
retrieve, access and manipulate calendar dates falling on or after December 31,
1999 and any date based, date dependent or date related data in the same manner
and in all material respects with the same functionality as such products
record, store, process, present, recognize, retrieve, access and manipulate
calendar dates falling before December 31, 1999 and any date based, date
dependent or date related data; provided that all third party software,
hardware, products, services and applications used with or using the products
properly exchange date data with it. The Company has not received any written
notice from any third party alleging, and to the Company's knowledge, there is
no reason to believe, that such third party's software, hardware, products,
services or applications when used with the Company's products (a) do not
properly exchange date data with the Company's products or (b) will cause the
Company's products not to be Year
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2000 Compliant. Except as specifically set forth herein, the Company is not
responsible and makes no representations or warranties with respect to Year 2000
Compliance of software and hardware provided by third parties.
3.15 Litigation. There are no claims, actions, suits, proceedings,
or investigations pending or, to the Company's knowledge, threatened against the
Company or any of its properties before any court or governmental agency, which,
if determined adversely to the Company, would have a Material Adverse Effect.
3.16 Governmental Consent. No consent, approval, authorization,
declaration, notification, or filing with any governmental authority on the part
of the Company is required in connection with the execution, delivery and
performance of this Agreement or the Ancillary Agreements, the offer, sale, or
issuance of the Shares or the consummation of any other transaction contemplated
hereby or by the Ancillary Agreements, except the qualification (or the taking
of such action as may be necessary to secure an exemption from qualification, if
available) of the offer and sale of the Shares and the shares of Common Stock
issuable on conversion thereof under applicable state "blue sky" securities
laws, which filings and qualifications, if required, will be accomplished in a
timely manner; provided, however, that solely with respect to state "blue sky"
securities laws, the representations and warranties provided in this Section
3.16 shall be subject to the accuracy of the representations of the Purchaser
set forth in Section 5 hereof.
3.17 ERISA. The Company does not sponsor, maintain, have any
obligation to contribute to, have any liability under, or otherwise is not a
party to, any Benefit Plan. For purposes of this Agreement, "Benefit Plan" means
any plan, fund, program, policy, arrangement or contract, whether formal or
informal, which is in the nature of (i) an employee pension benefit plan (as
defined in Section 3(2) of ERISA) or (ii) an employee welfare benefit plan (as
defined in Section 3(1) of ERISA).
3.18 Environmental and Safety Laws. The Company is not in violation
in any material respect of any applicable statute, law or regulation relating to
the environment or occupational health and safety.
3.19 Offering. Subject to the truth and accuracy of Purchaser's
representations and warranties set forth in this Agreement, the offer, sale and
issuance of the Shares as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act and any applicable state
securities laws.
3.20 Disclosure. No representation or warranty of the Company
contained in this Agreement, the Disclosure Schedule, the Ancillary Agreements,
or any certificate furnished or to
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be furnished to the Purchaser at the Closing contains an untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made. The Company has provided the Purchaser
with or made available to the Purchaser all information requested by the
Purchaser on or before the Closing Date that is reasonably relevant to its
decision to purchase the Shares, including all information the Company believes
is reasonably necessary to make such investment decision. To the Company's
knowledge, there are no facts which (individually or in the aggregate)
materially adversely affect the business, assets, liabilities, financial
condition, prospects or operations of the Company that have not been set forth
in the Agreement, the exhibits hereto, the Ancillary Agreements or in other
documents delivered to Purchasers or their attorneys or agents in connection
herewith.
3.21 Brokers or Finders. The Company has not incurred and will not
incur, directly or indirectly, as a result of any action taken by the Company,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or the transactions
contemplated hereby.
3.22 Employees. To the Company's knowledge, no employee of the
Company, nor any consultant with whom the Company has contracted, is in
violation of any term of any employment contract, proprietary information
agreement or any other agreement relating to the right of any such individual to
be employed by, or to contract with, the Company because of the nature of the
business to be conducted by the Company; and to the Company's knowledge the
continued employment by the Company of its present employees, and the
performance of the Company's contracts with its independent contractors, will
not result in any such violation. The Company has not received any notice
alleging that any such violation has occurred. No employee of the Company has
been granted the right to continued employment by the Company or to any material
compensation following termination of employment with the Company. The Company
is not aware that any officer, key employee or group of employees intends to
terminate his, her or their employment with the Company, nor does the Company
have a present intention to terminate the employment of any officer, key
employee or group of employees.
3.23 Tax Returns and Payments. The Company has timely filed all tax
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and to the
Company's knowledge all other taxes due and payable by the Company on or before
the Closing, have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised (a) that any of its returns,
federal, state or other, have been or are being audited as of the date hereof,
or (b) of any deficiency in assessment or proposed judgment to its federal,
state or other taxes. The Company has no knowledge of any liability of any tax
to be imposed upon its properties or assets as of the date of this Agreement
that is not adequately provided for.
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SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PARENT
The Parent hereby represents and warrants to the Purchaser that, except
as will be set forth on the Disclosure Schedule:
4.1 Organization and Qualification. The Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to own,
lease and operate its assets, properties and business and to carry on its
business as it is now being conducted or proposed to be conducted. The Parent is
duly qualified as a foreign corporation to transact business, and is in good
standing, in each jurisdiction where it owns or leases real property or
maintains employees or where the nature of its activities make such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect.
4.2 Certificate of Incorporation and Bylaws. The Parent has
delivered to the Purchaser true, correct, and complete copies of the Restated
Certificate and the Parent's Bylaws, as amended through the date hereof.
4.3 Corporate Power. The Parent has all requisite corporate power
and authority to execute and deliver this Agreement and the Ancillary Agreements
to which it is a party and to carry out and perform its obligations under the
terms of this Agreement and each of the Ancillary Agreements to which it is a
party.
