EXHIBIT 10.1
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT (this "AGREEMENT"), is
made and entered into as of the 26th day of August, 2002, by and between
BRILLIANT DIGITAL ENTERTAINMENT, INC., a Delaware corporation (the "COMPANY"),
located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
and the purchasers (each a "PURCHASER," and collectively, the "PURCHASERS")
listed on the Schedule of Purchasers attached hereto as Exhibit A (the "SCHEDULE
OF PURCHASERS"), each located at the address set forth on the Schedule of
Purchasers.
ARTICLE 1
AUTHORIZATION AND SALE OF COMMON STOCK
1.1 AUTHORIZATION. The Company has authorized the sale and issuance to
investors of up to an aggregate of (i) 7,123,836 shares of Common Stock, par
value $0.001 per share, of the Company ("COMMON STOCK"), at a price of $0.1502
per share (the "PURCHASE PRICE"), which represents the five (5) day volume
weighted average price of the stock for the five (5) days immediately preceding
the date of this Agreement, and (ii) warrants expiring September 3, 2005 to
purchase Common Stock in the form attached hereto as Exhibit B (the "WARRANTS"),
each at an exercise price per share of $0.168975 (the "EXERCISE PRICE"), which
represents a twelve and one-half percent (12.5%) premium over the Purchase
Price. The shares of Common Stock to be issued pursuant to the terms hereof are
referred to as the "COMMON SHARES." The shares of Common Stock issuable upon
exercise of the Warrants are referred to as the "WARRANT SHARES." The Common
Shares, the Warrants, and the Warrant Shares are collectively referred to as the
"SECURITIES."
1.2 AGREEMENT TO PURCHASE AND SELL SECURITIES. The Company agrees to issue
and sell to each Purchaser, and each Purchaser agrees to purchase from the
Company, the number of Common Shares set forth opposite such Purchaser's name in
the applicable column of the Schedule of Purchasers (the "COMMITTED SHARES") for
the aggregate purchase price, calculated on a per share purchase price of
$0.1502 per share, set forth opposite such Purchaser's name in the applicable
column of the Schedule of Purchasers (the "COMMITTED AMOUNT") on the terms and
conditions set forth herein. Additionally, in further consideration of each
Purchaser's purchase of the Common Shares hereunder, the Company agrees to issue
to the Purchaser, a Warrant initially exercisable for a number of Warrant Shares
equal to two hundred percent (200%) of the Committed Amount divided by the
Exercise Price (the "WARRANT COVERAGE"), at an exercise price per share equal to
the Exercise Price. The number and type of shares issuable upon exercise of the
Warrant is subject to adjustment as set forth in the Warrant.
1.3 CLOSING AND DELIVERY. The purchase and sale of the Common Shares and
Warrants shall occur at 12:00 p.m., Los Angeles time, on September 3, 2002, or
at such other time on or before September 3, 2002 as is mutually agreed upon by
the Company and the Purchasers. Such purchase and sale is referred to herein as
the "CLOSING," and the date of the Closing is referred to herein as the "CLOSING
DATE." The Closing shall be held at the offices of the Company first set forth
above. At the Closing, each Purchaser shall deliver to the Company by check or
wire transfer the Committed Amount and the Company shall deliver or cause to be
delivered to each Purchaser a
Warrant as described above. Within five (5) business days following the Closing
Date, the Company will deliver to each Purchaser a certificate evidencing the
Common Shares purchased at the Closing.
1.4 NATURE OF OFFERING. The investment in the Securities is being made in
reliance upon the provisions of Section 4(2) ("SECTION 4(2)") of the United
States Securities Act of 1933, as amended (the "SECURITIES ACT"), and Regulation
D ("REGULATION D") and the other rules and regulations promulgated under the
Securities Act and/or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to the
investment to be made hereunder.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 BY THE COMPANY. The Company hereby represents and warrants to the
Purchaser as follows:
(a) STATUS. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
the corporate power to own and operate its properties and assets, to carry on
its business as now conducted and to enter into and to perform its obligations
under this Agreement and the Warrants (collectively, the "TRANSACTION
DOCUMENTS"). The Company is duly qualified to do business and is in good
standing in California and in each other state in which a failure to be so
qualified would have a material adverse effect on the Company's financial
condition or its ability to own and operate its properties and assets and
conduct its business in the manner now conducted.
