DEBENTURE AND WARRANT PURCHASE AGREEMENT
BETWEEN
BRILLIANT DIGITAL ENTERTAINMENT, INC.
AND
ROSEWORTH GROUP, LTD.
DEBENTURE AND WARRANT PURCHASE AGREEMENT dated as of October 29, 1999 (the
"Agreement"), between Roseworth Group, Ltd. (the "Investor") and Brilliant
Digital Entertainment, Inc., a corporation organized and existing under the laws
of the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
and the Investor shall purchase, (i) one or more Convertible Debentures (as
defined) in the aggregate principal balance of $1,500,000 and (ii) Warrants (as
defined) to purchase up to 50,000 shares of the Company's Common Stock at an
exercise price of $5.50 per share; and
WHEREAS, such investment will be 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.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. "CAPITAL SHARES" shall mean the Common Stock and any shares of any
other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
Section 1.2. "CAPITAL SHARES EQUIVALENTS" shall mean any securities, rights, or
obligations that are convertible into or exchangeable for or give any right to
subscribe for any Capital Shares of the Company or any warrants, options or
other rights to subscribe for or purchase Capital Shares or any such convertible
or exchangeable securities.
Section 1.3. "CLOSING" shall mean each closing of the purchase and sale of a
Convertible Debenture pursuant to Section 2.1.
Section 1.4. "CLOSING DATE" shall mean the date on which all conditions to the
Closing have been satisfied (as defined in Section 2.1(a) hereto) and the
Closing shall have occurred.
Section 1.5. "COMMON STOCK" shall mean the Company's common stock, par value
$.001 per share.
Section 1.6. "CONVERSION SHARES" shall mean the shares of Common Stock issuable
upon conversion of the Convertible Debenture.
Section 1.7. "CONVERTIBLE DEBENTURE" shall mean one or more convertible
debentures in the aggregate principal amount of $1,500,000, each in the form of
Exhibit A hereto, to be issued to the Investor pursuant to this Agreement.
Section 1.8. "DAMAGES" shall mean any loss, claim, damage, liability, costs and
expenses (including, without limitation, reasonable attorney's fees and
disbursements and reasonable costs and expenses of expert witnesses and
investigation).
Section 1.9. "EFFECTIVE DATE" shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in the Registration Rights Agreement.
Section 1.10. "ESCROW AGENT" shall have the meaning set forth in the Escrow
Agreement.
Section 1.11. "ESCROW AGREEMENT" shall mean the Escrow Agreement in
substantially the form of Exhibit C hereto executed and delivered
contemporaneously with this Agreement.
Section 1.12. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
Section 1.13. "FIRST CLOSING" shall mean the date upon which (a) the Investor
delivers to the Escrow Agent immediately available funds in the amount of
$1,000,000, (b) the Company delivers to the Escrow Agent the Warrants and a
Convertible Debenture in the principal amount of $1,000,000, in each case to be
held by the Escrow Agent pursuant to the Escrow Agreement, and (c) the
conditions as more fully described in Sections 2.1(b)(i), (iii)- (ix) of this
Agreement and the Escrow Agreement are met.
Section 1.14. "INVESTOR SHARES" shall mean, collectively, the Conversion Shares,
the Warrant Shares and a number of shares of Common Stock issuable at each
closing as a fee under the Purchase Agreement not to exceed more than $30,000
worth of shares in the aggregate.
Section 1.15. "LEGEND" shall mean the legend set forth in Section 9.1.
Section 1.16. "MARKET PRICE" on any given date of determination shall mean the
lowest Volume Adjusted Price for any Trading Day during the fifteen (15) Trading
Days immediately preceding such date of determination.
Section 1.17. "MATERIAL ADVERSE Effect" shall mean any effect on the business,
operations, properties, prospects, 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 this Agreement, the Registration
EX 10.1-2
Rights Agreement, the Escrow Agreement, the Warrant or the Convertible Debenture
in any material respect.
Section 1.18. "OUTSTANDING" when used with reference to shares of Common Stock
or Capital Shares (collectively the "Shares"), shall mean, at any date as of
which the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
PROVIDED, HOWEVER, that "Outstanding" shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.19. "PERSON" shall mean an individual, a corporation, a partnership,
an association, a trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
Section 1.20. "PRINCIPAL MARKET" shall mean 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.
Section 1.21. "PURCHASE PRICE" shall mean one million five hundred thousand
dollars ($1,500,000).
Section 1.22. "REGISTRABLE SECURITIES" shall mean the Investor Shares until (i)
the Registration Statement has been declared effective by the SEC, and all
Investor Shares have been disposed of pursuant to the Registration Statement,
(ii) all Investor Shares have been sold under circumstances under which all of
the applicable conditions of Rule 144 (or any similar provision then in force)
under the Securities Act ("Rule 144") are met, (iii) all Investor Shares have
been otherwise transferred to holders who may trade such shares without
restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (iv) such time as, in the opinion of counsel to the
Company, all Investor Shares may be sold without any time, volume or manner
limitations pursuant to Rule 144(k) (or any similar provision then in effect)
under the Securities Act.
Section 1.23. "REGISTRATION RIGHTS AGREEMENT" shall mean the agreement regarding
the filing of the Registration Statement for the resale of the Registrable
Securities, entered into between the Company and the Investor as of the Closing
Date in the form annexed hereto as Exhibit B.
Section 1.24. "REGISTRATION Statement" shall mean a registration statement on
Form S-3 (if use of such form is then available to the Company pursuant to the
rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate, and which form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement, the Registration Rights Agreement and in accordance with the intended
method of distribution of such securities), for the registration of the resale
by the Investor of the Registrable Securities under the Securities Act.
Section 1.25. "REGULATION D" shall have the meaning set forth in the recitals of
this Agreement.
Section 1.26. "SEC" shall mean the Securities and Exchange Commission.
EX 10.1-3
Section 1.27. "3333" shall mean a date within five business days following the
Effective Date of the Registration Statement upon which (a) the Investor
delivers to the Escrow Agent immediately available funds in the amount of
$500,000 and (b) the Company delivers to the Escrow Agent a Convertible
Debenture in the principal amount of $500,000, in each case to be held by the
Escrow Agent pursuant to the Escrow Agreement, as more fully described in this
Agreement and the Escrow Agreement.
Section 1.28. "SECTION 4(2)" shall have the meaning set forth in the recitals of
this Agreement.
Section 1.29. "SECURITIES ACT" shall have the meaning set forth in the recitals
of this Agreement.
Section 1.30. "SEC DOCUMENTS" shall mean the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1998 and each report, proxy
statement or registration statement filed by the Company with the SEC pursuant
to the Exchange Act or the Securities Act since the filing of such Annual Report
through the date hereof.
Section 1.31. "SHARES" shall have the meaning set forth in Section 1.17.
Section 1.32. "TRADING DAY" shall mean any day during which the Principal Market
at such day shall be open for business.
Section 1.33. "VOLUME ADJUSTED PRICE" shall mean, on any Trading Day of
determination, the quotient obtained by dividing (1) the total dollar value of
all shares of Common Stock traded on the Principal Market on such Trading Day,
by (2) the total number of shares of the Common Stock traded on the Principal
Market on such Trading Day.
Section 1.34. "WARRANTS" shall mean one or more warrants to purchase up to
50,000 shares of Common Stock at an exercise price of $5.50 per share, each in
the form of Exhibit F hereto, to be issued to the Investor pursuant to this
Agreement.
Section 1.35. "WARRANT SHARES" shall mean the shares of Common Stock issued or
to be issued upon exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE OF THE CONVERTIBLE DEBENTURE
Section 2.1. Investment.
(a) Upon the terms and subject to the conditions set forth herein, the
Company agrees to sell, and the Investor agrees to purchase, the Warrants and
the Convertible Debenture at the Purchase Price, as follows:
(i) Upon execution and delivery of this Agreement, the Investor shall
deliver to the Escrow Agent immediately available funds in the
amount of $1,000,000, and the Company shall deliver to the Escrow
Agent the
EX 10.1-4
Warrants and a Convertible Debenture in the principal amount of
$1,000,000, in each case to be held by the Escrow Agent pursuant
to the Escrow Agreement;
(ii) Upon satisfaction of the conditions set forth in Section 2.1(b),
the closing (the "Closing") shall occur at the offices of the
Escrow Agent at which the Escrow Agent (x) shall release the
Warrants and the Convertible Debenture in the principal amount of
$1,000,000 to the Investor and (y) shall release $1,000,000
(after all fees have been paid as set forth in the Escrow
Agreement) to the Company, pursuant to the terms of the Escrow
Agreement;
(iii) Within five business days following the Effective Date of the
Registration Statement, the Investor shall deliver to the Escrow
Agent immediately available funds in the amount of $500,000, and
the Company shall deliver to the Escrow Agent a Convertible
Debenture in the principal amount of $500,000, in each case to be
held by the Escrow Agent pursuant to the Escrow Agreement; and
(iv) Upon receipt of the funds and the Convertible Debenture as
provided in Section 2.1(a)(iii), the Escrow Agent (x) shall
release the Convertible Debenture in the principal amount of
$500,000 to the Investor and (y) shall release $500,000 (after
all fees have been paid as set forth in the Escrow Agreement) to
the Company, pursuant to the terms of the Escrow Agreement.
(b) Each Closing is subject to the satisfaction of the following
conditions:
(i) acceptance and execution by the Company and by the Investor, of
this Agreement and all Exhibits hereto;
(ii) delivery into escrow by Investor of immediately available funds
in the amount of $1,000,000 of the Purchase Price as to the first
closing and $500,000 as to the second closing, as more fully set
forth in Escrow Agreement;
(iii) all representations and warranties of the Company contained
herein shall be true and correct on each Closing Date (as a
condition to the Investor's obligations), except as affected by
transactions contemplated hereby and thereby 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;
(iv) the Company shall have obtained all permits and qualifications
required by any state for the offer and sale of the Convertible
Debenture and the Warrants, or shall have the availability of
exemptions therefrom;
EX 10.1-5
(v) the sale and issuance of the Convertible Debenture and the
Warrants hereunder, and the proposed issuance by the Company to
the Investor of the Common Stock underlying the Convertible
Debenture and the Warrants upon the conversion or exercise
thereof shall be legally permitted by all laws and regulations to
which the Investor and the Company are subject and there shall be
no ruling, judgment or writ of any court prohibiting the
transactions contemplated by this Agreement;
(vi) delivery of the original fully executed Convertible Debenture
certificate in the principal amount of $1,000,000 and the
Warrants certificate to the Escrow Agent as to the First Closing
and the Convertible Debenture certificate in the principal amount
of $500,000 as to the Second Closing;
(vii) receipt by the Investor of an opinion of Troop Xxxxxxx Xxxxxx
Xxxxxxx & Xxxxx, LLP, counsel to the Company, in the form of
Exhibit D hereto;
(viii) delivery to the Investor of the Irrevocable Instructions to
Transfer Agent in the form attached hereto as Exhibit E; and
(ix) delivery to the Investor of the Registration Rights Agreement.
Section 2.2. LIQUIDATED DAMAGES. The parties hereto acknowledge and agree that
the sum payable pursuant to the Registration Rights Agreement shall constitute
liquidated damages and not penalties. The parties further acknowledge that (a)
the amount of loss or damages likely to be incurred is incapable or is difficult
to precisely estimate, (b) the amounts specified in such Sections bear a
reasonable proportion and are not plainly or grossly disproportionate to the
probable loss likely to be incurred by the Investor in connection with the
failure by the Company to timely cause the registration of the Registrable
Securities and (c) the parties are sophisticated business parties and have been
represented by sophisticated and able legal and financial counsel and negotiated
this Agreement at arm's length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1. INTENT. The Investor is entering into this Agreement for its own
account and the Investor has no present arrangement (whether or not legally
binding) at any time to sell the Convertible Debenture, the Warrants or the
Investor Shares to or through any person or entity; provided, however, that by
making the representations herein, the Investor does not agree to hold such
securities for any minimum or other specific term and reserves the right to
dispose of the Investor Shares at any time in accordance with federal and state
securities laws applicable to such disposition.
Section 3.2. SOPHISTICATED INVESTOR. The Investor is a sophisticated investor
(as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor
(as defined in Rule 501 of
EX 10.1-6
Regulation D), and Investor has such experience in business and financial
matters that it is capable of evaluating the merits and risks of an investment
in the Convertible Debenture, the Warrants and the Investor Shares. The Investor
acknowledges that an investment in the Convertible Debenture, the Warrants and
the Investor Shares is speculative and involves a high degree of risk.
Section 3.3. AUTHORITY. This Agreement and each agreement attached as an Exhibit
hereto which is required to be executed by Investor has been duly authorized and
validly executed and delivered by the Investor and is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4. NOT AN AFFILIATE. The Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5. ABSENCE OF CONFLICTS. The execution and delivery of this Agreement
and the agreements the forms of which are attached as Exhibits hereto and
executed in connection herewith, 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 Investor or (a) violate any provision of any indenture,
instrument or agreement to which Investor is a party or is subject, or by which
Investor 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 Investor 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 Investor is subject or to which any of its assets,
operations or management may be subject.
Section 3.6. DISCLOSURE; ACCESS TO INFORMATION. The Investor has received all
documents, records, books and other publicly available information pertaining to
Investor's investment in the Company that have been requested by the Investor.
The Company is subject to the periodic reporting requirements of the Exchange
Act, and the Investor has reviewed or received copies of all SEC Documents that
have been requested by it.
