EXHIBIT 10.40
BRILLIANT DIGITAL ENTERTAINMENT, INC.
TECHNOLOGY BUNDLE LICENSE AGREEMENT
This agreement ("AGREEMENT") is entered into as of the 2nd day of October, 2001
("EFFECTIVE DATE"), by and between Brilliant Digital Entertainment, Inc., a
Delaware corporation, located at 0000 Xxxxxxx Xxxxxx Xxxx., Xxxxx 000, Xxxxxxxx
Xxxxx, Xxxxxxxxxx 00000 ("BDE"), and Consumer Empowerment B.V., a company
organized under the laws of The Netherlands and located at Xxxxxxxxxx 00, 0000XX
Xxxxxxxxx, Xxx Xxxxxxxxxxx ("LICENSEE"). In consideration of the mutual terms,
conditions and covenants hereinafter set forth, BDE and Licensee agree as
follows:
1. LICENSES
a) Subject to the terms and conditions of this Agreement, BDE hereby grants
the following to Licensee during the term of this Agreement:
(i) A non-exclusive, non-transferable, worldwide license to use, and
sublicense to Licensee's end users, BDE's b3d projector and required
technology ("DIGITAL PROJECTOR") as a required install component in
all current and future versions and releases of Licensee's peer to
peer ("P2P") technology platform currently available on the Internet
known as the KaZaa Media Desktop and built upon the FastTrack P2P
technology ("KaZaa").
(ii) Provided Licensee is distributing the Digital Projector in accordance
with Section 2 below, a non-exclusive, non-transferable, worldwide
license to use, and sublicense to Licensee's end users, BDE's
Brilliant Installer Technology object code version ("BIT") that can be
customized for integration into KaZaa.
(iii) Upon execution of this Agreement by an authorized signatory of both
parties, BDE shall grant to KaZaa one hundred fifty thousand (150,000)
warrants to purchase BDE common stock ("BDE Warrants"). The BDE
Warrants shall be held in escrow according to the following time
schedule: (i) *** shall be held in escrow for *** and shall be
assigned to KaZaa, subject to *** and (ii) *** shall be assigned to
KaZaa subsequent to ***. All BDE Warrants shall be issued in the form
of Attachment "A" attached hereto and incorporated herein by reference
(the "Form of Warrant"), will have an exercise price per share equal
to the ten (10) day volume weighed averaging price of BDE's common
stock for the ten trading days immediately prior to the Effective Date
and must be exercised no later than thirty-six (36) months from the
Effective Date. Said Warrants shall have registration rights as
provided to other holders of warrants in BDE of comparable nature.
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*** Terms represented by this symbol are considered confidential. These
confidential terms have been omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
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b) Other than as provided in this Agreement, BDE shall retain all right,
title and interest in and to the BIT and Digital Projector (including, but not
limited to, ownership of all copyrights and other intellectual property rights
therein). Licensee acknowledges and agrees that no ownership interest in the BIT
and Digital Projector are transferred. Neither this Agreement, nor any action,
omission or statement by BDE or Licensee, nor Licensee's use of the BIT and
Digital Projector shall in any way confer or imply a grant, other than as
provided in this Agreement, of rights, title or interest thereto or to any
element or portion thereof, including without limitation, copyrights,
trademarks, trade names, service marks or goodwill, ownership of which shall at
all times remain solely and exclusively with BDE. Licensee shall not modify,
reverse engineer or decompile the BIT and Digital Projector. Licensee further
agrees to retain all copyright and trademark notices on the BIT and Digital
Projector and to take other steps necessary to protect BDE's intellectual
property rights.
2. LICENSEE'S OBLIGATIONS
Licensee shall, for the Term of this Agreement, bundle the Digital
Projector as a required install component in all current and future versions and
releases and downloads of KaZaa or any successors thereof distributed by
Licensee, commencing with all downloads made on October 16, 2001. The Digital
Projector will always be bundled in a manner that renders it fully operational
(to the same extent as when downloaded from BDE's site) to all users. In the
event the Digital Projector technology causes a technical conflict with KaZaa
and such technical conflict cannot immediately be corrected, KaZaa may
immediately remove the Digital Projector from all required installations as
provided for in this Section 2, until such time as BDE corrects this conflict.
