EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Purchase Agreement") is made and
entered into as of the 12th day of September, 1996, by and between Brilliant
Interactive, Inc., a corporation incorporated in the State of Delaware, United
States of America ("BII") and Sega Ozisoft Pty. Limited, a company incorporated
in the State of New South Wales, Australia ("Sega Ozisoft").
RECITALS
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A. BII, through its wholly owned subsidiary, Brilliant Interactive Ideas,
Pty. Ltd., a company incorporated in the State of New South Wales, Australia
("BII-Australia") based in Manly, Australia develops, produces and markets
interactive, multimedia titles for the education and entertainment markets.
BII-Australia is also working in conjunction with Sega Australia New
Developments ("SAND"), a division of Sega Ozisoft, to produce a multipath movie
under the title "Cyberswine." All rights, title and interest in and to the
Cyberswine project, including patents, patent applications, copyrights,
trademarks, service marks, characters, mask works, trade secrets and
confidential information are hereinafter referred to as the "Cyberswine
Property."
B. SAND is in the process of developing a suite of software tools to
enable the creation of multipath movies for distribution over various platforms
(including all code, proprietary rights, patents, patent applications,
copyrights, trademarks and other intellectual property rights related thereto,
the "SAND Engine"). Sega Ozisoft has funded SAND since its inception. The
assets used by SAND (the "SAND Assets") include without limitation (i) all
assets utilized by such division in the development of the SAND Engine including
all software (in object and source code form) included in the SAND Engine or any
iteration or release thereof, documentation and hardware, software tools, all
office furniture and supplies and any other equipment, (ii) any and all
intellectual, proprietary or other rights to the SAND Engine (including patents,
patent applications, copyrights, trademarks, service marks, characters, mask
works, trade secrets and confidential information, the "SAND IP") and any future
amendments, modifications or upgrades to the SAND IP, (iii) all rights to any
and all revenue arising from the SAND Engine and the SAND IP, (iv) all contract
rights of SAND (or of Sega Ozisoft which are directly related to the business of
SAND) necessary to conduct the business of SAND, and (iv) any and all content
produced by SAND or the SAND Engine relating to any and all current and future
Cyberswine Property and other multipath movies developed by SAND ("Content").
C. Sega Ozisoft desires to sell to BII, and BII desires to acquire from
Sega Ozisoft, the Sand Assets on the terms and subject to the conditions set
forth in this Purchase Agreement.
AGREEMENT
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NOW, THEREFORE, in consideration of the foregoing, and the mutual covenants
set forth herein, the parties agree as follows:
1. SALE AND TRANSFER OF SAND ASSETS
1.1 Sale and Purchase; Purchased Assets. On the Closing Date (as
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hereinafter defined) and on the terms and subject to the conditions set forth in
this Purchase Agreement, Sega Ozisoft hereby sells, conveys, assigns, transfers
and delivers to BII, free and clear of any and all liabilities, liens, claims,
charges, encumbrances, mortgages, security interests, pledges, rights of offset,
adverse claims, and restrictions of any type, kind or nature (collectively,
"Liens"), good and marketable title to the SAND Assets and BII hereby purchases
and acquires the SAND Assets from Sega Ozisoft by delivery of a convertible
promissory note in the form of Attachment "C" hereto (the "Note") in the
principal amount of $1,500,000 and which is mandatorily convertible upon the
effectiveness of the proposed Offering (as defined in Section 6.2 below) into
176,471 newly issued shares (the "Conversion Shares"), subject to adjustment to
reflect any stock splits, reverse stock splits or recapitalization, of the
Common Stock of BII, receipt of which is hereby acknowledged by Sega Ozisoft.
1.2 Further Actions. Sega Ozisoft shall, at its sole cost and expense,
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execute and deliver to, or obtain for, BII such other instruments of conveyance,
transfer and assignment as shall be necessary or appropriate to vest in BII,
good and marketable title in and to all of the SAND Assets, free and clear of
any and all Liens, including without limitation, any governmental or third party
consents, approvals, permits, assurances, releases or terminations of Liens or
other security interests necessary for the consummation of the transactions
contemplated by this Purchase Agreement.
2. NO ASSUMPTION OF LIABILITIES
2.1 Liabilities Not Assumed. Except as otherwise expressly provided in
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this Agreement, BII shall not and does not assume any liabilities, obligations
or commitments of Sega Ozisoft of any kind, known or unknown, contingent or
otherwise, of whatsoever kind or nature, and the same shall remain the sole
responsibility of Sega Ozisoft and Sega Ozisoft will indemnify and hold BII, its
officers, directors and stockholders, and each of them, harmless from and
against any and all such liabilities, expenses or obligations, including, but
not limited to, (a) deferred expenses, trade account liabilities and capitalized
leases; (b) product liability claims; (c) liabilities in respect of salaries,
employee benefit plans, including obligations to employees for bonus and/or
severance payments upon the sale of the Purchased Assets; (d) income, sales,
transfer or other taxes, including taxes arising out of the transactions
contemplated by this Purchase Agreement; or (e) legal expenses or other
transaction costs associated with the transactions contemplated by this Purchase
Agreement. BII will offer to hire or retain, on its customary basis, any or all
of the employees or consultants of
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SAND, but BII shall not assume or be bound by any of Sega Ozisoft's employment
or consulting contracts or other obligations with respect to such employees and
consultants.
2.2 BII acknowledges the following:
(a.) that it may not be possible by this Agreement to assign the contract
rights included in the SAND Assets, including without limitations
contracts for personal services and a lease of premises; and
(b.) that it is the intention of the parties that BII shall take over the
responsibilities of performance of the contracts included in the SAND
Assets where it receives the benefit thereof.