4.4 Capitalization. The authorized capital stock of the Parent
consists, or will consist immediately prior to the Closing, of 80,000,000
shares, of which 75,000,000 are designated as Common Stock, $0.001 par value per
share ("Parent Common Stock"), and of which 5,000,000 are designated as
Preferred Stock, $0.001 par value per share ("Preferred Stock"). Upon
consummation of the transactions contemplated by this Agreement, the
capitalization of the Parent shall be as set forth in Section 4.4 of the
Disclosure Schedule. Shares of the authorized Common Stock have been reserved as
follows: (i) not less than 850,000 of the authorized shares of Parent Common
Stock have been reserved for issuance upon exchange of Series A Preferred Stock
(the "Exchanged Shares"), and (ii) as of February 29, 2000, 6,269,886 of the
authorized shares of Parent Common Stock have been reserved for issuance to
employees, officers, directors and consultants of the Parent upon the exercise
of options pursuant to the Parent's stock option plans. As of the date of any
exchange of Series A Preferred Stock for Parent Common Stock as set forth in the
Exchange Agreement, the Exchanged Shares will be duly and validly issued and
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outstanding, will be fully paid and nonassessable with no personal liability
attaching to the ownership thereof, will not be subject to preemptive or similar
rights of stockholders of the Parent or others, will be free of any liens,
claims or encumbrances of the Parent and free of restrictions on transfer other
than as set forth in this Agreement or the Ancillary Agreements or under
applicable state and federal securities laws.
4.5 Authorization. All corporate action on the part of the Parent
and its stockholders necessary for the authorization, execution, delivery, and
performance of this Agreement and the Ancillary Agreements by the Parent, the
authorization, issuance, exchange and delivery of the Exchanged Shares and the
performance of all of the Parent's obligations hereunder and under the Ancillary
Agreements have been taken. This Agreement and each of the Ancillary Agreements,
when executed and delivered by the Parent, will constitute a valid and legally
binding obligation of the Parent, enforceable against the Parent in accordance
with its terms, except to the extent limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting creditors'
rights generally and by general equity principles regardless of whether such
enforceability is considered in a proceeding in equity or at law.
4.6 Financial Information. Copies of the Parent's audited balance
sheet, dated December 31, 1999 (the "Balance Sheet"), and the related statements
of operations and cash flows for the period from January 1, 1999 through
December 31, 1999 (collectively, the "Financial Statements") have been delivered
to the Purchaser, (i) present fairly the financial position, results of
operations and cash flow of the Parent as of such date and for such period, (ii)
have been compiled from the books and records of the Parent and its
Subsidiaries, and (iii) have been prepared in accordance with generally accepted
accounting principles, consistently applied.
4.7 Absence of Conflicts. The execution, delivery, and performance
of, and compliance with this Agreement and the Ancillary Agreements, the
issuance and exchange of the Exchanged Shares, and the consummation of the
transactions contemplated hereby and thereby, have not and will not: (i)
violate, conflict with or result in a breach of any provision of or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in the creation of any lien upon any of the
material assets, properties or business of the Parent under, any of the terms,
conditions or provisions of (x) the Certificate of Incorporation or the Bylaws
of the Parent, or (y) any material indenture, loan agreement or other contract
of the Parent; or (ii) violate any judgment, ruling, order, writ, injunction,
award, decree, or any law or rule of any federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority which is applicable to the Parent or any of its assets, properties or
businesses; or (iii) result in the suspension, revocation, impairment,
forfeiture, or non-renewal of any Permit that is
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material to the Parent, which individually or in the aggregate as to the items
set forth in clauses (i), (ii) or (iii) above would have a Material Adverse
Effect.
4.8 Governmental Consent. No consent, approval, authorization,
declaration, notification, or filing with any governmental authority on the part
of the Parent is required in connection with the execution, delivery and
performance of this Agreement or any of the Ancillary Agreements, or the
issuance and exchange of the Exchanged Shares or the consummation of any other
transaction contemplated hereby or by the Ancillary Agreements, except the
qualification (or the taking of such action as may be necessary to secure an
exemption from qualification, if available) of the offer and sale of the
Exchanged Shares under applicable state "blue sky" securities laws, which
filings and qualifications, if required, will be accomplished in a timely
manner; provided, however, that solely with respect to federal and state "blue
sky" securities laws, the representations and warranties provided in this
Section 4.8 shall be subject to the accuracy of the representations of the
Purchaser set forth in Section 5 hereof.
4.9 Offering. Subject to the truth and accuracy of Purchaser's
representations and warranties set forth in this Agreement, the offer of the
Exchanged Shares as contemplated by the Exchange Agreement is exempt from the
registration requirements of the Securities Act and any applicable state
securities laws.
4.10 Disclosure. No representation or warranty of the Parent
contained in this Agreement, the Disclosure Schedule, the Ancillary Agreements,
or any certificate furnished or to be furnished to the Purchaser at the Closing
contains an untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which they were made.
4.11 SEC Reports. The Parent will deliver to the Purchaser, prior
to the Closing Date, a true and complete copy of each form, report (including
but not limited to the Annual Report of the Parent on SEC Form 10-K for the
period ending December 31, 1999), schedule, registration statement, definitive
proxy statement and other document (together with all amendments thereof and
supplements thereto) filed by the Company or any of its Subsidiaries with the
SEC during the period from January 1, 2000 through and including the day
immediately prior to the Closing Date (as such documents have since the time of
their filing been amended or supplemented, the "Company SEC Reports"), which are
all the documents (other than preliminary material) that the Parent and its
Subsidiaries were required to file with the SEC since January 1, 2000. As of
their respective dates, the Company SEC Reports (i) complied as to form in all
material respects with the requirements of the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "Securities Act"), or the
Exchange Act, as the case may be, and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be
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stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as follows:
5.1 Investment. The Purchaser is, and will be, acquiring the
Shares and the Common Stock issued on conversion of the Shares for investment
for its own account, not as a nominee or agent, and not with the view to, or for
resale in connection with, any distribution thereof. The Purchaser understands
that the Shares and any shares of Common Stock issued on conversion of the
Shares have not been, and will not be, registered under the Securities Act or
the securities laws of any state by reason of exemptions from the registration
provisions of the Securities Act and such laws which depend upon, among other
things, the bona fide nature of the investment intent and the accuracy of the
Purchaser's representations as expressed herein.
5.2 Access to Data. The Purchaser has had an opportunity to
discuss the Company's business, management, and financial affairs with the
Company's management and has had the opportunity to review the Company's
facilities and business plans. The Purchaser has also had an opportunity to ask
questions of officers of the Company, which questions were answered to the
Purchaser's satisfaction. The Purchaser acknowledges that it has had an
opportunity to conduct its own independent due diligence investigation of the
Company.
