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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-QSB/A
[X] Quarterly Report Under Section 13 or 15(d) of The Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________________ to ______________________.
Commission file number 0-21637
BRILLIANT DIGITAL ENTERTAINMENT, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 95-4592204
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6355 TOPANGA CANYON BOULEVARD, SUITE 120
WOODLAND HILLS, CALIFORNIA 91367
(Address of Principal Executive Offices)
(818) 615-1500
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days.
Yes X No
----- ------
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Common Stock, par value
$0.001, 11,756,781 shares issued and outstanding as of July 12, 1999.
Transitional Small Business Disclosure Format (check one):
Yes No X
----- -----
Exhibit index is located on page 5.
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BRILLIANT DIGITAL ENTERTAINMENT, INC.
INDEX
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K............................ 3
Page 2
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
10.1 Architectural Development and Assistance Agreement, dated July
14, 1998. [Portions of this Exhibit have been deleted and
filed separately with the Securities and Exchange Commission
pursuant to a request for an order granting confidential
treatment.]
10.2 Warrant, dated July 16, 1998.
27.1 Financial Data Schedule. Incorporated by reference to Exhibit
27.1 to Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1998.
(b) Reports on Form 8-K.
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BRILLIANT DIGITAL ENTERTAINMENT, INC.
Date: July 13, 1999 /S/ MICHAEL OZEN
------------------------------------
By: Michael Ozen
Its: Chief Financial Officer
(Principal Financial and Accounting
Officer)and Secretary
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EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
10.1 Architectural Development and Assistance Agreement, dated July 14,
1998. [Portions of this Exhibit have been deleted and filed
separately with the Securities and Exchange Commission pursuant to
a request for an order granting confidential treatment.]
10.2 Warrant, dated July 16, 1998.
27.1 Financial Data Schedule. Incorporated by reference to Exhibit 27.1
to Quarterly Report on Form 10-QSB for the quarter ended September
30, 1998.
Page 5
ARCHITECTURAL DEVELOPMENT AND ASSISTANCE AGREEMENT
This agreement ("Agreement") is entered into as of July 14, 1998, ("Effective
Date") by and between Intel Corporation, having a place of business at 2200
Mission College Blvd., Santa Clara, California, 95054 ("Intel ") and Brilliant
Digital Entertainment Corporation, having a place of business at 6355 Topanga
Canyon Boulevard, Suite 120, Woodland Hills, California, 91367 ("Publisher") on
behalf of themselves and their respective worldwide subsidiaries.
BACKGROUND
A. Intel plans to release a processor having [*] technology. Publisher is
developing software which is able to use these enhanced capabilities.
B. Intel is willing to provide Publisher with assistance and funds, and to
receive distribution rights to the software. Publisher is willing to
undertake the development activities and grant the rights set out in this
Agreement.
AGREEMENT
Intel and Publisher agree as follows:
1. PUBLISHER'S EFFORTS
1.1. THE TITLES. The "Titles" to be developed and delivered under this
Agreement are the initial [*] scaleable episodes of the Titles and each of
the first three subsequent additional episodes (if any) of each Title,
made during the term of this Agreement, named Superman, Xena, Kiss and a
fourth Title to be determined and agreed upon by the parties no later than
November 1, 1998 (the TBD Title). The features the first episode of each
of the four Titles must posses are more particularly described in the
Product Requirements Document ("PRD") set forth in Attachment A. The
Titles include all versions for all PC platforms, and include all updates
and enhancements thereof made during the term of this Agreement and the
collateral material specified in Attachment B.
1.2. COMMITMENT TO DEVELOP. Publisher shall use commercially reasonable efforts
to develop and deliver to Intel the Titles according to the milestones set
forth in Section 3 and the Development Schedule and specifications
contained in the PRD. The Superman and Xena Titles, must, at a minimum,
noticeably demonstrate to an end user the advantages of running the Titles
on an Intel processor containing [*] technology, a [*], and [*] and
associated graphics cards vs. an Intel Processor running at [*] with a [*]
and an [*] and associated graphics card. The Kiss and the TBD Title must
at a minimum, noticeably demonstrate the advantages of it on an Intel
Processor containing [*] running at [*], with a [*] and [*] and associated
graphics card vs. an Intel Processor containing [*] running at [*], with a
[*] and an [*] and associated graphics card.
1.3. LANGUAGES. Superman and Xena will be ready and available for purchase by
retailers before June 1, 1999 in the following languages:
1.4. DIALOGUE AND TEXT: U.S. English, [*].
* THE ASTERISK SYMBOL REPLACES INFORMATION THAT HAS BEEN DELETED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR AN ORDER GRANTING CONFIDENTIAL TREATMENT.
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1.5. SUBTITLES AND TEXT: [*].
1.6. KISS and the TBD Title will be ready and available for purchase by
retailers in U.S. English on or before October 1, 1999, and on or before
November 1, 1999 in the following languages:
1.7. DIALOGUE AND TEXT: [*].
1.8. SUBTITLES AND TEXT: [*].
1.9. PROGRAM REVIEW. Intel, Publisher and any third party(s) working on the
Titles for Publisher shall meet at least twice a month (either in person
or by telephone conference) to review the progress of the Titles'
development, including the milestones set out in the Development Schedule
and the compliance of the Titles with the PRD.
2. TECHNICAL ASSISTANCE FROM INTEL. Intel is currently helping Publisher
optimize and port some of its products to the Intel microprocessor
architecture under a separate Source Code License Agreement ("SLA")
effective April 27, 1998 between the parties. Any technical contributions
to the Titles made by Intel hereunder shall be considered Modifications
under that SLA and subject solely to its terms.
Intel agrees that an Application Engineer will coordinate the
technical resources needed from Intel to assist with code optimizations
and will be made reasonably available to Publisher as needed.
3. ADVANCES OF FUNDS
3.1. AMOUNT AND TIMING. Intel will advance certain funds, totaling [*] ($[*])
to Publisher for delivery of 3 Titles, Superman, Xena, and Kiss. If Intel
and Publisher mutually agree upon the specific details of a fourth Title
(which is currently referred to as "Title to be determined") no later than
November 1, 1998, then Intel will advance additional funds totaling [*]
upon Intel's acceptance of the milestones identified below (collectively,
the "Funds"). Intel will advance the Funds to Publisher in the amounts
specified below [*] after Publisher's accomplishing and delivering,
subject to Intel's reasonable satisfaction and acceptance not to be
unreasonably withheld, each of the following milestones:
* THE ASTERISK SYMBOL REPLACES INFORMATION THAT HAS BEEN DELETED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR AN ORDER GRANTING CONFIDENTIAL TREATMENT.
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<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DATE (TO BE USED
TITLE(S) MILESTONE AS A GUIDE) PAYMENT
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
n/a Contract Signing [*]
- --------------------------------------------------------------------------------
Engine optimization
and preliminary
title artwork for
Superman and Xena Alpha September 20, 1998 [*]
- --------------------------------------------------------------------------------
Code Drop for
(Xena and Superman) Advisory Testing September 20, 1998
- --------------------------------------------------------------------------------
Superman and Xena Comdex Demo Code October 20, 1998
- --------------------------------------------------------------------------------
January '99 Launch
Superman Demo January 1, 1999 [*]
- --------------------------------------------------------------------------------
January '99 Launch
Xena Demo January 1, 1999 [*]
- --------------------------------------------------------------------------------
Superman Beta January 20, 1999 [*]
- --------------------------------------------------------------------------------
Xena Beta January 20, 1999 [*]
- --------------------------------------------------------------------------------
2nd code drop for
Superman and Xena advisory testing-- March 1, 1999 [*]
- --------------------------------------------------------------------------------
English version
Superman available in retail June 1, 1999 [*]
- --------------------------------------------------------------------------------
English version
Xena available in retail June 1, 1999 [*]
- --------------------------------------------------------------------------------
all other
languages
available for
distribution to or
Superman in retail June 1, 1999 [*]
- --------------------------------------------------------------------------------
ALL OTHER
LANGUAGES
AVAILABLE FOR
DISTRIBUTION TO OR
XENA IN RETAIL JUNE 1, 1999 [*]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Kiss and TBD
preliminary Title
Artwork and Engine
optimizations Alpha December 20, 1998 [*]
- --------------------------------------------------------------------------------
Kiss Beta March 20, 1999 [*]
- --------------------------------------------------------------------------------
TBD Title Beta March 20, 1999 [*]
- --------------------------------------------------------------------------------
Kiss E3 Demo Code May 20, 1999 [*]
- --------------------------------------------------------------------------------
TBD Title E3 Demo Code May 20, 1999 [*]
- --------------------------------------------------------------------------------
Kiss English
Kiss version October 1, 1999 [*]
- --------------------------------------------------------------------------------
English Version
TBD Title available in retail October 1, 1999 [*]
- --------------------------------------------------------------------------------
all other
languages
Kiss available in retail November 1, 1999 [*]
- --------------------------------------------------------------------------------
all other
languages
TBD Title available in retail November 1, 1999 [*]
- --------------------------------------------------------------------------------
</TABLE>
* THE ASTERISK SYMBOL REPLACES INFORMATION THAT HAS BEEN DELETED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR AN ORDER GRANTING CONFIDENTIAL TREATMENT.