Where the consent of any party to any such contract is required for the
purposes of the assignment of any of the SAND Assets, Sega Ozisoft and BII
will each use its best efforts to secure such consent, including the entry
into any novation of such contract, whereby Sega Ozisoft will be released
from any further performance of such contract and BII will undertake such
performance, effective prior to the Closing Date. Where such novation is
not possible, BII will undertake the performance of such contract after the
Closing Date on Sega Ozisoft's behalf, and indemnify Sega Ozisoft from any
liability under such contract or arising incidental to its performance as a
consequence of any act or omission on the part of BII on or after the
Closing Date. This provision operates with respect to, but is not limited
to, the contract(s) between Sega Ozisoft and BII with respect to the
exploitation of the Cyberswine Property.
3. THE CLOSING
The Closing shall occur on that date (the "Closing Date") which is set
forth in a written notice delivered to Sega Ozisoft from BII. The Closing Date
may be selected by BII in its sole discretion but shall be no later than
December 20, 1996.
4. REPRESENTATIONS AND WARRANTIES OF SEGA OZISOFT
As a material inducement to BII to enter into this Purchase Agreement and
to perform its obligations hereunder, Sega Ozisoft represents and warrants to,
and agrees with, BII as set forth below. The representations and warranties set
forth below shall be effective as of the date of this Purchase Agreement and as
of the Closing Date.
4.1 Organization and Standing. Sega Ozisoft is a corporation duly
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organized, validly existing and in good standing under the laws of Australia.
Sega Ozisoft has all requisite power and
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authority and all requisite permits necessary to own, lease and operate its
properties and assets and to carry on its business in the manner and in the
locations as presently conducted.
4.2 Authorization. Sega Ozisoft has the full power and authority
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(corporate and other) to enter into, execute and deliver this Purchase Agreement
and to perform all of the transactions contemplated hereby and all of its
obligations hereunder. All corporate proceedings have been taken and all
corporate authorizations have been obtained which are necessary to authorize the
execution, delivery and performance by Sega Ozisoft of this Purchase Agreement.
This Purchase Agreement has been duly and validly executed and delivered by Sega
Ozisoft and constitutes a valid and binding obligation of Sega Ozisoft,
enforceable against Sega Ozisoft in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors'
rights generally from time to time in effect.
4.3 Title to Assets. Sega Ozisoft is the sole owner of, and holds, all
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rights, title and interest in and to the SAND Assets free and clear of any
Liens. Upon delivery to BII of the SAND Assets, BII shall have good and
marketable title to the SAND Assets, free and clear of any Liens. The SAND
Assets are in good operating condition, normal wear and tear excepted. The SAND
Assets are not subject to any right of first refusal of any third party relating
to the sale of any of the SAND Assets.
4.4 No Infringement. To the best of Sega Ozisoft's knowledge and belief,
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as of the date hereof, the SAND IP and the Content does not infringe,
contravene, or otherwise conflict with any patent, copyright, trademark, service
xxxx or other intellectual property or proprietary rights of others.
4.5 Investment Representations. Sega Ozisoft has been advised that the
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Note and the Conversion Shares have not been registered under the Securities Act
of 1933, as amended (the "Securities Act"), nor qualified under any state blue
sky law, on the ground that no distribution or public offering of the Note or
Conversion Shares is to be effected, and that in this connection BII is relying
in part on the representations of Sega Ozisoft set forth in this Section 4.5.
Sega Ozisoft represents and warrants to BII that:
(a) Investment Intent. The Note to be issued to Sega Ozisoft pursuant
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to this Purchase Agreement is being acquired, and the Conversion Shares if
issued to Sega Ozisoft upon conversion of the Note will be acquired by Sega
Ozisoft solely for its own account, for investment purposes only, and with no
present intention of distributing, selling or otherwise disposing of them.
(b) Sophistication. Sega Ozisoft is an experienced and sophisticated
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investor, and has such knowledge and experience in financial and business
matters that it is capable of evaluating the risks and merits of acquiring the
Note and Conversion Shares. Sega Ozisoft has had, during the course of this
transaction and prior to Sega Ozisoft's acquisition of the Note, the opportunity
to ask questions of, and receive answers from, BII, BII-Australia and their
respective management
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concerning BII, BII-Australia and the terms and conditions of this Purchase
Agreement. Sega Ozisoft hereby acknowledges that Sega Ozisoft or Sega Ozisoft's
representatives have received all such information as Sega Ozisoft considers
necessary for evaluating the risks and merits of acquiring the Note and the
Conversion Shares and for verifying the accuracy of any information furnished to
Sega Ozisoft or to which Sega Ozisoft had access.
(c) Accredited Investor. Sega Ozisoft is an "accredited investor" for
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purposes of Regulation D promulgated by the Commission under the Securities Act.
(d) Addresses. Sega Ozisoft represents that Sega Ozisoft's address set
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forth in Section 8.1 is its true and correct address, and, if not its principal
place of business, is the address from which the Sega Ozisoft negotiated the
investment in the Note and Conversion Shares.
(e) Transfer Restrictions. Sega Ozisoft understands the restrictions
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on resale and transfer of the Note and Conversion Shares imposed upon the
holders thereof pursuant the Securities Act and this Purchase Agreement, and
will abide by such resale and transfer restrictions.
(f) Legend. Sega Ozisoft understands and agrees that a legend will be
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placed on the Note and the certificates representing the Conversion Shares which
will state that such securities have not been registered under the Securities
Act, and that any transfer or attempt to transfer such securities, except in a
transaction exempt from the federal and applicable state securities laws or in a
registered or qualified offering under federal and state securities laws, will
be void and of no effect and will not be recognized by BII.
4.6 Accuracy of Other Information. None of the information contained in
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this Purchase Agreement with respect to Sega Ozisoft or the SAND Assets,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were or will be made, not materially misleading.
Sega Ozisoft has disclosed to BII all information known to Sega Ozisoft which
Sega Ozisoft reasonably believes to be material to a decision by BII to enter
into this Purchase Agreement.
5. REPRESENTATIONS AND WARRANTIES OF BII
As a material inducement to Sega Ozisoft to enter into this Purchase
Agreement and to perform its obligations hereunder, BII represents and warrants
to and agrees with Sega Ozisoft as set forth below. The representations and
warranties set forth below shall be effective as of the date of this Purchase
Agreement and as of the Closing Date.