5.3 Authorization. This Agreement and the Registration Rights
Agreement, when executed and delivered by the Purchaser, will constitute valid
and legally binding obligations of the Purchaser, enforceable in accordance with
their respective terms, subject to (i) laws of general application relating to
bankruptcy, insolvency, and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief, or other equitable remedies.
The Purchaser has full power and authority to enter into and to perform its
obligations under this Agreement and the Registration Rights Agreement to which
it is a party in accordance with their respective terms.
5.4 Brokers or Finders. The Company has not incurred and will not
incur, directly or indirectly, through the Purchaser, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
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SECTION 6
CONDITIONS TO OBLIGATIONS OF THE PARTIES
6.1 Conditions to Obligations of Purchaser. The obligations of the
Purchaser to purchase the Shares and to perform any of its obligations hereunder
are subject to the fulfillment of each the following conditions (all of which
may be waived in whole or in part by Purchaser in its sole discretion):
(a) the filing of the Restated Certificate by the Company
with the Secretary of State of the State of Delaware;
(b) the delivery by the Company and the Parent of the
Disclosure Schedule (which shall be acceptable to Purchaser in its sole
discretion), the Ancillary Agreements, the certificates described in Section
2.2(e) hereof and the consents, permits and waivers, if any, described in
Section 2.2(g) hereof;
(c) the delivery by the Company of the Restated
Certificate;
(d) the truth and accuracy in all material respects as of
the Closing Date of the representations and warranties of the Company and the
Parent set forth in Sections 3 and 4 hereof.; and
(e) receipt by the Purchaser of the opinion of Brian
O'Donoghue, legal counsel to the Company, in customary form and relating to,
among other things, the Company's organization, existence and authority to
execute this Agreement, the enforceability of this Agreement and the
Registration Rights Agreement, and the issuance of the Preferred Shares.
6.2 Conditions to the Obligations of the Company and the Parent.
The obligations of the Company and the Parent to perform any of their respective
obligations hereunder are subject to (a) the delivery by the Purchaser of the
Ancillary Agreements and (b) the truth and accuracy in all material respects as
of the Closing Date of the representations and warranties of the Purchaser set
forth in Section 5 hereof.
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SECTION 7
POST CLOSING COVENANTS
The parties hereto agree as follows with respect to the period
following the Closing and prior to the date upon which the Company (or its
successors or assigns) shall become subject to the reporting requirements under
the Securities Exchange Act of 1934:
7.1 Basic Information Rights.
The Company will maintain true books and records of account in which
full and correct entries will be made of all its business transactions pursuant
to a system of accounting established and administered in accordance with
generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
(a) For so long as Adobe owns at least a majority of the
Shares originally purchased hereunder, the Company shall, in the event
that the financial statements of the Company are not consolidated with
the financial statements of the Parent, furnish to Adobe:
(i) as soon as available, and in any event
within 90 days after the end of each fiscal year of the
Company, a copy of the audited consolidated balance sheet of
the Company as of the end of such year and the related
consolidated statements of income and cash flows for such
fiscal year, setting forth in each case in comparative form
the figures for the previous year, all in reasonable detail;
(ii) as soon as available, and in any event
within 45 days of each of the first three fiscal quarters of
each year, the unaudited consolidated balance sheet of the
Company and the related consolidated statements of income and
cash flow for such quarter and for the period commencing on
the first day of the fiscal year and ending on the last day of
such quarter; and
(iii) as soon as available, and in any event
within 15 days of the end of each month, the unaudited
consolidated balance sheet of the Company and the related
consolidated statements of income and cash flow for such month
and for the period commencing on the first day of the fiscal
year and ending on the last day of such month.
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(b) For so long as Adobe owns at least a majority of the Shares
originally purchased hereunder and the Company is a Subsidiary of the Parent,
the Parent shall furnish to Adobe:
(i) as soon as available, and in any event within 90
days after the end of each fiscal year of the Parent, a copy of the
audited consolidated balance sheet of the Parent and its Subsidiaries
as of the end of such year and the related consolidated statements of
income and cash flows for such fiscal year, setting forth in each
case in comparative form the figures for the previous year, all in
reasonable detail; and
(ii) as soon as available, and in any event within 45
days of each of the first three fiscal quarters of each year, the
unaudited consolidated balance sheet of the Parent and its
Subsidiaries and the related consolidated statements of income and
cash flow for such quarter and for the period commencing on the first
day of the fiscal year and ending on the last day of such quarter.
7.2 Access and Additional Information Rights. The Company will
permit Adobe and its employees, advisors and other authorized representatives,
so long as Adobe owns at least a majority of the Shares originally purchased
hereunder, to visit and inspect any of the properties of the Company, including
its books of account and other records (and make copies thereof and take
extracts therefrom), and to discuss its affairs, finances and accounts with the
Company's officers and its independent auditors, all at such reasonable times
during normal business hours and as often as Adobe may reasonably request. For
so long as Adobe owns at least a majority of the Shares originally purchased
hereunder, the Company shall promptly notify the Purchaser of any material
adverse change in the business, prospects, assets or condition, financial or
otherwise, of the Company and of any actual litigation or governmental
proceeding or investigation brought in writing against the Company by a third
party with a bona fide dispute with the Company, or against any officer,
director or key employee of the Company which, if adversely determined, would
have a Material Adverse Effect; provided, however, that such notification shall
be limited to the existence of such action and specifically shall not include
the advice of counsel or any other information protected by the attorney-client
privilege or work-product doctrine.
