THE SECURITIES EVIDENCED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, HAVE BEEN TAKEN FOR INVESTMENT AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT.
NONTRANSFERABLE REDEEMABLE WARRANT AGREEMENT
This Warrant Agreement (the "AGREEMENT") is made and entered into as of
this 28th day of February, 2000 by and between Brilliant Digital Entertainment,
Inc., a Delaware corporation (the "COMPANY"), and e-NewMedia Digital
Entertainment (with permitted transferee pursuant to Section 8.2 below, the
"HOLDER").
By acceptance of this Warrant Agreement, the Holder hereby agrees as
follows:
1. GRANT OF WARRANT. The Company hereby grants to the Holder the right and
option (the "WARRANT") to purchase at any time during the "Exercise Period" (as
defined in Section 2 below), upon the terms and subject to the conditions set
forth in this Agreement, an aggregate of 307,692 shares of Common Stock, par
value $.001 per share, of the Company (the "COMMON Stock"), for an exercise
price per share (the "EXERCISE PRICE") of $6.50 subject to adjustment as
provided in Section 5 below. The shares of Common Stock issuable upon exercise
of the Warrant are referred to as the "WARRANT SHARES," and the Warrant Shares
and the Warrant are together referred to as the "SECURITIES."
2. EXERCISE PERIOD. The Warrant shall be exercisable commencing on the date
hereof and terminate and expire at 5:00 p.m. (Los Angeles time) on November 30,
2000.
3. EXERCISE OF WARRANT. There is no obligation to exercise all or any
portion of the Warrant. The Warrant may be exercised, in whole or in part, at
any time after the date hereof only by delivery to the Company of:
3.1 Written notice of exercise in form and substance identical to and
containing the representations set forth in EXHIBIT A attached to this
Agreement; and
3.2 Payment of the Exercise Price for the Warrant Shares being
acquired upon exercise of the Warrant, by wire transfer in immediately
available Federal funds. Upon receipt of the foregoing, the Company shall
promptly issue in the name of the Holder a certificate evidencing the
Warrant Shares being purchased by such exercise and deliver such
certificate to the address requested in the notice of exercise.
4. REDEMPTION.
4.1 At any time after the date of this Agreement the Company may
redeem and cancel all, and not less than all, the unexercised rights to
purchase Warrant Shares evidenced by the Warrant for an aggregate
redemption price (the "REDEMPTION PRICE") of $.001 multiplied by the number
of Warrant Shares then issuable under the Warrant, provided, however, that
before any such call for redemption of the Warrant can take place the (i)
high closing bid price for the Common Stock in the over-the-counter market
as reported by the NASD Automated Quotation System or (ii) the closing sale
price on the primary exchange on which the Common Stock is traded, if the
Common Stock is traded on a national securities exchange, shall have for
twenty (20) consecutive trading days subsequent to the date of this
agreement equaled or exceeded 120% of the Exercise Price.
4.2 In case the Company shall exercise its right to redeem all, and
not less than all, the unexercised rights to purchase Warrant Shares
evidenced by the Warrant, it shall give or cause to be given notice to the
Holder by mailing to the Holder a notice of redemption, first class,
postage prepaid, to the address of the Holder set forth in Section 10.2
below, within twenty (20) calendar days of the aforementioned fifteen (15)
consecutive trading days and not later than the thirtieth (30th) day before
the date fixed for redemption. Any notice mailed in the manner provided
herein shall be conclusively presumed to have been duly given whether or
not the Holder receives such notice.
4.3 The notice of redemption shall specify (i) the Redemption Price,
(ii) the date fixed for redemption (the "REDEMPTION DATE"), and (iii) that
the right to exercise the Warrant shall terminate at the close of the
market upon which the Common Stock is then traded on the business day
immediately preceding the date fixed for redemption.
4.4 Any right to exercise the Warrant shall terminate on close of the
market upon which the Common Stock is then traded on the business day
immediately preceding the Redemption Date. The Redemption Price payable to
the Holder shall be mailed to the Holder at its address set forth in
Section 10.2 below.