5.1 Organization and Standing. BII is a corporation duly organized,
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validly existing and in good standing under the laws of the State of Delaware.
BII has all requisite power and authority necessary to own, lease and operate
its properties and assets and to carry on its business in the manner and in the
locations as presently conducted. Copies of the Restated Certificate of
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Incorporation of BII (as certified by the Secretary of State of the State of
Delaware, the "Restated Certificate") and Bylaws of BII have been delivered to
Sega Ozisoft and are accurate and complete as of the date hereof.
5.2 Authorization. BII has the full power and authority (corporate and
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other) to enter into, execute and deliver this Purchase Agreement and to perform
all of the transactions contemplated hereby and all of its obligations
hereunder. All corporate proceedings have been taken and all corporate
authorizations have been obtained which are necessary to authorize the
execution, delivery and performance by BII of this Purchase Agreement. This
Purchase Agreement has been duly and validly executed and delivered by BII and
constitutes a valid and binding obligation of BII, enforceable against BII in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting creditors' rights generally from time to time in effect.
5.3 BII Australia. BII owns all of the outstanding capital stock of BII-
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Australia. There are no outstanding options, contracts, commitments, warrants,
preemptive rights agreements or other rights of any character affecting or
relating in any manner to the issuance of any equity securities of BII-
Australia, or entitling any person or entity to acquire any equity securities of
BII-Australia, including options granted under any stock option or incentive
plan.
5.4 Capitalization. BII is authorized by its Restated Certificate to
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issue up to 10,000,000 shares of Common Stock and up to 1,000,000 shares of
Preferred Stock which may be issued in one or more series. Immediately prior to
the Closing, 1,000,000 shares of Common Stock will be issued and outstanding and
no shares of Preferred Stock will be issued and outstanding. All of the issued
and outstanding shares of Common Stock have been duly authorized and validly
issued and are fully-paid and non-assessable. Except as set forth on Schedule
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"A", there are no outstanding options, contracts, commitments, warrants,
---
preemptive rights agreements or other rights of any character affecting or
relating in any manner to the issuance of the Common Stock, Preferred Stock or
other equity securities of BII, or entitling any person or entity to acquire any
of the Common Stock or other equity securities of BII, including options granted
under any stock option or incentive plan.
5.5 Issuance Conversion Shares. The Conversion Shares to be issued to
--------------------------
Sega Ozisoft upon conversion of the Note have been duly and validly authorized,
and if and when delivered, will be duly and validly issued, fully paid and non-
assessable, and will be free of any Liens or restrictions (other than those
imposed pursuant to this Purchase Agreement and under the Securities Act or
applicable state securities or blue sky laws).
5.6 Offering. Assuming the truth, accuracy and completeness of the
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representations and warranties of Sega Ozisoft set forth in Section 4 of this
Purchase Agreement, the offer, sale and issuance to Sega Ozisoft of the
Conversion Shares, constitute, and will constitute, transactions exempt from the
registration and prospectus delivery requirements of Section 5 of the Securities
Act and BII has obtained (or is exempt from the requirement to obtain) all
qualifications, permits and
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other consents required by all applicable state laws governing the offer, sale
and issuance of securities.
6. FURTHER AGREEMENTS OF THE PARTIES
6.1 Confidentiality. BII and Sega Ozisoft hereby acknowledge to and agree
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with the other that any and all information which has been disclosed by one to
the other, its employees, consultants, agents and stockholders during the
discussions and negotiations leading to the execution of this Purchase
Agreement, and all information to be disclosed by one to the other, its
employees, consultants and agents and stockholders, during the period commencing
on the date of execution of this Purchase Agreement through the Closing or
termination of this Purchase Agreement, shall constitute confidential
information and trade secrets of the disclosing party, and as such are secret,
confidential and unique and constitute the exclusive trade secrets and property
of such party. Such information has been made known and available to the other
party and its respective employees, consultants and agents strictly in
connection with the negotiation and execution of this Purchase Agreement and the
consummation of the transactions provided for herein. Each party hereby
acknowledges and agrees that any use or disclosure of any such confidential
information or trade secrets, other than pursuant to or as allowed by this
Purchase Agreement, would be wrongful and could cause irreparable injury to the
other. Accordingly, each party hereby expressly agrees, for itself and on
behalf of its stockholders and directors, if any, and its principal officers,
managers, employees, agents, consultants and representatives, that it and they
will not at any time prior to the Closing or at any time thereafter, use or
disclose, other than in accordance with the terms and provisions of this
Purchase Agreement, any of such confidential information or trade secrets;
provided, that BII or Sega Ozisoft may use or disclose such confidential
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information or secrets of the other without restriction if such information or
secrets (i) were or are available to such party on a non-confidential basis from
a source other than the other party; or (ii) were or become generally available
to the public; and provided, further, that if BII or Sega Ozisoft are requested
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or required (by interrogatories, requests for information or documents, subpoena
or similar process) to disclose any of such information or secrets of the other,
such disclosure, may be made without liability hereunder. Notwithstanding the
foregoing, no provision of this Section 6.1 shall in any manner whatsoever
prevent or inhibit BII from using or disclosing any such confidential
information relating to the Purchased Assets in any manner BII shall deem fit
from and after the Closing; provided further, Sega Ozisoft hereby agrees, for
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Sega Ozisoft, Sega Ozisoft's affiliates, officers, managers, employees, agents,
consultants and representatives, that they will not at any time from and after
the Closing Date use or disclose any such confidential information which either
(i) concerns BII, or its business or operations or (ii) relates to the SAND
Assets. Each party acknowledges that, in the event of a violation by the other
of the terms and provisions of this Section 6.1, the remedies at law would not
be adequate; and accordingly, in such event such party may proceed to protect
and enforce its rights under this Section 6.1 by a suit in equity for specific
performance hereof, or for an injunction against the violation hereof. This
confidentiality provision supersedes all other confidentiality agreements or
provisions, contained in any document or agreement, entered into between BII and
Sega Ozisoft.