(b) AUTHORIZATION. The Company has full legal right, power and
authority to conduct its business and affairs. The Company has full legal right,
power and authority to enter into and perform its obligations under the
Transaction Documents, including the issuance of the Securities. The execution
and delivery of this Agreement, the execution and delivery of the Warrants, and
the performance by the Company of its obligations thereunder, including the
issuance of the Securities, are within the corporate powers of the Company and
have been duly authorized by all necessary corporate action properly taken and
the Company has received all necessary governmental approvals, if any, that are
required. The officer(s) executing this Agreement and the Warrants are duly
authorized to act on behalf of the Company.
(c) VALIDITY AND BINDING EFFECT. This Agreement and the Warrants are
the legal, valid and binding obligations of the Company, enforceable in
accordance with their respective terms, subject to limitations imposed by
bankruptcy, insolvency, moratorium or other similar laws affecting the rights of
creditors generally or the application of general equitable principles.
(d) NO CONFLICTS. Consummation of the transactions contemplated
hereby and the performance of the obligations of the Company under and by virtue
of the Transaction Documents, including the issuance of the Securities, do not
conflict with, and will not result in any breach of, or constitute a default or
trigger a lien under, any mortgage, security deed or agreement, deed of trust,
lease, bank loan or credit agreement, corporate charter or bylaws, agreement or
certificate of limited partnership, partnership agreement, license, franchise or
any other instrument or agreement to which the Company is a party or by which
the Company or its respective properties may be bound or affected or to which
the Company has not obtained an effective waiver.
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(e) EXEMPTION FROM REGISTRATION; VALID ISSUANCES. Subject to the
accuracy of the Purchasers' representations in Section 2.2(d), (e), (g) and (h),
the sale of the Securities will not require registration under the Securities
Act or any applicable state securities law. The Common Shares, when issued, sold
and delivered in accordance with the terms of this Agreement, shall be duly and
validly issued, fully-paid and non-assessable shares of Common Stock, free of
all liens, claims, encumbrances, preemptive rights, rights of first refusal and
restrictions on transfer, except as imposed by applicable securities laws. The
Warrant Shares issuable by the Company upon the exercise of the Warrants, shall,
if and when the Warrants are exercised in accordance with their respective terms
and the consideration therefore is received by the Company, be duly and validly
issued, fully-paid and non-assessable shares of Common Stock, free of all liens,
claims, encumbrances, preemptive rights, rights of first refusal and
restrictions on transfer, except as imposed by applicable securities laws.
(f) SEC DOCUMENTS. The Company has made available to the Purchasers
true and complete copies of the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2000 and each report, proxy statement or
registration statement filed by the Company with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") or the Securities Act since the filing of such
Annual Report through the date hereof (collectively such documents are referred
to as the "SEC DOCUMENTS"). As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act, and
rules and regulations of the SEC promulgated thereunder and the SEC Documents
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Documents complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
interim statements, to normal year-end audit adjustments). Except for
indebtedness incurred in that certain financing transaction that closed on or
around December 10, 2001, by and among the Company, ▇▇▇▇▇▇ ▇▇▇▇▇, and certain
other Purchasers, neither the Company nor any of its subsidiaries has any
material indebtedness, obligations or liabilities of any kind (whether accrued,
absolute, contingent or otherwise, and whether due or to become due) that would
have been required to be reflected in, reserved against or otherwise described
in the financial statements or in the notes thereto in accordance with GAAP,
which was not fully reflected in, reserved against or otherwise described in the
financial statements or the notes thereto included in the SEC Documents or was
not incurred in the ordinary course of business consistent with the Company's
past practices since the last date of such financial statements.
(g) NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS
TRANSACTION. Neither the Company nor any of its affiliates nor any person acting
on its or their behalf (i) has conducted or will conduct any general
solicitation (as that term is used in Rule 502(c) of Regulation D) or general
advertising with respect to the Securities or (ii) made any offers or sales of
any security
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or solicited any offers to buy any security under any circumstances that would
require registration of the Securities under the Securities Act; provided, that
the Company makes no representation or warranty with respect to the Purchasers.
(h) NO MATERIAL ADVERSE EFFECT. Since June 30, 2002, no Material
Adverse Effect (as defined herein) has occurred or exists with respect to the
Company, except as disclosed in the SEC Documents. For purposes hereof,
"MATERIAL ADVERSE EFFECT" shall mean any effect on the business, operations,
properties, prospects, material agreements or financial condition of the Company
that is material and adverse to the Company and its subsidiaries and affiliates,
taken as a whole, and/or any condition, circumstance, or situation that would
prohibit or otherwise interfere with the ability of the Company to enter into
and perform any of its obligations under the Transaction Documents in any
material respect.