7.3. Right to Consent to Certain Future Common Stock Issuances;
Transfer Restrictions. So long as Adobe is the holder of a majority of the
Series B Preferred Stock originally purchased hereunder, the Company or the
Parent, as the case may be, shall not, without the prior written consent of
Adobe, sell to a single purchaser securities constituting or convertible into
35% or more of the Common Stock of the Company (a "Significant Sale of
Securities") on a Fully Diluted Basis provided such purchaser has been
reasonably identified in writing to the Company by the President of Adobe as, in
the good faith judgment thereof, having
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a material business conflict with Adobe with respect to Adobe's investment in
the Company. As used herein, the term "Fully Diluted Basis" means on the basis
of all outstanding shares of capital stock of the Company and all options
(whether vested or unvested), warrants, rights, calls, commitments or agreements
of any character to which the Company is a party or by which it is bound calling
for the issuance of shares of capital stock of the Company or any securities
convertible into or exercisable or exchangeable for, or representing the right
to purchase or otherwise receive, directly or indirectly, any such capital
stock, or other arrangement to acquire, at any time or under any circumstance,
capital stock of the Company or any such other securities. Other than in
connection with a public offering effected in accordance with the Registration
Rights Agreement or pursuant to a merger or consolidation of the Company, Adobe
shall not, without the Company's prior written consent, voluntarily transfer any
Shares or shares of Common Stock issuable on conversion thereof to any Person
reasonably identified by the Chairman of the Board of Directors of the Company
as, in the good faith judgment thereof, a material competitor of the Company.
Notwithstanding anything herein to the contrary, Adobe shall have the right to
transfer the Shares or any shares of Common Stock issuable upon conversion
thereof to any parent company, Subsidiary or affiliate of Adobe without the
prior written consent of the Company. For purposes of giving effect to the
rights granted hereunder, (a) the Company or the Parent (as the case may be)
shall give Adobe 20 days' prior written notice of its intention to make a
Significant Sale of Securities, which notice shall identify the prospective
purchaser and (b) Adobe shall give the Company 20 days' prior written notice of
its intention to make a transfer of any Shares or shares of Common Stock
issuable on conversion thereof to any Person other than a parent company,
Subsidiary or affiliate of Adobe, which notice shall identify the prospective
transferee.
7.4. Preemptive Right. If the Company or, in the event that Parent
and the Company enter into a Restructuring Merger (as defined in the Exchange
Agreement), Parent shall enter into an agreement providing for the private sale
or issuance of Additional Stock (as defined in the Restated Certificate) to a
third party, Adobe shall have a right to subscribe for and purchase the number
of shares of Common Stock as will permit Adobe to maintain its then current
equity interest in the Company or Parent (as the case may be) at the same price
and on the same terms and conditions as the proposed sale to such third party
(the "Preemptive Right"); provided, however, that the Preemptive Right shall
expire and be of no further force and effect on the date after which the market
capitalization of the Company or, in the event that Parent and the Company enter
into a Restructuring Merger (as defined in the Exchange Agreement), Parent is
equal to or greater than $600,000,000 for a consecutive thirty (30) trading day
period.
7.5. Board Representative Rights. So long as Adobe is the holder of
a majority of the Preferred Shares originally purchased hereunder, Adobe shall
have the right to elect a representative to serve on the Board of Directors of
the Company.
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SECTION 8
GENERAL PROVISIONS
8.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York without giving
effect to the conflicts of laws principles thereof (other than New York General
Obligations Law Section 5-1401).
8.2 Successors and Assigns; Third Party Beneficiaries. Except as
otherwise expressly limited herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors and assigns of the parties
hereto. Nothing in this Agreement, expressed or implied, is intended to confer
upon any party other than the parties hereto and their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement.
8.3 Entire Agreement; Amendment and Waiver. This Agreement, the
Disclosure Schedule and the Ancillary Agreements constitute the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof and thereof and supersede all prior agreements among the parties,
if any. Any term of this Agreement may be amended, and the observance of any
term hereof may be waived (either generally or in a particular instance) only
with the written consent of each of the Purchaser and the Company and, to the
extent affected thereby, the Parent. Any amendment or waiver effected in
accordance with this Section 6.3 shall be binding upon each of the parties
hereto.
8.4 Survival. The representations and warranties made herein shall
survive any investigation made by the Purchaser and the Closing for a period of
eighteen (18) months, except that the representations and warranties in Sections
3.3, 3.5, 3.6, 4.3, 4.4 and 4.5 shall survive indefinitely.
8.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be (i) by facsimile, (ii)
mailed by registered or certified mail, postage prepaid, (iii) delivered by
reliable overnight courier service, or (iv) otherwise delivered by hand or by
messenger, addressed (A) if to the Purchaser, to Adobe Systems Incorporated, 345
Park Avenue, San Jose, CA 95110-2704 or at such other address as the Purchaser
shall have furnished to the Company in writing, and (B) if to the Company, to
Metastream Corporation, 498 Seventh Avenue, Suite 1810, New York, N.Y. 10018,
Attention: President (Fax No.: 646-485-9101) with a copy to Metastream
Corporation, 498 Seventh Avenue, Suite 1810, New York, N.Y. 10018, Attention:
General Counsel (Fax No.: 646-485-9101) or at such other address as the Company
shall have furnished to the Purchaser in writing, and (C) if to the Parent, to
MetaCreations
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Corporation, 6303 Carpinteria Avenue, Carpinteria, CA, Attention: President (Fax
No.: 805-566-6336) with a copy to MetaCreations Corporation, 498 Seventh Avenue,
Suite 1810, New York, N.Y. 10018, Attention: General Counsel (Fax No.:
646-485-9101) or at such other address as the Parent shall have furnished to the
Purchaser in writing. All such notices and communications shall be effective (x)
on the date of transmission if delivered by facsimile, (y) on the day of
delivery if delivered by hand or by registered or certified mail, and (z) on the
day following deposit thereof with a reliable overnight courier service if
delivered thereby.
8.6 Delays or Omissions. No delay or omission to exercise any
right, power, or remedy accruing to any party upon any breach or default under
this Agreement shall be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent, or approval of
any kind or character on the part of any party of any breach or default under
this Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing.
8.7 References. Unless the context otherwise requires, any
reference to a "Section" refers to a section of this Agreement. Any reference to
"this Section" refers to the whole number section in which such reference is
contained.
8.8 Severability. If any provision of this Agreement is held to be
unenforceable under applicable law, then such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms. The court in its discretion may substitute for the excluded provision an
enforceable provision which in economic substance reasonably approximates the
excluded provision.