Section 3.7. MANNER OF SALE. At no time was Investor presented with or solicited
by or through any leaflet, public promotional meeting, television advertisement
or any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that:
Section 4.1. ORGANIZATION OF THE COMPANY. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries and does not own more that fifty percent (50%) of
EX 10.1-7
or control any other business entity except as set forth in the SEC Documents
and except for The Auctionchannel, a Delaware corporation, Brilliant Interactive
Ideas, Pty. Ltd., a company incorporated in New South Wales, Australia, and
Trojan Television, Ltd., a corporation formed under the laws of England and
Wales, each of which is a majority-owned subsidiary of the Company. The Company
is duly qualified and is in good standing as a foreign corporation to do
business in every jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, other than those in
which the failure so to qualify would not have a Material Adverse Effect.
Section 4.2. AUTHORITY. (i) The Company has the requisite corporate power and
corporate authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement and the Escrow Agreement and to
issue the Convertible Debenture, the Warrants and the Investor Shares pursuant
to their respective terms, (ii) the execution, issuance and delivery of this
Agreement, the Registration Rights Agreement, the Escrow Agreement, the
Convertible Debenture and the Warrants by the Company and the consummation by it
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required, and (iii) this
Agreement, the Registration Rights Agreement, the Escrow Agreement, the
Convertible Debenture and the Warrants have been duly executed and delivered by
the Company and at the Closing shall constitute valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application. The Company has duly and validly authorized and reserved for
issuance shares of Common Stock sufficient in number for the conversion of the
Convertible Debenture (assuming a Market Price of $1.00) and the exercise of the
Warrants. The Company understands and acknowledges the potentially dilutive
effect to the Common Stock of the issuance of the Investor Shares. The Company
further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Convertible Debenture and Warrant Shares upon exercise of the
Warrants in accordance with this Agreement, the Convertible Debenture and the
Warrants, respectively, is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
stockholders of the Company and notwithstanding the commencement of any case
under 11 U.S.C. section 101 et seq. (the "Bankruptcy Code"). The Company shall
not seek judicial relief from its obligations hereunder except pursuant to the
Bankruptcy Code. In the event the Company is a debtor under the Bankruptcy Code,
the Company hereby waives to the fullest extent permitted any rights to relief
it may have under 11 U.S.C. section 362 in respect of the conversion of the
Convertible Debenture and/or exercise of the Warrants. The Company agrees,
without cost or expense to the Investor, to take or consent to any and all
action necessary to effectuate relief under 11 U.S.C. section 362.
Section 4.3. CAPITALIZATION. The authorized capital stock of the Company
consists of 30,000,000 shares of Common Stock, par value $0.001, of which
12,186,784 shares are issued and outstanding as of October 21, 1999 and
1,000,000 shares of preferred stock, par value $0.001 per share, of which no
shares are issues and outstanding. Except for outstanding options and warrants
to acquire a total of 815,040 shares of Common Stock, there are no outstanding
Capital Shares Equivalents. All of the outstanding shares of Common Stock of the
Company have been duly and validly authorized and issued and are fully paid and
non-assessable.
EX 10.1-8
Section 4.4. COMMON STOCK. The Company has registered its Common Stock pursuant
to Section 12(b) of the Exchange Act and is in full compliance with all
reporting requirements of the Exchange Act, and the Company is in compliance
with all requirements for the continued listing or quotation of its Common
Stock, and such Common Stock is currently listed or quoted on the Principal
Market. As of the date hereof, the Principal Market is the American Stock
Exchange and the Company has not received any notice regarding, and to its
knowledge there is no threat, of the termination or discontinuance of the
eligibility of the Common Stock for such listing.
Section 4.5. SEC DOCUMENTS. The Company has delivered or made available to the
Investor true and complete copies of the SEC Documents. The Company has not
provided to the Investor any information that, according to applicable law, rule
or regulation, should have been disclosed publicly prior to the date hereof by
the Company, but which has not been so disclosed. 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 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). 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.
Section 4.6. EXEMPTION FROM REGISTRATION; VALID ISSUANCES. Subject to the
accuracy of the Investor's representations in Article III, the sale of the
Convertible Debenture, the Warrants and the Investor Shares will not require
registration under the Securities Act and/or any applicable state securities
law. When issued in accordance with the Convertible Debenture or the Warrants,
as the case may be, the Investor Shares will be duly and validly issued, fully
paid, and non-assessable. Neither the sales of the Convertible Debenture, the
Warrants or the Investor Shares, nor the Company's performance of its
obligations under this Agreement, the Registration Rights Agreement, the Escrow
Agreement, the Convertible Debenture or the Warrants, will (i) result in the
creation or imposition by the Company of any liens, charges, claims or other
encumbrances upon the Convertible Debenture, the Warrants or the Investor or,
except as contemplated herein, any of the assets of the Company, or (ii) entitle
the holders of Outstanding Capital Shares to preemptive or other rights to
subscribe to or acquire the Capital Shares or other securities of the
EX 10.1-9
Company. None of the Convertible Debenture, the Warrants or the Investor Shares
shall subject the Investor to personal liability to the Company or its creditors
by reason of the possession thereof.
Section 4.7. 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 Convertible Debenture, the Warrants or the
Investor Shares or (ii) made any offers or sales of any security or solicited
any offers to buy any security under any circumstances that would require
registration of the Convertible Debenture, the Warrants or the Investor Shares
under the Securities Act; provided, that the Company makes no representation or
warranty with respect to the Investor or Curzon Capital Corp.
Section 4.8. CORPORATE DOCUMENTS. The Company has furnished or made available to
the Investor true and correct copies of the Company's Certificate of
Incorporation, as amended and in effect on the date hereof (the "Certificate"),
and the Company's By-Laws, as amended and in effect on the date hereof (the
"By-Laws").
Section 4.9. NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the
Convertible Debenture, the Warrants and the Investor Shares do not and will not
(i) result in a violation of the Company's Certificate of Incorporation or
By-Laws or (ii) conflict with, or constitute a material default (or an event
that with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
any material agreement, indenture or instrument, or any "lock-up" or similar
provision of any underwriting or similar agreement to which the Company is a
party, or (iii) result in a violation of any federal, state or local law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or by which any material
property or asset of the Company is bound or affected, nor is the Company
otherwise in violation of, conflict with or default under any of the foregoing
(except in each case for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not have, individually or
in the aggregate, a Material Adverse Effect). The business of the Company is not
being conducted in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations that either singly or in the
aggregate would not have a Material Adverse Effect. The Company is not required
under federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or issue and sell the Convertible Debenture or
the Warrants in accordance with the terms hereof (other than any SEC, American
Stock Exchange or state securities filings that may be required to be made by
the Company subsequent to Closing, any registration statement that may be filed
pursuant hereto, and any shareholder approval required by the rules applicable
to companies whose common stock trades on the American Stock Exchange); provided
that, for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Investor herein.
EX 10.1-10
Section 4.10. NO MATERIAL ADVERSE CHANGE. Since December 31, 1998, no Material
Adverse Effect has occurred or exists with respect to the Company, except as
disclosed in the SEC Documents.
Section 4.11. NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since December 31, 1998,
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.
Section 4.12. 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 Investor and Curzon Capital
Corp. in connection with the transactions contemplated hereby, the Company has
not issued, offered or sold the Convertible Debenture or any shares of Common
Stock (including for this purpose any securities of the same or a similar class
as the Convertible Debenture or Common Stock or any securities convertible into,
exchangeable or exercisable for the Convertible Debenture or 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 Investor
of the Convertible Debenture, the Warrants and the Investor Shares 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 Convertible Debenture or 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 Investor of the Convertible Debenture, the Warrants
and the Investor Shares as contemplated by this Agreement.
Section 4.13. 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 have a Material Adverse Effect. 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.
Section 4.14. 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 Convertible Debenture or Warrants in
connection with the transaction contemplated by this Agreement, have not made,
at any time, any oral communication in connection with the offer 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.
Section 4.15. MATERIAL NON-PUBLIC INFORMATION. The Company has not disclosed to
the Investor any material non-public information that (i) if disclosed, would,
or could reasonably be expected to have, a material effect on the price of the
Common Stock or (ii) according to applicable law,
EX 10.1-11
rule or regulation, should have been disclosed publicly by the Company prior to
the date hereof but which has not been so disclosed.
Section 4.16. INSURANCE. The Company maintains property and casualty, general
liability, workers' compensation, environmental hazard, personal injury and
other similar types of insurance with financially sound and reputable insurers
that is adequate, consistent with industry standards and the Company's
historical claims experience. The Company has not received notice from, and has
no knowledge of any threat by, any insurer (that has issued any insurance policy
to the Company) that such insurer intends to deny coverage under or cancel,
discontinue or not renew any insurance policy presently in force.
Section 4.17. TAX MATTERS.
(a) The Company has filed all Tax Returns which it is required to file
under applicable laws; all such Tax Returns are true and accurate and have been
prepared in compliance with all applicable laws; the Company has paid all Taxes
due and owing by it (whether or not such Taxes are required to be shown on a Tax
Return) and have withheld and paid over to the appropriate taxing authorities
all Taxes which it is required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third parties; and since December 31,
1998, the charges, accruals and reserves for Taxes with respect to the Company
(including any provisions for deferred income taxes) reflected on the books of
the Company are adequate to cover any Tax liabilities of the Company if its
current tax year were treated as ending on the date hereof.
(b) No claim has been made by a taxing authority in a jurisdiction where
the Company does not file tax returns that such corporation is or may be subject
to taxation by that jurisdiction. There are no foreign, federal, state or local
tax audits or administrative or judicial proceedings pending or being conducted
with respect to the Company; no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority; and, except
as disclosed above, no written notice indicating an intent to open an audit or
other review has been received by the Company from any foreign, federal, state
or local taxing authority. There are no material unresolved questions or claims
concerning the Company's Tax liability. The Company (A) has not executed or
entered into a closing agreement pursuant to ss. 7121 of the Internal Revenue
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law; or (B) has not agreed to or is required to make any
adjustments pursuant to ss. 481 (a) of the Internal Revenue Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Company or any of its subsidiaries or has any knowledge
that the IRS has proposed any such adjustment or change in accounting method, or
has any application pending with any taxing authority requesting permission for
any changes in accounting methods that relate to the business or operations of
the Company. The Company has not been a United States real property holding
corporation within the meaning of ss. 897(c)(2) of the Internal Revenue Code
during the applicable period specified in ss. 897(c)(1)(A)(ii) of the Internal
Revenue Code.
(c) The Company has not made an election under ss. 341(f) of the Internal
Revenue Code. The Company is not liable for the Taxes of another person that is
not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any
EX 10.1-12
payments, is obligated to make payments or is a party to an agreement that could
obligate it to make any payments that would not be deductible under ss. 280G of
the Internal Revenue Code.
(d) For purposes of this Section 4.18:
"IRS" means the United States Internal Revenue Service.
"TAX" or "TAXES" means federal, state, county, local, foreign, or
other income, gross receipts, ad valorem, franchise, profits,
sales or use, transfer, registration, excise, utility,
environmental, communications, real or personal property, capital
stock, license, payroll, wage or other withholding, employment,
social security, severance, stamp, occupation, alternative or
add-on minimum, estimated and other taxes of any kind whatsoever
(including, without limitation, deficiencies, penalties,
additions to tax, and interest attributable thereto) whether
disputed or not.
"TAX RETURN" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and
including any amendment thereof.
Section 4.18. PROPERTY. Neither the Company nor any of its subsidiaries owns any
real property. Each of the Company and its subsidiaries has good and marketable
title to all personal property owned by it, free and clear of all liens,
encumbrances and defects (other than certain liens on the Company's personal
property in the U.S. securing indebtedness not in excess of $100,000) except
such as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company; and to the Company's knowledge any real property and buildings
held under lease by the Company as tenant are held by it under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
interfere with the use made and intended to be made of such property and
buildings by the Company.
Section 4.19. INTELLECTUAL PROPERTY. Each of the Company and its subsidiaries
owns or possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") necessary for the conduct of its
business as now being conducted. To the Company's knowledge, except as disclosed
in the SEC Documents neither the Company nor any of its subsidiaries is
infringing upon or in conflict with any right of any other person with respect
to any Intangibles. Except as disclosed in the SEC Documents, no claims have
been asserted by any person to the ownership or use of any Intangibles and the
Company has no knowledge of any basis for such claim.
Section 4.20. INTERNAL CONTROLS AND PROCEDURES. The Company maintains books and
records and internal accounting controls which provide reasonable assurance that
(i) all transactions to which the Company is a party or by which its properties
are bound are executed with management's authorization; (ii) the recorded
accountability of the Company's assets is compared with existing assets at
regular intervals; (iii) access to the Company's assets is permitted only in
accordance with management's authorization; and (iv) all transactions to which
the Company is a party or by
EX 10.1-13
which its properties are bound are recorded as necessary to permit preparation
of the financial statements of the Company in accordance with U.S. generally
accepted accounting principles.
Section 4.21. PAYMENTS AND CONTRIBUTIONS. Neither the Company nor any of its
directors, officers or, to its knowledge, other employees has (i) used any
Company funds for any unlawful contribution, endorsement, gift, entertainment or
other unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment of Company funds to any foreign or domestic government
official or employee; (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other similar payment to any
person with respect to Company matters.