Upon successful resolution of said technical conflict, Licensee's obligation
under this Section 2 shall resume to be in full force and effect, without
prejudice to Licensee's right to terminate this Agreement pursuant to Section 4
hereunder.
3. CONSIDERATION
As consideration for KaZaa's bundling BDE's proprietary Digital Projector
with the KaZaa browser, BDE shall pay KaZaa ***.
4. TERM AND TERMINATION
a.) The term ("TERM") of this Agreement shall be for one (1) year
commencing on the Effective Date upon execution of this Agreement by authorized
signatories of both parties. The Term shall automatically renew for two
additional terms of one (1) year each ("ADDITIONAL TERMS"), provided that
neither Party gives written notice of non-renewal at least ninety (90) days
prior to end of either Additional Term.
b.) Either party shall have the right to immediately terminate this
Agreement in the event of any of the following:
i. Upon written notice of termination by one party, effective
immediately, if the other party commits a material breach, which is
not cured within sixty (60) days of its receipt of written notice from
the non-breaching party.
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*** Terms represented by this symbol are considered confidential. These
confidential terms have been omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
Page 2 of 6
ii. Upon written notice of termination, effective immediately, by the
non-defaulting party; if either party has breached its obligations of
confidentiality hereunder.
iii. Upon written notice of termination, effective immediately, if one
party's actions materially adversely affects the other party and such
adverse actions are not cured within sixty (60) days of written
notice.
c.) Notwithstanding the foregoing, in the event Licensee materially
breaches any of BDE's material intellectual property rights in connection with
this Agreement, BDE shall have the right to terminate this Agreement
immediately. .
d.) The provisions of this Section 4 (Term and Termination), Section 5
(Confidentiality), Section 6 (Representation, Warranties and Indemnifications),
Section 7 (Limitation of Liability) and Section 8 (Remedies) shall survive any
termination or expiration of this Agreement.
5. CONFIDENTIALITY
a.) The terms of this Agreement and information and data that one party
(the "Receiving Party") has received or will receive from the other party (the
"Disclosing Party") about the Disclosing Party's (or its suppliers') business
activities that are proprietary and confidential, which shall include all
business, financial, technical and other information of a party marked or
designated by such party as "confidential" or "proprietary," or information
which, by the nature of the circumstances surrounding the disclosure, should be
reasonably understood to be confidential or proprietary to the Disclosing Party
and any reference manuals compiled or provided hereunder (collectively,
"CONFIDENTIAL INFORMATION"), ought in good faith to be treated as confidential.
The Receiving Party agrees that for the Term and for two (2) years thereafter,
the Receiving Party will not disclose the Confidential Information to any third
party, nor use the Confidential Information for any purpose not permitted under
this Agreement. The nondisclosure obligations set forth in this Section shall
not apply to information that the Receiving Party can document (i) is generally
available to the public (other than through breach of this Agreement), (ii) is
furnished by the Disclosing Party to others without restrictions similar to
those imposed by this Agreement, (iii) is independently developed by employees
or agents of the Receiving Party who can be shown to have had no access to the
information or (iv) was already lawfully in the Receiving Party's possession at
the time of receipt of the information from the Disclosing Party.
b.) Notwithstanding the foregoing, each party may disclose Confidential
Information (i) to the extent required by a court of competent jurisdiction or
other governmental authority or otherwise as required by law or (ii) on a
"need-to-know" basis under an obligation of confidentiality to its legal
counsel, accountants, banks and other financing sources and their advisors.