(i) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since June 30, 2002, no
event or circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
(j) NO INTEGRATED OFFERING. Other than as described in the SEC
Documents or pursuant to an effective registration statement under the
Securities Act, or pursuant to the issuance or exercise of employee stock
options, or pursuant to its discussion with the Purchasers of the Common Shares
in connection with the transactions contemplated hereby, the Company has not
issued, offered or sold the Common Shares or any other shares of Common Stock
(including for this purpose any securities of the same or a similar class as the
Common Stock or any securities convertible into, exchangeable or exercisable for
the Common Stock or any such other securities) within the six-month period next
preceding the date hereof in a manner that would make unavailable the exemption
from Securities Act registration being relied upon by the Company for the offer
and sale to the Purchaser and the other purchasers of the Securities as
contemplated by this Agreement, and the Company shall not permit any of its
directors, officers or affiliates directly or indirectly to take any action
(including, without limitation, any offering or sale to any person or entity of
the Common Shares or other shares of Common Stock), so as to make unavailable
the exemption from Securities Act registration being relied upon by the Company
for the offer and sale to the Purchaser and the other purchasers of the
Securities as contemplated by this Agreement.
(k) LITIGATION AND OTHER PROCEEDINGS. Except as disclosed in the SEC
Documents, there are no lawsuits or proceedings pending or, to the knowledge of
the Company, threatened, against the Company, nor has the Company received any
written or oral notice of any such action, suit, proceeding or investigation,
which could reasonably be expected to either have a Material Adverse Effect or
result in a judgment against the Company in an amount in excess of $75,000.
Except as set forth in the SEC Documents, no judgment, order, writ, injunction
or decree or award has been issued by or, to the knowledge of the Company,
requested of any court, arbitrator or governmental agency which could result in
a Material Adverse Effect.
(l) NO MISLEADING OR UNTRUE COMMUNICATION. The Company and, to the
knowledge of the Company, any person representing the Company, or any other
person selling or offering to sell the Common Shares or Warrants in connection
with the transactions contemplated by this Agreement, have not made, at any
time, any oral communication in connection with the offer
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or sale of the same which contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements, in
the light of the circumstances under which they were made, not misleading.
(m) SUBSIDIARIES. The Company does not have any subsidiaries except
for Brilliant Studios, Inc., a Delaware corporation, B3D, Inc., a Delaware
corporation, and Brilliant Digital Entertainment Pty. Limited, an Australian
corporation. The Company also owns seventy-five percent (75%) of the outstanding
shares of Digital Hip Hop, Inc., a Delaware corporation, and fifty-one percent
(51%) of the outstanding shares of Altnet, Inc., a Delaware corporation.
(n) SOLVENCY OF THE COMPANY. The Company will be solvent under GAAP
immediately following the Closing.
2.2 BY THE PURCHASERS. Each Purchaser hereby represents and warrants to
the Company with respect to itself as follows:
(a) STATUS. If the Purchaser is a corporation, partnership, trust,
limited liability company, or other legal entity, such Purchaser is duly
organized, validly existing and in good standing (to the extent applicable)
under the laws of the state of its formation, and has the power to own and
operate its properties, to carry on its business as now conducted and to enter
into and to perform its obligations under this Agreement.
(b) AUTHORIZATION. The Purchaser has the full legal right, power and
authority to enter into and perform its obligations under this Agreement. The
execution and delivery of this Agreement and the performance by the Purchaser of
its obligations hereunder are within the powers of the Purchaser and have been
duly authorized by all necessary action properly taken and the Purchaser has
received all necessary governmental approvals, if any, that are required. The
person executing this Agreement and the respective Warrants is duly authorized
to act on behalf of the Purchaser.
(c) VALIDITY AND BINDING EFFECT. This Agreement and the respective
Warrants are the legal, valid and binding obligations of the Purchaser,
enforceable in accordance with their respective terms, subject to limitations
imposed by bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally or the application of general equitable
principles.
(d) INVESTMENT REPRESENTATIONS.