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3.2. USE OF FUNDS. The Funds shall only be used for development of the Title
until the final deliverable hereunder is accepted by Intel.
4. INTEL PARTICIPATION IN MARKETING PARTICIPATION IN MARKETING
4.1. MARKETING. If accepted and timely delivered, Intel will include the Title
prominently in Intel's [*] marketing efforts and, at Intel's sole
discretion, may include Publisher in other appropriate marketing
activities.
4.2. LICENSE. To the extent it actually possesses the right to do so, Publisher
grants to Intel a royalty-free, world-wide license, with the right to
sublicense, to copy, demonstrate, prepare derivative works of, and display
and perform publicly the Title and its collateral artwork and
documentation in connection with Intel's marketing activities for the
Title as well as any other Intel marketing activities. This license,
however, is contingent upon Intel receiving written approval from
Publisher each time Intel wishes to exercise its rights hereunder.
Publisher will grant such requests if it has the right to do so.
4.3. OTHER TITLES. Intel and Publisher may develop or market products which are
directly competitive with the Title.
5. INTEL'S RECOUPMENT OF THE FUNDS
5.1. "Revenue Copy" means a sale, license, or other distribution of one copy of
a Title for which Publisher receives revenue.
5.2. ROYALTY ON REVENUE COPIES. Intel shall earn a royalty on each Revenue Copy
distributed by or through Publisher according to the rate schedule below,
but not to exceed $[*] (or $[*] if additional funds for which the second
sentence of section 3.1 provides, are not advanced by Intel) for Revenue
Copies sold, licensed, or otherwise distributed in the United States and
not to exceed $[*] (or $[*] if additional funds for which the second
sentence of section 3.1 provides, are not advanced by Intel) for Revenue
Copies sold, licensed, or otherwise distributed elsewhere.
[*]
5.3. RESERVES. Publisher shall be entitled to retain a reasonable reserve for
product returns and discounts, not to exceed [*]% of the amount otherwise
payable under section 5.1. Such reserve shall be liquidated no later than
[*] following the [*] in which the reserve was retained.
* THE ASTERISK SYMBOL REPLACES INFORMATION THAT HAS BEEN DELETED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR AN ORDER GRANTING CONFIDENTIAL TREATMENT.
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5.4. ADVERTISING. Until the funds have been recouped, Intel will also receive
from Publisher [*]% of Publisher's [*] revenues from advertising on CD ROM
versions of the Titles and on web pages devoted to the Titles, minus [*]
([*]% of [*] revenues). These revenues apply towards Intel's recoupment of
the Funds. If Publisher derives revenue from web pages on which the Titles
and other properties are advertised, Intel will receive [*]% of [*]
revenues for the percentage of advertising revenue derived from the Titles
specifically.
5.5. WEB LINKING. Publisher will provide a link and generate visits from its
World Wide Web page to another World Wide Web page that Intel will, from
time to time specify ("click throughs").
5.5.1. Intel and Publisher will agree on the specific terms of this web
linking plan no later than 9/20/98 for BTS titles and 5/20/99 for
Holiday titles.
5.6. DISCOUNTED TITLE PURCHASES. For a period of [*] years after the Effective
Date, Intel shall have the option, at its sole discretion, to purchase
copies of the Titles at a [*]% discount off the best distributor discount
(minimum of [*]% ), for re-sale by Intel. Intel will apply the [*]%
discount towards the recoupment of the Funds for each unit subsequently
sold by Intel or Intel's designated agent.
5.7. USE OF AN INTEL LOGO. Publisher will, at Intel's request, use an Intel
logo on the Titles' packaging in a manner specified by Intel and according
to standard Intel logo licensing terms. Publisher will not use an Intel
logo unless so requested to do so by Intel.
5.8. FUNDS RECOUPMENT CAP. The maximum aggregate amount payable to Intel under
section 5 as royalties, as advertising revenues, and as discounts shall
not exceed the actual amount of funds paid to publisher by Intel under
section 3.1. The discounts may continue to be provided subject to Section
5.5 following full recoupment of funds.
* THE ASTERISK SYMBOL REPLACES INFORMATION THAT HAS BEEN DELETED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR AN ORDER GRANTING CONFIDENTIAL TREATMENT.
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6. MONEY
6.1. MANNER OF PAYMENT. All payments shall be made in US dollars, and shall be
sent to the address specified in this Agreement. Payments shall be made by
wire transfer or, if no wire transfer instructions are given, by check
drawn on a U.S. bank. A party may specify revised instructions and address
by written notice to the other.
6.2. PAYMENTS TO INTEL. Payments to Intel shall be by wire transfer to [*] for
the account of Intel Corporation, General Account [*].
6.3. PAYMENTS TO PUBLISHER. Payments to Publisher shall be made by wire
transfer to: [*], ABA#: [*], Attn: [*], [*], Account Name: Brilliant
Digital Entertainment, Account #: [*].
6.4. STATEMENTS. Within [*] after the end of each calendar quarter during the
term of this Agreement Publisher shall pay any amounts due and shall
deliver to Intel at the addresses set out in this Agreement a report which
sets out:
6.4.1. The period covered;
6.4.2. The number of copies of each Title distributed hereunder;
6.4.3. The number of Revenue Copies,
6.4.4. The balance of the Funds; and
6.4.5. The balance of accounts receivable on the Titles.
6.5. RECORDS AND AUDITING. Each party shall maintain complete and accurate
records of the activities performed under this Agreement (including
records of sales and distribution) for a period of three (3) years after
the completion thereof. Records relating to the performance of this
Agreement shall be made available in confidence to other party's
independent certified public accountants (or equivalent for non-U.S.
jurisdictions) upon reasonable notice, which records may be used for the
sole purpose of auditing a party's compliance with the Agreement. In the
event that a shortfall greater than 10% is discovered in royalties paid by
a party, such audit shall be at the audited party's expense, and such
party shall promptly make up the difference.
6.6. TAXES. Each party shall be solely responsible for its own taxes, including
any applicable sales taxes and customs duties on items acquired under this
Agreement. To the extent, if any, that the applicable taxing authority
requires withholding of taxes based on payments made hereunder, the paying
party shall withhold such taxes and provide the payee with the
documentation reasonably necessary to claim a credit therefor.
* THE ASTERISK SYMBOL REPLACES INFORMATION THAT HAS BEEN DELETED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR AN ORDER GRANTING CONFIDENTIAL TREATMENT.
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7. TERM, TERMINATION, WHAT IF SOMETHING GOES WRONG
7.1. TERM OF AGREEMENT. This Agreement's term commences as of the Effective
Date and terminates on the later of March 31, 2003 or the last day of the
calendar year in which Intel fully recoups the Funds, unless earlier
terminated or unless extended by agreement of the parties.
7.2. BREACH. Either party may terminate this Agreement by written notice if the
other party is in material breach of any of its terms and fails to cure
such breach within thirty days of written notice of such breach.
7.3. DELAY. Publisher shall promptly notify Intel of any anticipated delay in
meeting the Development Schedule. If it appears that there will be a delay
in having one or more Titles delivered and accepted as set out in this
Agreement, then Intel and Publisher shall meet to discuss an appropriate
course of action in good faith before exercising any of the remedies set
out below. Both parties shall use reasonable judgment and efforts to
rearrange development and ingredient delivery schedules to deal with
setbacks, such as unavailability of specific technology ingredients or
difficulty in developing the Titles.
7.3.1. If Publisher's delay is due to causes beyond its reasonable control
then the remaining dates for Publisher's deliverables, and all other
dates calculated from those date(s), shall be extended by a
reasonable amount of time, not in any case to exceed three months in
the aggregate or the period of any delay in Intel's providing
technology labeled "Critical."
7.3.2. If the Delay will be over ninety days, then Intel may terminate the
Agreement by written notice to Publisher.
7.4. CONVENIENCE. In addition to the provisions above, Intel may, at its sole
discretion, terminate this Agreement without cause by written notice to
Publisher. If Intel chooses to terminate this Agreement without cause,
Publisher shall be entitled to retain all Funds provided by Intel to
Publisher before the effective date of termination, and Intel shall have
no rights in Publisher's Titles.
7.5. EFFECT OF TERMINATION. Upon any termination of this Agreement for any
reason:
7.5.1. Publisher shall on Intel's written request, return all materials
that Intel had provided hereunder.
7.5.2. The provisions of Section 8 shall survive termination.
7.5.3. Any third-party licenses directly or indirectly granted by a party
under this Agreement shall survive such termination, PROVIDED, that
the party granting such license shall be responsible for any
royalties earned on the license under this Agreement.
7.5.4. Publisher may retain that portion of the Funds paid prior to
termination, but if
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termination is other than for Convenience or for breach by Intel,
and Publisher releases, licenses or otherwise commercializes the
Titles in any format or medium, Publisher shall return the
previously advanced Funds to Intel at a rate of $[*] per retail
Revenue Copy or $[*] per OEM Revenue Copy until the entire amount of
previously advanced Funds is repaid to Intel.