5. ADJUSTMENTS TO EXERCISE PRICE, REDEMPTION PRICE AND NUMBER OF SHARES.
The Exercise Price, Redemption Price and number of Shares shall be subject to
adjustment from time to time as follows:
5.1 In the event the Company should at any time or from time to time
after the date of this Warrant (the "ISSUANCE 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 or other securities or rights convertible into, or entitling
the holder thereof to receive, directly or indirectly, additional shares of
Common Stock (hereinafter referred to as "COMMON STOCK EQUIVALENTS")
without payment of any consideration by such holder for the additional
shares of Common Stock or the Common Stock Equivalents (including the
additional shares of Common Stock issuable upon conversion or exercise
thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the
Exercise Price and the Redemption Price shall be appropriately decreased
(i.e., the per share
Page 2
Exercise Price and the Redemption Price shall be adjusted such that the
aggregate exercise price and for all Warrant Shares issuable upon exercise
of the Warrant in full and the Redemption Price for the entire Warrant, as
adjusted, shall remain the same) and the number of Warrant Shares shall be
increased in proportion to such increase in the aggregate number of shares
of Common Stock outstanding and those issuable with respect to such Common
Stock Equivalents.
5.2 If the number of shares of Common Stock outstanding at any time
after the Issuance Date is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date of such
combination, the Exercise Price and Redemption Price shall each be
appropriately increased (i.e., the per share Exercise Price and the
Redemption Price shall be adjusted such that the aggregate exercise price
for all Warrant Shares issuable upon exercise of the Warrant in full and
the aggregate redemption price for the entire Warrant, as adjusted, shall
remain the same) and the number of Shares shall be decreased in proportion
to such decrease in the aggregate number of shares of Common Stock
outstanding and those issuable with respect to such Common Stock
Equivalents.
5.3 In case of any capital reorganization, any reclassification of the
Common Stock (other than a change in par value or a recapitalization
described in Section 5.1 or 5.2 of this Agreement), or the consolidation of
the Company with, or a sale of substantially all of the assets of the
Company to (which sale is followed by a liquidation or dissolution of the
Company), or merger of the Company with, another person, the Holder shall
thereafter be entitled upon exercise of the Warrant to purchase the kind
and number of shares of stock or other securities or the amount or value of
any cash, assets or other property receivable upon such event by a holder
of the number of shares of the Common Stock which the Warrant entitles the
holder of the Warrant to purchase from the Company immediately prior to
such event; and in any such case, appropriate adjustment shall be made in
the application of the provisions set forth in this Agreement with respect
to the Holder's rights and interests thereafter, to the end that the
provisions set forth in this Agreement (including the specified changes and
other adjustments to the Exercise Price and Redemption Price) shall
thereafter be applicable in relation to any shares or other property
thereafter purchasable upon exercise of the Warrant.
5.4 If it is expected that there will occur any event described in
Section 5.3 hereof, the Company shall give the holder of the Warrant notice
thereof, which notice shall be given at such time or times as notice is
given to the holders of the Company's Common Stock.
5.5 The provisions of this Section 5 are intended to be exclusive, and
the holder of the Warrant shall have no rights other than as set forth in
this Agreement (and the rights of a stockholder upon exercise of the
Warrant) upon the occurrence of any of the events described in this Section
5.
5.6 The grant of the Warrant shall not affect in any way the right or
power of the Company to make adjustments, reclassifications,
reorganizations or changes in its capital or business structure, or to
merge, consolidate, dissolve or liquidate, or to sell or transfer all or
any part of its business or assets.
Page 3
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF HOLDER. The Holder makes
the following representations, warranties and covenants:
6.1 The Holder is acquiring the Securities for its own account with
the present intention of holding such Securities for investment purposes
only and not with a view to, or for sale in connection with, any
distribution of such Securities (other than a distribution in compliance
with all applicable federal and state securities laws).
6.2 The Holder is an experienced and sophisticated investor and has
such knowledge and experience in financial and business matters that it is
capable of evaluating the relative merits and the risks of an investment in
the Securities and of protecting its own interests in connection with this
transaction.
6.3 The Holder is willing to bear and is capable of bearing the
economic risk of an investment in the Securities.