(i) The Purchaser has such knowledge and experience in financial
and business matters, including investments of the type represented by this
Agreement and the Warrants, as to be capable of evaluating the merits of
investment in the Company and can bear the economic risk of an investment in the
Securities;
(ii) The Purchaser is an "accredited investor" as such term is
defined in Rule 501 of Regulation D under the Securities Act; and
(iii) The Purchaser is acquiring the Common Shares and the
Warrant and, to the extent exercised, will be acquiring the Warrant Shares, for
investment purposes only, for its
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own account and not with a view to, or for resale in connection with, the
distribution or other disposition thereof in contravention of the Securities Act
or any state securities law.
(e) TRANSFER RESTRICTIONS. The Purchaser acknowledges and agrees that
the Securities are subject to the following transfer restrictions:
(i) The Securities have not been registered under the Securities
Act, and Purchaser agrees not to sell, pledge, distribute, offer for sale,
transfer or otherwise dispose of the Securities, as applicable, in the absence
of (i) an effective registration statement under the Securities Act as to
Securities, as applicable, and registration or qualification of the Securities
under any applicable Blue Sky or state securities laws then in effect, or (ii)
an opinion of counsel, reasonably satisfactory to the Company, that such
registration and qualification are not required. Each of the certificates
evidencing the Common Shares, and upon exercise of the Warrants, each of the
certificates evidencing the Warrant Shares, shall bear a legend in the form set
forth in Article 4 hereof.
(ii) In the reasonable discretion of the Company, the Company may
condition any transfer of all or any portion of the Securities (other than a
disposition satisfying the conditions set forth in clause (i) of Section
2.2(e)(i) above) upon the transferee's delivery to the Company of a written
agreement, in form and substance reasonably satisfactory to the Company, whereby
the transferee (i) makes such representations and warranties to and for the
benefit of the Company as are comparable to the representations and warranties
of the Purchaser hereto, as and to the extent applicable to the proposed
disposition, and (ii) agrees to be bound by the transfer restrictions set forth
in this Section 2.2(e).
(f) ABSENCE OF CONFLICTS. The execution and delivery of this
Agreement and the Warrants to which the Purchaser is a party, and the
consummation of the transactions contemplated thereby, and compliance with the
requirements thereof, will not violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on the Purchaser or (a) violate
any provision of any indenture, instrument or agreement to which the Purchaser
is a party or is subject, or by which the Purchaser or any of its assets is
bound; (b) conflict with or constitute a material default thereunder; (c) result
in the creation or imposition of any lien pursuant to the terms of any such
indenture, instrument or agreement, or constitute a breach of any fiduciary duty
owed by the Purchaser to any third party; or (d) require the approval of any
third-party (which has not been obtained) pursuant to any material contract,
agreement, instrument, relationship or legal obligation to which the Purchaser
is subject or to which any of its assets, operations or management may be
subject.
(g) DISCLOSURE; ACCESS TO INFORMATION. The Purchaser has received all
documents, records, books and other publicly available information pertaining to
the Purchaser's investment in the Company that have been requested by the
Purchaser. The Company is subject to the periodic reporting requirements of the
Exchange Act, and the Purchaser has reviewed or received copies of all SEC
Documents that have been requested by it.
(h) MANNER OF SALE. At no time was the Purchaser presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
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ARTICLE 3
COVENANTS AND AGREEMENTS
3.1 LISTING OF COMMON STOCK. The Company hereby agrees to use its best
efforts to maintain the listing of the Common Stock on any of the American Stock
Exchange, the New York Stock Exchange, the NASDAQ National Market, or the NASDAQ
Small-Cap Market, whichever is at the time the principal trading exchange or
market for the Common Stock (the "PRINCIPAL MARKET"), and as soon as reasonably
practicable following the Closing to list the Common Shares and the Warrant
Shares on the Principal Market. The Company further agrees, if the Company
applies to have the Common Stock traded on any other Principal Market, it will
include in such application the Common Shares and the Warrant Shares.
3.2 ISSUANCE OF COMMON SHARES AND WARRANT. The sale of the Common Shares
and the Warrants and the issuance of the Warrant Shares upon exercise of the
Warrants, as the case may be, shall be made in accordance with the provisions
and requirements of Section 4(2) and Regulation D under the Securities Act, and
any applicable state securities law. The Company shall make all necessary SEC
and "blue sky" filings required to be made by the Company in connection with the
sale of the Securities to the Purchaser as required by all applicable laws.