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6.2 Employment
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(a.) BII may prior to the Closing Date deliver a letter to chosen
employees of SAND ("Employee") incorporating an offer to transfer with the SAND
Assets and offering employment on the same terms and conditions within BII-
Australia as those on which the Employee is then employed and carrying across
the then current on-going Employee benefits provided by Sega Ozisoft together
with any additional statutory requirements so that a SAND employee who accepts
the offer of employment under this clause ("Transferring Employee") would be
deemed a 'transferred employee' under Division 6 of the Xxx Xxxxx Xxxxx
Xxxxxxxxxx Xxxxxxxxx Xxx 0000, Xxxxxxxxx.
(b.) On or before the last business day prior to the Closing Date Sega
Ozisoft shall pay to BII in respect of each Transferring Employee an amount
equal to the sum of all amounts due to those Employees as at the Closing Date in
respect of accrued wages, salaries, allowances, annual leave inclusive of any
leave loading and other emoluments accrued by the Transferring Employees as at
the Closing Date.
(c.) On and from the Closing Date BII must in relation to each
Transferring Employee be responsible for and keep Sega Ozisoft indemnified
against claims made against Sega Ozisoft by the relevant Transferring Employee
for wages, salary, annual leave entitlement, holiday pay, sick leave, long
service leave and other allowances accumulated by the Transferring Employee
during his or her employment with Sega Ozisoft and treat that Transferring
Employee and deal with every such entitlement as if the entitlement had been
accrued by the Transferring Employee while in the employment of BII.
6.3 Public Offering. BII shall keep Sega Ozisoft informed with respect to
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the process of selection of a managing underwriter for the Offering and cause
BII to allow Sega Ozisoft to participate in any road show. While participating
in any road show relating to the Offering, Xxxx Xxxx, Xxxxx Xxxxxxxxxx and
Xxxxxxx Xxxx shall act as representatives of BII and not as representatives of
Sega Ozisoft or Sega Enterprises Japan. Sega Ozisoft shall cooperate and take
such actions, provide such financial statements of SAND and other information
and assistance, and execute all such further instruments and documents as BII
may reasonably request to permit BII prepare all registration statements and
other filings necessary or desirable to register the proposed underwritten
initial public offering of Common Stock of BII (the "Offering") under the laws
of the United States. Sega Ozisoft will assist BII in the conduct of any road
shows. Sega Ozisoft has reviewed the letter discussing pre-offering publicity
(a copy of which is attached as Schedule "B" hereto), and agrees to conduct
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itself, and cause its employees, consultants, agents and stockholders to conduct
themselves, in a manner consistent with such letter. Specifically, Sega Ozisoft
agrees not to make any statements regarding the proposed public offering and to
refer all inquiries concerning BII or relating to the proposed public offering
to BII. Sega Ozisoft agrees to enter into a lock-up agreement with the
underwriters of the proposed public offering whereby it agrees not to sell the
Conversion Shares for such period of time from and after the effective date of
such public offering as may be requested by such underwriters, which shall not
be longer than 12 months.
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6.4 Sega Ozisoft shall fund the operations of SAND through the closing of
the initial public offering of shares of Common Stock of BII (the "IPO
Closing"). BII shall reimburse Sega Ozisoft for expenses incurred to fund the
operations of SAND for the period commencing August 1, 1996 and terminating on
the October 31, 1996, in excess of A$75,000 per month (the "Initial Excess
Amount"). BII shall reimburse Sega Ozisoft for all expenses incurred to fund
the operations of SAND for the period commencing November 1, 1996 through the
IPO Closing (collectively with the Initial Excess Amount, the "Excess"). BII
shall pay the Excess to Sega Ozisoft promptly after the IPO Closing upon receipt
from Sega Ozisoft of documentation setting forth in reasonable detail the amount
and nature of each expense in the Excess.
6.5 Cyberswine Royalty. BII shall pay to Sega Ozisoft a royalty of 12.5%
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of Adjusted Gross Receipts on the Cyberswine multipath movie, exclusive of any
sequels thereto, any merchandising thereof and any adaption to linear video
product. The royalty shall be paid with respect to each calendar quarter on the
45th day following the last day of that calendar quarter. "Adjusted Gross
Receipts" is gross receipts received by BII or any affiliate of BII on the
Cyberswine multipath movie, exclusive of any sequels thereto, any merchandising
thereof and any adaption to linear video product, and after deducting any
royalties and fees payable to Cyberswine licensors.
6.6 Further Cooperation. Sega Ozisoft shall cooperate with any efforts by
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BII to employ the employees and retain the services of consultants of SAND;
provided that Sega Ozisoft will have no liability if the employees or
consultants elect not to accept employment with BII.
6.7 Board Representation. So long as Sega Ozisoft maintains ownership of
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at least 7% of the outstanding equity securities of BII, BII will use its best
efforts to cause a nominee of Sega Ozisoft reasonably acceptable to be nominated
by the Board of Directors of BII for election as a director of BII so that Sega
Ozisoft has either one representative on the Board of Directors of BII or one
representative nominated for election at the succeeding annual stockholders
meeting so long as Sega Ozisoft maintains ownership of at least 7% of the
outstanding equity securities of BII.
6.8 Nature and Survival of Representations and Warranties. All
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representations and warranties of the Sega Ozisoft and BII shall survive the
Closing of this Purchase Agreement.