6.4 The Company has made available, prior to the date of this
Agreement, to the Holder the opportunity to ask questions of the Company
and its officers, and to receive from the Company and its officers
information concerning the terms and conditions of the Securities and this
Agreement and to obtain any additional information with respect to the
Company, its business, operations and prospects, as reasonably requested by
the Holder.
6.5 The Holder is an "accredited investor" as that term is defined
under Rule 501(a)(8) of Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"SECURITIES ACT").
7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The Company
makes the following representations, warranties and covenants:
7.1 The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. The Company has
the requisite corporate power and authority to carry on its business as now
being conducted and to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby.
7.2 All corporate action on the part of the Company, its directors and
shareholders necessary for the authorization, execution, delivery and
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby has been taken. This Agreement constitutes
the valid and binding obligation of the Company, enforceable in accordance
with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
7.3 The Warrant Shares, when issued in accordance with the terms of
this Warrant, will be duly authorized, validly issued and nonassessable
shares of the Common Stock of the Company, free and clear of any liens,
claims or restrictions imposed by or through the Company other than as set
forth in this Agreement.
Page 4
7.4 The Company covenants that it will at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the issuance of the Warrant Shares upon
exercise of all or part of the Warrant, such number of shares of Common
Stock as shall then be issuable upon the exercise of the entire Warrant.
8. RESTRICTIONS ON TRANSFER OR EXERCISE OF THE WARRANT AND SHARES.
8.1 Each certificate for Warrant Shares initially issued upon the
exercise of the Warrant shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
CONDITIONS SPECIFIED IN A CERTAIN WARRANT AGREEMENT DATED
FEBRUARY 28, 2000. NO TRANSFER, SALE, PLEDGE, HYPOTHECATION,
ENCUMBRANCE OR OTHER DISPOSITION OF THE SHARES REPRESENTED BY
THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL REGISTERED OR
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO
IT, THAT THE TRANSACTION IS EXEMPT FROM REGISTRATION, AND UNTIL
SUCH CONDITIONS AS ARE CONTAINED IN THE WARRANT AGREEMENT HAVE
BEEN FULFILLED. A COPY OF THE FORM OF THE WARRANT AGREEMENT IS ON
FILE AT THE OFFICES OF BRILLIANT INTERACTIVE, INC. THE HOLDER OF
THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE
BOUND BY THE PROVISIONS OF THE WARRANT AGREEMENT."
If the Warrant Shares are no longer subject to the transfer
restrictions imposed by applicable state and federal securities law because
either (i) the resale of the Warrant Shares has been registered on a
registration statement declared effective by the Commission or (ii) in the
reasonable opinion of counsel for the Company, or the opinion of counsel
for the Holder, which opinion is reasonably satisfactory to counsel for the
Company, all future dispositions of any of the Warrant Shares by the
contemplated transferee would be exempt from or would satisfy the
registration and prospectus delivery requirements of the Securities Act and
the qualification requirements of the applicable state securities laws,
then the restrictions on transfer of such securities contained in this
Section 8.1 shall not apply to any subsequent transfer thereof and the
Company shall, promptly upon request by the Holder, remove the legend set
forth above and shall promptly issue, in exchange for the certificate
bearing such legend, a certificate without such legend to the Holder.
8.2 THE HOLDER AGREES THAT THE WARRANT MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED OR HYPOTHECATED EXCEPT (I) TO ITS SUCCESSORS IN A MERGER OR
CONSOLIDATION OR OTHER BUSINESS COMBINATION; (II) TO PURCHASERS OF ALL OR
SUBSTANTIALLY ALL OF ITS ASSETS; OR (III) BY OPERATION OF LAW. HOLDER
FURTHER AGREES THAT THE COMPANY SHALL HAVE NO OBLIGATION TO EFFECT ANY
TRANSFER OF THE WARRANT PURSUANT TO THE IMMEDIATELY PRECEDING SENTENCE
UNLESS THE TRANSFEREE, PURCHASER, ASSIGNEE OR PLEDGEE, AS THE CASE MAY BE,
SHALL HAVE EXECUTED AN AGREEMENT OBLIGATING THE TRANSFEREE TO COMPLY WITH
ALL TERMS AND CONDITIONS OF THIS AGREEMENT APPLICABLE TO THE TRANSFEROR.