Section 4.22. NO MISREPRESENTATION. No representation or warranty of the Company
contained in this Agreement, any schedule, annex or exhibit hereto or any
agreement, instrument or certificate furnished by the Company to the Investor
pursuant to this Agreement, contains any 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.
ARTICLE V
COVENANTS OF THE INVESTOR
Section 5.1. COMPLIANCE WITH LAW. The Investor's trading activities with respect
to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Company's Common Stock is
listed.
Section 5.2. SHORT SALES. The Investor and its affiliates shall not engage in
short sales of the Company's Common Stock; provided, however, that the Investor
may enter into any short sale or other hedging or similar arrangement it deems
appropriate with respect to Conversion Shares on the Trading Day it delivers a
Conversion Notice with respect to such Conversion Shares so long as such
arrangements do not involve more than the number of such Conversion Shares
(determined as of the date of such Conversion Notice, as applicable).
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. REGISTRATION RIGHTS. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.
Section 6.2. RESERVATION OF COMMON STOCK. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to issue the Conversion Shares pursuant to any conversion
of the Convertible Debenture and the Warrant
EX 10.1-14
Shares pursuant to any exercise of the Warrants; such amount of shares of Common
Stock to be reserved shall be calculated based upon a Market Price for the
Common Stock under the terms of the Convertible Debenture of $1.00. The number
of shares so reserved from time to time, as theretofore increased or reduced as
hereinafter provided, may be reduced by the number of shares actually delivered
pursuant to any conversion of the Convertible Debenture or exercise of the
Warrants.
Section 6.3. LISTING OF COMMON Stock. The Company hereby agrees to maintain the
listing of the Common Stock on a Principal Market, and as soon as reasonably
practicable following the Closing (but in any event prior to the effective date
of the Registration Statement) to list the Investor 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 Investor Shares, and will take such other action as is necessary or
desirable in the opinion of the Investor to cause the Common Stock to be listed
on such other Principal Market as promptly as possible. The Company will take
all action to continue the listing and trading of its Common Stock on a
Principal Market (including, without limitation, maintaining sufficient net
tangible assets) and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market
and shall provide Investor with copies of any correspondence to or from such
Principal Market which questions or threatens delisting of the Common Stock,
within three (3) Business Days of the Company's receipt thereof, until the
Investor has disposed of all of its Registrable Securities. If at any time
during the term of the Convertible Debenture the aggregate number of outstanding
shares of Common Stock that were issued upon conversions of the Convertible
Debenture, exercise of the Warrants and the issuance of the $30,000 worth of
Investor Shares exceeds 19.5% of the Company's issued and outstanding Common
Stock as of the Closing Date, the Company shall call and convene a meeting or
solicit the written consent of its stockholders within 90 days after the request
of the Investor for the purpose of seeking stockholder approval of the issuance
of Common Stock upon conversion of the Convertible Debenture and exercise of the
Warrants, with a recommendation of the Board of Directors of the Company that
such proposal be approved.
Section 6.4. EXCHANGE ACT REGISTRATION. The Company will cause its Common Stock
to continue to be registered under Section 12(b) or (g) of the Exchange Act,
will use its best efforts to comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Act until the Investor has
disposed of all of its Registrable Securities.
Section 6.5. LEGENDS. The certificates evidencing the Registrable Securities
shall be free of legends, except as set forth in Article IX.
Section 6.6. CORPORATE EXISTENCE. The Company will take all steps necessary
to preserve and continue the corporate existence of the Company.
Section 6.7. CONSOLIDATION; MERGER. The Company shall not, at any time after the
date hereof, effect any merger or consolidation of the Company with or into, or
a transfer of all or substantially all of the assets of the Company to, another
entity (a "Consolidation Event") unless the resulting successor or acquiring
entity (if not the Company) assumes by written instrument or
EX 10.1-15
by operation of law the obligation to deliver to the Investor such shares of
stock and/or securities as the Investor is entitled to receive pursuant to this
Agreement.
Section 6.8. ISSUANCE OF CONVERTIBLE DEBENTURE AND WARRANT SHARES. The sale of
the Convertible Debenture and the Warrants and the issuance of the Investors
Shares upon conversion of the Convertible Debenture or 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 (with
respect to the issuance of the Convertible Debenture), Section 3(a)(9) of the
Securities Act (with respect to the issuance of the Conversion Shares) 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 Investor as required by all applicable Laws, and
shall provide a copy thereof to the Investor promptly after such filing.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.1. SURVIVAL. The representations, warranties and covenants made by
each of the Company and the Investor in this Agreement, the annexes, schedules
and exhibits hereto and in each instrument, agreement and certificate entered
into and delivered by them pursuant to this Agreement, shall survive the Closing
and the consummation of the transactions contemplated hereby. In the event of a
breach or violation of any of such representations, warranties or covenants, the
party to whom such representations, warranties or covenants have been made shall
have all rights and remedies for such breach or violation available to it under
the provisions of this Agreement or otherwise, whether at law or in equity,
irrespective of any investigation made by or on behalf of such party on or prior
to the Closing Date.
Section 7.2. INDEMNITY. (a) The Company hereby agrees to indemnify and hold
harmless the Investor, its Affiliates and their respective officers, directors,
partners and members (collectively, the "Investor Indemnitees"), from and
against any and all losses, claims, Damages, judgments, penalties, liabilities
and deficiencies (collectively, "Losses"), and agrees to reimburse the Investor
Indemnitees for all reasonable out-of-pocket expenses (including the reasonable
fees and expenses of legal counsel), in each case promptly as incurred by the
Investor Indemnitees and to the extent arising out of or in connection with:
(i) any misrepresentation, omission of fact or breach of any of the
Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered by
the Company pursuant to this Agreement;
(ii) any failure by the Company to perform in any material respect any
of its covenants, agreements, undertakings or obligations set
forth in this Agreement, the annexes, schedules or exhibits
hereto or any instrument, agreement or certificate entered into
or delivered by the Company pursuant to this Agreement; or
EX 10.1-16
(iii) any claim or legal action brought against any Investor
Indemnitee by a stockholder of the Company (other than the
Investor or its Affiliates) in its own right or in the right of
the Company, in connection with or as a result of the execution
and performance of this Agreement by the Investor Indemnitee;
provided, however, that the Company shall not be obligated to
indemnify and hold harmless an Investor Indemnitee in respect of
any such claim or action brought against an Investor Indemnitee
which arises out of the breach of any representation, warranty or
covenant of such Investor Indemnitee contained in this Agreement.
(b) The Investor hereby agrees to indemnify and hold harmless the Company,
its Affiliates and their respective officers, directors, partners and members
(collectively, the "Company Indemnitees"), from and against any and all Losses,
and agrees to reimburse the Company Indemnitees for reasonable all out-of-pocket
expenses (including the reasonable fees and expenses of legal counsel), in each
case promptly as incurred by the Company Indemnitees and to the extent arising
out of or in connection with:
(i) any misrepresentation, omission of fact, or breach of any of the
Investor's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered by
the Investor pursuant to this Agreement; or
(ii) any failure by the Investor to perform in any material respect
any of its covenants, agreements, undertakings or obligations set
forth in this Agreement or any instrument, certificate or
agreement entered into or delivered by the Investor pursuant to
this Agreement.
Section 7.3. NOTICE. Promptly after receipt by either party hereto seeking
indemnification pursuant to Section 7.2 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to Section
7.2 is being sought (the "Indemnifying Party") of the commencement thereof; but
the omission to so notify the Indemnifying Party shall not relieve it from any
liability that it otherwise may have to the Indemnified Party, except to the
extent that the Indemnifying Party is materially prejudiced and forfeits
substantive rights and defenses by reason of such failure. In connection with
any Claim as to which both the Indemnifying Party and the Indemnified Party are
parties, the Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the Indemnifying
Party, the Indemnified Party shall have the right to employ separate legal
counsel and to participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, out-of-pocket costs and
expenses, (y) the Indemnified Party and the Indemnifying Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such
EX 10.1-17
Claim. If the Indemnified Party employs separate legal counsel in circumstances
other than as described in clauses (x), (y) or (z) above, the fees, costs and
expenses of such legal counsel shall be borne exclusively by the Indemnified
Party. Except as provided above, the Indemnifying Party shall not, in connection
with any Claim in the same jurisdiction, be liable for the fees and expenses of
more than one firm of legal counsel for the Indemnified Party (together with
appropriate local counsel). The Indemnifying Party shall not, without the prior
written consent of the Indemnified Party (which consent shall not unreasonably
be withheld), settle or compromise any Claim or consent to the entry of any
judgment that does not include an unconditional release of the Indemnified Party
from all liabilities with respect to such Claim or judgment.
Section 7.4. DIRECT CLAIMS. In the event one party hereunder should have a claim
for indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association as set forth in
Article X. Judgment upon any award rendered by any arbitrators may be entered in
any court having competent jurisdiction thereof.
ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF
NON-PUBLIC INFORMATION.
Section 8.1. DUE DILIGENCE REVIEW. Subject to Section 8.2, the Company shall
make available for inspection and review by the Investor, advisors to and
representatives of the Investor (who may or may not be affiliated with the
Investor and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of the Registrable Securities on behalf of the
Investor pursuant to the Registration Statement, any such registration statement
or amendment or supplement thereto or any blue sky, American Stock Exchange or
other filing, all SEC Documents and other filings with the SEC, and all other
publicly available corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the Company's
officers, directors and employees to supply all such publicly available
information reasonably requested by the Investor or any such representative,
advisor or underwriter in connection with such Registration Statement
(including, without limitation, in response to all questions and other inquiries
reasonably made or submitted by any of them), prior to and from time to time
after the filing and effectiveness of the Registration Statement for the sole
purpose of enabling the Investor and such representatives, advisors and
underwriters and their respective accountants and attorneys to conduct initial
and ongoing due diligence with respect to the Company and the accuracy of the
Registration Statement.
Section 8.2. NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
(a) The Company shall not disclose material non-public information to the
Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information as being
non-
EX 10.1-18
public information and provides the Investor, such advisors and representatives
with the opportunity to accept or refuse to accept such non-public information
for review. Other than disclosure of any comment letters received from the SEC
staff with respect to the Registration Statement, the Company may, as a
condition to disclosing any non-public information hereunder, require the
Investor's advisors and representatives to enter into a confidentiality
agreement in form reasonably satisfactory to the Company and the Investor.
(b) Nothing herein shall require the Company to disclose material
non-public information to the Investor or its advisors or representatives, and
the Company represents that it does not disseminate material non-public
information to any investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts, provided, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, promptly notify the advisors and representatives of the
Investor and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting material non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration Statement would cause
such prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 8.2 shall be construed to mean that such persons or entities
other than the Investor (without the written consent of the Investor prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
the Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
ARTICLE IX
LEGENDS; TRANSFER AGENT INSTRUCTIONS
Section 9.1. LEGENDS. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legend or equivalent
(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 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.
EX 10.1-19
Section 9.2. TRANSFER AGENT INSTRUCTIONS. Upon the execution and delivery
hereof, the Company is issuing to the transfer agent for its Common Stock (and
to any substitute or replacement transfer agent for its Common Stock upon the
Company's appointment of any such substitute or replacement transfer agent)
instructions in substantially the form of Exhibit E hereto. Such instructions
shall be irrevocable by the Company from and after the date hereof or from and
after the issuance thereof to any such substitute or replacement transfer agent,
as the case may be, except as otherwise expressly provided in the Registration
Rights Agreement. It is the intent and purpose of such instructions, as provided
therein, to require the transfer agent for the Common Stock from time to time
upon transfer of Registrable Securities by the Investor to issue certificates
evidencing such Registrable Securities free of the Legend during the following
periods and under the following circumstances and without consultation by the
transfer agent with the Company or its counsel and without the need for any
further advice or instruction or documentation to the transfer agent by or from
the Company or its counsel or the Investor:
(a) at any time after the Effective Date, upon surrender of one or more
certificates evidencing Common Stock that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered; provided that (i) the Registration
Statement shall then be effective; (ii) the Investor confirms to the transfer
agent that it has sold, pledged or otherwise transferred or agreed to sell,
pledge or otherwise transfer such Common Stock in a bona fide transaction to a
third party that is not an affiliate of the Company; and (iii) the Investor
confirms to the transfer agent that the Investor has complied with the
prospectus delivery requirement.
(b) at any time upon any surrender of one or more certificates evidencing
Registrable Securities that bear the Legend, to the extent accompanied by a
notice requesting the issuance of new certificates free of the Legend to replace
those surrendered and containing representations that (i) the Investor is
permitted to dispose of such Registrable Securities without limitation as to
amount or manner of sale pursuant to Rule 144(k) under the Securities Act or
(ii) the Investor has sold, pledged or otherwise transferred or agreed to sell,
pledge or otherwise transfer such Registrable Securities in a manner other than
pursuant to an effective registration statement, to a transferee who will upon
such transfer be entitled to freely tradable securities.
Any of the notices referred to above in this Section 9.2 may be sent by
facsimile to the Company's transfer agent.
Section 9.3. NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend other
than the one specified in Section 9.1 has been or shall be placed on the share
certificates representing the Registrable Securities and no instructions or
"stop transfer orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article IX.
Section 9.4. INVESTOR'S COMPLIANCE. Nothing in this Article shall affect in any
way the Investor's obligations under any agreement to comply with all applicable
securities laws upon resale of the Common Stock.