7.6. RIGHTS. Subject to the limitations in Section 4.2, Publisher warrants and
represents that it has or shall obtain all rights necessary to undertake
the activities described in this Agreement and to grant the licenses
described herein. Publisher shall promptly notify Intel of any charge or
claim of infringement of any third party's right relating to development
or distribution of the Titles.
7.7. NOT A MUNITION. Publisher warrants and represents that the Titles,
including any updates or revisions, contains and shall contain no
encryption or other capabilities that renders it subject to the US's
International Traffic and Arms Regulation (ITAR) set forth at 22 C.F.R.,
Section 120 et seq. or any successor or foreign counterpart regulations.
7.8. SUITS BASED ON TITLES. Publisher shall defend, indemnify, and hold Intel
and its customers harmless from and against any suit or proceeding brought
against Intel, its subsidiaries or customers, based upon the development
or distribution of Titles, including any claim that the Titles infringes
any third-party intellectual property right (a "Claim"). Publisher's
indemnity will include all damages and costs awarded, including attorneys'
fees, and settlement costs, provided that Intel shall not settle any claim
without Publisher's consent.
7.8.1. The indemnified party shall promptly notify Publisher of any Claim
and will provide information, assistance, and cooperation in
defending against it (at Publisher's expense).
7.8.2. The indemnified party will have the right to participate in the
defense of any Claim, at its own expense.
7.8.3. If there appears, in Intel's opinion, to be a reasonable likelihood
that distribution of any portion of the Titles may be found to
infringe the rights of any third party, then Intel may terminate the
Agreement or Publisher, at its expense, will either (i) obtain for
Intel or its customers the right to continue to use such Titles as
contemplated herein, (ii) modify such Titles so that it becomes
non-infringing, but without materially altering its functionality,
or (iii) replace such Titles with a functionally equivalent
non-infringing Titles, all at Intel's option.
7.8.4. This indemnity shall not apply to portions of the Titles prepared or
provided by the indemnified party.
7.8.5. Publisher's total liability under this section shall not exceed the
amount of Funds provided by Intel under this agreement.
* THE ASTERISK SYMBOL REPLACES INFORMATION THAT HAS BEEN DELETED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
AN ORDER GRANTING CONFIDENTIAL TREATMENT.
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8. WARRANTS. As partial consideration for Intel's obligations under Section 2 of
this Agreement and the requirements under "Next Step" in clause 6 ("Application
Feature Specifications") of the "Intel Brilliant Digital Entertainment Technical
Production Requirements Document" attached hereto as Attachment A, Publisher has
granted to Intel a Warrant, attached hereto as Attachment D.
9. GENERAL PROVISIONS
9.1. CONFIDENTIAL TERMS. Except as otherwise provided herein, each party shall
maintain other party's confidential disclosures in confidence pursuant to
CNDA #89580. Neither party may disclose the existence or terms of this
Agreement without the prior written consent of the other party except as
required by law or as required by section 401(a), "Immediate Public
Disclosure of Material Information," of the American Stock Exchange
Company Guide. Any such required disclosure(s) will be to the most limited
extent allowable.
9.2. TITLE. Except for the licenses expressly provided here, or in a "shrink
wrap" or other written license, no licenses are granted by either party,
either expressly or by implication, to any intellectual property of the
other. Notwithstanding Intel's ownership in the copyrights in the Intel
Technology, Publisher shall own all copyrights in its own original work,
including its own Titles.
9.3. RELATIONSHIP OF PARTIES. The parties are not partners or joint venturers,
or liable for the obligations, acts, or activities of the other.
9.4. AMENDMENTS AND ASSIGNMENTS. Any change, modification or waiver to this
Agreement must be in writing and signed by an authorized representative of
each party. Neither party may assign this Agreement or any portion of this
Agreement to any other party without the other's prior written consent.
9.5. MERGER AND WAIVER. This Agreement is the entire agreement between the
parties with respect to the development and distribution of the Titles,
and it supersedes any prior or contemporaneous agreements and negotiations
relating thereto. No waiver of any breach or default shall constitute a
waiver of any subsequent breach or default.
9.6. LIMITED LIABILITY. Neither party shall be liable to the other for lost
profits, expected revenues, or development or support costs arising from
any termination of this Agreement. IN NO EVENT SHALL EITHER PARTY BE
LIABLE TO THE OTHER FOR LOSS OF PROFITS, DATA, OR USE OR ANY SPECIAL,
CONSEQUENTIAL OR INCIDENTAL DAMAGES, HOWEVER CAUSED, EVEN IF ADVISED OF
THE POSSIBILITY OF SUCH DAMAGE. THE PARTIES ACKNOWLEDGE THAT THESE
LIMITATIONS ON POTENTIAL LIABILITIES WERE AN ESSENTIAL ELEMENT IN SETTING
CONSIDERATION UNDER THIS AGREEMENT.
9.7. EXPORT. Neither party shall export the Titles or the Intel in violation of
US or other applicable law.
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9.8. NOTICES AND REQUESTS. All notices and requests required or made under this
Agreement must be in writing and shall be personally delivered or if
mailed postage prepaid, certified or registered mail, or overnight courier
to the addresses listed below:
--------------------------------------------------------------------------
TO INTEL TO PUBLISHER
Intel Corporation,
2200 Mission College Blvd.,
Santa Clara, California 95052
ATTN.: GENERAL COUNSEL
--------------------------------------------------------------------------
DIRECT ROYALTY STATEMENTS TO: DIRECT ROYALTY STATEMENTS TO:
Post Contract Management, SC4-210,
Intel Corporation,
2200 Mission College Blvd.,
Santa Clara, California 95052
--------------------------------------------------------------------------
9.9. CHOICE OF LAW. Any claim based on this Agreement shall be governed by the
laws of Delaware, and shall be subject to the exclusive jurisdiction of
the state and federal courts located there.
9.10. ATTACHMENTS. The following Attachments are incorporated by reference into
this Agreement:
9.10.5 Attachment D-- Warrants
IN WITNESS OF THEIR AGREEMENT, the parties have caused the Agreement to be
executed below by their authorized representatives.
INTEL CORPORATION BRILLIANT DIGITAL ENTERTAINMENT, INC.
BY: /S/ CLAUDE LEGLISE BY: /S/ MICHAEL OZEN
-------------------- ---------------------
CLAUDE LEGLISE MICHAEL OZEN
VICE-PRESIDENT CHIEF FINANCIAL OFFICER
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WARRANT
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF COMMON STOCK
ISSUABLE HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION
UNDER THE ACT UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE
SALE OF SUCH SECURITIES IS MADE PURSUANT TO SECURITIES AND EXCHANGE COMMISSION
RULE 144.
WARRANT TO PURCHASE COMMON STOCK OF
BRILLIANT DIGITAL ENTERTAINMENT, INC.
(Subject to Adjustment)
NO. __ July 16, 1998
THIS CERTIFIES THAT, for value received by Brilliant Digital Entertainment,
Inc., a Delaware corporation (the "Company") under clause 8 of the Software
Development Agreement entered into by the Company and Intel Corporation on July
14, 1998, Intel, or its permitted registered assigns ("HOLDER"), is entitled,
subject to the terms and conditions of this Warrant, at any time or from time to
time after the issuance date of this Warrant (the "EFFECTIVE Date"), and before
5:00 p.m. Pacific Time on the third anniversary of the Effective Date (the
"EXPIRATION DATE"), to purchase from the Company, three hundred thousand
(300,000) shares of Common Stock of the Company at a price per share of $4.00
(the "Purchase Price"). Both the number of shares of Common Stock purchasable
upon exercise of this Warrant and the Purchase Price are subject to adjustment
and change as provided herein. This Warrant Agreement confirms, sets forth in
long term and in its entirety, and supersedes an agreement between the Company
and Intel reached on July 10, 1998.
1. CERTAIN DEFINITIONS. As used in this Warrant the following terms shall
have the following respective meanings:
1.1. "FAIR MARKET VALUE" of a share of Common Stock as of a particular date
shall mean:
(a) If traded on a securities exchange or the Nasdaq National
Market, the Fair Market Value shall be deemed to be the
average of the closing prices of the Common Stock of the
Company on such exchange or market over the five (5) trading
days ending immediately prior to the applicable date of
valuation;
(b) If actively traded over-the-counter, the Fair Market Value
shall be deemed to be the average of the closing bid prices
over the thirty (30)-day period ending immediately prior to
the applicable date of valuation; and
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(c) If there is no active public market, the Fair Market Value
shall be the value thereof, as agreed upon by the Company
and the Holder; provided, however, that if the Company and
the Holder cannot agree on such value, such value shall be
determined by an independent valuation firm experienced in
valuing businesses such as the Company and jointly selected
in good faith by the Company and the Holder. Fees and
expenses of the valuation firm shall be paid for by the
Company.
1.2. "HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
1.3. "REGISTERED HOLDER" shall mean any Holder in whose name this Warrant is
registered upon the books and records maintained by the Company.
1.4. "WARRANT" as used herein, shall include this Warrant and any warrant
delivered in substitution or exchange therefor as provided herein.
1.5. "COMMON STOCK" shall mean the Common Stock of the Company and any other
securities at any time receivable or issuable upon exercise of this
Warrant.