8.3 Prior to any exercise of the Warrant or any transfer or attempted
transfer of any of the Warrant or Warrant Shares, the Holder shall give the
Company written notice of his intention so to do, describing briefly the
manner of any such proposed exercise, sale or transfer.
Page 5
The Holder may effect such exercise or transfer, provided that such
exercise or transfer is not prohibited by this Section 8 and such exercise
or transfer complies with all applicable federal and state securities laws
and regulations.
8.4 If in the reasonable opinion of counsel for the Company,
notwithstanding the opinion of counsel to a Holder to the contrary, if any,
the proposed transfer of such Warrant Shares or the Warrant may not be
effected without registration thereof under the Securities Act and such
registration has not occurred, the Company shall, as promptly as
practicable, so notify the Holder and the Holder shall not consummate the
proposed transfer.
9. DISPUTES.
9.1 ARBITRATION.
a. Except as otherwise expressly provided for in Section 9.3
below, all disputes arising in connection with this Agreement shall be
finally settled by arbitration in Los Angeles, California, in
accordance with the rules of the American Arbitration Association (the
"RULES OF ARBITRATION") and judgment on the award rendered by the
arbitration panel (the "ARBITRATION PANEL") may be entered in any
court or tribunal of competent jurisdiction.
b. Any party which desires to initiate arbitration proceedings as
provided in Section 9.1(a) above may do so by delivering written
notice to the other party (the "ARBITRATION NOTICE") specifying (A)
the nature of the dispute or controversy to be arbitrated, (B) the
name and address of the arbitrator appointed by the party initiating
such arbitration and (C) such other matters as may be required by the
Rules of Arbitration.
c. The party who receives an Arbitration Notice shall appoint an
arbitrator and notify the initiating party of such arbitrator's name
and address within 30 days after delivery of the Arbitration Notice;
otherwise, a second arbitrator shall be appointed at the request of
the party who delivered the Arbitration Notice as provided in the
Rules of Arbitration. The two arbitrators so appointed shall appoint a
third arbitrator who shall be the chairman or the Arbitration Panel
and who shall be of American nationality. Should the arbitrators
appointed by the parties not agree upon the appointment of the third
arbitrator within 30 days of their appointment, the third shall be
appointed in accordance with the Rules of Arbitration.
d. In any arbitration proceeding conducted pursuant to the
provisions of this Section 9, both parties shall have the right to
discovery, to call witnesses and to cross-examine the opposing party's
witnesses, either through legal counsel, expert witnesses or both, and
such proceedings shall be conducted in the English language.
9.2 FINALITY OF DECISION. All decisions of the Arbitration Panel shall
be final, conclusive and binding on all parties and shall not be subject to
judicial review. The arbitrator shall divide all costs (other than fees of
counsel) incurred in conducting the arbitration proceeding and the final
award in accordance with what they deem just and equitable under the
circumstances.
9.3 LIMITATIONS. Notwithstanding anything to the contrary contained in
Sections 9.1 and 9.2 above, any claim by either party for injunctive or
other equitable relief, including specific
Page 6
performance, may be brought in any court of competent jurisdiction and any
judgment, order or decree relating thereto shall have precedence over any
arbitral award or proceeding.
10. MISCELLANEOUS PROVISIONS.
10.1 FURTHER ASSURANCES. The Company and the Holder agree to execute
such further documents or instruments and to take such other actions as are
necessary to carry out the transactions contemplated by this Agreement and
the other agreements referred to herein. 10.2 NOTICES. Any and all notices
and other communications to be served hereunder shall be either delivered
(i) by hand; (ii) by prepaid overnight delivery service; or (iii) by
certified or registered mail, postage pre-paid, in each case, addressed as
follows:
If to the Holder:
-----------------------
-----------------------
-----------------------
-----------------------
-----------------------
Attn: ___________________
If to the Company:
Brilliant Digital Entertainment, Inc.