EX 10.1-20
ARTICLE X
CHOICE OF LAW
Section 10.1. GOVERNING LAW/ARBITRATION. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any dispute under this Agreement
or any Exhibit attached hereto shall be submitted to arbitration under the
American Arbitration Association (the "AAA") in New York City, New York, and
shall be finally and conclusively determined by the decision of a board of
arbitration consisting of three (3) members (hereinafter referred to as the
"Board of Arbitration") selected as according to the rules governing the AAA.
The Board of Arbitration shall meet on consecutive business days in New York
City, New York, and shall reach and render a decision in writing (concurred in
by a majority of the members of the Board of Arbitration) with respect to the
amount, if any, which the losing party is required to pay to the other party in
respect of a claim filed. In connection with rendering its decisions, the Board
of Arbitration shall adopt and follow the laws of the State of New York. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. Any decision made by the Board
of Arbitration (either prior to or after the expiration of such thirty (30)
calendar day period) shall be final, binding and conclusive on the parties to
the dispute, and entitled to be enforced to the fullest extent permitted by law
and entered in any court of competent jurisdiction. The Board of Arbitration
shall be authorized and is hereby directed to enter a default judgment against
any party failing to participate in any proceeding hereunder within the time
periods set forth in the AAA rules. The non-prevailing party to any arbitration
(as determined by the Board of Arbitration) shall pay the expenses of the
prevailing party including reasonable attorney's fees, in connection with such
arbitration. Any party shall be entitled to obtain injunctive relief from a
court in any case where such relief is available.
ARTICLE XI
ASSIGNMENT; ENTIRE AGREEMENT
Section 11.1. ASSIGNMENT. Neither this Agreement nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Agreement shall inure
to the benefit of, and be enforceable by, any permitted transferee of the
Convertible Debenture or the Warrants purchased or acquired by the Investor
hereunder with respect to the Convertible Debenture or the Warrants held by such
person, and (b) upon the prior written consent of the Company, which consent
shall not unreasonably be withheld or delayed, the Investor's interest in this
Agreement may be assigned at any time, in whole or in part, to any other person
or entity (including any affiliate of the Investor) who agrees to make the
representations and warranties contained in Article III and who agrees to be
bound by the covenants of Article V. Such permitted assignment shall not relieve
the Investor of its obligations under Article V.
EX 10.1-21
ARTICLE XII
NOTICES
Section 12.1. NOTICES. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: Brilliant Digital Entertainment, Inc.
0000 Xxxxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxx, Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Troop Xxxxxxx Pasich Reddick & Xxxxx, LLP
(shall not constitute notice) 0000 Xxxxxxx Xxxx Xxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Investor:
Roseworth Group, Ltd.
c/o Xx. Xxxxxxxx & Partners
Xxxxxxxxxx 00
XX-0000
Xxxxx, Xxxxxxxxxxxxx
Facsimile: 011-41-75-2360-405
with a copy to: Xxxxxx X. Xxxxx, Esq.
(shall not constitute notice) Xxxxxxx Xxxxxx & Green, P.C.
EX 10.1-22
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Xxxxxx Xxxxxx
Curzon Capital Corp.
00 0xx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving written notice of such changed
address or facsimile number to the other party hereto as provided in this
Section 12.1.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. COUNTERPARTS/ FACSIMILE/ AMENDMENTS. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 13.2. ENTIRE AGREEMENT. This Agreement, the agreements attached as
Exhibits hereto, which include, but are not limited to the Convertible
Debenture, the Warrants, the Escrow Agreement, and the Registration Rights
Agreement, set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all Exhibits to this Agreement are incorporated herein by this
reference and shall constitute part of this Agreement as is fully set forth
herein.
Section 13.3. SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that such severability shall be ineffective if
it materially changes the economic benefit of this Agreement to any party.
Section 13.4. HEADINGS. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
EX 10.1-23
Section 13.5. REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity relied
upon for the determination of the trading price or trading volume of the Common
Stock on any given Trading Day for the purposes of this Agreement shall be
Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
Section 13.6. REPLACEMENT OF CERTIFICATES. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Convertible Debenture, the Warrants
or any Investor Shares and (ii) in the case of any such loss, theft or
destruction of such certificate, upon delivery of an indemnity agreement or
security reasonably satisfactory in form and amount to the Company (which shall
not exceed that required by the Company's transfer agent in the ordinary course)
or (iii) in the case of any such mutilation, on surrender and cancellation of
such certificate, the Company at its expense will execute and deliver, in lieu
thereof, a new certificate of like tenor.
Section 13.7. FEES AND EXPENSES. Each of the Company and the Investor agrees to
pay its own expenses incident to the performance of its obligations hereunder.
Section 13.8. BROKERAGE. Each of the parties hereto represents that it has had
no dealings in connection with this transaction with any finder or broker who
will demand payment of any fee or commission from the other party. The Company
on the one hand, and the Investor, on the other hand, agree to indemnify the
other against and hold the other harmless from any and all liabilities to any
person claiming brokerage commissions or finder's fees on account of services
purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.
EX 10.1-24
IN WITNESS WHEREOF, the parties hereto have caused this Debenture and
Warrant Purchase Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
BRILLIANT DIGITAL ENTERTAINMENT, INC.
By: /S/ XXXXXXX XXXX
--------------------------------
Xxxxxxx Xxxx
Chief Financial Officer
ROSEWORTH GROUP, LTD.
By: /S/ XXXX XXXXXXX
---------------------------------
Xxxx Xxxxxxx
Director
EX 10.1-25
EXHIBIT A
4% CONVERTIBLE DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE
BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE OR CANADIAN PROVINCE, OR UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES ARE RESTRICTED AND MAY NOT
BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.
No. ______ US ___________
BRILLIANT DIGITAL ENTERTAINMENT, INC.
4% CONVERTIBLE DEBENTURE DUE OCTOBER 29, 2000
THIS DEBENTURE is issued by BRILLIANT DIGITAL ENTERTAINMENT, INC., a
corporation organized and existing under the laws of the State of Delaware (the
"Company") and is designated as its 4% Convertible Debenture Due ___________,
______.
FOR VALUE RECEIVED, the Company promises to pay to ROSEWORTH GROUP, LTD.,
or permitted assigns (the "Holder"), the principal sum of ___________ and 00/100
(US __________) Dollars on the later of (1) _________________ or (2) six months
after the date that the Securities and Exchange Commission first declares the
Registration Statement to be effective, but in no event later than December 31,
2000 (the "Maturity Date") and to pay interest on the principal sum outstanding
from time to time quarterly in arrears at the rate of 4% per annum accruing from
the date of initial issuance. Accrual of interest shall commence on the first
business day to occur after the date of initial issuance and continue until
payment in full of the principal sum has been made or duly provided for.
Quarterly interest payments shall be due and payable on January 1, April 1, July
1 and October 1 of each year, commencing with January 1, 2000. If any interest
payment date or the Maturity Date is not a business day in the State of New
York, then such payment shall be made on the next succeeding business day.
Subject to the provisions of Paragraph 4 below, the interest on this Debenture
is payable at the option of the Company, in cash or in shares of Common Stock of
the Company, $.001 par value per share ("Common Stock") valued at the Conversion
Price (as defined herein) on the interest payment date, at the address last
appearing on the Debenture Register of the Company as designated in writing by
the Holder from time to time. The Company will pay the principal of and any
accrued but unpaid interest due upon this Debenture on the Maturity Date, less
any amounts required by law to be deducted, to the registered holder of this
Debenture as of the tenth day prior to the Maturity Date and addressed to such
holder at the last address appearing on the Debenture Register. The forwarding
of such check, or the required number of shares of Common Stock determined
pursuant to the provisions of Paragraph 4 below, shall constitute a payment of
principal and interest hereunder and shall satisfy and discharge the liability
for principal and
interest on this Debenture to the extent of the sum represented by such check
or the equivalent Conversion Price value of such shares of Common Stock (as
defined in Paragraph 3 below) plus any amounts so deducted.
This Debenture is subject to the following additional provisions:
1. The Company shall be entitled to withhold from all payments of principal
of, and interest on, this Debenture any amounts required to be withheld under
the applicable provisions of the United States income tax laws or other
applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.
2. This Debenture has been issued subject to investment representations of
the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws. The Holder shall deliver written
notice to the Company of any proposed transfer of this Debenture. In the event
of any proposed transfer of this Debenture, the Company may require, prior to
issuance of a new Debenture in the name of such other person, that it receive
reasonable transfer documentation including legal opinions that the issuance of
the Debenture in such other name does not and will not cause a violation of the
Act or any applicable state or foreign securities laws. Prior to due presentment
for transfer of this Debenture, the Company and any agent of the Company may
treat the person in whose name this Debenture is duly registered on the
Company's Debenture Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this
Debenture be overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary. This Debenture has been executed and
delivered pursuant to the Debenture and Warrant Purchase Agreement dated as of
October 29, 1999 between the Company and the original Holder (the "Purchase
Agreement"), and is subject to the terms and conditions of the Purchase
Agreement, which are, by this reference, incorporated herein and made a part
hereof. Capitalized terms used and not otherwise defined herein shall have the
meanings set forth for such terms in the Purchase Agreement.
3. The Holder of this Debenture is entitled, at its option, to convert at
any time commencing on the date hereof, the principal amount of this Debenture
or any portion thereof, together with accrued but unpaid interest, provided that
the portion of the principal amount so converted is Five Thousand Dollars (US
$5,000) or a multiple thereof (unless if at the time of such election to convert
the aggregate principal amount of this Debenture is less than Five Thousand
Dollars (US $5,000), then the whole amount thereof) into shares of Common Stock
of the Company ("Conversion Shares") at a conversion price for each share of
Common Stock ("Conversion Price") equal to the lower of (a) 95% of the Market
Price at the Conversion Date (as defined in Section 8 hereof) or (b) $6.00. The
term "Market Price" shall have the meaning set forth in the Purchase Agreement.
EX 10.1 - A-2
4. The entire unpaid balance of this Debenture and accrued interest thereon
outstanding on the Maturity Date hereof shall automatically convert into Common
Stock at the Conversion Price on the Maturity Date.
5. If the closing price per share of the Common Stock on the Principal
Market is equal to or less than $1.00 for 10 or more consecutive Trading Days,
the Company shall have the right within 3 Trading Days after the date any such
triggering event occurs to deliver to the Holder a written notice of the
Company's intent to redeem the entire outstanding amount of this Debenture.
Within 3 Trading Days following its receipt of such notice, the Holder shall
elect (by delivering written notice to the Company ) either (a) to have the
Company redeem the Debenture for a cash payment equal to 120% of the outstanding
principal amount of this Debenture and all accrued and unpaid interest thereon,
or (b) to agree not to convert all or any portion of this Debenture for a
thirty-day period commencing upon the Holder's receipt of the Company's notice
pursuant to the preceding sentence. If the Holder fails to deliver its notice to
the Company within such 3 Trading Day Period, the Company may elect to have the
provisions of clause (a) or (b) of the preceding sentence apply by delivering
written notice to the Holder within Three Trading Days following the expiration
of the Holder's notice period. If the Holder or the Company elects to have this
Debenture redeemed, the Company shall make the redemption payment to the Holder
within 5 Trading Days following its receipt of the Holder's notice electing
redemption or the Company's delivery of its notice to the Holder electing
redemption, as applicable.
6. Notwithstanding anything to the contrary contained herein, in the event
that a conversion (when aggregated with all prior conversions of portions of
this Debenture) requires the Company to issue a number of shares of Common Stock
which would exceed 19.5% of the number of shares of Common Stock issued and
outstanding on the date of this Debenture, the Company shall issue only such
number of shares of Common Stock as shall not exceed such limit and shall pay
the Holder cash in the amount of the Volume Adjusted Price on the Conversion
Date for the number of shares of Common Stock in excess of such number of shares
into which this Debenture (or the portion thereof then being converted) is then
convertible at the Conversion Price. Any payments under this Paragraph 6 shall
be made to a U.S. account designated in writing by the Holder to the Company
when the Notice of Conversion is given. The rights of all holders of Convertible
Debentures issued under the Purchase Agreement to convert their Convertible
Debentures into shares of Common Stock shall be prorated among such holders
based on their respective percentage holdings at the time of conversion of the
aggregate outstanding amount of all Convertible Debentures in order to comply
with the aforesaid overall limitation. Any conversion which is paid in cash
under this Paragraph 6 shall be paid within five (5) Business Days of the
Conversion Date, or else the Company shall thereafter be unable to exercise its
redemption rights under Paragraph 5 with respect to the outstanding Debentures.
7. In the event that the Conversion Price of the Common Stock is less than
$3.00 per share on any Conversion Date, or in the event a registration statement
permitting the immediate resale of the Conversion Shares by the Holder is not
effective on such Conversion Date, the Company may elect to deliver to the
Holder in consideration of any such conversion cash, Conversion Shares or any
combination thereof. The amount of cash to be delivered shall
EX 10.1 - A-3
equal the Volume Adjusted Price on the Conversion Date of the number of shares
of Common Stock as would have been issued at the Conversion Price upon such
conversion. The Company's ability to deliver cash as full or partial conversion
consideration in accordance with this Section 7 shall be conditioned on the
Company's delivery of notice to the Holder of such election by the Company no
later than twenty-four (24) hours following the Company's receipt of a Notice of
Conversion. The Holder shall then have a further twenty-four (24) hour period in
which to withdraw his Notice of Conversion, or else the Holder shall be deemed
to have accepted such alternative cash consideration.