7. REGISTRATION RIGHTS
7.1 Piggyback Registration. If, at any time during the period commencing
----------------------
on the date that is 180 days from the IPO Closing, BII shall propose to register
any shares of Common Stock (but excluding any shares or securities being
registered pursuant to Form S-8 or Form S-4 or any successor form thereto), BII
shall (i) give Sega Ozisoft written notice, or telegraphic, telecopy or
telephonic notice followed as soon as practicable by written confirmation
thereof, of such proposed registration at least 20 business days prior to the
filing of such registration statement and, (ii) upon written notice, or
telegraphic or telephonic notice followed as soon as practicable by written
confirmation thereof, given to BII by Sega Ozisoft within 15 days after the
giving of such written
9
confirmation or written notice by BII, BII shall include or cause to be included
in any such regis tration statement all or such portion of the Conversion Shares
as Sega Ozisoft may request; provided, however, that BII may at any time
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withdraw or cease proceeding with any such registration if it shall at the same
time withdraw or cease proceeding with the registration of the Common Stock
originally proposed to be registered; and provided further, that in connection
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with any registered public offering involving an underwriting, the managing
underwriter may (if in its reasonable opinion marketing factors so require)
limit the number of securities (including any Conversion Shares) included in
such offering (other than securities of BII). In the event of any such
limitation, the total number of Conversion Shares to be offered for the account
of Sega Ozisoft in the registration shall be reduced in proportion to the
respective number of shares requested to be included therein by all holders of
BII's Common Stock (other than BII) entitled to include shares of Common Stock
in the registration to the extent necessary to reduce the total number of shares
proposed to be registered to the number of shares recommended by the managing
underwriter.
7.2 BII's Obligations in Piggyback Registration. The following provisions
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shall also be applicable at the sole cost and expense of BII in the case of
registrations under Section 7.1:
(a.) Following the effective date of such registration statement, BII
shall, upon the request of Sega Ozisoft, forthwith supply such number of
prospectuses meeting the requirements of the Securities Act as shall be
requested by Sega Ozisoft to permit it to make a public distribution of all of
its Conversion Shares, provided that Sega Ozisoft shall from time to time
furnish BII with such appropriate information (relating to the intentions of
Sega Ozisoft) in connection therewith as BII shall request in writing.
(b.) BII shall bear the entire cost and expense of the registration of
securities provided for in this Section (but not the selling expenses of Sega
Ozisoft).
(c.) BII shall indemnify and hold harmless Sega Ozisoft from and
against any and all losses, claims, damages and liabilities (including
reasonable fees and expenses of counsel) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or any prospectus included therein required to be filed
or furnished by reason of this Section or otherwise or in any application or
other filing under, the Securities Act or any other applicable Federal or state
securities law, or arising out of or based upon any omission or alleged omission
to state therein a material fact required to be stated therein (i.e., in any
such registration statement, prospectus, application or other filing) or
necessary to make the statements therein not misleading, to which such person
may become subject, or any violation or alleged violation by BII to which such
Person may become subject, under the Securities Act, the Exchange Act, or other
Federal or state laws or regulations, at common law or otherwise, except to the
extent that such losses, claims, damages or liabilities are caused by any such
untrue statement or alleged untrue statement or omission or alleged omission
based upon and in strict conformity with written information furnished to BII by
such person expressly for use therein; provided however, that Sega Ozisoft shall
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at the same time indemnify BII, its directors, each officer signing the related
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registration statement, and each person, if any, who controls BII within the
meaning of the Securities Act, from and against any and all losses, claims,
damages and liabilities (including reasonable fees and expenses of counsel)
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any registration statement or any prospectus
included therein required to be filed or furnished by reason of this Section, or
otherwise or in any application or other filing under, the Securities Act or any
other applicable Federal or state securities law, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein (i.e., in any such registration statement, prospectus,
application or other filing) or necessary to make the statements therein not
misleading, to which such person may become subject, or any violation or alleged
violation by Sega Ozisoft to which BII, its directors, each officer signing the
related registration statement, and each person, if any, who controls BII within
the meaning of the Securities Act, may become subject, under the Securities Act,
the Exchange Act, or other Federal or state laws or regulations, at common law
or otherwise, to the extent that such losses, claims, damages or liabilities are
caused by any such untrue statement or alleged untrue statement or omission or
alleged omission based upon and in strict conformity with written information
furnished to BII by Sega Ozisoft expressly for use therein.
(d.) In the event any person entitled to indemnification hereunder
receives in writing a complaint, claim or other written notice of any loss,
claim, damage, liability or action giving rise to a claim for indemnification
under Section 7.2(c), the person claiming indemnification under Section 7.2(c)
shall promptly notify the person or persons against whom indemnification is
sought (the "Indemnitor") of such complaint, notice, claim or action, and the
Indemnitor shall have the right to investigate and defend any such loss, claim,
damage, liability or action. The person claiming indemnification shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof but the fees and expenses of such counsel shall not be at the
expense of the Indemnitor. In no event shall the Indemnitor be obligated to
indemnify any person for any settlement of any claim or action effected without
the Indemnitor's consent, which consent shall not be unreasonably withheld.
8. TAXES
8.1 Payment of Taxes, Filing of Returns. Sega Ozisoft shall remain
-----------------------------------
liable for the filing of all tax returns and reports and for the payment of all
federal, state and local taxes of Sega Ozisoft relating to the operation of the
Purchased Assets on or prior to the Closing Date and Sega Ozisoft shall remain
so liable for the payment of all of its taxes attributable to or relating to the
consummation of the transactions contemplated herein, and shall indemnify and
hold BII and it affiliates harmless from and against all liability in connection
therewith.
8.2 Sales Taxes. Sega Ozisoft shall bear all responsibility for stamp,
-----------
sales, use, value added or other similar taxes, if any, arising out of the
consummation of the transactions herein pro-
11
vided for and shall be liable for the filing of all necessary tax returns and
reports with respect to such taxes.
9. MISCELLANEOUS
9.1 Notices. All notices, requests, demands and other communications
-------
(collectively referred to in this Section 8.1 as "Notices") given or made
pursuant to this Purchase Agreement shall be in writing and shall be deemed to
have been duly given if sent by registered or certified mail, return receipt
requested, postage and fees prepaid, by facsimile transmission, or otherwise
actually delivered to the following addresses:
(a) if to BII, to:
Brilliant Interactive, Inc.
c/o Xxxxxx Xxxxxxxx, Esq
Troop Xxxxxxxxx, Xxxxxxx & Xxxxxx, LLP
00000 Xxxxxxxx Xxxx.
Xxx Xxxxxxx XX 00000
XXX
(b) if to Sega Ozisoft, to:
Sega Ozisoft Pty. Ltd.