2. EXERCISE OF WARRANT
2.1. PAYMENT. Subject to compliance with the terms and conditions of this
Warrant and applicable securities laws, this Warrant may be exercised, in
whole or in part at any time or from time to time, on or before the
Expiration Date by the delivery (including, without limitation, delivery
by facsimile) of the form of Notice of Exercise attached hereto as EXHIBIT
1 (the "Notice of Exercise"), duly executed by the Holder, at the
principal office of the Company, and as soon as practicable after such
date, surrendering
(a) this Warrant at the principal office of the Company, and
(b) payment, (i) in cash (by check) or by wire transfer, (ii) by
cancellation by the Holder of indebtedness of the Company to the
Holder; or (iii) by a combination of (i) and (ii), of an amount
equal to the product obtained by multiplying the number of shares of
Common Stock being purchased upon such exercise by the then
effective Purchase Price (the "Exercise Amount"), except that if
Holder is subject to HSR Act Restrictions (as defined in Section 2.4
below), the Exercise Amount shall be paid to the Company within five
(5) business days of the termination of all HSR Act Restrictions.
2.2. NET ISSUE EXERCISE. In lieu of the payment methods set forth in Section
2.1(b) above, the Holder may elect to exchange all or some of this Warrant
for shares of Common Stock equal to the value of the amount of the Warrant
being exchanged on the date of exchange. If Holder elects to exchange this
Warrant as provided in this Section 2.2, Holder shall tender to the
Company the Warrant for the amount being exchanged, along with written
notice of Holder's election to exchange some
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or all of the Warrant, and the Company shall issue to Holder the number of
shares of the Common Stock computed using the following formula:
X = Y (A-B)
-----
A
Where X = the number of shares of Common Stock to be issued
to Holder.
Y = the number of shares of Common Stock purchasable
under the amount of the Warrant being exchanged (as
adjusted to the date of such calculation).
A = the Fair Market Value of one share of the Common
Stock.
B = Purchase Price (as adjusted to the date of such
calculation).
2.3. "EASY SALE" EXERCISE. In lieu of the payment methods set forth in Section
2.1(b) above, when permitted by law and applicable regulations (including
Nasdaq and NASD rules), the Holder may pay the Purchase Price through a
"same day sale" commitment from the Holder (and if applicable a
broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD Dealer")), whereby the Holder irrevocably elects to
exercise this Warrant and to sell a portion of the shares so purchased to
pay the Purchase Price and the Holder (or, if applicable, the NASD Dealer)
commits upon sale (or, in the case of the NASD Dealer, upon receipt) of
such shares to forward the Purchase Price directly to the Company.
2.4. STOCK CERTIFICATES; FRACTIONAL SHARES. As soon as practicable on or
after the date of any exercise of this Warrant, the Company shall issue
and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of whole shares of Common Stock
issuable upon such exercise, together with cash in lieu of any fraction of
a share equal to such fraction of the current Fair Market Value of one
whole share of Common Stock as of such date of exercise. No fractional
shares or scrip representing fractional shares shall be issued upon an
exercise of this Warrant.
2.5. HSR ACT. The Company hereby acknowledges that exercise of this
Warrant by Holder may subject the Company and/or the Holder to the filing
requirements of the HSR Act and that Holder may be prevented from
exercising this Warrant until the expiration or early termination of all
waiting periods imposed by the HSR Act ("HSR Act Restrictions"). If on or
before the Expiration Date Holder has sent the Notice of Exercise to
Company and Holder has not been able to complete the exercise of this
Warrant prior to the Expiration Date because of HSR Act Restrictions, the
Holder shall be entitled to complete the process of exercising this
Warrant in accordance with the procedures contained herein notwithstanding
the fact that completion of the exercise of this Warrant would take place
after the Expiration Date.
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2.6. PARTIAL EXERCISE; EFFECTIVE DATE OF EXERCISE. In case of any partial
exercise of this Warrant, the Company shall cancel this Warrant upon
surrender hereof and shall execute and deliver a new Warrant of like tenor
and date for the balance of the shares of Common Stock purchasable
hereunder. This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise
as provided above. However, if Holder is subject to HSR Act filing
requirements this Warrant shall be deemed to have been exercised on the
date immediately following the date of the expiration of all HSR Act
Restrictions. The person entitled to receive the shares of Common Stock
issuable upon exercise of this Warrant shall be treated for all purposes
as the holder of record of such shares as of the close of business on the
date the Holder is deemed to have exercised this Warrant.
2.7. VESTING. The warrants shall vest fully upon issuance.
3. VALID ISSUANCE: TAXES. All shares of Common Stock issued upon the
exercise of this Warrant shall be validly issued, fully paid and
non-assessable, and the Company shall pay all taxes and other
governmental charges that may be imposed in respect of the issue or
delivery thereof. The Company shall not be required to pay any tax or
other charge imposed in connection with any transfer involved in the
issuance of any certificate for shares of Common Stock in any name
other than that of the Registered Holder of this Warrant, and in such
case the Company shall not be required to issue or deliver any stock
certificate or security until such tax or other charge has been paid,
or it has been established to the Company's reasonable satisfaction
that no tax or other charge is due.
4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number of shares of
Common Stock issuable upon exercise of this Warrant (or any shares of
stock or other securities or property receivable or issuable upon exercise
of this Warrant) and the Purchase Price are subject to adjustment upon
occurrence of the following events:
4.1. ADJUSTMENT FOR STOCK SPLITS, STOCK SUBDIVISIONS OR COMBINATIONS OF
SHARES. The Purchase Price of this Warrant shall be proportionally
decreased and the number of shares of Common Stock issuable upon exercise
of this Warrant (or any shares of stock or other securities at the time
issuable upon exercise of this Warrant) shall be proportionally increased
to reflect any stock split or subdivision of the Company's Common Stock.
The Purchase Price of this Warrant shall be proportionally increased and
the number of shares of Common Stock issuable upon exercise of this
Warrant (or any shares of stock or other securities at the time issuable
upon exercise of this Warrant) shall be proportionally decreased to
reflect any combination of the Company's Common Stock.
4.2. ADJUSTMENT FOR DIVIDENDS OR DISTRIBUTIONS OF STOCK OR OTHER
SECURITIES OR PROPERTY. In case the Company shall make or issue, or shall
fix a record date for the determination of eligible holders entitled to
receive, a dividend or other distribution with respect to the Common Stock
(or any shares of stock or other securities at the time issuable upon
exercise of the Warrant) payable in (a) securities of the Company or (b)
assets (excluding cash dividends paid or payable solely out of retained
earnings), then, in each such case, the Holder of this Warrant on exercise
hereof at any time after the consummation, effective date or record
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date of such dividend or other distribution, shall receive, in addition to
the shares of Common Stock (or such other stock or securities) issuable on
such exercise prior to such date, and without the payment of additional
consideration therefor, the securities or such other assets of the Company
to which such Holder would have been entitled upon such date if such
Holder had exercised this Warrant on the date hereof and had thereafter,
during the period from the date hereof to and including the date of such
exercise, retained such shares and all such additional securities or other
assets distributed with respect to such shares as aforesaid during such
period giving effect to all adjustments called for by this Section 4.
4.3. RECLASSIFICATION. If the Company, by reclassification of securities
or otherwise, shall change any of the securities as to which purchase
rights under this Warrant exist into the same or a different number of
securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would
have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change, and the
Purchase Price therefor shall be appropriately adjusted, all subject to
further adjustment as provided in this Section 4. No adjustment shall be
made pursuant to this Section 4.3 upon any conversion or redemption of the
Common Stock which is the subject of Section 4.5.
4.4. ADJUSTMENT FOR CAPITAL REORGANIZATION, MERGER OR CONSOLIDATION. In
case of any capital reorganization of the capital stock of the Company
(other than a combination, reclassification, exchange or subdivision of
shares otherwise provided for herein), or any merger or consolidation of
the Company with or into another corporation, or the sale of all or
substantially all the assets of the Company then, and in each such case,
as a part of such reorganization, merger, consolidation, sale or transfer,
lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Purchase Price then in
effect, the number of shares of stock or other securities or property of
the successor corporation resulting from such reorganization, merger,
consolidation, sale or transfer that a holder of the shares deliverable
upon exercise of this Warrant would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Warrant
had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as
provided in this Section 4. The foregoing provisions of this Section 4.4
shall similarly apply to successive reorganizations, consolidations,
mergers, sales and transfers and to the stock or securities of any other
corporation that are at the time receivable upon the exercise of this
Warrant. If the per-share consideration payable to the Holder hereof for
shares in connection with any such transaction is in a form other than
cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all
events, appropriate adjustment (as determined in
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<PAGE>
good faith by the Company's Board of Directors) shall be made in the
application of the provisions of this Warrant with respect to the rights
and interests of the Holder after the transaction, to the end that the
provisions of this Warrant shall be applicable after that event, as near
as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.