8. (a) Conversion shall be effectuated by surrendering this Debenture to
the Company (if such Conversion will convert all outstanding principal) together
with the form of conversion notice attached hereto as Exhibit A (the "Notice of
Conversion"), executed by the Holder of this Debenture evidencing such Holder's
intention to convert this Debenture or a specified portion (as above provided)
hereof, and accompanied, if required by the Company, by proper assignment hereof
in blank. Interest accrued or accruing from the date of issuance to the date of
conversion shall, at the option of the Company, be paid in cash as set forth
above or in Common Stock upon conversion at the Conversion Price on the
Conversion Date. No fraction of a shares or scrip representing a fraction of a
share will be issued on conversion, but the number of shares issuable shall be
rounded to the nearest whole share. The date on which Notice of Conversion is
given (the "Conversion Date") shall be deemed to be the date on which the Holder
faxes the Notice of Conversion duly executed to the Company. Facsimile delivery
of the Notice of Conversion shall be accepted by the Company at facsimile number
(000) 000-0000 Attn.: Xxxx Xxxx. Certificates representing Common Stock upon
conversion will be delivered to the Holder within six (6) Business Days from the
date the Notice of Conversion is delivered to the Company. Delivery of shares
upon conversion shall be made to a U.S. address specified by the Holder in the
Notice of Conversion.
(b) The Company understands that a delay in the issuance of shares of
Common Stock upon a conversion beyond the six (6) Business Day period
described in Paragraph 8(a) could result in economic loss to the Holder. As
compensation to the Holder for such loss, the Company agrees to pay late
payments to the Holder for late issuance of shares of Common Stock upon
conversion in accordance with the following schedule (where "No. Business
Days Late" is defined as the number of Business Days beyond six (6)
Business Days from the date the Notice of Conversion is delivered to the
Company).
No. Business Days Xxxx Xxxx Payment for Each
$5,000 of Principal Amount
Being Converted
1 $100
2 $200
3 $300
4 $400
5 $500
EX 10.1 - A-4
No. Business Days Xxxx Xxxx Payment for Each
$5,000 of Principal Amount
Being Converted
6 $600
7 $700
8 $800
9 $900
10 $1,000
More than 10 $1,000 +$200 for each Business Day
Late beyond 10 Business Days
The Company shall pay any payments incurred under this Paragraph 8(b)
in immediately available funds upon demand. Nothing herein shall limit
Holder's right to pursue injunctive relief and/or actual damages for the
Company's failure to issue and deliver Common Stock to the holder,
including, without limitation, the Holder's actual losses occasioned by any
"buy-in" of Common Stock necessitated by such late delivery. Furthermore,
in addition to any other remedies which may be available to the Holder, in
the event that the Company fails for any reason to effect delivery of such
shares of Common Stock within six (6) Business Days from the date the
Notice of Conversion is delivered to the Company, the Holder will be
entitled to revoke the relevant Notice of Conversion by delivering a notice
to such effect to the Company, whereupon the Company and the Holder shall
each be restored to their respective positions immediately prior to
delivery of such Notice of Conversion, and in such event no late payments
shall be due in connection with such withdrawn conversion.
(c) If at any time (a) the Company challenges, disputes or denies the
right of the Holder to effect the conversion of this Debenture into Common
Stock or otherwise dishonors or rejects any Notice of Conversion delivered
in accordance with this Paragraph 8 or (b) any Company stockholder who is
not and has never been an Affiliate (as defined in Rule 405 under the
Securities Act of 1933, as amended) of the Holder obtains a judgment or any
injunctive relief from any court or public or governmental authority which
denies, enjoins, limits, modifies, delays or disputes the right of the
holder hereof to effect the conversion of this Debenture into Common Stock,
then the Holder shall have the right, by written notice, to require the
Company to promptly redeem this Debenture for cash at a redemption price
equal to one hundred ten percent (110%) of the outstanding principal amount
hereof and all accrued and unpaid interest hereon. Under any of the
circumstances set forth above, the Company shall be responsible for the
payment of all costs and expenses of the Holder, including reasonable legal
fees and expenses, as and when incurred in disputing any such action or
pursuing its rights hereunder (in addition to any other rights of the
Holder), subject in the case of clause (b) to the Company's right to
control and assume the defense of any such action. In the absence of an
injunction precluding the same, the Company shall issue shares upon a
properly noticed conversion.
(d) The Holder shall be entitled to exercise its conversion privilege
notwithstanding the commencement of any case under 11 U.S.C. ss. 101 et
seq. (the "Bankruptcy Code"). In the event the Company is a debtor under
the Bankruptcy Code, the Company hereby
EX 10.1 - A-5
waives to the fullest extent permitted any rights to relief it may have
under 11 X.X.X.xx. 362 in respect of the Holder's conversion privilege.
9. No provision of this Debenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of, and
interest on, this Debenture at the time, place, and rate, and in the coin or
currency or shares of Common Stock, herein prescribed. This Debenture is a
direct obligation of the Company.
10. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, employee, officer or
director, as such, past, present or future, of the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
11. If the Company merges or consolidates with another corporation or sells
or transfers all or substantially all of its assets to another person and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. In the event of any proposed
merger, consolidation or sale or transfer of all or substantially all of the
assets of the Company (a "Sale"), the Holder hereof shall have the right to
convert by delivering a Notice of Conversion to the Company and the Escrow Agent
within fifteen (15) days of receipt of notice of such Sale from the Company. In
the event the Holder hereof shall elect not to convert, the Company may prepay
all outstanding principal and accrued interest on this Debenture as provided in
Section 5, less all amounts required by law to be deducted, upon which tender of
payment following such notice, the right of conversion shall terminate.
12. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
13. This Debenture shall be governed by and construed in accordance with
the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising
EX 10.1 - A-6
under this Agreement and hereby waives, to the maximum extent permitted by law,
any objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.
14. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or interest
on this Debenture and same shall continue for a period of three
(3) days; or
b. Any of the representations or warranties made by the Company
herein, in the Purchase Agreement, the Registration Rights
Agreement, or in any agreement, certificate or financial or other
written statements heretofore or hereafter furnished by the
Company in connection with the execution and delivery of this
Debenture or the Purchase Agreement shall be false or misleading
in any material respect at the time made; or
c. The Company fails to issue shares of Common Stock to the Holder
or to cause its Transfer Agent to issue shares of Common Stock
upon exercise by the Holder of the conversion rights of the
Holder in accordance with the terms of this Debenture, fails to
transfer or to cause its Transfer Agent to transfer any
certificate for shares of Common Stock issued to the Holder upon
conversion of this Debenture as and when required by this
Debenture or the Registration Rights Agreement, and such transfer
is otherwise lawful, or fails to remove any restrictive legend or
to cause its Transfer Agent to transfer any certificate or any
shares of Common Stock issued to the Holder upon conversion of
this Debenture as and when required by this Debenture, the
Purchase Agreement or the Registration Rights Agreement and such
legend removal is otherwise lawful, and any such failure shall
continue uncured for five (5) business days; or
d. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition,
agreement or obligation of the Company under the Purchase
Agreement, the Registration Rights Agreement or this Debenture
and such failure shall continue uncured for a period of thirty
(30) days after written notice from the Holder of such failure;
or
e. The Company shall (1) admit in writing its inability to pay its
debts generally as they mature; (2) make an assignment for the
benefit of creditors or commence proceedings for its dissolution;
or (3) apply for or consent to the appointment of a trustee,
liquidator
EX 10.1 - A-7
or receiver for its or for a substantial part of its property or
business; or
f. A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business
without its consent and shall not be discharged within sixty (60)
days after such appointment; or
g. Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties
or assets of the Company and shall not be dismissed within sixty
(60) days thereafter; or
h. Any money judgment, writ or warrant of attachment, or similar
process in excess of One Hundred Thousand ($100,000) Dollars in
the aggregate shall be entered or filed against the Company or
any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of sixty (60) days
or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
i. Bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against
the Company and, if instituted against the Company, shall not be
dismissed within sixty (60) days after such institution or the
Company shall by any action or answer approve of, consent to, or
acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any
such proceeding; or
j. The Company shall have its Common Stock suspended or delisted
from trading on an exchange or the Nasdaq market for in excess of
two Trading Days;
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, anything herein or
in any note or other instruments contained to the contrary notwithstanding, and
the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law;
provided, that any payment of this Debenture in connection with an Event of
Default (other than a delisting of its Common Stock pursuant to clause (j.)) may
be made, at the Company's election, in cash or in shares of Common Stock, in
EX 10.1 - A-8
such number as would be issued at the Conversion Price on the date the Debenture
becomes due and payable.
15. Nothing contained in this Debenture shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.
16. In no event shall the Holder be permitted to convert this Debenture for
shares of Common Stock in excess of the amount of this Debenture upon the
conversion of which, (x) the number of shares of Common Stock owned by such
Holder (other than shares of Common Stock issuable upon conversion of this
Debenture) plus (y) the number of shares of Common Stock issuable upon
conversion of this Debenture, would be equal to or exceed 9.9% of the number of
shares of Common Stock then issued and outstanding, including shares issuable
upon conversion of this Debenture held by such Holder after application of this
Paragraph 16. As used herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder. To the extent that the
limitation contained in this Paragraph 16 applies, the determination of whether
this Debenture is convertible (in relation to other securities owned by the
Holder) and of which a portion of this Debenture is convertible shall be in the
sole discretion of such Holder, and the submission of a Notice of Conversion
shall be deemed to be such Holder's determination of whether this Debenture is
convertible (in relation to other securities owned by such holder) and of which
portion of this Debenture is convertible, in each case subject to such aggregate
percentage limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination. Nothing contained herein shall be
deemed to restrict the right of a holder to convert this Debenture into shares
of Common Stock at such time as such conversion will not violate the provisions
of this Paragraph 16. The provisions of this Paragraph 16 may be waived by the
Holder of this Debenture upon not less than 75 days' prior notice to the
Company, and the provisions of this Paragraph 16 shall continue to apply until
such 75th day (or such later date as may be specified in such notice of waiver).
No conversion of this Debenture in violation of this Paragraph 16 but otherwise
in accordance with this Debenture shall affect the status of the Common Stock
issued upon such conversion as validly issued, fully-paid and nonassessable. If
on the Maturity Date the conversion of this Debenture into Common Stock pursuant
to Paragraph 4 would cause the limit contained in the first sentence of this
Paragraph 16 to be exceeded, such conversion of this Debenture shall occur up to
such limit and the remaining unconverted portion of this Debenture shall be
converted into Common Stock (1) in accordance with one or more Notices of
Conversion delivered by the Holder or (2) 65 days after the Maturity Date,
whichever is earlier. Notwithstanding anything contained herein to the contrary,
no interest shall accrue after the Maturity Date on any such unconverted portion
of this Debenture.
EX 10.1 - A-9
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: October 29, 1999
BRILLIANT DIGITAL ENTERTAINMENT, INC.
By:
---------------------------------
Name: Xxxxxxx Xxxx
Title: Chief Financial Officer
Attest:
-----------------------
EX 10.1 - A-10
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $_______ of the
principal amount of the above Debenture No. 1 into Shares of Common Stock of
BRILLIANT DIGITAL ENTERTAINMENT, INC. (the "Company") according to the
conditions hereof, as of the date written below.
Date of Conversion* ___________________________________________________________
Accrued Interest $____________________________________________________________
Applicable Conversion Price * _________________________________________________
Signature______________________________________________________________________
[Name]
Address:_______________________________________________________________________
_______________________________________________________________________
EX 10.1 - A-11
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of October 29, 1999, between
ROSEWORTH GROUP, LTD., having an address at c/o Xx. Xxxxxxxx & Partners,
Xxxxxxxxxxx 00, XX-0000, Xxxxx, Xxxxxxxxxxxxx ("Holder"), and BRILLIANT DIGITAL
ENTERTAINMENT, INC., a corporation incorporated under the laws of the State of
Delaware, and having its principal place of business at 0000 Xxxxxxx Xxxxxx
Xxxx., Xxxxx 000, Xxxxxxxx Xxxxx, XX 00000 (the "Company").
WHEREAS, simultaneously with the execution and delivery of this Agreement,
the Holder is entering into a Debenture and Warrant Purchase Agreement dated the
date hereof (the "Purchase Agreement"), pursuant to which the Holder will
purchase from the Company (i) one or more Convertible Debentures (terms not
defined herein shall have the meanings ascribed to them in the Purchase
Agreement) in the aggregate principal amount of $1,500,000, (ii) Warrants to
purchase up to 50,000 shares of the Company's Common Stock at an exercise price
of $5.50 per share and (iii) a number of shares of Common Stock issuable at each
closing as a fee under the Purchase Agreement not to exceed more than $30,000
worth of shares in the aggregate;
WHEREAS, the Company desires to grant to the Holder the registration rights
set forth herein with respect to the shares of Common Stock issuable (i) upon
conversion of the Convertible Debenture, (ii) upon exercise of the Warrants and
(iii) as a fee at each closing (hereinafter referred to as the "Stock" or
"Securities" of the Company).