8.9 Pronouns. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.
8.10 Counterparts; Facsimile Execution. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original and enforceable against the parties actually executing such
counterpart, and all of which, when taken together, shall constitute one
instrument. Facsimile execution and delivery of this Agreement shall be legal,
valid and binding execution and delivery for all purposes.
8.11 Certain Definitions. As used in this Agreement, the following
terms shall have the following meanings unless the context otherwise required:
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(a) "Person" means any individual, corporation, general
or limited partnership, limited liability company, limited liability
partnership, firm, joint venture, association, enterprise, joint stock company,
trust, business trust, unincorporated organization or other entity.
(b) "Subsidiary" means any Person as to which the Company
or the Parent, as the case may be, directly or indirectly, owns or has the power
to vote, or to exercise a controlling influence with respect to, fifty percent
(50%) or more of the securities of any class of such person, the holders of
which class are entitled to vote for the election of directors (or persons
performing similar functions) of such person.
8.12 Restrictive Legends. (a) Each certificate representing (i)
Shares, (ii) any securities issued upon conversion of the Shares, and (iii) any
other securities issued or issuable, directly or indirectly, in respect of any
of the Shares or any shares issued upon conversion of the Shares, upon any stock
split, stock dividend, recapitalization, merger, consolidation, share exchange
or similar event, shall (unless otherwise permitted by the provisions of this
Section 6.12) be stamped or otherwise imprinted with a legend in substantially
the following form to the extent applicable (in addition to any legend(s)
required under the Registration Rights Agreement or applicable state securities
laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT. THE TRANSFER OF SUCH
SECURITIES IS ALSO RESTRICTED PURSUANT TO THE SERIES B
PREFERRED STOCK PURCHASE AGREEMENT DATED AS OF JULY 18, 2000,
AS AMENDED FROM TIME TO TIME, INCLUDING SECTION 7.3 THEREOF.
The Purchaser and any subsequent holder of the Shares consents to the
Company making a notation on its records and giving instructions to any transfer
agent of the Shares in order to implement the restrictions on transfer described
in this Section 6.12.
(b) The Company or the Parent, as the case may be, shall reissue
promptly certificates without the foregoing legend at the request of any
holder thereof if the holder shall have obtained an opinion of counsel (which
counsel may be counsel to the Company or the Parent, as the case may be)
reasonably acceptable to the Company or the Parent, as the case may be, to the
effect that the securities proposed to be disposed of may lawfully be so
disposed of without registration,
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<PAGE> 23
qualification or legend or, as to the second sentence thereof, the applicable
provisions of this Agreement have terminated and no longer require such legend.
Any legend endorsed on an instrument pursuant to applicable state securities
laws and the stop-transfer instructions with respect to such securities shall be
removed upon receipt by the Company or the Parent, as the case may be, of an
order of the appropriate blue sky authority authorizing such removal or an
opinion of counsel reasonably satisfactory to the Company or the Parent, as the
case may be, to the effect that any such applicable state securities legends or
stop-transfer instructions are not required and may be removed.
8.13 Confidentiality. The Purchaser agrees to keep confidential any
confidential or proprietary information provided to it by the Company or the
Parent pursuant to this Agreement or the Ancillary Agreements, in the Disclosure
Schedule or otherwise, and further agrees that it will use such information
solely for purposes related to its investment in the Company; provided, however,
that (i) any of such information may be disclosed to the Purchaser's partners,
directors, officers, employees, investment advisor, attorneys, accountants,
consultants and other professionals who need to know such information (it being
understood that such partners, directors, officers, employees, investment
advisor, attorneys, accountants, consultants and other professionals shall be
informed by the Purchaser of the confidential nature of such information and
shall be directed to treat such information confidentially), (ii) any of such
information may be disclosed, to any prospective purchaser of any Shares of the
Company owned by a Purchaser as long as such prospective purchaser agrees in
writing to be bound by the confidentiality provisions of this Section, (iii) any
such information may be disclosed following prior notice if (A) required by
subpoena, applicable law, regulation, regulatory body, administrative order,
stock exchange rules or any listing or trading agreement, and (iv) disclosure of
such information may be made with respect to which the Company consents in
writing. The provisions of this Section 6.13 shall not apply to information
which (x) is already known to the Purchaser, (y) is or becomes generally
available to the public other than as a result of disclosure by the partners,
directors, officers, employees, agents or advisors of the Purchaser, or (z)
becomes available to the Purchaser on a non-confidential basis from a source
other than the Company, provided that such source is not known by the Purchaser
to be bound by an obligation of confidentiality or secrecy to the Company or the
Parent, as the case may be.
8.14 Legal Fees and Expenses. Each party hereto shall bear its own
expenses and legal fees incurred on its behalf with respect to the negotiation
of this Agreement and the transactions contemplated hereby.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Series B
Preferred Stock Purchase Agreement to be executed by their duly authorized
officers as of the date first set forth above.
METASTREAM CORPORATION
By: /s/ Robert E. Rice
------------------------------------
Name: Robert E. Rice
Title: CEO
METACREATIONS CORPORATION
By: /s/ Robert E. Rice
------------------------------------
Name: Robert E. Rice
Title: CEO
ADOBE SYSTEMS INCORPORATED
By: /s/ Bruce R. Chizen
------------------------------------
Name: Bruce R. Chizen
Title: President
24
<PAGE> 25
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT, dated as of July 18, 2000 (this "Agreement"), among
METASTREAM CORPORATION, a Delaware corporation (the "Company"), METACREATIONS
CORPORATION, a Delaware corporation (the "Parent") and ADOBE SYSTEMS
INCORPORATED, a Delaware corporation (the "Holder"), with reference to the
following:
A. Parent owns 80% of the outstanding common stock, par value $0.00001 per
share, of the Company ("Company Common Stock"), which investment
represents Parent's principal asset.
B. On the date hereof, Holder purchased 1,500,000 shares (the "Preferred
Shares") of Series B Convertible Preferred Stock of the Company
("Series B Preferred Stock") pursuant to that certain Series B
Preferred Stock Purchase Agreement (the "Purchase Agreement"), which
shares are, under certain circumstances, convertible into Company
Common Stock in accordance with the provisions of the Amended and
Restated Certificate of Incorporation of the Company.