4.5. CONVERSION OF COMMON STOCK. In case all or any portion of the
authorized and outstanding shares of Common Stock of the Company are
redeemed or converted or reclassified into other securities or property
pursuant to the Company's Certificate of Incorporation or otherwise, or
the Common Stock otherwise ceases to exist, then, in such case, the Holder
of this Warrant, upon exercise hereof at any time after the date on which
the Common Stock is so redeemed or converted, reclassified or ceases to
exist (the "Termination Date"), shall receive, in lieu of the number of
shares of Common Stock that would have been issuable upon such exercise
immediately prior to the Termination Date, the securities or property that
would have been received if this Warrant had been exercised in full and
the Common Stock received thereupon had been simultaneously converted
immediately prior to the Termination Date, all subject to further
adjustment as provided in this Warrant. Additionally, the Purchase Price
shall be immediately adjusted to equal the quotient obtained by dividing
(x) the aggregate Purchase Price of the maximum number of shares of Common
Stock for which this Warrant was exercisable immediately prior to the
Termination Date by (y) the number of shares of Common Stock of the
Company for which this Warrant is exercisable immediately after the
Termination Date, all subject to further adjustment as provided herein.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the
Purchase Price, or number or type of shares issuable upon exercise of
this Warrant, the Chief Financial Officer or Controller of the Company
shall compute such adjustment in accordance with the terms of this
Warrant and prepare a certificate setting forth such adjustment and
showing in detail the facts upon which such adjustment is based,
including a statement of the adjusted Purchase Price. The Company
shall promptly send (by facsimile and by either first class mail,
postage prepaid or overnight delivery) a copy of each such certificate
to the Holder.
6. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory to
the Company of the ownership of and the loss, theft, destruction or
mutilation of this Warrant, and of indemnity reasonably satisfactory to
it, and (in the case of mutilation) upon surrender and cancellation of
this Warrant, the Company will execute and deliver in lieu thereof a new
Warrant of like tenor as the lost, stolen, destroyed or mutilated Warrant.
7. RESERVATION OF COMMON STOCK. The Company hereby covenants that at all
times there shall be reserved for issuance and delivery upon exercise
of this Warrant such number of shares of Common Stock or other shares
of capital stock of the Company as are from time to time issuable upon
exercise of this Warrant and, from time to time, will take all steps
necessary to amend its Certificate of Incorporation to provide
sufficient reserves of shares of Common Stock issuable upon exercise of
this Warrant. All such shares shall be duly authorized, and when
issued upon such exercise, shall be validly
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<PAGE>
issued, fully paid and non-assessable, free and clear of all liens,
security interests, charges and other encumbrances or restrictions on sale
and free and clear of all preemptive rights, except encumbrances or
restrictions arising under federal or state securities laws. Issuance of
this Warrant shall constitute full authority to the Company's Officers who
are charged with the duty of executing stock certificates to execute and
issue the necessary certificates for shares of Common Stock upon the
exercise of this Warrant.
8. TRANSFER AND EXCHANGE. Subject to the terms and conditions of this
Warrant and compliance with all applicable securities laws, this
Warrant and all rights hereunder may be transferred to any Registered
Holder's parent, subsidiary or affiliate, in whole or in part, on the
books of the Company maintained for such purpose at the principal
office of the Company referred to above, by the Registered Holder
hereof in person, or by duly authorized attorney, upon surrender of
this Warrant properly endorsed and upon payment of any necessary
transfer tax or other governmental charge imposed upon such transfer.
Upon any permitted partial transfer, the Company will issue and deliver
to the Registered Holder a new Warrant or Warrants with respect to the
shares of Common Stock not so transferred. Each taker and holder of
this Warrant, by taking or holding the same, consents and agrees that
when this Warrant shall have been so endorsed, the person in possession
of this Warrant may be treated by the Company, and all other persons
dealing with this Warrant, as the absolute owner hereof for any purpose
and as the person entitled to exercise the rights represented hereby,
any notice to the contrary notwithstanding; provided, however that
until a transfer of this Warrant is duly registered on the books of the
Company, the Company may treat the Registered Holder hereof as the
owner for all purposes.
9. RESTRICTIONS ON TRANSFER. The Holder, by acceptance hereof, agrees
that, absent an effective registration statement filed with the
Securities and Exchange Commission (the "SEC") under the Securities Act
covering the disposition or sale of this Warrant or the Common Stock
issued or issuable upon exercise hereof, as the case may be, and
registration or qualification under applicable state securities laws,
such Holder will not sell, transfer, pledge, or hypothecate any or all
of this Warrant or such Common Stock, as the case may be, unless either
(i) the Company has received an opinion of counsel, in form and
substance reasonably satisfactory to the Company, to the effect that
such registration is not required in connection with such disposition
or (ii) the sale of such securities is made pursuant to SEC Rule 144.
10. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant, the
Holder hereby represents, warrants and covenants that any shares of
stock purchased upon exercise of this Warrant shall be acquired for
investment only and not with a view to, or for sale in connection with,
any distribution thereof; that the Holder has had such opportunity as
such Holder has deemed adequate to obtain from representatives of the
Company such information as is necessary to permit the Holder to
evaluate the merits and risks of its investment in the Company; that
the Holder is able to bear the economic risk of holding such shares as
may be acquired pursuant to the exercise of this Warrant for an
indefinite period; that the Holder understands that the shares of stock
acquired pursuant to the exercise of this Warrant will not be
registered under the 1933 Act (unless otherwise required pursuant to
exercise by the Holder of the registration rights, if any, granted to
the Registered Holder) and will be "restricted securities" within the
meaning of Rule 144 under the 1933 Act and that the exemption from
registration under Rule 144 will not be
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available for at least one (1) year from the date of exercise of this
Warrant, subject to any special treatment by the SEC for exercise of this
Warrant pursuant to Section 2.2, and even then will not be available
unless a public market then exists for the stock, adequate information
concerning the Company is then available to the public, and other terms
and conditions of Rule 144 are complied with; and that all stock
certificates representing shares of stock issued to the Holder upon
exercise of this Warrant or upon conversion of such shares may have
affixed thereto a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS
ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT
FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE
WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
11. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not
entitle the Holder to any voting rights or other rights as a
stockholder of the Company. In the absence of affirmative action by
such Holder to purchase Common Stock by exercise of this Warrant or
Common Stock upon conversion thereof, no provisions of this Warrant,
and no enumeration herein of the rights or privileges of the Holder
hereof shall cause such Holder hereof to be a stockholder of the
Company for any purpose.
12. REGISTRATION RIGHTS. All shares of Common Stock issuable upon exercise of
this Warrant shall be "Registrable Securities" or such other definition of
securities entitled to registration rights pursuant to Exhibit 3 to this
Warrant.
13. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Holder that:
13.1. DUE AUTHORIZATION; CONSENTS. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for (a) the
authorization, execution and delivery of, and the performance of all
obligations of the Company under, this Warrant, and (b) the authorization,
issuance, reservation for issuance and delivery of all of the Common Stock
issuable upon exercise of this Warrant, has been duly taken. This Warrant
constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms, subject, as to enforcement of remedies, to
applicable bankruptcy, insolvency, moratorium, reorganization and similar
laws affecting creditors' rights generally and to general equitable
principles. All consents, approvals and authorizations of, and
registrations, qualifications and filings with, any federal or state
governmental agency, authority or body, or any third party, required in
connection with the execution, delivery
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and performance of this Warrant
and the consummation of the transactions contemplated hereby and thereby
have been obtained.
13.2. ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
has all requisite corporate power to own, lease and operate its property
and to carry on its business as now being conducted and as currently
proposed to be conducted.
13.3. SEC REPORTS; FINANCIAL STATEMENTS.
(a) The Company has duly filed with the SEC the Company's annual report
on Form 10-K for the year ended December 31, 1998 (the "Brilliant
Digital Entertainment, Inc. SEC Reports"). As of their respective
filing dates, the Brilliant Digital Entertainment, Inc. SEC Reports
complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended, and none of the SEC
Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the
extent corrected by a subsequently filed document with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the Brilliant Digital
Entertainment, Inc. SEC Reports complied as to form in all material
respects with the applicable published rules and regulations of the
SEC with respect thereto, was prepared in accordance with generally
accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the
notes to such financial statements or, in the case of unaudited
statements, as permitted for by Form 10-Q) and presented fairly, in
all material respects, the consolidated financial position of the
Company and its subsidiaries as at the respective dates and the
consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial
statements are subject to normal and recurring year-end adjustments
which are not expected to be material in amount.
13.4. VALID ISSUANCE OF STOCK. The outstanding shares of the capital stock of
the Company are duly and validly issued, fully paid and non-assessable,
and such shares, and all outstanding options and other securities of the
Company, have been issued in full compliance with the registration and
prospectus delivery requirements of the Securities Act and the
registration and qualification requirements of all applicable state
securities laws, or in compliance with applicable exemptions therefrom,
and all other provisions of applicable federal and state securities laws,
including without limitation, anti-fraud provisions.
13.5. GOVERNMENTAL CONSENTS. All consents, approvals, orders, authorizations or
registrations, qualifications, declarations or filings with any federal or
state governmental authority on the part of the Company required in
connection with
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the consummation of the transactions contemplated herein shall have been
obtained prior to and be effective as of the Effective Date.