3.3 AUTHORIZED SHARES. At all times from and after the Closing Date, the
Company shall maintain a sufficient number of authorized shares of Common Stock
reserved for issuance upon exercise of the Warrants in accordance with the terms
thereof.
3.4 REGISTRATION RIGHTS. All of the Common Shares issued pursuant to the
terms of this Agreement and the Warrant Shares issuable upon exercise of the
Warrants shall be "Registrable Securities" or such other definition of
securities entitled to registration rights pursuant to Exhibit C to this
Agreement. The Purchasers shall be entitled to the registration rights set forth
in Exhibit C with respect to such Common Shares and Warrant Shares.
3.5 HOLDBACK AGREEMENT. Notwithstanding registration of the Common Shares
and Warrant Shares, prior to January 23, 2003, each Purchaser agrees not to
affect any private or public sale of, make any short sale of, loan, pledge,
grant any option with respect to, or otherwise dispose of or transfer for value,
any of the Common Shares or Warrant Shares acquired by such Purchaser hereunder
or upon exercise of the Warrant issued hereunder.
ARTICLE 4
LEGEND
Each certificate representing the Common Shares and the Warrant Shares will
bear a legend in substantially the following form (the "LEGEND"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
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BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A
TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
ARTICLE 5
CONDITIONS TO CLOSING
5.1 CONDITIONS TO THE OBLIGATIONS OF PURCHASER. The obligations of each
Purchaser to purchase the Common Shares and Warrants pursuant to the terms of
this Agreement at the Closing and the other obligations of each Purchaser under
this Agreement are subject to the satisfaction as of the Closing of the
following conditions, any of which may be waived in writing in whole or in part
by Purchaser:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall be true and correct
as of the date hereof and as of the Closing Date with the same force and effect
as though such representations and warranties had been made at and as of such
date (i.e., with respect to a representation that a state of facts exists on or
as of the date hereof, it is a condition that such state of facts exists on or
as of the Closing Date, and with respect to a representation that a state of
facts has or has not changed between a date prior to the date hereof and the
date hereof, it is a condition that such state of facts has or has not changed
between such prior date and the Closing Date), except as affected by
transactions contemplated hereby and except that any such representation or
warranty made as of a specified date (other than the date of this Agreement)
shall only need to have been true on and as of such date.
(b) FAIRNESS OPINION. The Company shall have delivered to the
Purchaser an opinion from The Mentor Group stating that the transactions
contemplated by this Agreement are fair to the Company and its shareholders from
a financial point of view.
(c) BOARD APPROVAL. The Company shall have delivered to the Purchaser
a resolution of a majority of the Board of Directors of the Company, consisting
solely of members of the Board of Directors of the Company who do not have an
interest in the transactions contemplated by this Agreement, approving the
transactions contemplated by this Agreement.
ARTICLE 6
MISCELLANEOUS
6.1 SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES. 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 the Company or by or on behalf of a Purchaser shall bind and
inure to the benefit of their respective heirs, legal representatives,
successors-in-title and assigns, whether so expressed or not.
6.2 SEVERABILITY. Wherever possible each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective
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to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement and
shall be interpreted so as to be effective and valid.
6.3 ARTICLE AND SECTION HEADINGS, DEFINED TERMS. Numbered and titled
article and section headings and defined terms are for convenience only and
shall not be construed as amplifying or limiting any of the provisions of this
Agreement.
6.4 NOTICES. Any and all notices, elections or demands permitted or
required to be made under this Agreement shall be in writing, signed by the
party giving such notice, election or demand and shall be delivered personally,
telecopied, or sent by certified mail or overnight via nationally recognized
courier service (such as Federal Express), to the other party at the address set
forth in the introductory paragraph to this Agreement, in the Schedule of
Purchasers or at such other address as may be supplied in writing and of which
receipt has been acknowledged in writing. The date of personal delivery or
telecopy or two (2) business days after the date of mailing (or the next
business day after delivery to such courier service), as the case may be, shall
be the date of such notice, election or demand.
6.5 ENTIRE AGREEMENT. This Agreement and the other written agreements
between the Company and the Purchasers, represent the entire agreement between
the parties concerning the subject matter hereof, and all oral discussions and
prior agreements are merged herein; provided, if there is a conflict between
this Agreement and any other document executed contemporaneously herewith with
respect to the obligations described herein, the provision of this Agreement
shall control.