Building A
Southern Industrial Estates
000 Xxxxxx Xxxxxx
Xxxxxx, XXX 0000
Xxxxxxxxx
Any Notice shall be deemed duly given when received by the addressee thereof,
provided that any Notice sent by registered or certified mail shall be deemed to
have been duly given two days from the date of deposit in the United States
mails, unless sooner received. Any of the parties to this Purchase Agreement
may from time to time change its address for receiving notices by giving written
notice thereof in the manner set forth above.
9.2 Specific Performance. Sega Ozisoft acknowledges that the SAND Assets
--------------------
are unique to the requirements of the BII and that BII will have no adequate
remedy at law if Sega Ozisoft shall fail to perform its obligation to deliver to
BII the SAND Assets hereunder. In such event, BII shall have the right, in
addition to any other rights it may have, to specific performance of this
Purchase Agreement.
12
9.3 MOU Superseded. This Purchase Agreement replaces and supersedes that
--------------
certain Memorandum of Understanding, dated as of June 12, 1996, by and between
Sega Ozisoft and BII-Australia which, upon execution of this Purchase Agreement
shall be terminated in its entirety.
9.4 Successors and Assigns. This Purchase Agreement shall be binding upon
----------------------
and inure to the benefit of the parties hereto and their respective successors
and assigns.
9.5 Waiver and Amendment. No provision of this Purchase Agreement may be
--------------------
waived unless in writing signed by all the parties to this Purchase Agreement,
and waiver of any one provision of this Purchase Agreement shall not be deemed
to be a waiver of any other provision. This Purchase Agreement may be amended
only by a written agreement executed by the parties to this Purchase Agreement.
9.6 GOVERNING LAW. THIS PURCHASE AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED BOTH AS TO VALIDITY AND PERFORMANCE AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO THE CHOICE OF LAW
PRINCIPLES THEREOF.
9.7 Captions; Certain Terms; Presumptions Regarding Drafting Party. The
--------------------------------------------------------------
various captions and headings contained in this Purchase Agreement are for
reference only and shall not be considered or referred to in resolving questions
of interpretation of this Purchase Agreement. As used in this Purchase
Agreement, the terms "Section," "Schedule" or "Exhibit" shall be interpreted as
referring to the Sections, Schedules and Exhibits contained in or attached to
this Purchase Agreement, unless otherwise specified. As used in this Purchase
Agreement, the term "including" means "including but not limited to" unless
otherwise specified; the word "or" means "and/or." Any rule or provision of law
which provides that a contract or agreement is to be construed against the
author of the contract or agreement shall not apply to this Purchase Agreement.
9.8 Counterparts. This Purchase Agreement may be executed in any number
------------
of counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
9.9 Costs and Attorneys' Fees. If any action, suit or other proceeding is
-------------------------
instituted to remedy, prevent or obtain relief from a default in the performance
by any party of its obligations under this Purchase Agreement, the prevailing
party shall recover all of such party's costs and reasonable attorneys' fees
incurred in each and every such action, suit or other proceeding, including any
and all appeals or petitions therefrom.
9.10 Third Party Beneficiaries. The provisions of this Purchase Agreement
-------------------------
are for the benefit of the BII and Sega Ozisoft and their respective affiliates
specifically referenced herein, and are not for the benefit of any other person
or entity.
13
9.11 Expenses. Except as otherwise provided in this Purchase Agreement
--------
each of the parties shall pay its own expenses incurred in connection with the
preparation of this Purchase Agreement and the consummation of the transactions
contemplated hereby and all documents reasonably necessary to effectuate the
terms and intent of this Purchase Agreement.
9.12 Severability. Whenever possible, each provision of this Purchase
------------
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Purchase Agreement shall be
or become prohibited or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Purchase
Agreement.
9.13 Rights Cumulative. No right granted to the parties under this
-----------------
Purchase Agreement on default or breach is intended to be in full or complete
satisfaction of any damages arising out of such default or breach, and each and
every right under this Purchase Agreement, or under any other document or
instrument delivered hereunder, or allowed by law or equity, shall be cumulative
and may be exercised from time to time.
9.14 Entire Agreement. This Purchase Agreement and the Schedules,
----------------
Exhibits and other writings and agreements specifically identified herein
contain the entire agreement between BII and Sega Ozisoft with respect to the
transactions contemplated hereby and supersede and shall be interpreted
independently of any previous agreements, commitments, understandings and
negotiations between the parties, written or oral, relating to the subject
matter hereof.
14
IN WITNESS WHEREOF, each of the parties hereto has executed or caused this
Purchase Agreement to be executed on its behalf all as of the day and year first
above written.
EXECUTED by the parties at Los Angeles, California as an agreement as of
the date first above written:
SIGNED FOR BY SEGA OZISOFT PTY LIMITED
by the representative in the presence of:
/s/ Yasushi Okue /s/ Tsuneo Naibo
---------------------------------------- ------------------------------------
Witness Representative
Yasushi Okue Tsuneo Naibo
---------------------------------------- ------------------------------------
Name (please print) Name (please print)
SIGNED FOR BY BRILLIANT INTERACTIVE, INC.
by the representative in the presence of:
/s/ Xxxxx Xxxxxxx
---------------------------------------- ------------------------------------
Witness Representative
Xxxxx Xxxxxxx
---------------------------------------- ------------------------------------
Name (please print) Name (please print)
FOR PURPOSES OF SECTION 8.3 ONLY:
SIGNED FOR BY BRILLIANT INTERACTIVE PTY LIMITED
by the representative in the presence of:
/s/ Xxxx Xxxxxx
---------------------------------------- ------------------------------------
Witness Representative
Xxxx Xxxxxx
---------------------------------------- ------------------------------------
Name (please print) Name (please print)
15
SCHEDULE "B" -- LETTER RE PUBLICITY
-----------------------------------
16
SCHEDULE "C" -- NOTE
--------------------
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
ONLY PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE OF THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE ACT. THESE SECURITIES MAY NOT BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
BRILLIANT DIGITAL ENTERTAINMENT, INC.