14. NOTICES. Except as may be otherwise provided herein, all notices,
requests, waivers and other communications made pursuant to this Agreement
shall be in writing and shall be conclusively deemed to have been duly
given (a) when hand delivered to the other party; (b) when received when
sent by facsimile at the address and number set forth below; (c) three
business days after deposit in the U.S. mail with first class or certified
mail receipt requested postage prepaid and addressed to the other party as
set forth below; or (d) the next business day after deposit with a
national overnight delivery service, postage prepaid, addressed to the
parties as set forth below with next-business-day delivery guaranteed,
provided that the sending party receives a confirmation of delivery from
the delivery service provider.
To Holder: To the Company:
Intel Corporation Brilliant Digital Entertainment, Inc.
2200 Mission College Blvd. 6355 Topanga Canyon Blvd. Suite 120
Santa Clara, CA 95052 Woodland Hills, CA 91367
Attn: Treasurer Attn: Chief Financial Officer
Fax Number: (408) 765-6038 Fax Number: (818) 615-0995
With copies to: With copies to:
Intel Corporation Brilliant Digital Entertainment, Inc.
2200 Mission College Blvd. 6355 Topanga Canyon Blvd. Suite 120
Santa Clara, CA 95052 Woodland Hills, CA 91367
Attn: General Counsel Attn: Chief Executive Officer
Fax Number: (408)765-1859 Fax Number: (818) 615-0995
Each person making a communication hereunder by facsimile shall promptly
confirm by telephone to the person to whom such communication was
addressed each communication made by it by facsimile pursuant hereto but
the absence of such confirmation shall not affect the validity of any such
communication. A party may change or supplement the addresses given above,
or designate additional addresses, for purposes of this Section 14 by
giving the other party written notice of the new address in the manner set
forth above.
15. HEADINGS. The headings in this Warrant are for purposes of convenience in
reference only, and shall not be deemed to constitute a part hereof.
16. LAW GOVERNING. This Warrant shall be construed and enforced in accordance
with, and governed by, the laws of the State of California.
17. NO IMPAIRMENT. The Company will not, by amendment of its Certificate
of Incorporation or bylaws, or through reorganization, consolidation,
merger, dissolution, issue or sale of securities, sale of assets or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times
in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order
to protect the rights of the Registered Holder of this Warrant against
impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any shares of stock
issuable upon the exercise of this Warrant above the amount payable
therefor upon such exercise, and (b) will take all such action as may
be necessary or appropriate in order that the
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Company may validly and legally issue fully paid and non-assessable
shares of Common Stock upon exercise of this Warrant.
18. NOTICES OF RECORD DATE. In case:
18.1. the Company shall take a record of the holders of its Common Stock (or
other stock or securities at the time receivable upon the exercise of this
Warrant), for the purpose of entitling them to receive any dividend or
other distribution, or any right to subscribe for or purchase any shares
of stock of any class or any other securities or to receive any other
right; or
18.2. of any consolidation or merger of the Company with or into another
corporation, any capital reorganization of the Company, any
reclassification of the Capital Stock of the Company, or any conveyance of
all or substantially all of the assets of the Company to another
corporation in which holders of the Company's stock are to receive stock,
securities or property of another corporation; or
18.3. of any voluntary dissolution, liquidation or winding-up of the Company; or
18.4. of any redemption or conversion of all outstanding Common Stock;
then, and in each such case, the Company will mail or cause to be mailed
to the Registered Holder of this Warrant a notice specifying, as the case
may be, (i) the date on which a record is to be taken for the purpose of
such dividend, distribution or right, or (ii) the date on which such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation, winding-up, redemption or conversion is to take
place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock or (such stock or securities as at the time are
receivable upon the exercise of this Warrant), shall be entitled to
exchange their shares of Common Stock (or such other stock or securities),
for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, dissolution,
liquidation or winding-up. The Company shall use all reasonable efforts to
ensure such notice shall be delivered at least thirty (30) days prior to
the date therein specified.
19. SEVERABILITY. If any term, provision, covenant or restriction of this
Warrant is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Warrant shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
20. COUNTERPARTS. For the convenience of the parties, any number of
counterparts of this Warrant may be executed by the parties hereto and
each such executed counterpart shall be, and shall be deemed to be, an
original instrument.
21. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date
of this Warrant enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Holders of this
Warrant or otherwise conflicts with the provisions hereof. The rights
granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to holders of the
Company's securities under any other agreements, except rights that
have been waived.
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22. SATURDAYS, SUNDAYS AND HOLIDAYS. If the Expiration Date falls on a
Saturday, Sunday or legal holiday, the Expiration Date shall automatically
be extended until 5:00 p.m. the next business day.
23. CONFIDENTIALITY. Confidential or proprietary information disclosed by
either party under this Agreement, as well as the terms of this
Agreement and Holder's investment in the Company (subject to Section 24
below), shall be considered confidential information (the "CONFIDENTIAL
INFORMATION") and shall not be disclosed by the Company or Holder to
22. SATURDAYS, SUNDAYS AND HOLIDAYS. If the Expiration Date falls on a
Saturday, Sunday or legal holiday, the Expiration Date shall automatically
be extended until 5:00 p.m. the next business day.
23. CONFIDENTIALITY. Confidential or proprietary information disclosed by
either party under this Agreement, as well as the terms of this
Agreement and Holder's investment in the Company (subject to Section 24
below), shall be considered confidential information (the "CONFIDENTIAL
INFORMATION") and shall not be disclosed by the Company or Holder to
any third party. The Company or Holder shall immediately notify the
other party of any information that comes to its attention which might
indicate that there has been a loss of confidentiality with respect to
the Confidential Information. In the event that the Company or Holder
is requested or becomes legally compelled (by statute or regulation or
by oral questions, interrogatories, request for information or
documents, subpoena, criminal or civil investigative demand or similar
process, including without limitation, in connection with any public or
private offering of the Company's capital stock) to disclose any of the
Confidential Information, such party (the "DISCLOSING PARTY") shall
provide the other party (the "NON-DISCLOSING PARTY") with prompt
written notice of that fact so that the other party may seek (with the
cooperation and reasonable efforts of the Disclosing Party) a
protective order, confidential treatment or other appropriate remedy.
In such event, the Disclosing Party shall furnish only that portion of
the Confidential Information which is legally required and shall
exercise reasonable efforts to obtain reliable assurance that
confidential treatment will be accorded the Confidential Information to
the extent reasonably requested by the Non-Disclosing Party. The
provisions of this Section 23 shall be in addition to, and not in
substitution for, the provisions of any separate nondisclosure
agreement executed by the parties hereto with respect to the
transaction contemplated hereby.
24. PUBLIC ANNOUNCEMENTS. Notwithstanding the provisions of Section 23
above, from and after the Closing, the Company may disclose the
existence of this Agreement and Holder's investment in the Company
solely to the Company's investors, investment bankers, lenders,
accountants, legal counsel, business partners, and bona fide
prospective investors, employees, lenders and business partners, in
each case only where such persons or entities have executed appropriate
nondisclosure agreements with the Company. The Company shall not issue
any press release or make any other announcement to the general public
or in any professional or trade publication regarding Holder, this
Agreement or any of the terms hereof without the prior written consent
of Holder, which consent may be withheld at the sole discretion of
Holder. Notwithstanding the foregoing, Holder may disclose its
investment in the Company and the terms thereof to third parties or to
the public at its discretion, and the Company shall have the right to
disclose to third parties any such information disclosed by Holder in a
press release or other public announcement. If the Company or Holder
determines that any disclosure not otherwise authorized by this
Agreement is required by law or regulation, then the provisions of
Section 23 regarding disclosure of Confidential Information by a
Disclosing Party shall govern.
25. DISPUTE RESOLUTION. The parties agree to negotiate in good faith to
resolve any dispute between them regarding this Warrant. If the
negotiations do not resolve the dispute to the reasonable satisfaction
of both parties, then each party shall nominate one senior officer of
the rank of Vice President or higher as its representative. These
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representatives shall, within thirty (30) days of a written request by
either party to call such a meeting, meet in person and alone (except for
one assistant for each party) and shall attempt in good faith to resolve
the dispute. If the disputes cannot be resolved by such senior managers in
such meeting, the parties agree that they shall, if requested in writing
by either party, meet within thirty (30) days after such written
notification for one day with an impartial mediator and consider dispute
resolution alternatives other than litigation. If an alternative method of
dispute resolution is not agreed upon within thirty (30) days after the
one day mediation, either party may begin litigation proceedings. This
procedure shall be a prerequisite before taking any additional action
hereunder.
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IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the
Effective Date.
Intel Corporation Brilliant Digital Entertainment, Inc.
/s/ TONY GOSDEN /s/ MICHAEL OZEN
- -------------------------------------- -------------------------------------
By By
Tony Gosden Michael Ozen
- -------------------------------------- -------------------------------------
Printed Name Printed Name
Assistant Treasurer Chief Financial Officer
- -------------------------------------- -------------------------------------
Title Title
SIGNATURE PAGE TO WARRANT TO PURCHASE COMMON STOCK
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EXHIBIT 1
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
Brilliant Digital Entertainment, Inc.