6.6 GOVERNING LAW; JURISDICTION. This Agreement shall be construed and
enforced in accordance with, and shall be governed by, the laws of the State of
California, without regard to the conflict of law principles thereof. Any
dispute arising under or in relation to this Agreement shall be resolved in any
competent court located in Los Angeles County, State of California, and each of
the Company and the Purchasers hereby irrevocably submit to the jurisdiction of
any such court.
6.7 AMENDMENT. Neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
the party against whom enforcement of any such amendment, waiver, discharge or
termination is sought.
6.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
COMPANY:
BRILLIANT DIGITAL ENTERTAINMENT, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer and
President
SIGNATURE PAGE TO
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
{Purchaser signature page continued on next page}
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PURCHASERS:
Markev Services, LLC ▇▇▇▇▇▇ ▇▇▇▇▇
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(Print Name of Purchaser) (Print Name of Purchaser)
/s/ ▇▇▇▇ ▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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(Signature) (Signature)
Manager
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(Title, if applicable) (Title, if applicable)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ Haya
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(Print Name of Purchaser) (Print Name of Purchaser)
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ /s/ ▇▇▇ Haya
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(Signature) (Signature)
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(Title, if applicable) (Title, if applicable)
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------- ---------------------------
(Print Name of Purchaser) (Print Name of Purchaser)
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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(Signature) (Signature)
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(Title, if applicable) (Title, if applicable)
SIGNATURE PAGE TO
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
EXHIBIT A
SCHEDULE OF PURCHASERS
PURCHASER COMMITTED AMOUNT COMMITTED SHARES
---------------------------------- ---------------- ----------------
$
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ $200,000 1,331,558
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Markev Services, LLC $350,000 2,330,226
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ $400,000 2,663,116
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ Haya $20,000 133,156
▇▇▇ ▇. ▇▇▇ ▇▇▇ #▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ $50,000 332,890
▇.▇. ▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ $50,000 332,890
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
------------------- ----------------
TOTAL $1,070,000 7,123,836
=================== ================
EXHIBIT B
WARRANT
[OMITTED]
EXHIBIT C
REGISTRATION RIGHTS
1. REGISTRATION RIGHTS.
1.1 Definitions. For purposes of this Exhibit C to the Agreement:
"AFFILIATE" means, with respect to a Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with, such Person in question. For the purposes of this definition,
"CONTROL" (including, with correlative meanings, the terms "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"AGREEMENT" means that certain Common Stock and Warrant Purchase
Agreement dated as of August 26, 2002, by and among the Company and the
Purchasers named therein.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or
any duly constituted committee of that Board which has been delegated the
authority to take the specific action in question.
"COMMON STOCK" means the Company's common stock, par value $0.001 per
share.
"COMPANY" means Brilliant Digital Entertainment, Inc., a Delaware
corporation.
"ELIGIBLE OFFERING" means any public offering of Common Stock by the
Company other than: (i) any registration relating solely to the sale of
securities to participants in a Company stock plan, (ii) any registration
relating to corporate reorganization or other transaction under Rule 145 of
the Act, (iii) any registration on any form (other than Form ▇-▇, ▇-▇ or
S-3) which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of
the Registrable Securities, and (iv) any registration in which the only
Common Stock being registered is Common Stock issuable upon conversion of
debt securities which are also being registered.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC (or any other federal agency at
the time administering the Securities Exchange Act of 1934, as amended)
promulgated thereunder.
"PERSON" means any individual, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, government bureau or agency or other
subdivision thereof or other entity of any kind or nature.
"PURCHASERS" means the Purchasers named in the Agreement.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement or similar
document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document by the SEC.
"REGISTRABLE SECURITIES" means (i) the Common Stock purchased by the
Purchasers pursuant to the terms of the Agreement, (ii) any Common Stock
issuable upon exercise of the Warrants, as defined in the Agreement, (iii)
any Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of the shares referenced in (i) or (ii) above, and (iv) any
Common Stock of the Company issued by way of a stock split of the shares
referenced in (i), (ii) or (iii) above.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC (or any other federal agency at the time
administering the Securities Act of 1933, as amended) promulgated
thereunder.