6. REPRESENTATIONS, WARRANTIES AND INDEMNITIFICATIONS
a) BY BDE. BDE represents and warrants all of the following: (i) BDE is
authorized to enter into this Agreement; (ii) BDE has the right to grant the
rights granted to Licensee hereunder; (iii) the BIT and Digital Projector, and
the normal use thereof, shall not violate any
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third party rights, including without limitation, intellectual party rights,
rights of privacy, publicity, personal or proprietary rights, or other common
law or statutory rights; (iv) BDE shall not knowingly violate requirements
related to data protection requirements in force anywhere in the world and shall
obtain all consents necessary to process personal data (including sensitive
data); and (v) the BIT and Digital Projector are free from any viruses, "time
bombs", disabling programming codes or instructions, copy protection mechanisms,
or other such items that may interfere with or adversely affect the use of them.
In furtherance of the foregoing, BDE shall indemnify, defend and hold harmless
Licensee, its affiliates, officers, directors, employees, consultants and agents
from and against any and all claims, actions, losses, damages, liabilities,
costs and expenses (including reasonable outside attorneys' fees) resulting from
or arising out of or in connection with any breach of the foregoing
representations and warranties or any breach of this Agreement or any portion
thereof. Licensee shall promptly notify BDE of all claims and proceedings
related thereto of which Licensee becomes aware.
b) BY LICENSEE. Licensee represents and warrants all of the following: (i)
Licensee is authorized to enter into this Agreement; (ii) Licensee's use of the
BIT and Digital Projector shall not defame any person or entity or infringe the
rights of any third party, including, without limitation, any trade name,
trademark, copyright or other intellectual property right and shall not invade
or violate any right of privacy, publicity, personal or proprietary right, or
other common law or statutory right; (iii) Licensee shall not alter, reverse
engineer or decompile the BIT and Digital Projector; (iv) Licensee shall not use
the BIT and Digital Projector, except as specifically permitted herein; and (v)
Licensee shall not attack title to or any rights of BDE in and to the BIT and
Digital Projector or attack the validity of this Agreement. In furtherance of
the foregoing, Licensee shall indemnify, defend and hold harmless BDE, its
affiliates, officers, directors, employees, consultants and agents from and
against any and all claims, actions, losses, damages, liabilities, costs and
expenses (including reasonable outside attorneys' fees) resulting from or
arising out of or in connection with any breach of the foregoing representations
and warranties or any breach of this Agreement or any portion thereof. BDE shall
promptly notify Licensee of all claims and proceedings related thereto of which
BDE becomes aware.
c) THE BIT AND DIGITAL PROJECTOR ARE LICENSED "AS IS" AND WITHOUT ANY
REPRESENTATIONS OR WARRANTIES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, ALL
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
7. LIMITATION OF LIABILITY
IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON BREACH OF CONTRACT, TORT
(INCLUDING NEGLIGENCE) OR OTHERWISE, WHETHER OR NOT THAT PARTY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.
8. REMEDIES
Licensee's failure to comply with any material condition, term or
obligation herein or any material breach of this Agreement shall render the
licenses granted herein null and void. In the case of any material breach by
Licensee, BDE shall have the right to pursue all appropriate
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remedies at law or in equity therefor. Any breach of Licensee's obligations
regarding BDE's trademarks, service marks, trade names, copyrights or other
intellectual property rights shall entitle BDE to seek equitable relief in
addition to its other available legal remedies in a court of competent
jurisdiction. Licensee confirms that BDE's forbearance to enforce any right or
remedy following any breach shall not be a waiver of BDE's right to elect or
enforce the same right or remedy for later breaches.
9. GENERAL
a) PUBLICITY. Neither of the parties hereto shall issue a press release or
public announcement or otherwise make any disclosure concerning this Agreement
or the terms hereof, without prior written approval by the other party.