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the securities Brilliant Digital Entertainment, Inc., as provided for therein,
and (check the applicable box):
[ ] tenders herewith payment of the exercise price in full in the form of cash
or a certified or official bank check in same-day funds in the amount of
$____________ for _________ such securities.
[ ] Elects the [Net Issue Exercise][Easy Sale Exercise] option pursuant to
Section 2.2 or 2.3 of the Warrant, and accordingly requests delivery of a
net of ______________ of such securities.
Please issue a certificate or certificates for such securities in the name of,
and pay any cash for any fractional share to (please print name, address and
social security number):
Name:
--------------------------------------------------------------------
Address:
--------------------------------------------------------------------
Signature:
--------------------------------------------------------------------
Note: The above signature should correspond exactly with the name on the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form below.
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher whole number of shares.
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EXHIBIT 2
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, hereby sells, assigns and transfers unto
____________________________ the within Warrant Certificate, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ____________________________ attorney, to transfer said Warrant
Certificate on the books of the within-named Company with respect to the number
of Warrants set forth below, with full power of substitution in the premises:
- -------------------------------------------------------------------------------
NAME(S) OF ASSIGNEE(S) ADDRESS # OF WARRANTS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
And if said number of Warrants shall not be all the Warrants represented by the
Warrant Certificate, a new Warrant Certificate is to be issued in the name of
said undersigned for the balance remaining of the Warrants registered by said
Warrant Certificate.
--------------------------------------------------------------------
Dated:
--------------------------------------------------------------------
Signature:
--------------------------------------------------------------------
Notice: The signature to the foregoing Assignment must correspond to the name as
written upon the face of this security in every particular, without alteration
or any change whatsoever; signature(s) must be guaranteed by an eligible
guarantor institution (banks, stock brokers, savings and loan associations and
credit unions with membership in an approved signature guarantee medallion
program) pursuant to Securities and Exchange Commission Rule 17Ad-15.
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26
EXHIBIT 3
1. REGISTRATION RIGHTS.
1.1 DEFINITIONS. For purposes of this Section 1:
(a) REGISTRATION. The terms "REGISTER," "REGISTERED," and
"REGISTRATION" refer to a registration effected by preparing
and filing a registration statement in compliance with the
Securities Act of 1933, as amended, (the "SECURITIES ACT"),
and the declaration or ordering of effectiveness of such
registration statement
(b) REGISTRABLE SECURITIES. The term "REGISTRABLE SECURITIES"
means: (1) any Common Stock of the Company issued or to be
issued upon exercise of the Warrant and (2) any shares of
Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in
replacement of, any shares of Common Stock described in
clause (1) of this subsection (b). Notwithstanding the
foregoing, "Registrable Securities" shall exclude any
Registrable Securities sold by a person in a transaction in
which rights under this Section 1 are not assigned in
accordance with this Agreement or any Registrable
Securities sold in a public offering, whether sold pursuant
to Rule 144 promulgated under the Securities Act, or in a
registered offering, or otherwise.
(c) REGISTRABLE SECURITIES THEN OUTSTANDING. The number of shares
of "REGISTRABLE SECURITIES THEN OUTSTANDING" shall mean the
number of shares of Common Stock of the Company that are
Registrable Securities and (l) are then issued and outstanding
or (2) are then issuable pursuant to an exercise of the
Warrant or pursuant to conversion of securities issuable
pursuant to an exercise of the Warrant.
(d) HOLDER. For purposes of this Section 1, the term "HOLDER"
means any person owning of record Registrable Securities that
have not been sold to the public or pursuant to Rule 144
promulgated under the Securities Act or any permitted assignee
of record of such Registrable Securities to whom rights under
this Section 1 have been duly assigned in accordance with this
Agreement.
(e) FORM S-3. The term "FORM S-3" means such form under the
Securities Act as is in effect on the date hereof or any
successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
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(f) SEC. The term "SEC" or "COMMISSION" means the U.S. Securities
and Exchange Commission.
1.2 [INTENTIONALLY OMITTED].
1.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to
filing any registration statement under the Securities Act for
purposes of effecting a public offering of securities of the Company
(including, but not limited to, registration statements relating to
secondary offerings of securities of the Company, but EXCLUDING
registration statements relating to any registration under Section
1.4 of this Agreement or to any employee benefit plan or a corporate
reorganization) and will afford each such Holder an opportunity to
include in such registration statement all or any part of the
Registrable Securities then held by such Holder. Each Holder
desiring to include in any such registration statement all or any
part of the Registrable Securities held by such Holder shall within
twenty (20) days after receipt of the above-described notice from
the Company, so notify the Company in writing, and in such notice
shall inform the Company of the number of Registrable Securities
such Holder wishes to include in such registration statement. If a
Holder decides not to include all of its Registrable Securities in
any registration statement thereafter filed by the Company, such
Holder shall nevertheless continue to have the right to include any
Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and conditions
set forth herein.
(a) UNDERWRITING. If a registration statement under which the
Company gives notice under this Section 1.3 is for an
underwritten offering, then the Company shall so advise the
Holders of Registrable Securities. In such event, the
right of any such Holder's Registrable Securities to be
included in a registration pursuant to this Section 1.3
shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent
provided herein. All Holders proposing to distribute their
Registrable Securities through such underwriting shall
enter into an underwriting agreement in customary form with
the managing underwriter or underwriters selected for such
underwriting (including a market stand-off agreement of up
to 180 days if required by such underwriters).
Notwithstanding any other provision of this Agreement, if
the managing underwriter(s) determine(s) in good faith that
marketing factors require a limitation of the number of
shares to be underwritten, then the Company shall include
in such offering (i) first, all the securities the Company
proposes to register for its own account, and (ii) second,
Holder's Registrable Securities and other shares of Common
Stock of the Company requested to be included by other
investors having written registration rights agreements
with the Company respecting such shares ("Other Registrable
Securities"), with Holder and each such investor proposing
to sell such shares participating in such registration on a
pro rata basis, such participation to be based upon the
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number of shares of Registrable Securities and Other
Registrable Securities then held by the Holder and each such
investor, respectively; PROVIDED, HOWEVER, that the right of
the underwriters to exclude shares (including Registrable
Securities) from the registration and underwriting as
described above shall be restricted so that all shares that
are not Registrable Securities or Other Registrable Securities
and are held by any other person, including, without
limitation, any person who is an employee, officer or director
of the Company (or any subsidiary of the Company) shall first
be excluded from such registration and underwriting before any
Registrable Securities and Other Registrable Securities are so
excluded. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by
written notice to the Company and the underwriter(s),
delivered at least ten (10) business days prior to the
effective date of the registration statement. Any Registrable
Securities excluded or withdrawn from such underwriting shall
be excluded and withdrawn from the registration. For any
Holder that is a partnership, the Holder and the partners and
retired partners of such Holder, or the estates and family
members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons, and
for any Holder that is a corporation, the Holder and all
corporations that are affiliates of such Holder, shall be
deemed to be a single "Holder," and any pro rata reduction
with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned
by all entities and individuals included in such "Holder," as
defined in this sentence.
(b) EXPENSES. All expenses incurred in connection with a
registration pursuant to this Section 1.3 (excluding
underwriters' and brokers' discounts and commissions
relating to shares sold by the Holders and legal fees of
counsel for the Holders), including, without limitation all
federal and "blue sky" registration, filing and
qualification fees, printers' and accounting fees, and fees
and disbursements of counsel for the Company, shall be
borne by the Company.
(c) NO LIMIT ON REGISTRATIONS. Except as otherwise provided
herein, there shall be no limit on the number of times the
Holders may request registration of Registrable Securities
under this Section 1.3.
1.4 FORM S-3 REGISTRATION. In case the Company shall at any time after
the first anniversary of the date hereof receive from any Holder or
Holders of a majority of all Registrable Securities then outstanding
a written request or requests that the Company effect a registration
on Form S-3 and any related qualification or compliance with respect
to all or a part of the Registrable Securities owned by such Holder
or Holders, then the Company will:
(a) NOTICE. Promptly give written notice of the proposed
registration and the Holder's or Holders' request therefor,
and any related qualification or compliance, to all other
Holders of Registrable Securities; and
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(b) REGISTRATION. As soon as practicable, effect such registration
and all such qualifications and compliances as may be so
requested and as would permit or facilitate the sale and
distribution of all or such portion of such Holders or
Holders' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable
Securities of any other Holder or Holders joining in such
request as are specified in a written request given within
twenty (20) days after the Company provides the notice
contemplated by Section 1.4(a); provided, HOWEVER, that the
Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this
Section 1.4:
(1) if Form S-3 is not available for such offering by the
Holders:
(2) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and
such other securities (if any) at an aggregate price to
the public of less than $1,000,000;
(3) if the Company shall furnish to the Holders a
certificate signed by the President or Chief Executive
Officer of the Company stating that in the good faith
judgment of the Board of Directors of the Company, it
would be materially detrimental to the Company and its
shareholders for such Form S-3 Registration to be
effected at such time, in which event the Company shall
have the right to defer the filing of the Form S-3
registration statement no more than once during any
twelve month period for a period of not more than ninety
(90) days after receipt of the request of the Holder or
Holders under this Section 1.4;
(4) if the Company has, within the six (6) month period
preceding the date of such request, already effected a
registration under the Securities Act other than a
registration from which the Registrable Securities of
Holders have been excluded (with respect to all or any
portion of the Registrable Securities the Holders
requested be included in such registration) pursuant to
the provisions of Section 1.3(a); or
(5) in any particular jurisdiction in which the Company
would be required to qualify to do business or to
execute a general consent to service of process in
effecting such registration, qualification or
compliance.