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. REGISTRABLE SECURITIES. As used herein the term "Registrable
Security" means the Securities until (i) the Registration Statement has been
declared effective by the Commission, and all Securities have been disposed of
pursuant to the Registration Statement, (ii) all Securities have been sold under
circumstances under which all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the Securities Act ("Rule 144") are met,
(iii) all Securities have been otherwise transferred to holders who may trade
such Securities without restriction under the Securities Act, and the Company
has delivered a new certificate or other evidence of ownership for such
Securities not bearing a restrictive legend or (iv) such time as, in the opinion
of counsel to the Company, all Securities may be sold without any time, volume
or manner limitations pursuant to Rule 144(k) (or any similar provision then in
effect) under the Securities Act. The term "Registrable Securities" means any
and/or all of the securities falling within the foregoing definition of a
"Registrable Security." In the event of any merger, reorganization,
consolidation, recapitalization or other change in corporate structure affecting
the Common Stock, such adjustment shall be deemed to be made in the definition
of "Registrable Security" as is appropriate in order to prevent any dilution or
enlargement of the rights granted pursuant to this Agreement.
Section 2. RESTRICTIONS ON TRANSFER. The Holder acknowledges and understands
that prior to the registration of the Registrable Securities as provided herein,
the Securities are "restricted securities" as defined in Rule 144 promulgated
under the Act. The Holder
understands that no disposition or transfer of the Registrable Securities may be
made by Holder in the absence of (i) an opinion of counsel to the Holder that
such transfer may be made without registration under the Securities Act or (ii)
such registration.
With a view to making available to the Holder the benefits of Rule 144
under the Securities Act or any other similar rule or regulation of the
Commission that may at any time permit the Holder to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
(a) comply with the provisions of paragraph (c)(1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Holder, make available other information as required by,
and so long as necessary to permit sales of, its Registrable Securities pursuant
to Rule 144.
Section 3. REGISTRATION RIGHTS WITH RESPECT TO THE SECURITIES.
(a) The Company agrees that it will prepare and file with the Securities
and Exchange Commission ("Commission"), on or before November 30, 1999, a
registration statement (on Form S-3, or other appropriate registration
statement) under the Securities Act (the "Registration Statement"), at the sole
expense of the Company (except as provided in Section 3(c) hereof), in respect
of all holders of Securities, so as to permit a public offering and resale of
the Registrable Securities under the Act.
The Company shall use its best efforts to cause the Registration Statement
to become effective on or before February 28, 1999, or, if earlier, within five
(5) days of Commission clearance to request acceleration of effectiveness. The
number of shares designated in the Registration Statement to be registered shall
include (i) the number of shares of Common Stock which would be issued upon
conversion of the Convertible Debenture assuming a Market Price of $1.00 per
share of Common Stock, (ii) 50,000 shares of Common Stock which may be issued
upon exercise of the Warrants and (iii) a number of shares of Common Stock
issuable at each closing as a fee under the Purchase Agreement not to exceed
more than $30,000 worth of shares in the aggregate. The Registration Statement
shall include appropriate language regarding reliance upon Rule 416 to the
extent permitted by the Commission. The Company will notify Holder of the
effectiveness of the Registration Statement within one Business Day of such
event. In the event that the number of shares so registered shall be
insufficient to register the resale of all the Registrable Securities, then the
Company shall be obligated to file, within thirty (30) days notice from any
Holder, a further registration statement registering such shares and shall use
its best efforts to cause such registration statement to become effective within
sixty (60) days from the filing date.
(b) The Company will maintain the Registration Statement or post-effective
amendment filed under this Section 3 hereof effective under the Securities Act
until the
EX 10.1 - B-2
earlier of (i) the date that none of the Convertible Debenture, the Warrants or
the Registrable Securities are or may become issued and outstanding, (ii) the
date that all of the Registrable Securities have been sold pursuant to the
Registration Statement, (iii) the date the holders thereof receive an opinion of
counsel to the Company, which counsel shall be reasonably acceptable to the
Holder, that the Registrable Securities may be sold under the provisions of Rule
144 without limitation as to volume, (iv) all Registrable Securities have been
otherwise transferred to Holders who may trade such shares without restriction
under the Securities Act, and the Company has delivered a new certificate or
other evidence of ownership for such securities not bearing a restrictive
legend, or (v) all Registrable Securities may be sold without any time, volume
or manner limitations pursuant to Rule 144(k) or any similar provision then in
effect under the Securities Act in the opinion of counsel to the Company, which
counsel shall be reasonably acceptable to the Holder (the "Effectiveness
Period").
(c) All fees, disbursements and out-of-pocket expenses and costs incurred
by the Company in connection with the preparation and filing of the Registration
Statement under subparagraph 3(a) and in complying with applicable securities
and Blue Sky laws (including, without limitation, all attorneys' fees of the
Company) shall be borne by the Company. The Holder shall bear the cost of
underwriting and/or brokerage discounts, fees and commissions, if any,
applicable to the Registrable Securities being registered and the fees and
expenses of its counsel. The Holder and its counsel shall have a reasonable
period, not to exceed three (3) Business Days, to review the proposed
Registration Statement or any amendment thereto, prior to filing with the
Commission, and the Company shall provide each Holder with copies of any comment
letters received from the Commission with respect thereto within two (2)
Business Days of receipt thereof. The Company shall make reasonably available
for inspection by Holder, any underwriter participating in any disposition
pursuant to the Registration Statement, and any attorney, accountant or other
agent retained by such Holder or any such underwriter all relevant financial and
other records, pertinent corporate documents and properties of the Company and
its subsidiaries, and cause the Company's officers, directors and employees to
supply all information reasonably requested by such Holder or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
PROVIDED, HOWEVER, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material non-public information shall be kept
confidential by such Holder and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such Holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and PROVIDED FURTHER that, if the foregoing inspection and information gathering
would otherwise disrupt the Company's conduct of its business, such inspection
and information gathering shall, to the maximum extent possible, be coordinated
on behalf of the Holder and the other parties entitled thereto by one firm of
counsel designed by and on behalf of the majority in interest of Holder and
other parties. The Company shall qualify any of the Registrable Securities for
sale in such states as such Holder reasonably designates and shall furnish
indemnification in the manner provided in Section 6 hereof. However,
EX 10.1 - B-3
the Company shall not be required to qualify in any state which will require an
escrow or other restriction relating to the Company and/or the sellers, or which
will require the Company to qualify to do business in such state or require the
Company to file therein any general consent to service of process. The Company
at its expense will supply the Holder with copies of the Registration Statement
and the prospectus included therein and other related documents in such
quantities as may be reasonably requested by the Holder.
(d) The Company shall not be required by this Section 3 to include a
Holder's Registrable Securities in any Registration Statement which is to be
filed if, in the opinion of counsel for both the Holder and the Company (or,
should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holder and the Company) the
proposed offering or other transfer as to which such registration is requested
is exempt from applicable federal and state securities laws and would result in
all purchasers or transferees obtaining securities which are not "restricted
securities", as defined in Rule 144 under the Securities Act.
(e) In the event that (i) the Registration Statement to be filed by the
Company pursuant to Section 3(a) above is not filed with the Commission on or
before November 30, 1999, (ii) the Registration Statement is not declared
effective by the Commission on or before February 28, 1999 (or, if the
Registration Statement receives a review by the Commission staff, on or before
March 29, 1999), or (iii) the Registration Statement is not maintained as
effective by the Company for the period set forth in Section 3(b) above (each a
"Registration Default"), then the Company will pay Holder (pro rated on a daily
basis), as liquidated damages for such failure and not as a penalty, in the
event of late filing (in the case of clause (i) above), two percent (2%) of the
aggregate market value of the Registrable Securities issued or issuable to the
Holder upon conversion of the Convertible Debenture on any date of determination
and beneficially held by the Holder for every monthly period or portion thereof
thereafter until the Registration Statement has been filed, and in the event of
late effectiveness (in case of clause (ii) above) or lapsed effectiveness (in
the case of clause (iii) above), two percent (2%) of the aggregate market value
of the Registrable Securities issued or issuable to the Holder upon conversion
of the Convertible Debenture on any date of determination and beneficially held
by the Holder for every monthly period or portion thereof thereafter (regardless
of whether one or more such Registration Defaults are then in existence) until
the Registration Statement has been declared effective. Such payment of the
liquidated damages shall be made to the Holder in cash, within five (5) calendar
days of demand, provided, however, that the payment of such liquidated damages
shall not relieve the Company from its obligations to register the Registrable
Securities pursuant to this Section. The market value of the Common Stock for
this purpose shall be the closing price (or last trade, if so reported) on the
Principal Market for each day during such Registration Default. Notwithstanding
anything to the contrary contained herein, a failure to maintain the
effectiveness of the Registration Statement or the ability of a Holder to use
the Registration Statement to effect resales of Registrable Securities during
the period after 45 days and within 90 days from the end of the Company's fiscal
year resulting solely from the need to update the Company's financial statements
contained or incorporated by reference in the Registration Statement shall not
constitute a Registration Default and shall not trigger the accrual of
liquidated damages hereunder.
EX 10.1 - B-4
If the Company does not remit the damages to the Holder as set forth above,
the Company will pay the Holder reasonable costs of collection, including
attorneys fees, in addition to the liquidated damages. The registration of the
Registrable Securities pursuant to this provision shall not affect or limit
Holder's other rights or remedies as set forth in this Agreement.
(f) No provision contained herein shall preclude the Company from selling
securities pursuant to any Registration Statement in which it is required to
include Registrable Securities pursuant to this Section 3.
(g) If at any time or from time to time after the effective date of the
Registration Statement, the Company notifies the Holder in writing of the
existence of a Potential Material Event (as defined in Section 3(h) below), the
Holder shall not offer or sell any Registrable Securities or engage in any other
transaction involving or relating to Registrable Securities, from the time of
the giving of notice with respect to a Potential Material Event until such
Holder receives written notice from the Company that such Potential Material
Event either has been disclosed to the public or no longer constitutes a
Potential Material Event; provided, however, that the Company may not so suspend
the right to such holders of Registrable Securities for more than twenty (20)
days in the aggregate (or such greater period, not to exceed 90 days in the
aggregate, as may be required to prepare and file audited financial statements
of a company or business acquired) during any twelve month period, during the
periods the Registration Statement is required to be in effect. If a Potential
Material Event shall occur prior to the date the Registration Statement is
filed, then the Company's obligation to file the Registration Statement shall be
delayed without penalty for not more than twenty (20) days (or such greater
period, not to exceed 90 days in the aggregate, as may be required to prepare
and file audited financial statements of a company or business acquired). The
Company must give Holder notice in writing at least two (2) business days prior
to the first day of the blackout period.
(h) "Potential Material Event" means any of the following: (a) the
possession by the Company of material information not ripe for disclosure in a
registration statement, as determined in good faith by the Chief Executive
Officer or the Board of Directors of the Company that disclosure of such
information in the Registration Statement would be detrimental to the business
and affairs of the Company; or (b) any material engagement or activity by the
Company which would, in the good faith determination of the Chief Executive
Officer or the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Chief Executive Officer or
the Board of Directors of the Company that the Registration Statement would be
materially misleading absent the inclusion of such information.
Section 4. COOPERATION WITH COMPANY. The Holder will cooperate with the Company
in all respects in connection with this Agreement, including timely supplying
all information reasonably requested by the Company (which shall include all
information regarding the Holder and proposed manner of sale of the Registrable
Securities required to be disclosed in the Registration Statement) and executing
and returning all documents reasonably requested in connection with the
registration and sale of the Registrable Securities and entering into
EX 10.1 - B-5
and performing its obligations under any underwriting agreement, if the offering
is an underwritten offering, in usual and customary form, with the managing
underwriter or underwriters of such underwritten offering. Nothing in this
Agreement shall obligate the Holder to consent to be named as an underwriter in
the Registration Statement. The obligation of the Company to register the
Registrable Securities shall be absolute and unconditional as to those
Registrable Securities which the Commission will permit to be registered without
naming the Holder as an underwriter.
Section 5. REGISTRATION PROCEDURES. If and whenever the Company is required by
any of the provisions of this Agreement to effect the registration of any of the
Registrable Securities under the Act, the Company shall (except as otherwise
provided in this Agreement), as expeditiously as possible, subject to the
Holder's assistance and cooperation as reasonably required:
(a) (i) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Act with respect to the sale or other
disposition of all securities covered by such registration statement whenever
the Holder of such Registrable Securities shall desire to sell or otherwise
dispose of the same (including prospectus supplements with respect to the sales
of securities from time to time in connection with a registration statement
pursuant to Rule 415 promulgated under the Act) and (ii) take all lawful action
such that each of (A) the Registration Statement and any amendment thereto does
not, when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, not misleading and (B) the Prospectus forming part
of the Registration Statement, and any amendment or supplement thereto, does not
at any time during the Registration Period include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(b) (i) prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any prospectus (including any supplements thereto), provide draft copies thereof
to the Holders and reflect in such documents all such comments as the Holders
(and their counsel) reasonably may propose respecting the Selling Shareholders
and Plan of Distribution sections (or equivalents) and (ii) furnish to each
Holder such numbers of copies of a prospectus including a preliminary prospectus
or any amendment or supplement to any prospectus, as applicable, in conformity
with the requirements of the Act, and such other documents, as such Holder may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities owned by such Holder;
(c) register and qualify the Registrable Securities covered by the
Registration Statement under such other securities or blue sky laws of such
jurisdictions as the Holder shall reasonably request (subject to the limitations
set forth in Section 3(d) above), and do any and all other acts and things which
may be necessary or advisable to enable each Holder to consummate the public
sale or other disposition in such jurisdiction of the securities owned by
EX 10.1 - B-6
such Holder, except that the Company shall not for any such purpose be required
to qualify to do business as a foreign corporation in any jurisdiction wherein
it is not so qualified or to file therein any general consent to service of
process;
(d) list such Registrable Securities on the American Stock Exchange, other
national securities exchange, the NASDAQ National Market or the NASDAQ Small-Cap
Market, on which the Common Stock of the Company is then listed, if the listing
of such Registrable Securities is then permitted under the rules of such
exchange or Nasdaq;
(e) notify each Holder of Registrable Securities covered by the
Registration Statement, at any time when a prospectus relating thereto covered
by the Registration Statement is required to be delivered under the Act, of the
happening of any event of which it has knowledge as a result of which the
prospectus included in the 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 the Company
shall prepare and file a curative amendment under Section 5(a) as quickly as
commercially possible;
(f) as promptly as practicable after becoming aware of such event, notify
each Holder who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance by the
Commission of any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take all lawful action
to effect the withdrawal, recession or removal of such stop order or other
suspension;
(g) cooperate with the Holders who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the Registration Statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Holders reasonably may
request and registered in such names as the Holder may request; and, within
three business days after a Registration Statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Holders whose Registrable Securities
are included in such Registration Statement) an appropriate instruction and, to
the extent necessary, an opinion of such counsel;
(h) take all such other lawful actions reasonably necessary to expedite and
facilitate the disposition by the Holders of their Registrable Securities in
accordance with the intended methods therefor provided in the prospectus which
are customary for issuers to perform under the circumstances;
(i) in the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus
EX 10.1 - B-7
supplement or post-effective amendment as soon as practicable after it is
notified of the matters to be included or incorporated in such Prospectus
supplement or post-effective amendment; and
(j) maintain a transfer agent and registrar for its Common Stock.