Notwithstanding the foregoing, either party may announce the existence of
relationship between Licensee and BDE.
b) ASSIGNMENT. Neither party may assign this Agreement, in whole or in
part, without the other party's written consent (which will not be unreasonably
withheld), except that either party may assign this Agreement (i) in connection
with a sale of all or substantially all of such party's assets, (ii) to a
subsidiary or affiliate, or (iii) as part of a merger, consolidation or
reorganization. It shall be noted that, whenever in this Agreement one of the
parties hereto is named or referred to, the heirs, legal representatives,
successors, successors-in-title and assigns of such parties shall be included,
and all covenants and agreements contained in this Agreement by or on behalf of
BDE or KaZaa shall be binding upon and inure to the benefit of their respective
heirs, legal representatives, successors-in-title and assigns, whether so
expressed or not.
c) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of California, notwithstanding the actual
state or country of residence or incorporation of Licensee. The parties hereto
agree that the exclusive forum for the resolution of disputes hereunder shall be
the State or Federal Courts located in Los Angeles County, California and waive
any objection thereto on the basis of personal jurisdiction or venue.
d) ATTORNEYS' FEES. If any action, suit or other proceeding is instituted
concerning or arising out of this Agreement, the prevailing party shall recover
all of such party's reasonable outside attorneys' fees and costs incurred in
each and every such action, suit or other proceeding, including any and all
appeals or petitions therefrom.
e) NOTICE. All notices required to be given hereunder shall be deemed to
have been given: (i) seven (7) days after deposit in the mail, postage prepaid
for first-class mail, return receipt requested; (ii) three (3) days after
deposit with Federal Express or another nationally recognized overnight delivery
service, delivery charges prepaid; or (iii) upon the date of receipt of written
confirmation that the notice was transmitted by electronic facsimile device
("Fax"), as set forth below:
If to BDE:
Brilliant Digital Entertainment, Inc.
0000 Xxxxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000 XXX
Attn: Xxxxx Xxxxxxxxxx,
Fax: x0 (000) 000-0000
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If to Licensee:
Consumer Empowerment X.X.
Xxxxxxx 00000
0000XX Xxxxxxxxx, Xxx Xxxxxxxxxxx
Attn: Xxxxxx Xxxxxxxxx
Fax: x00-00-000-0000
f) NO AGENCY. The parties are independent contractors and will have no
power or authority to assume or create any obligation or responsibility on
behalf of each other. This Agreement will not be construed to create or imply
any partnership, agency or joint venture.
g) SEVERABILITY. In the event that any of the provisions of this Agreement
are held to be unenforceable under any applicable law or be so held by an
applicable court decision, the remaining portions of this Agreement will remain
in full force and effect.
h) MODIFICATIONS AND WAIVERS. Unless otherwise specified, any amendment,
supplement or modification of or to any provision of this Agreement, any waiver
of any provision of this Agreement and any consent to any departure by the
parties from the terms of this Agreement, shall be effective only if it is made
or given in writing and signed by both parties. No failure or delay on the part
of either party in exercising any right, power or remedy under this Agreement
shall operate as a waiver, nor shall any single or partial exercise of any such
right, power or remedy preclude any other or further exercise or the exercise of
any other right, power or remedy.
i) ENTIRE AGREEMENT. This Agreement is the complete and exclusive agreement
between the parties with respect to the subject matter hereof, superseding any
prior agreements and communications (both written and oral) regarding such
subject matter.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the Effective Date.
BRILLIANT DIGITAL ENTERTAINMENT, INC. KAZAA ("LICENSEE")
By: /S/ XXXXX XXXXXXXXXX By: /S/ XXXXXX XXXXXXXXX
--------------------------------- ------------------------------
Name: Xxxxx Xxxxxxxxxx Name: Xxxxxx Xxxxxxxxx
------------------------------- ------------------------------
Title: President and Chief Executive Title: President & CEO
Officer ------------------------------
-------------------------------
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ATTACHMENT A
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.
NO. __ _____________, 2002
THIS CERTIFIES THAT, for value received, _______________, 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 "EXPIRATION DATE"), to purchase from Brilliant Digital
Entertainment, Inc., a Delaware corporation (the "COMPANY"), up to
______________ (______) shares of Common Stock of the Company at a price per
share of $____ (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.
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 traded over-the-counter, the Fair Market Value shall be deemed
to be the average of the closing bid and asked quotations
averaged over the fifteen (15)-day period ending immediately
prior to the applicable date of valuation; and
(c) If there is no public market, the Fair Market Value shall be the
value thereof, as agreed upon in good faith 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
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 "REGISTERED HOLDER" shall mean any Holder in whose name this Warrant
is registered upon the books and records maintained by the Company.