0000 Xxxxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000
Attn: Chief Executive Officer
or at such other address and to the attention of such other person as any
party hereto may designate by written notice to the other in accordance
with the terms hereof.
Any such notice shall be effective (i) if delivered by hand, when
personally delivered; (ii) if given by overnight delivery service, on the
business day following deposit with such service addressed as aforesaid; or
(iii) if given by registered or certified mail, 72 hours after deposit in
the mail postage pre-paid, addressed as aforesaid.
10.3 AMENDMENT; WAIVER. This Agreement shall be binding upon and inure
to the benefit of the parties to this Agreement and their respective
successors, heirs and personal representatives. No provision of this
Agreement may be amended or waived unless in writing signed by all of the
parties to this Agreement. Waiver of any one provision of this Agreement
shall not be deemed to be a waiver of any other provision.
10.4 GOVERNING LAW. This 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. Each of the parties hereto hereby waive their right to
a jury trial with respect to any such legal actions.
Page 7
10.5 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 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.
10.6 NO FINDERS. The parties each agree to indemnify and hold harmless
the other against any expense incurred by reason of any consulting,
brokerage commission or finder's fee alleged to be payable to any person in
connection with the transactions contemplated hereby because of any act,
omission or statement of indemnifying party or any dealings by the
indemnifying party with any consultant, broker or finder.
10.7 EXPENSES. Each of the parties shall pay its own expenses incurred
in connection with the preparation of this agreement and the consummation
of the transactions contemplated hereby.
10.8 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this 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 Agreement.
10.9 HEADINGS. The section and subsection headings contained in this
Agreement are included for convenience only and form no part of the
agreement between the parties.
10.10 SURVIVAL. The provisions of Section 9 and Section 10 shall
survive termination of this Agreement.
10.11 INTERPRETATION. In all matters of interpretation, whenever
necessary to give effect to any provision of this Agreement, each gender
shall include the others, the singular shall include the plural, and the
plural shall include the singular. The titles of the paragraphs of this
Agreement are for convenience only and shall not in any way affect the
interpretation of any provision or condition of this Agreement. Each party
and its counsel have reviewed and revised this Agreement. As a result, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the
interpretation of this Agreement or any amendments or exhibits thereto.
10.12 ENTIRE AGREEMENT. This Agreement constitutes and embodies the
entire understanding and agreement of the parties hereto relating to the
subject matter hereof and there are no other agreements or understandings,
written or oral, in effect between the parties relating to such subject
matter except as expressly referred to herein.
Page 8
IN WITNESS WHEREOF, the parties have entered into and executed this
Warrant Agreement as of the date first above written.
BRILLIANT DIGITAL ENTERTAINMENT, INC.
By: /S/ XXXX XXXX
---------------------------------
Name: Xxxx Xxxx
Title: Chairman and CEO
Page 9
EXHIBIT A
NOTICE OF EXERCISE
(TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT)
TO: Brilliant Digital Entertainment, Inc.
The undersigned hereby irrevocably elects (to the extent indicated
herein) to exercise the Warrant granted to the undersigned pursuant to that
certain Nontransferable Redeemable Warrant Agreement dated _________, 2000
between the undersigned and Brilliant Digital Entertainment, Inc., a Delaware
corporation (the "COMPANY") and to purchase ___________ shares of Common Stock
(the "SECURITIES") of the Company. The closing of the exercise of the Warrant
shall take place at _____ on _________________, ________ at the principal
executive office of the Company located at Brilliant Digital Entertainment,
Inc., 0000 Xxxxxxx Xxxxxx Xxxx., Xxxxx 000, Xxxxxxxx Xxxxx, XX 00000.
The undersigned represents, warrants and agrees that the undersigned
(a) is acquiring the Securities for its own account with the present intention
of holding such Securities for investment purposes only and not with a view to,
or for sale in connection with, any distribution of such Securities (other than
a distribution in compliance with all applicable federal and state securities
laws and the provisions of the Agreement), (b) is an "accredited investor" as
that term is defined under Rule 501 of Regulation D promulgated by the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
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(Signature)
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(Print Name)
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(Title, if Any)