C. In order to induce Holder to purchase the Shares, Parent is willing to
exchange all, but not less than all, of the Preferred Shares for newly
issued shares of common stock, par value $0.001 per share, of Parent
("Parent Common Stock") in accordance with and subject to the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the obligations and agreements
contained herein and in the Purchase Agreement, the parties hereto agree as
follows:
1. Exchange of Securities. (a) Subject to and upon compliance with the
provisions of this Agreement, the Parent shall, upon the election of the Holder
by delivery of a notice of exercise during the Exchange Period in accordance
with Section 2 below, issue and deliver to the Holder in exchange for each share
of Series B Preferred Stock such number of fully paid and nonassessable shares
of Parent Common Stock as is determined by dividing $6.6667 by the Exchange
Price in effect at the time of the exchange. The term "Exchange Price" as used
herein means 0.87 multiplied by the lesser of (a) $6.67 and (b) the average of
the last per share sales price of Parent Common Stock as reported in the
National Association of Securities Dealers Automated Quotation System during the
15 consecutive trading days immediately prior to the date upon which notice of
the election to exchange is delivered to the Parent and the Company in
accordance with Section 2 hereof; provided, however, that the Exchange Price
shall be subject to adjustment as provided in Section 3 below. The term
"Exchange Period" as used herein means the period beginning on the date hereof
and ending on the date on which the earliest of the following occurs: (a) the
date on
<PAGE> 26
which the Company files a registration statement relating to the initial public
offering of Company Common Stock, provided that if such initial public offering
is not consummated within two hundred seventy (270) days of such filing, then
the Holder's rights under this exchange agreement shall be reinstated subject to
the provisions hereof; (b) the exercise by the Holder of any of its conversion
rights under the Series B Preferred Stock or the automatic conversation thereof;
(c) the merger or consolidation of the Parent and the Company in which the
surviving corporation is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended, provided, with respect to this clause (c)
only, that Parent is immediately prior thereto and has been at all times since
the date hereof the owner of a majority of the voting capital stock of the
Company and continues to elect the majority of the Board of Directors or other
governing body of the Company and provided further that the Parent has not
merged into or consolidated with another corporation or other entity or sold all
or substantially all of its assets or capital stock, in each case under
circumstances in which the holders of the majority in voting power of the
outstanding capital stock of the Parent, immediately prior to such merger,
consolidation or sale own less than the majority in voting power of the
outstanding capital stock of the Parent or the surviving or resulting
corporation or acquirer, as the case may be, immediately following such merger,
consolidation or sale (a "Restructuring Merger"); and (d) July 18, 2005. Parent
and the Company shall give the Holder 30 days' written notice prior to the
occurrence of any of the events set forth in clauses (a)-(c) of this Section 1.
The Series B Preferred Stock may be exchanged in whole but not in part. If the
Parent shall sell, assign or transfer to a third party a number of shares of
Company Common Stock representing a majority in voting power of the outstanding
capital stock of the Company (other than in a transaction in which paragraph
3(c) below is applicable), provision shall be made so that the Holder will be
entitled to exchange the Preferred Shares for shares of common stock of such
third party upon the same terms and conditions as the terms and conditions
hereof except that the price at which shares of such third party's common stock
shall be exchangeable for the Preferred Shares shall be appropriately adjusted
to reflect the fair market value of such common stock, as determined in good
faith by the Board of Directors of Parent, provided, however, that if the Holder
objects in writing (an "Objection Notice") to such a determination of fair
market value of the Board of Directors within 15 days after notice of such
determination has been sent to the Holder, then the Parent and the Holder shall
attempt to resolve such dispute within 10 days following the Parent's receipt of
the Objection Notice. If the Parent and the Holder are unable to resolve such
dispute within such 10-day period, then such determination shall be made by a
nationally recognized independent investment banking firm mutually agreed upon
by the Parent and the Holder (the expense of which firm or appraiser shall be
born by the Parent). The determination of such firm shall be final and binding
on the Parent and the Holder. If the parties cannot agree on the investment
banking firm to make the determination contemplated by this section within 20
days after the Parent's receipt of the Objection Notice, then the Parent and the
Holder shall each designate an investment bank, and such two firms shall agree
upon and designate a third investment bank, which firm shall thereupon make such
determination.
(b) In the event that the Parent and the Company enter into an
agreement governing a Restructuring Merger ("Restructuring Merger Agreement"),
the Holder shall, upon the election
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of the Parent by delivery of a notice of exercise in accordance with Section
2(b) below, transfer, assign and deliver the Preferred Shares to the Parent, in
exchange for such number of fully paid and nonassessable shares of Parent Common
Stock as is equal to the greater of (i) the number of shares of Parent Common
Stock deliverable to the Holder if the Holder had exercised its rights under
Section 1(a) hereof or (ii) the number of shares of Parent Common Stock that
would have been deliverable to the Holder pursuant to the Restructuring Merger
Agreement if the Holder had exercised its right to convert the Preferred Shares
to Company Common Stock immediately prior to the Restructuring Merger (the
"Original Exchange"); provided, however, that if the Restructuring Merger is not
consummated within forty-five (45) days of the date of the Restructuring Merger
Agreement (the "Merger Period"), the Holder shall have the right and the Company
and Parent shall be obligated if such right is exercised to rescind the Original
Exchange and restore the parties rights and obligations as they existed
immediately prior to the Original Exchange such that Company and Parent shall
re-exchange the shares of Parent Common Stock received by the Holder pursuant to
this Section 1(b) for the Preferred Shares and, if the Holder exercises its
right to effect such recission hereunder, the Holder's rights under the Amended
and Restated Certificate of Incorporation of the Company as in effect on the
date thereof, this Agreement, the Purchase Agreement and the Registration Rights
Agreement shall be reinstated in full force and effect without any further
action on the part of the Company, the Parent or the Holder. Parent and the
Company, jointly and severally agree to indemnify and hold harmless the Holder
and its officers, directors, employees, stockholders, successors and assigns
from and against any federal, state and local taxes (including any interest or
penalties thereon) or other costs incurred by the Holder resulting from the
transactions contemplated by the proviso in the first sentence of this Section
1(b). Any indemnification payment shall be made within thirty (30) days from the
date that the Holder makes written demand therefor.