8% MANDATORY CONVERTIBLE NOTE
U.S. $1,500,000 September 30, 1996
Subject to the terms and conditions of this 8% Convertible Note (the
"Note"), Brilliant Digital Entertainment, Inc., a Delaware corporation (the
"Company"), for value received, promises to pay to the order of Sega Ozisoft,
Pty. Ltd., a corporation formed under the laws of New South Wales, Australia, or
its registered assigns (the "Noteholder"), whose address is set forth in Section
8.3 below, the principal amount of U.S. $1,500,000, plus simple interest on the
unpaid principal balance from the date hereof at the rate of eight percent (8%)
per annum. Such principal amount plus all accrued but previously unpaid
interest will be due and payable on the first anniversary of the Note Date.
Principal and interest payable hereunder shall be paid to the Noteholder in
lawful money of the United States of America by wire transfer to such bank
account or at such other address or location as shall be specified by the
Noteholder. Overdue interest shall bear interest at the rate of eight percent
(8%) per annum from the date on which it is due until paid.
This Note is issued pursuant to that certain Asset Purchase Agreement dated
of even date herewith between the Company and the Noteholder (the "Agreement").
The following is a statement of the rights of the Noteholder and the terms
and conditions to which this Note is subject, and to which the Company and the
Noteholder, by the acceptance of this Note, agree.
1. Definitions. As used in this Note, the following terms, unless the
-----------
context otherwise requires, shall have the following meanings:
17
1.1 "Company" shall mean the Company and shall include any
-------
corporation that shall succeed to or assume the obligations of the Company under
this Note.
1.2 "Common Stock" shall mean the Common Stock, par value $0.001 per
------------
share, of the Company.
1.3 "Note Date" shall mean the date on which this Note was originally
---------
issued, which is set forth on the first page of this Note in the heading.
1.4 Any capitalized terms not otherwise defined herein shall have
the meaning set forth in the Agreement.
2. Mandatory Conversion.
--------------------
2.1 Conversion. On the terms and subject to the conditions set forth
----------
in this Note, effective at such time (the "Conversion Time") as the Securities
and Exchange Commission declares effective the Company's initial underwritten
public offering of Common Stock (the "Offering") the entire unpaid principal
amount of this Note shall be automatically and without notice or any other
action by the Company convert into 780,001 shares of Common Stock (the
"Conversion Shares").
2.2 Conversion Time. Conversion of this Note pursuant to this
---------------
Section 2 shall be deemed effective upon the Conversion Time.
2.3 Mechanics and Effect of Conversion. At its expense, the Company
----------------------------------
shall, as soon as practicable after the conversion of this Note, issue and
deliver to the Noteholder a certificate or certificates for the number of
Conversion Shares to which the Noteholder shall be entitled upon such
conversion. Upon conversion of this Note, the Company shall be forever released
from its obligation to pay any and all of the principal amount of this Note, and
from its obligation to pay all accrued but previously unpaid interest on such
principal amount.
2.3.1 Regulatory Compliance. If any of the Conversion Shares
---------------------
require registration or listing with, or approval of, any governmental
authority, stock exchange or other regulatory body under any federal or state
law or regulation or otherwise, before such shares may be validly issued or
delivered to the registered holder thereof upon conversion, the Company will, as
expeditiously as possible and at its expense, endeavor to secure such
registration, listing or approval.
2.3.2 Charges, Taxes and Expenses. Issuance of a certificate
---------------------------
for Conversion Shares upon the conversion of this Note shall be made without
charge to the Noteholder for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company, and such certificate shall be issued in
the name of the Noteholder or, subject to satisfaction of the
18
provisions of Section 3.5 of the Agreement, in such name or names as may be
directed by the Noteholder.
2.4 Adjustment to Conversion Price. If the Company should at any
------------------------------
time or from time to time after the Note Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock, then,
following such record date (or the date of such dividend, distribution, split or
subdivision if no record date is fixed), and provided that such stock split,
dividend or other distribution is actually effected, the number of Conversion
Shares issuable upon conversion of this Note shall be appropriately increased in
proportion to such increase in the number of outstanding shares of Common Stock.
If the number of shares of Common Stock outstanding at any time after the Note
Date is decreased by a combination of the outstanding shares of Common Stock,
then, following the record date of such combination, the number of Conversion
Shares issuable on conversion of this Note shall be decreased in proportion to
such decrease in the number of outstanding shares of Common Stock.
2.5 No Impairment. The Company will not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, recapitalization,
transfer or assets, consolidation, merger, dissolution, issuance or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Section 2 in order to protect the conversion rights of
the Noteholder from impairment.
2.6 Miscellaneous Conversion Price Matters. The Company shall at all
--------------------------------------
times reserve and keep available out of its authorized but unissued Common Stock
the full number of shares of Common Stock deliverable upon conversion of this
Note and shall, at its own expense, take all such actions and obtain all such
permits and orders as may be necessary to enable the Company lawfully to issue
such Common Stock to the Noteholder upon the conversion of this Note. The
Company also hereby covenants that its issuance of this Note shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Common Stock upon conversion of this Note.
3. Treatment of Note. To the extent permitted by generally accepted
-----------------
accounting principles consistently applied, the Company shall treat, account and
report this Note as debt and not equity for accounting purposes and with respect
to any returns filed with federal, state or local tax authorities.