(c) EXPENSES. The Company shall pay all expenses incurred in
connection with each registration requested pursuant to
this Section 1.4, (excluding underwriters' or brokers'
discounts and commissions relating to shares sold by the
Holders and legal fees of counsel for the Holders and
excluding expenses required to be paid by a Holder pursuant
to Section 1.5(g) below), including without limitation
federal and "blue sky" registration,
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filing and
qualification fees, printers' and accounting fees, and fees
and disbursements of counsel.
(d) DEFERRAL. Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting the filing of a registration
statement pursuant to this Section 1.4, a certificate signed
by the President or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board, it would
be materially detrimental to the Company and its stockholders
for such registration statement to be filed, then the Company
shall have the right to defer such filing for a period of not
more than ninety (90) days after receipt of the request of the
initiating Holders; PROVIDED, HOWEVER, that the Company may
not utilize this right more than once in any twelve (12) month
period.
(e) NO LIMIT ON REGISTRATIONS. Except as otherwise provided
herein, there shall be no limit on the number of times the
Holders may request registration of Registrable Securities
under this Section 1.4.
1.5 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities under this Agreement the
Company shall, as expeditiously as reasonably possible:
(a) REGISTRATION STATEMENT. Prepare and file with the SEC a
registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration
statement to become effective, PROVIDED, HOWEVER, that the
Company shall not be required to keep any such registration
statement effective for more than ninety (90) days.
(b) AMENDMENTS AND SUPPLEMENTS. Prepare and file with the SEC such
amendments and supplements to such registration statement and
the prospectus used in connection with such registration
statement as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) PROSPECTUSES. Furnish to the Holders such number of copies of
a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and
such other documents as they may reasonably request in order
to facilitate the disposition of the Registrable Securities
owned by them that are included in such registration.
(d) BLUE SKY. Use its best efforts to register and qualify the
securities covered by such registration statement under
such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of
process in any such states or jurisdictions.
(e) UNDERWRITING. In the event of any underwritten public
offering, enter into and perform its obligations under an
underwriting agreement in usual
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and customary form, with the managing underwriter(s) of such
offering. Each Holder participating in such underwriting shall
also enter into and perform its obligations under such an
agreement.
(f) NOTIFICATION. Notify each Holder of Registrable Securities
covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under
the Securities Act of the happening of any event as a result
of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then
existing.
(g) OPINION AND COMFORT LETTER. Furnish, at the request of any
Holder requesting registration of Registrable Securities,
on the date that such Registrable Securities are delivered
to the underwriters for sale, if such securities are being
sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in
interest of the Holders requesting registration, addressed
to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a "comfort"
letter dated as of such date, from the independent
certified public accountants of the Company, in form and
substance as is customarily given by independent certified
public accountants to underwriters in an underwritten
public offering and reasonably satisfactory to a majority
in interest of the Holders requesting registration,
addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities. If such
securities are not being sold through underwriters, then
the Company shall furnish, at the request and at the sole
expense of any Holder requesting registration of
Registrable Securities, on the date that the registration
statement with respect to such securities becomes
effective, an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given
to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the
underwriters, if any, and to the Holders requesting
registration of Registrable Securities.
1.6 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections
1.3 or 1.4 that the selling Holders shall furnish to the Company
such information regarding themselves, the Registrable Securities
held by them, and the intended method of disposition of such
securities as shall be required to timely effect the Registration of
their Registrable Securities.
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1.7 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 1.3 or 1.4:
(a) BY THE COMPANY. To the extent permitted by law; the Company
will indemnify and hold harmless each Holder, the partners,
officers and directors of each Holder, any underwriter (as
determined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Securities Exchange
Act of 1934, as amended, (the "1934 Act"), against any losses,
claims, damages, or Liabilities (joint or several) to which
they may become subject under the Securities Act, the 1934 Act
or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements,
omissions or violations (collectively a "VIOLATION"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement,
including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements
thereto;
(ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or
necessary to make the statements therein not misleading,
or
(iii) any violation or alleged violation by the Company of the
Securities Act, the 1934 Act, any federal or state
securities law or any rule or regulation promulgated
under the Securities Act, the 1934 Act or any federal or
state securities law in connection with the offering
covered by such registration statement;
and the Company will reimburse each such Holder, partner,
officer or director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as
incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; PROVIDED,
HOWEVER, that the indemnity agreement contained in this
subsection 1.7(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of
the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with
such registration by such Holder, partner, officer, director,
underwriter or controlling person of such Holder.
(b) BY SELLING HOLDERS. To the extent permitted by law, each
selling Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who
have signed the registration statement, each person, if
any, who controls the Company within the meaning of the
Securities Act,
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any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's
partners, directors or officers or any person who controls
such Holder within the meaning of the Securities Act or the
1934 Act, against any losses, claims, damages or liabilities
(joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Holder,
partner or director, officer or controlling person of such
other Holder may become subject under the Securities Act, the
1934 Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each
case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred
by the Company or any such director, officer, controlling
person, underwriter or other Holder, partner, officer,
director or controlling person of such other Holder in
connection with investigating or defending any such loss,
claim, damage, liability or action: PROVIDED, HOWEVER, that
the indemnity agreement contained in this subsection 1.7(b)
shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is
effected without the consent of the Holder, which consent
shall not be unreasonably withheld; and PROVIDED, FURTHER,
that the total amounts payable in indemnity by a Holder under
this Section 1.7(b) in respect of any Violation shall not
exceed the net proceeds received by such Holder in the
registered offering out of which such Violation arises.
(c) NOTICE. Promptly after receipt by an indemnified party
under this Section 1.7 of notice of the commencement of any
action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to
be made against any indemnifying party under this
Section 1.7, deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying
party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any
other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the
parties; PROVIDED, HOWEVER, that an indemnified party shall
have the right to retain its own counsel, with the fees and
expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate
due to actual or potential conflict of interests between
such indemnified party and any other party represented by
such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a
reasonable time of the commencement of any such action
shall relieve such indemnifying party of liability to the
indemnified party under this Section 1.7 to the extent the
indemnifying party is prejudiced as a result thereof, but
the omission so to deliver written notice to the
indemnified party will not relieve it of any liability that
it may have to any indemnified party otherwise than under
this Section 1.7.
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(d) DEFECT ELIMINATED IN FINAL PROSPECTUS. The foregoing indemnity
agreements of the Company and Holders are subject to the
condition that, insofar as they relate to any Violation made
in a preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the SEC at the time the
registration statement in question becomes effective or the
amended prospectus filed with the SEC pursuant to SEC Rule
424(b) (the "FINAL PROSPECTUS"), such indemnity agreement
shall not inure to the benefit of any person if a copy of the
Final Prospectus was timely furnished to the indemnified party
and was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action
is required by the Securities Act.
(e) CONTRIBUTION. In order to provide for just and equitable
contribution to joint liability under the Securities Act in
any case in which either (i) any Holder exercising rights
under this Agreement, or any controlling person of any such
Holder, makes a claim for indemnification pursuant to this
Section 1.7 but it is judicially determined (by the entry
of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such
indemnification may not be enforced in such case
notwithstanding the fact that this Section 1.7 provides for
indemnification in such case, or (ii) contribution under
the Securities Act may be required on the part of any such
selling Holder or any such controlling person in
circumstances for which indemnification is provided under
this Section 1.7; then, and in each such case, the Company
and such Holder will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that
such Holder is responsible for the portion represented by
the percentage that the public offering price of its
Registrable Securities offered by and sold under the
registration statement bears to the public offering price
of all securities offered by and sold under such
registration statement, and the Company and other selling
Holders are responsible for the remaining portion;
provided, HOWEVER, that, in any such case: (A) no such
Holder will be required to contribute any amount in excess
of the public offering price of all such Registrable
Securities offered and sold by such Holder pursuant to such
registration statement; and (B) no person or entity guilty
of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty
of such fraudulent misrepresentation.
(f) SURVIVAL. The obligations of the Company and Holders under
this Section 1.7 shall survive until the fifth anniversary of
the completion of any offering of Registrable Securities in a
registration statement, regardless of the expiration of any
statutes of limitation or extensions of such statutes.
1.8 TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company shall have no
obligations pursuant to Sections 1.3 and 1.4 with respect to any
Registrable
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Securities proposed to be sold by a Holder in a registration
pursuant to Section 1.3 or 1.4 more than seven (7) years after the
date of this Agreement, or, if, in the opinion of counsel to the
Company, all such Registrable Securities proposed to be sold by a
Holder may then be sold under Rule 144 in one transaction without
exceeding the volume limitations thereunder.
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