2. Method of Exchange. (a) In order to exercise its exchange rights
hereunder, the Holder shall surrender the certificate or certificates
representing the Preferred Shares duly endorsed, at the office of the Parent or
of any transfer agent for Parent Common Stock, and shall give 15 days' advance
written notice by mail, postage prepaid, to the Parent and the Company at their
respective principal corporate offices of the election to exchange the same,
stating therein the name or names in which the certificate or certificates for
shares of Parent Common Stock are to be issued. Subject to Section 2(c) below,
the Parent shall, no later than the end of such 15-day period, issue and deliver
to the Holder, or to the Person designated in such notice, (i) a certificate or
certificates for the number of shares of Parent Common Stock issuable thereto in
accordance with the terms and conditions hereof and (ii) a certificate of the
Parent signed by its President setting forth customary representations and
warranties of Parent (including with respect to valid issuance of the shares of
Parent Common Stock under corporate law and relevant securities laws,
authorization, Securities Act filings of Parent and capitalization of Parent).
Subject to Section 2(c) below, such exchange shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
certificate or certificates representing the Preferred Shares and the person or
entity entitled to receive the shares of Parent Common Stock issuable
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<PAGE> 28
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Parent Common Stock as of such date.
(b) In order to exercise its exchange rights hereunder, the Parent
shall issue a certificate or certificates representing the shares of Parent
Common Stock issuable hereunder duly endorsed, at the office of the Parent or of
any transfer agent for Parent Common Stock, and shall give 10 days' advance
written notice by mail, postage prepaid, to the Holder at its principal
corporate offices of the election to exchange the same. The Holder shall, no
later than the end of such 10-day period, deliver to the Parent a certificate or
certificates representing the Preferred Shares together with a stock power
endorsed by the Holder. Such exchange shall be deemed to have been made
immediately prior to the close of business on the date of the delivery of the
certificate or certificates representing the Preferred Shares and the Parent
shall be treated for all purposes as the record holder or holders of the
Preferred Shares as of such date.
(c) In the event that Parent is required to obtain shareholder
approval pursuant to the rules and/or regulations promulgated by the Securities
and Exchange Commission or any securities exchange on which its securities are
then trading in order to issue shares of Parent Common Stock in accordance with
this agreement, Parent shall not be obligated to exchange the Preferred Shares
pursuant to Section 1 until such shareholder approval is obtained.
Notwithstanding the foregoing, in connection with an exchange pursuant to
Section 1(b), if such stockholder approval is not obtained prior to the end of
the Merger Period, then Parent and the Company shall be required to re-exchange
the Preferred Shares to the Holder in accordance with Section 1(b).
3. Adjustment. The Exchange Price shall be subject to adjustment from
time to time as follows:
(a) Split; Subdivision or Combination. If the Parent shall,
after the date hereof and prior to the termination of the Exchange
Period, effect a split or subdivision of the outstanding shares of
Parent Common Stock, then, as of the record date for such split or
subdivision (or as of the date of such split or subdivision if no
record date is fixed), the Exchange Price shall be appropriately
decreased and the number of shares of Parent Common Stock issuable on
exchange of each share of Series B Preferred Stock shall be increased
in proportion to such increase in the number of outstanding shares of
Parent Common Stock. If the number of shares of Parent Common Stock
outstanding during the Exchange Period is decreased by a combination of
the outstanding shares of Parent Common Stock, then, following the
record date of such combination (or as of the date of such combination
if no record date is fixed), the Exchange Price shall be appropriately
increased in proportion to such decrease in the number of outstanding
shares of Parent Common Stock.
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<PAGE> 29
(b) Stock Dividends. If the Parent shall, during the Exchange
Period, pay a dividend with respect to Parent Common Stock in shares of
Parent Common Stock, then, following the payment date of such dividend,
the Exchange Price shall be appropriately adjusted so that the Holder
shall be entitled to receive upon exchange of the Preferred Shares the
number of shares of Parent Common Stock which the Holder would have
owned immediately following such dividend had the Holder exchanged the
Preferred Shares immediately prior thereto.
(c) Mergers; Recapitalizations. If the Parent is, after the
date hereof and prior to the termination of the Exchange Period, a
party to a transaction (including a merger, consolidation, sale of all
or substantially all of the Parent's assets (other than such
transaction in which the Holder exercises its rights under Section 5
hereof) or a reclassification or recapitalization of the Parent Common
Stock), in which the previously outstanding shares of Parent Common
Stock shall be changed into or, pursuant to the operation of law or the
terms of the transaction to which the Parent is a party, exchanged for
different securities of the Parent or securities of another corporation
or interests in a non-corporate entity or other property (including
cash) or any combination of any of the foregoing, then, provision shall
be made so that each holder of shares of Series B Preferred Stock shall
be entitled, upon exchange, to an amount per share of Series B
Preferred Stock equal to (1) the aggregate amount of stock, securities,
cash or any other property (payable in kind), as the case may be, into
which or for which each share of Parent Common Stock is changed,
exchanged or reclassified times (2) the number of shares of Parent
Common Stock into which a share of Series B Preferred Stock is
exchangeable immediately prior to the consummation of such transaction.
(d) Fractional Shares. No fractional shares of Parent Common
Stock shall be issued upon the exchange of the Preferred Shares, and,
in lieu of fractional shares, the Parent shall, as soon as practicable,
pay the holder an amount in cash equal to such fraction multiplied by
the then current fair market value of one share of Parent Common Stock.
4. Reservation of Stock Issuable Upon Exchange; Increase in Authorized
Capital. The Parent shall at all times reserve and keep available out of its
authorized but unissued shares of Parent Common Stock, solely for the purpose of
effecting the exchange of the Preferred Shares, such number of shares of Parent
Common Stock as shall from time to time be sufficient to effect the exchange of
the Preferred Shares. If at any time the number of authorized but unissued
shares of Parent Common Stock shall not be sufficient to effect the exchange of
all the Preferred Shares, then, in addition to such other remedies as shall be
available to the Holder, the Parent will take such corporate action as may be
necessary to increase its authorized but unissued shares of Parent Common Stock
to such number of shares as shall be sufficient for such purposes.