1.2 PIGGYBACK REGISTRATIONS. From and after the date of the Agreement, the
Company shall notify the Purchasers in writing at least twenty (20) days prior
to filing any registration statement under the Securities Act for purposes of
effecting an Eligible Offering, and will afford the Purchasers an opportunity to
include in such registration statement all or any part of the Registrable
Securities then held by any Purchaser. If the Purchasers desire to include in
any such registration statement all or any part of the Registrable Securities
they hold, such Purchasers shall, within ten (10) days after receipt of the
above-described notice from the Company, so notify the Company in writing, and
in such notice shall inform the Company of the number of Registrable Securities
such Purchaser wishes to include in such registration statement. If any
Purchaser decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Purchaser shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
a. UNDERWRITING. If a registration statement under which the Company
gives notice under this Section 1.2 is for an underwritten offering, then
the Company shall so advise the Purchasers. In such event, the right of the
Purchasers' Registrable Securities to be included in a registration
pursuant to this Section 1.2 shall be conditioned upon the Purchasers'
participation in such underwriting and the inclusion of the Purchasers'
Registrable Securities in the underwriting to the extent provided herein.
If the Purchasers are proposing to distribute their Registrable Securities
through such underwriting, such Purchasers shall enter into an underwriting
agreement in customary form with the managing underwriter or underwriter(s)
selected for such underwriting. Notwithstanding any other provision of this
Agreement, if the managing underwriter(s) determine(s) in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, then the managing underwriter(s) may exclude shares
(including Registrable Securities) from the registration and the
underwriting, and the number of shares that
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may be included in the registration and the underwriting shall be
allocated, first, to the Company, second to the holders of any other
registration rights granted by the Company prior to the date of this
Agreement, and third, to the Purchasers, on a pro rata basis based on the
total number of Registrable Securities then held by each Purchaser. If any
Purchaser disapproves of the terms of any such underwriting, such Purchaser
may elect to withdraw therefrom by written notice to the Company and the
underwriter, delivered at least ten (10) business days prior to the
effective date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and
withdrawn from the registration.
b. EXPENSES. The Company shall pay all expenses incurred in connection
with a registration pursuant to this Section 1.2 (excluding underwriters'
or brokers' discounts and commissions), including, without limitation all
federal and "blue sky" registration and qualification fees, printers' and
accounting fees, and fees and disbursements of counsel for the Company and
the fees and disbursements of special counsel for the Purchasers.
1.3 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities under this Exhibit C to the
Agreement, the Company shall, as expeditiously as reasonably possible:
a. prepare and file with the SEC a registration statement with respect
to such Registrable Securities and use its commercially reasonable efforts
to cause such registration statement to become effective, provided,
however, that the Company shall not be required to keep any such
registration statement effective for more than ninety (90) days;
b. prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such registration statement;
c. furnish to the Purchasers such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents as they may reasonably request
in order to facilitate the disposition of the Registrable Securities owned
by the Purchasers that are included in such registration;
d. use all reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or blue
sky laws of such jurisdictions as shall be reasonably requested by a
majority in interest of the Purchasers, provided that the Company shall not
be required in connection therewith or as a condition thereto to qualify to
do business or to file a general consent to service of process in any such
states or jurisdictions;
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e. in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering; and
f. at such time as the Purchasers' Registrable Securities are covered
by such registration statement, notify the Purchasers at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and at the request of a majority in interest of the Purchasers
prepare and file an amendment to any such prospectus as may be necessary.
g. cause all Registrable Securities registered hereunder to be listed
on each securities exchange on which similar securities issued by the
Company are then listed;
h. provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of the Registration Statement;
and
i. in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the
qualification of any securities included in the registration statement for
sale in any jurisdiction, use its commercially reasonable efforts promptly
to obtain the withdrawal of such order.
1.4 PURCHASER'S OBLIGATIONS.
a. It shall be a condition precedent to the obligations of the Company
to take any action pursuant to Section 1.2 that the Purchasers shall
furnish to the Company such information regarding such Purchasers, the
Registrable Securities held by the Purchasers and the intended method of
disposition of such securities, as shall be required to timely effect the
registration of its Registrable Securities.
b. Purchasers agree that upon receipt of written notice of a Blackout
Period from the Chief Executive Officer or Chairman of the Board of
Directors, the Purchasers will not offer or sell Registrable Securities or
engage in any transaction involving or relating to Registrable Securities
during the time period set forth in such notice (such Blackout Period not
to exceed 30 days) and will not disclose the contents of such notice until
the Blackout Period has ended. For purposes of this Section 1.4: "BLACKOUT
PERIOD": shall mean the occurrence of a material event which may be, in the
good faith opinion of the Board of Directors, materially adverse to the
Company's financial condition, business or operations or may require a
disclosure which is not in the Company's best interest in light of the
existence of (A) any material acquisition or financing activity involving
the Company, including a proposed public offering of debt or equity
securities, (B) an undisclosed material event, the public disclosure of
which would have a material adverse effect on the
4
Company, and (C) a proposed material transaction involving the Company and
a material portion of its assets.