Section 6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the Holder and each
person, if any, who controls the Holder within the meaning of the Securities Act
("Distributing Holder") against any losses, claims, damages or liabilities,
joint or several (which shall, for all purposes of this Agreement, include, but
not be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees), to which the Distributing Holder may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, or any related preliminary prospectus,
final prospectus or amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, preliminary prospectus,
final prospectus or amendment or supplement thereto in reliance upon, and in
conformity with, written information furnished to the Company by the
Distributing Holder, specifically for use in the preparation thereof. This
Section 6(a) shall not inure to the benefit of any Distributing Holder with
respect to any person asserting such loss, claim, damage or liability who
purchased the Registrable Securities which are the subject thereof if the
Distributing Holder failed to send or give (in violation of the Securities Act
or the rules and regulations promulgated thereunder) a copy of the prospectus
contained in such Registration Statement to such person at or prior to the
written confirmation to such person of the sale of such Registrable Securities,
where the Distributing Holder was obligated to do so under the Securities Act or
the rules and regulations promulgated thereunder. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(b) Each Distributing Holder agrees that it will indemnify and hold
harmless the Company, and each officer, director of the Company or person, if
any, who controls the Company within the meaning of the Securities Act, against
any losses, claims, damages or liabilities (which shall, for all purposes of
this Agreement, include, but not be limited to, all reasonable costs of defense
and investigation and all reasonable attorneys' fees) to which the Company or
any such officer, director or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, or any related preliminary prospectus, final
prospectus or amendment or supplement thereto, or arise out of or are based upon
the omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
but in each case only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission
EX 10.1 - B-8
was made in the Registration Statement, preliminary prospectus, final prospectus
or amendment or supplement thereto in reliance upon, and in conformity with,
written information furnished to the Company by such Distributing Holder,
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Distributing Holder may otherwise
have.
(c) Promptly after receipt by an indemnified party under this Section 6 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 6, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party except to
the extent of actual prejudice demonstrated by the indemnifying party. In case
any such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, assume the defense thereof,
subject to the provisions herein stated and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this Section 6 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless the indemnifying party shall not
pursue the action to its final conclusion. The indemnified party 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 indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that if the indemnified party is the Distributing Holder, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party, or (ii) the named parties to any such action
(including any impleaded parties) include both the Distributing Holder and the
indemnifying party and the Distributing Holder shall have been advised by such
counsel that there may be one or more legal defenses available to the
indemnifying party different from or in conflict with any legal defenses which
may be available to the Distributing Holder (in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf of
the Distributing Holder, it being understood, however, that the indemnifying
party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Distributing Holder,
which firm shall be designated in writing by the Distributing Holder). No
settlement of any action against an indemnified party shall be made without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld.
Section 7. Contribution. In order to provide for just and equitable contribution
under the Securities Act in any case in which (i) the indemnified party makes a
claim for indemnification pursuant to Section 6 hereof but is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
EX 10.1 - B-9
notwithstanding the fact that the express provisions of Section 6 hereof provide
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any indemnified party, then the Company and the
applicable Distributing Holder shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (which shall, for all
purposes of this Agreement, include, but not be limited to, all reasonable costs
of defense and investigation and all reasonable attorneys' fees), in either such
case (after contribution from others) on the basis of relative fault as well as
any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the applicable Distributing Holder on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Distributing Holder
agree that it would not be just and equitable if contribution pursuant to this
Section 7 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 7. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section 7 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
Notwithstanding any other provision of this Section 7, in no event shall
any (i) Holder be required to undertake liability to any person under this
Section 7 for any amounts in excess of the dollar amount of the proceeds to be
received by such Holder from the sale of such Holder's Registrable Securities
(after deducting any fees, discounts and commissions applicable thereto)
pursuant to any Registration Statement under which such Registrable Securities
are to be registered under the Securities Act and (ii) underwriter be required
to undertake liability to any person hereunder for any amounts in excess of the
aggregate discount, commission or other compensation payable to such underwriter
with respect to the Registrable Securities underwritten by it and distributed
pursuant to the Registration Statement.
Section 8. NOTICES. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by reputable courier service, fully prepaid, addressed to such
EX 10.1 - B-10
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the Company: BRILLIANT DIGITAL ENTERTAINMENT, INC.
0000 Xxxxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000
Attention: Xxxx Xxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to: Xxxxxx Xxxxxxxx, Esq.
(shall not constitute notice) Troop Xxxxxxx Xxxxxx Xxxxxxx & Xxxxx, LLP
0000 Xxxxxxx Xxxx Xxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
If to any Holder: At its last known address appearing on the
books of the Company maintained for
such purpose.
with a copy to: Xxxxxx X. Xxxxx, Esq.
(shall not constitute notice) Xxxxxxx Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 8 by giving at least ten (10) days' prior written
notice of such changed address or facsimile number to the other party hereto.
Section 9. ASSIGNMENT. This Agreement is binding upon and inures to the benefit
of the parties hereto and their respective heirs, successors and permitted
assigns. The rights granted the Holder under this Agreement may be assigned to
any purchaser of substantially all of the Registrable Securities (or the rights
thereto) from Holder, as otherwise permitted by the Purchase Agreement. In the
event of a transfer of the rights granted under this Agreement, the Holder
agrees that the Company may require that the transferee comply with reasonable
conditions as determined in the discretion of the Company.
Section 10. ADDITIONAL COVENANTS OF THE COMPANY. The Company agrees that at such
time as it meets all the requirements for the use of Securities Act Registration
Statement on Form S-3 it shall file all reports and information required to be
filed by it with the Commission
EX 10.1 - B-11
in a timely manner and take all such other action so as to maintain such
eligibility for the use of such form.
Section 11. COUNTERPARTS/FACSIMILE. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when together shall constitute but one and the same instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other party. In lieu of the original, a facsimile
transmission or copy of the original shall be as effective and enforceable as
the original.
Section 12. REMEDIES. The remedies provided in this Agreement are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
Section 13. CONFLICTING AGREEMENTS. The Company shall not enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the holders of Registrable Securities in this Agreement or otherwise
prevents the Company from complying with all of its obligations hereunder.
Section 14. HEADINGS. The headings in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
Section 15. GOVERNING LAW, ARBITRATION. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any dispute under this Agreement
shall be submitted to arbitration under the American Arbitration Association
(the "AAA") in New York City, New York, and shall be finally and conclusively
determined by the decision of a board of arbitration consisting of three (3)
members (hereinafter referred to as the "Board of Arbitration") selected as
according to the rules governing the AAA. The Board of Arbitration shall meet on
consecutive business days in New York City, New York, and shall reach and render
a decision in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the losing party is
required to pay to the other party in respect of a claim filed. In connection
with rendering its decisions, the Board of Arbitration shall adopt and follow
the laws of the State of New York. To the extent practical, decisions of the
Board of Arbitration shall be rendered no more than thirty (30) calendar days
following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to all parties
involved in the dispute. Any decision made by the Board of Arbitration (either
prior to or after the expiration of such thirty (30)
EX 10.1 - B-12
calendar day period) shall be final, binding and conclusive on the parties to
the dispute, and entitled to be enforced to the fullest extent permitted by law
and entered in any court of competent jurisdiction. The Board of Arbitration
shall be authorized and is hereby directed to enter a default judgment against
any party failing to participate in any proceeding hereunder within the time
periods set forth in the AAA rules. The non-prevailing party to any arbitration
(as determined by the Board of Arbitration) shall pay the expenses of the
prevailing party including reasonable attorney's fees, in connection with such
arbitration. Any party shall be entitled to obtain injunctive relief from a
court in any case where such relief is available.
Section 16. SEVERABILITY. If any provision of this Agreement shall for any
reason be held invalid or unenforceable, such invalidity or unenforceablity
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein. Terms not otherwise defined herein shall be defined in accordance with
the Agreement.
EX 10.1 - B-13
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed, on the day and year first above written.
BRILLIANT DIGITAL ENTERTAINMENT, INC.
By:
--------------------------------
Xxxxxxx Xxxx
Chief Financial Officer
ROSEWORTH GROUP, LTD.
By:
--------------------------------
Xxxx Xxxxxxx
Director
EX 10.1 - B-14
EXHIBIT C
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of October 29, 1999, by
and among BRILLIANT DIGITAL ENTERTAINMENT, INC., a corporation incorporated
under the laws of the State of Delaware, and having its principal place of
business at 0000 Xxxxxxx Xxxxxx Xxxx., Xxxxx 000, Xxxxxxxx Xxxxx, Xxxxxxxxxx
00000 (the "Company"), Roseworth Group, Ltd., having an address at c/o Xx.
Xxxxxxxx & Partners, Xxxxxxxxxxx 00, XX-0000, Xxxxx, Xxxxxxxxxxxx (xxx
"Investor"), and Xxxxxxx Xxxxxx & Green, P.C., having an address at 000 Xxxx
Xxxxxx, Xxx Xxxx, XX 00000 (the "Escrow Agent"). Capitalized terms used but not
defined herein shall have the meanings set forth in the Debenture Purchase
Agreement referred to in the first recital.
W I T N E S S E T H:
WHEREAS, the Investor will be purchasing from the Company warrants (the
"Warrants") to purchase up to 50,000 shares of the Company's common stock, par
value $.001 per share (the "Common Stock"), and one or more Convertible
Debentures (collectively, the "Debenture" and together with the Warrants, the
"Securities") in the aggregate principal amount of $1,500,000 at the purchase
price set forth in the Debenture and Warrant Purchase Agreement (the "Purchase
Agreement") dated the date hereof between the Investor and the Company, which
will be issued as per the terms contained herein and in the Purchase Agreement;
WHEREAS, it is intended that the purchase of the securities be consummated
in accordance with the requirements set forth by Regulation D promulgated under
the Securities Act of 1933, as amended; and
WHEREAS, the Company and the Investor have requested that the Escrow Agent
hold the Purchase Price in escrow until the Escrow Agent has received the
certificates representing the Warrants, the Debenture, and certain other closing
documents specified herein;
NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged and intending to be legally
bound hereby, the parties agree as follows:
ARTICLE 1
TERMS OF THE INITIAL ESCROW
1.1 The parties hereby agree to establish an escrow account with the Escrow
Agent whereby the Escrow Agent shall hold the funds for the purchase of the
Securities as contemplated by the Purchase Agreement.
1.2 At the Closing, upon Escrow Agent's receipt of $970,000 ($1,000,000 of
the Purchase Price, less $30,000 of costs payable by the Company to the
Investor) into its
attorney trustee account, it shall notify the Company, or the Company's
designated attorney or agent, of the amount of funds it has received into its
account.
1.3 At the Closing, the Company, upon receipt of said notice, shall deliver
to the Escrow Agent the certificates representing the Warrants and a Debenture
in the principal amount of $1,000,000 to be issued to the Investor together
with:
(i) the original executed Registration Rights Agreement in the form
of Exhibit B to the Purchase Agreement;
(ii) Instructions to Transfer Agent in the form of Exhibit E to the
Purchase Agreement;
(iii) the original executed opinion of Troop Xxxxxxx Xxxxxx Xxxxxxx &
Xxxxx, LLP, in the form of Exhibit D to the Purchase Agreement;
(iv) the original executed Purchase Agreement
Escrow Agent shall then communicate with the Company to confirm the
validity of the issuance of the Warrants and the Debenture. In the event that
the foregoing items are not in the Escrow Agent's possession within three (3)
Business Days of the Escrow Agent notifying the Company that the Escrow Agent
has custody of the $970,000, then the Investor shall have the right to demand
the return of said sum.
1.4 At the Closing, once Escrow Agent confirms the validity of the issuance
of the Warrants and the Debenture by means of its receipt of a Release Notice in
the form attached hereto as EXHIBIT X executed by the Company and the Investor,
it shall immediately wire the $970,000 per the written instructions of the
Company. Once the funds (as set forth above) have been received per the
Company's instructions, the Escrow Agent shall then arrange to have the Warrants
and Debenture certificates, the Registration Rights Agreement and the opinion of
counsel delivered as per instructions from the Investor and to deliver the
Instructions to Transfer Agent to the Transfer Agent.