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5. Put Right. Unless prohibited by the Delaware General Corporation Law
and subject to and upon material compliance by the Holder with the provisions of
this Agreement, the Holder shall have the right (the "Put Right") at any time
from the date hereof to July 18, 2002 to require the Parent or the Company (or
a third party if applicable as described herein) to purchase, in such
proportions as the Holder may elect, all but not less than all of the shares of
Series B Preferred Stock held by Holder at the time of exercise of the Put
Right, for an amount per share equal to the purchase price per share pursuant to
the Purchase Agreement plus an amount equal to interest thereon at a rate per
annum equal to 5.5%, calculated from the date hereof and compounded quarterly
(the "Put Amount"). In order to exercise the Put Right hereunder, the Holder
shall give 15 days' advance written notice to the Parent and the Company of
Holder's election to exercise its rights hereunder. If the Parent shall sell,
assign or transfer to a third party a number of shares of Company Common Stock
representing a majority in voting power of the outstanding capital stock of the
Company, provision shall be made so that Holder will be entitled to require such
third party, in addition to the Parent and the Company, to purchase the
Preferred Shares upon the same terms and conditions as the terms and conditions
hereof. The Company and Parent undertake that the agreement with such third
party shall provide, among other things, that Parent, the Company and such third
party shall be jointly and severally liable for the obligations set forth in
this Section and the Holder shall be entitled to seek payment for the Put Amount
from Parent, the Company and such third party.
6. Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
conflicts of laws principles thereof (other than New York General Obligations
Law section 5-1401) except to the extent application of the law of the state of
incorporation of the Parent shall be mandatory with respect thereto.
7. Successors and Assigns; Third Party Beneficiaries. Except as
otherwise expressly limited herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors and assigns of the parties
hereto, including a subsequent holder of all, but not less than all, of the
shares of Series B Preferred Stock issued pursuant to the Purchase Agreement.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party other than the parties hereto and their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement.
8. Entire Agreement; Amendment and Waiver. This Agreement, the Purchase
Agreement and the Registration Rights Agreement constitute the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof and thereof and supersede all prior agreements among the parties,
if any. Any term of this Agreement may be amended, and the observance of any
term hereof may be waived (either generally or in a particular instance) only
with the written consent of each of the Holder and the Parent and, to the extent
affected thereby, the Company. Any amendment or waiver effected in accordance
with this Section 8 shall be binding upon each of the parties hereto.
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9. Notices, etc. All notices and other communications pursuant to this
Agreement shall be made in accordance with the Purchase Agreement at the
addresses or facsimile numbers as set forth therein.
10. Delays or Omissions. No delay or omission to exercise any right,
power, or remedy accruing to any party upon any breach or default under this
Agreement shall be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent, or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. In no event shall the
Holder's rights be terminated by a failure of either the Parent or the Company
to perform their respective obligations hereunder.
11. References. Unless the context otherwise requires, any reference to
a "Section" refers to a section of this Agreement. Any reference to "this
Section" refers to the whole number section in which such reference is
contained.
12. Severability. If any provision of this Agreement is held to be
unenforceable under applicable law, then such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms. The court in its discretion may substitute for the excluded provision an
enforceable provision which in economic substance reasonably approximates the
excluded provision.
13. Pronouns. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.
14. Counterparts; Facsimile Execution. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original and
enforceable against the parties actually executing such counterpart, and all of
which, when taken together, shall constitute one instrument. Facsimile execution
and delivery of this Agreement shall be legal, valid and binding execution and
delivery for all purposes.
15. Definitions. As used in this Agreement, "Person" means any
individual, corporation, general or limited partnership, limited liability
company, limited liability partnership, firm, joint venture, association,
enterprise, joint stock company, trust, business trust, unincorporated
organization or other entity.
16. Restrictive Legends. (a) Each certificate representing any shares
issued upon exchange of the Preferred Shares, and (b) any other securities
issued or issuable, directly or indirectly, in respect of any of the Preferred
Shares or any shares issued upon exchange of the
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<PAGE> 32
Preferred Shares in respect of any stock split, stock dividend,
recapitalization, merger, consolidation, share exchange or similar event, shall
(unless otherwise permitted by the provisions of this Section 16) be stamped or
otherwise imprinted with a legend in substantially the following form to the
extent applicable (in addition to any legend(s) required under the Purchase
Agreement, the Registration Rights Agreement or applicable state securities
laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT.
The Holder and any subsequent holder of the Preferred Shares consents
to the Parent making a notation on its records and giving instructions to any
transfer agent of the Shares in order to implement the restrictions on transfer
described in this Section 16.
(b) The Parent shall reissue promptly certificates without the
foregoing legend at the request of any holder thereof if the holder shall have
furnished to Parent an opinion of counsel (which counsel may be counsel to the
Parent) reasonably acceptable to the Parent to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend. Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Parent of an order of
the appropriate blue sky authority authorizing such removal or an opinion of
counsel reasonably satisfactory to the Parent to the effect that any such
applicable state securities legends or stop-transfer instructions are not
required and may be removed.
17. Legal Fees and Expenses. Each party hereto shall bear its own
expenses and legal fees incurred on its behalf with respect to the negotiation
of this Agreement and the transactions contemplated hereby.
18. Specific Performance. The covenants and agreements contained in
this Agreement, are unique and any breach thereof on the part of Parent or the
Company (as the case may be) may not be fully compensable in damages and the
breach or threatened breach of the provisions of this Agreement would cause the
Holder irreparable harm. Accordingly, in addition to and not in limitation of
any other remedies available to the Holder for a breach or threatened breach of
this Agreement, the Holder will be entitled to seek specific performance of this
Agreement upon any breach by Parent or the Company and to seek an injunction
restraining any such party from such breach or threatened breach.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Exchange
Agreement to be executed by their duly authorized officers as of the date first
set forth above.
METASTREAM CORPORATION
By: /s/ Robert E. Rice
------------------------------------
Name: Robert E. Rice
Title: CEO
METACREATIONS CORPORATION
By: /s/ Robert E. Rice
------------------------------------
Name: Robert E. Rice
Title: CEO
ADOBE SYSTEMS INCORPORATED
By: /s/ Bruce R. Chizen
------------------------------------
Name: Bruce R. Chizen
Title: President
9