1.5 DELAY OF REGISTRATION. Purchasers shall not have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.6 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Section 1:
a. BY THE COMPANY. To the extent permitted by law, the Company will
indemnify and hold harmless the Purchasers, any underwriter (as defined in
the Securities Act) for the Purchasers and each person, if any, who
controls a Purchaser or a Purchaser's underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "VIOLATION"):
i. any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto;
ii. omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements
therein not misleading; or
iii. violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any federal or state securities law
or any rule or regulation promulgated under the Securities Act, the
Exchange Act or any federal or state securities law in connection with
the offering covered by such registration statement;
and the Company will reimburse each Purchaser or its underwriter or
controlling person for any legal or other expenses reasonably incurred
by them, as incurred, in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 1.6.a. shall
not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any
such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance
upon and in conformity with written information furnished expressly
for use in connection with such registration by a Purchaser, his
underwriter or any controlling person of a Purchaser.
5
b. BY THE PURCHASERS. To the extent permitted by law, the Purchasers
will indemnify and hold harmless the Company, each of its directors, each
of its officers who have signed the registration statement, each person, if
any, who controls the Company within the meaning of the Securities Act, or
any underwriter, against any losses, claims, damages or liabilities (joint
or several) to which the Company or any such director, officer, controlling
person, or underwriter may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by the Purchasers expressly for use in
connection with such registration; and the Purchasers will reimburse any
legal or other expenses reasonably incurred by the Company or any such
director, officer, controlling person, or underwriter in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection 1.6.b. shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Purchasers, which consent shall not be
unreasonably withheld; and provided further, that the total amounts payable
in indemnity by the Purchasers under this subsection 1.6.b. in respect of
any Violation shall not exceed the net proceeds received by the Purchasers
in the registered offering out of which such Violation arises.
c. NOTICE. Promptly after receipt by an indemnified party under this
Section 1.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section
1.6, deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any
other indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory to the parties; provided, however, that
an indemnified party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential
conflict of interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.6, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under
this Section 1.6.
d. DEFECT ELIMINATED IN FINAL PROSPECTUS. The foregoing indemnity
agreements of the Company and the Purchasers are subject to the condition
that, insofar as they relate to any Violation made in a preliminary
prospectus but eliminated or remedied in the amended prospectus on file
with the SEC at the time the registration
6
statement in question becomes effective or the amended prospectus filed
with the SEC pursuant to SEC Rule 424(b) (the "FINAL PROSPECTUS"), such
indemnity agreement shall not inure to the benefit of any person if a copy
of the Final Prospectus was furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at
or prior to the time such action is required by the Securities Act.
e. SURVIVAL. The obligations of the Company and the Purchasers under
this Section 1.6 shall survive the completion of any offering of
Registrable Securities in a registration statement.
f. SETTLEMENT. No indemnified party, in the defense of any such claim
or litigation, shall, except with the consent of each indemnified party,
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in
respect to such claim or litigation.
1.7 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities pursuant to Section 1.2 may not be assigned by
the Purchasers.
1.8 HOLDBACK AGREEMENTS. Purchasers shall not effect any public sale or
distribution (including sales pursuant to Rule 144) of equity securities of the
Company, or any securities convertible into or exchangeable or exercisable for
equity securities of the Company, during the thirty days prior to and the
120-day period beginning on the effective date of any registration or any in
which Registrable Securities are included (except as part of such underwritten
offering), unless the underwriters managing the registered public offering
otherwise agree.
1.9 TERMINATION OF REGISTRATION RIGHTS. Purchasers shall not be entitled
to exercise any right provided in Section 1 hereof subsequent to the time at
which all Registrable Securities held by the Purchasers (and any Affiliates of
the Purchasers with whom the Purchasers must aggregate their sales under Rule
144) can be sold in any three month period without registration in compliance
with Rule 144 of the Act.
7