1.3 "WARRANT" as used herein, shall include this Warrant and any warrant
delivered in substitution or exchange therefor as provided herein.
1.4 "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 in cash (by check) or by wire transfer 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").
2.2 STOCK CERTIFICATES; FRACTIONAL SHARES. As soon as practicable on or
after the date of any exercise of this Warrant but in any event within
5 business days after its receipt of the Exercise Amount, the Company
shall issue and deliver to the person or persons designated by the
Holder a certificate or certificates for the aggregate 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.
2.3 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. 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
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date the Company receives the Notice of Exercise, subject to receipt
of the Exercise Amount.
2.4 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. 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 other
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 reverse
stock split, consolidation or 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
(including debt instruments) 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 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
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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 therefore 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 (including
cash) to which the 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 shall be the value as
agreed upon in good faith 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 such property jointly selected in good faith by
the Company and the Holder. All Fees and expenses of the valuation
firm shall be paid for by the Company. In all events, appropriate
adjustment (as determined in 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.
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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 such that the aggregate Purchase Price of the
maximum number of securities or other property for which this Warrant
is exercisable immediately after the Termination Date is equal to 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, 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. In addition, if at any time prior
to the Expiration Date:
5.1 the Company shall declare any dividend payable in any securities or
make any distribution to its stockholders;
5.2 the Company shall offer to its stockholders as a class any additional
shares of Common Stock or securities convertible into Common Stock or
any right to subscribe to Common Stock or securities convertible or
exchangeable into Common Stock; or
5.3 a dissolution or winding up of the Company (other than in connection
with a consolidation, merger or sale of all or substantially all of
its property, assets and business as an entirety) shall be proposed;
then in any one or more of such events, the Company shall give notice in
writing of such event to the Holder at least 10 days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution
or subscription rights, or for the determination of stockholders entitled
to vote on such proposed dissolution, liquidation or winding up. Such
notice shall specify such record date or date of the closing of the
transfer books, as the case may be.
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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 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.
Page 6
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 available for at
least one (1) year from the date of exercise of this Warrant, 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. 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
Page 7
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:
BRILLIANT DIGITAL ENTERTAINMENT, INC.
____________________________ 0000 Xxxxxxx Xxxxxx Xxxx., Xxxxx 000
____________________________ Xxx Xxxxxxx, XX 00000
Attn:_______________________ Attn: Chief Financial Officer
Fax Number:_________________ Fax Number: (000) 000-0000
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. A party may
change or supplement the addresses given above, or designate additional
addresses, for purposes of this SECTION 12 by giving the other party
written notice of the new address in the manner set forth above.
13. HEADINGS. The headings in this Warrant are for purposes of convenience in
reference only, and shall not be deemed to constitute a part hereof.
14. LAW GOVERNING. This Warrant shall be construed and enforced in accordance
with, and governed by, the laws of the State of California.
15. 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 therefore upon such exercise, and (b) will take
all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-assessable shares
of Common Stock upon exercise of this Warrant.
16. 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.
17. 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.
Page 8
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the
Effective Date.
Brilliant Digital Entertainment, Inc.
------------------------------------ -------------------------------------
By By
------------------------------------ -------------------------------------
Printed Name Printed Name
------------------------------------ -------------------------------------
Title Title
SIGNATURE PAGE TO WARRANT TO PURCHASE COMMON STOCK
Page 9
EXHIBIT 1
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
To: 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 of Brilliant Digital Entertainment, Inc., as provided for
therein, and tenders herewith payment of the exercise price in full in the form
of a certified or official bank check in same-day funds or wire transfer in the
amount of $____________ for _________ 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.
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.
EXHIBIT 2
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, the undersigned hereby sells, assigns and transfers unto the
parties set forth below all or such portion of the Warrants represented by the
within Warrant Certificate set forth below, 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.