4. Events of Default. If any of the following events shall occur and be
-----------------
continuing (each individually referred to as an "Event of Default"), the
Noteholder may declare the entire unpaid principal and accrued interest on this
Note immediately due and payable, without any
19
other presentment, demand, protest or other notice of any kind or character, all
of which are hereby expressly waived; provided, however, that with respect to
-------- -------
the Events of Default described in Sections 4.2 and 4.3 below, the unpaid
principal and accrued interest on this Note shall automatically become
immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by the
Company:
4.1 Principal or Interest. (a) Any default in the payment of any
---------------------
part of the interest of this Note shall occur and such default shall be
continuing uncured or unwaived for 30 days after the Noteholder has given the
Company written notice thereof or (b) the Company's failure to observe any
covenant or other provision contained in this Note or the Agreement and such
failure of observation shall be continuing uncured or unwaived for 30 days after
the Noteholder has given the Company written notice thereof;
4.2 Involuntary Bankruptcy. Within 270 days after the commencement
----------------------
of an action against the Company seeking any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar relief under any statute,
law or regulation, such action shall not have been dismissed or all orders or
proceedings thereunder affecting the operations or the business of the Company
stayed, or the stay of any such order or proceeding shall thereafter be set
aside, or within 270 days after the appointment without the consent or
acquiescence of the Company of any trustee, receiver or liquidator of the
Company or of all or any substantial part of the properties of the Company, such
appointment shall not have been vacated; or
4.3 Voluntary Bankruptcy. The Company shall have commenced a
--------------------
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or shall have consented to the entry of an order for
relief in an involuntary case under any such law, or shall have consented to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian or similar official, of the Company or for any substantial
part of its property, or shall have made any general assignment for the benefit
of creditors, or shall have failed generally to pay its debts as they become due
or shall have admitted in writing its inability to pay its debts generally as
they become due, or shall have taken any corporate action in furtherance of any
of the foregoing.
5. Remedies. If any Events of Default shall have occurred and be
--------
continuing, the Noteholder may proceed to protect and enforce its rights under
this Note by an action in law, suit in equity or other appropriate proceeding,
whether for specific performance of any agreement contained in this Note or in
the Agreement or for an injunction against a violation of any terms of this Note
or of the Agreement or in aid of the exercise of any power granted by this Note,
the Agreement or by law. In case any action is brought arising from a breach of
any provision of this Note, the non-prevailing party shall pay to the prevailing
party all of the prevailing party's fees and expenses, including without
limitation reasonable attorneys' fees, relating to such action. No course of
dealing and no delay on the part of the Noteholder in exercising any right shall
operate as a waiver thereof or otherwise prejudice the Noteholder's rights,
powers or remedies. No right, power or remedy conferred by this Note or by the
20
Agreement upon the Noteholder shall be exclusive of any right, power or remedy
referred to in this Note or the Agreement, or now or hereafter available at law,
in equity, by statute or otherwise.
6. Unpaid Interest. In case any one or more Events of Default shall
---------------
occur and be continuing, any due but unpaid interest shall continue to remain
due and accrue interest thereon at the rate of eight percent (8%) per annum from
the date on which it is due until paid.
7. No Shareholder Rights. This Note shall not entitle the Noteholder to
---------------------
any voting rights or other rights as a shareholder of the Company, prior to
conversion hereof.
8. Miscellaneous.
-------------
8.1 Successors and Assigns. Subject to the foregoing terms and
----------------------
conditions, and to the restrictions on transfer described in the Agreement, the
rights and obligations of the Company and the Noteholder shall inure to the
benefit of and be binding upon the respective executors, administrators, heirs,
transferees, successors and assigns of the Company and the Noteholder.
8.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
AGREEMENTS BETWEEN CALIFORNIA RESIDENTS ENTERED INTO AND TO BE PERFORMED
ENTIRELY WITHIN CALIFORNIA.
8.3 Notices. Except as otherwise provided herein, all communications
-------
hereunder shall be in writing or by either telecopier or telegraph and, if to
the Company, shall be mailed, telecopied or telegraphed or delivered to
Brilliant Digital Entertainment, Inc., c/o Xxxxxx Xxxxxxxx, Esq., Troop
Xxxxxxxxx Xxxxxxx & Xxxxxx, LLP, 00000 Xxxxxxxx Xxxx., Xxx Xxxxxxx XX 00000
(telecopier: (000) 000-0000); and if to the Noteholder, shall be mailed,
telecopied, telegraphed or delivered to Sega Ozisoft Pty. Ltd., Building A,
Southern Industrial Estates, 000 Xxxxxx Xxxxxx, Xxxxxx, XXX 0000 Xxxxxxxxx
(telecopier: 01161296693410) Attention: President. All notices given by
telecopy or telegraph shall be promptly confirmed by letter. Any party hereto
may by notice so given change its address for future notice hereunder.
8.4 Severability. In case any provision of this Note shall be
------------
invalid, illegal or unenforceable, it shall, to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable, the intent of the parties, and the validity, legality and
enforceability of the remaining provisions of this Note shall not in any way be
affected or impaired thereby.
21
8.5 Waiver and Amendment. Any provision of this Note may be amended,
--------------------
waived or modified upon the written consent of the transferee, successor or
assign of the Noteholder.
8.6 Lost, Stolen, Mutilated or Destroyed Note. If this Note is lost,
-----------------------------------------
stolen, mutilated or destroyed, the Company shall, on such terms as to indemnity
or otherwise as it may reasonably impose (which shall, in the case of a
mutilated Note, include the surrender and cancellation thereof), issue a new
Note of like denomination and tenor as the Note so lost, stolen, mutilated or
destroyed.
8.7 Titles and Headings. The titles and headings contained in this
-------------------
Note are intended for reference and shall not by themselves determine the
construction or interpretation of this Note.
8.8 Entire Agreement. This Note, the Agreement and the other
----------------
documents delivered pursuant hereto and thereto, constitute the full and entire
understanding and agreement between the parties with respect to the subjects
hereof and thereof.
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the
date first written above.
Brilliant Digital Entertainment, Inc.
/s/ Xxxxx Xxxxxxx
--------------------------
By: Xxxxx Xxxxxxx
Its: Secretary
22