1.5 Promptly following the Closing, the Company shall deliver to the Escrow
Agent a certificate representing a number of shares of Common Stock of the
Company issued to the Investor equal to $20,000 divided by the Volume Adjusted
Price per share of the Common Stock on the Closing Date, rounded up to the
nearest whole share. The Escrow Agent shall then arrange to have such
certificate delivered as per instructions from the Investor.
ARTICLE 2
TERMS OF THE SECOND ESCROW
2.1 Within 5 Business Days following the Effective Date, upon Escrow
Agent's receipt of $485,000 ($500,000 of the Purchase Price, less $15,000 of
costs payable by
EX 10.1 - C-2
the Company to the Investor) into its attorney trustee account, it shall notify
the Company, or the Company's designated attorney or agent, of the amount of
funds it has received into its account.
2.2 The Company, upon receipt of said notice, shall deliver to the Escrow
Agent the certificates representing the Debenture in the principal amount of
$500,000 to be issued to the Investor. Escrow Agent shall then communicate with
the Company to confirm the validity of the issuance of the Debenture. In the
event that the foregoing items are not in the Escrow Agent's possession within
three (3) Business Days of the Escrow Agent notifying the Company that the
Escrow Agent has custody of the $485,000, then the Investor shall have the right
to demand the return of said sum.
2.3 Once Escrow Agent confirms the validity of the issuance of the
Debenture by means of its receipt of a Release Notice in the form attached
hereto as EXHIBIT X executed by the Company and the Investor, it shall
immediately wire the $485,000 per the written instructions of the Company. Once
the funds (as set forth above) have been received per the Company's
instructions, the Escrow Agent shall then arrange to have the Debenture
certificate delivered as per instructions from the Investor.
2.4 Promptly following receipt of the $485,000 per the Company's
instructions, the Company shall deliver to the Escrow Agent a certificate
representing a number of shares of Common Stock of the Company issued to the
Investor equal to $10,000 divided by the Volume Adjusted Price per share of the
Common Stock on the Effective Date, rounded up to the nearest whole share. The
Escrow Agent shall then arrange to have such certificate delivered as per
instructions from the Investor.
ARTICLE 3
MISCELLANEOUS
3.1 No waiver or any breach of any covenant or provision herein contained
shall be deemed a waiver of any preceding or succeeding breach thereof, or of
any other covenant or provision herein contained. No extension of time for
performance of any obligation or act shall be deemed any extension of the time
for performance of any other obligation or act.
3.2 All notices or other communications required or permitted hereunder
shall be in writing, and shall be sent by fax, overnight courier, registered or
certified mail, postage prepaid, return receipt requested, and shall be deemed
received upon receipt thereof, as follows:
(a) Brilliant Digital Entertainment, Inc.
0000 Xxxxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
EX 10.1 - C-3
or to such other person at such other place as the Company shall designate to
the Investor in writing;
(b) if to Escrow Agent, to
Xxxxxxx Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxx
Telephone: (000)000-0000
Facsimile: (000) 000-0000
(c) if to the Investor:
Roseworth Group, Ltd.
c/o Xx. Xxxxxxxx & Partners
Xxxxxxxxxxx 00
XX-0000
Xxxxx, Xxxxxxxxxxxxx
Facsimile: 011-41-75-2360-405
3.3 This Escrow Agreement shall be binding upon and shall inure to the
benefit of the permitted successors and permitted assigns of the parties hereto.
3.4 This Escrow Agreement is the final expression of, and contains the
entire agreement between, the parties with respect to the subject matter hereof
and supersedes all prior understandings with respect thereto. This Escrow
Agreement may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
parties to be charged or by its agent duly authorized in writing or as otherwise
expressly permitted herein.
3.5 Whenever required by the context of this Escrow Agreement, the singular
shall include the plural and masculine shall include the feminine. This Escrow
Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to Articles are to this Escrow Agreement.
3.6 The parties hereto expressly agree that this Escrow Agreement shall be
governed by, interpreted under and construed and enforced in accordance with the
laws of the State of New York. Any action to enforce, arising out of, or
relating in any way to, any provisions of this Escrow Agreement shall brought
through the American Arbitration Association at the designated locale of New
York, New York as is more fully set forth in the Purchase Agreement.
3.7 The Escrow Agent's duties hereunder may be altered, amended, modified
or revoked only by a writing signed by the Company, each Investor and the Escrow
Agent.
EX 10.1 - C-4
3.8 The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed by
the Escrow Agent to be genuine and to have been signed or presented by the
proper party or parties. The Escrow Agent shall not be personally liable for any
act the Escrow Agent may do or omit to do hereunder as the Escrow Agent while
acting in good faith, and any act done or omitted by the Escrow Agent pursuant
to the advice of the Escrow Agent's attorneys-at-law shall be conclusive
evidence of such good faith.
3.9 The Escrow Agent is hereby expressly authorized to disregard any and
all warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
3.10 The Escrow Agent shall not be liable in any respect on account of the
identity, authorization or rights of the parties executing or delivering or
purporting to execute or deliver the Purchase Agreement or any documents or
papers deposited or called for thereunder.
3.11 The Escrow Agent shall be entitled to employ such legal counsel and
other experts as the Escrow Agent may deem necessary properly to advise the
Escrow Agent in connection with the Escrow Agent's duties hereunder, may rely
upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor. THE ESCROW AGENT HAS ACTED AS LEGAL COUNSEL FOR THE
INVESTOR, AND MAY CONTINUE TO ACT AS LEGAL COUNSEL FOR THE INVESTOR, FROM TIME
TO TIME, NOTWITHSTANDING ITS DUTIES AS THE ESCROW AGENT HEREUNDER. THE COMPANY
CONSENTS TO THE ESCROW AGENT IN SUCH CAPACITY AS LEGAL COUNSEL FOR THE INVESTOR
AND WAIVES ANY CLAIM THAT SUCH REPRESENTATION REPRESENTS A CONFLICT OF INTEREST
ON THE PART OF THE ESCROW AGENT. THE COMPANY UNDERSTANDS THAT THE INVESTOR AND
THE ESCROW AGENT ARE RELYING EXPLICITLY ON THE FOREGOING PROVISION IN ENTERING
INTO THIS ESCROW AGREEMENT.
3.12 The Escrow Agent's responsibilities as escrow agent hereunder shall
terminate if the Escrow Agent shall resign by written notice to the Company and
the Investor. In the event of any such resignation, the Investor and the Company
shall appoint a successor Escrow Agent.
3.13 If the Escrow Agent reasonably requires other or further instruments
in connection with this Escrow Agreement or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
3.14 It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the documents or the
escrow funds held by the Escrow Agent hereunder, the Escrow Agent is authorized
and directed in the Escrow Agent's sole discretion (1) to retain in the Escrow
Agent's possession without liability to anyone all or any part of said documents
or the escrow funds until such disputes shall have been settled
EX 10.1 - C-5
either by mutual written agreement of the parties concerned by a final order,
decree or judgment or a court of competent jurisdiction after the time for
appeal has expired and no appeal has been perfected, but the Escrow Agent shall
be under no duty whatsoever to institute or defend any such proceedings or (2)
to deliver the escrow funds and any other property and documents held by the
Escrow Agent hereunder to a state or federal court having competent subject
matter jurisdiction and located in the State and City of New York in accordance
with the applicable procedure therefor.
3.15 The Company and the Investor agree jointly and severally to indemnify
and hold harmless the Escrow Agent and its partners, employees, agents and
representatives from any and all claims, liabilities, costs or expenses in any
way arising from or relating to the duties or performance of the Escrow Agent
hereunder or the transactions contemplated hereby or by the Purchase Agreement
other than any such claim, liability, cost or expense to the extent the same
shall have been determined by final, unappealable judgment of a court of
competent jurisdiction to have resulted from the gross negligence or willful
misconduct of the Escrow Agent.
EX 10.1 - C-6
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
as of October 29, 1999.
COMPANY:
BRILLIANT DIGITAL ENTERTAINMENT, INC.
By:
-----------------------------------
Xxxxxxx Xxxx
Chief Financial Officer
INVESTOR:
ROSEWORTH GROUP, LTD.
By:
-----------------------------------
Xxxx Xxxxxxx
Director
ESCROW AGENT:
XXXXXXX XXXXXX & GREEN, P.C.
By:
-----------------------------------
Name:
Title:
EX 10.1 - C-7
EXHIBIT D
October 29, 1999
Roseworth Group, Ltd.
c/o Xx. Xxxxxxxx & Partners
Xxxxxxxxxxx 00
XX-0000
Xxxxx, Xxxxxxxxxxxxx
Re: BRILLIANT DIGITAL ENTERTAINMENT, INC.
Ladies and Gentlemen:
We have acted as counsel for Brilliant Digital Entertainment, Inc., a
Delaware corporation (the "Company"), in connection with that certain Debenture
and Warrant Purchase Agreement, dated as of October 29, 1999 (the "Purchase
Agreement"), between the Company and Roseworth Group, Ltd. (the "Investor").
Pursuant to the Purchase Agreement and subject to the terms and conditions
contained therein, the Company has agreed to sell to the Investor and the
Investor has agreed to purchase from the Company one or more Convertible
Debentures in the aggregate principal amount of $1,500,000 and Warrants to
purchase up to 50,000 shares of the Company's Common Stock, par value $0.001 per
share (the "Common Stock"). The Convertible Debenture is convertible into shares
of Common Stock on the terms and subject to the conditions contained in the
Convertible Debenture. Unless otherwise defined herein, all capitalized words
and phrases defined in the Purchase Agreement shall have the same meanings when
used herein.
This opinion is rendered to you at the request of our client pursuant to
Section 2.1(b)(vii) of the Purchase Agreement.
In connection with rendering this opinion, we have examined original
documents, or copies properly certified or otherwise identified to our
satisfaction as being in the form of original documents, of the following:
(i) The Amended and Restated Certificate of Incorporation of the
Company, as currently in effect (the "Certificate");
(ii) The Amended and Restated Bylaws of the Company, as currently in
effect (the "Bylaws");
(iii) Minutes of meetings and written consents of the Company's Board
of Directors made available to us by the Company;
(iv) A list of all outstanding options, warrants and other Capital
Share Equivalents granted by the Company, as set forth in the SEC Documents
or otherwise provided to us by the Company;
(v) An executed copy of the form of certificate evidencing the Common
Stock;
(vi) An executed copy of the Purchase Agreement;
(vii) An executed copy of the Convertible Debenture in the principal
sum of $1,000,000;
(viii) An executed copy of the Warrants;
(ix) An executed copy of the Registration Rights Agreement dated as of
October 29, 1999 between the Company and the Investor (the "Registration
Rights Agreement");
(x) An executed copy of the Escrow Agreement dated as of October 29,
1999 among the Company, the Investor and Xxxxxxx, Xxxxxx & Green, P.C., as
Escrow Agent (the "Escrow Agreement" and, together with the Purchase
Agreement and the Registration Rights Agreement, the "Transaction
Agreements");
(xi) All of the other documents delivered among the parties to the
Purchase Agreement at the Closing;
(xii) An officers' certificate of the Company as to certain factual
matters;
(xiii) All instruments, contracts and other agreements which were
filed as exhibits to the SEC Documents, which have been certified to us by
the Company as being all of the instruments, contracts and other agreements
material to the Company to which the Company is a party or by which any of
its properties or assets are bound (the "Material Agreements"); and
(xiv) The listing agreement between the Company and the American Stock
Exchange providing for the listing of the Common Stock on such exchange, as
currently in effect.
In addition, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of all such records of the Company, and all such
agreements, certificates of public officials, certificates of officers or other
representatives of the Company
EX 10.1 - D-2
and others, and such other documents, certificates and records as we have deemed
necessary or appropriate as a basis for the opinions set forth herein.
In our examination, we have assumed, without investigation or inquiry, the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures, the legal capacity of natural persons, the conformity to the
originals of all documents submitted to us as copies and the authenticity of
such originals, and the due authorization, execution and delivery of all
documents, other than the due execution and delivery of the Transaction
Agreements by the Company, where due execution and delivery are prerequisites to
the effectiveness thereof.
Whenever any of the phrases "to our knowledge," "based upon our knowledge"
or "known to us" appears in this opinion, each of the phrases means that (a) we
have relied exclusively on our review of the documents described in paragraphs
(i) through (xiv) above, (b) we have made no examination or investigation of
public records (including, without limitation, any plaintiff or defendant
indices of any state or federal courts), whether or not such examination or
investigation might otherwise be reasonable or prudent, and (c) no attorney who
has participated in the preparation of the Transaction Agreements or any of the
related agreements or participated in the negotiation and preparation of this
opinion and who is currently employed by or is a member of our firm, has any
conscious awareness of facts or other information which indicates that the
opinions contained herein and qualified by such phrases are untrue. Unless
otherwise expressly stated herein, we have not undertaken any independent
investigation to determine the existence or non-existence of any factual
matters.
On the basis of the foregoing and in reliance thereon, and on such other
matters as we deem relevant under the circumstances, and upon consideration of
applicable law, subject to the assumptions, exceptions and qualifications set
forth herein, we are of the opinion that as of the date hereof:
1. The Company is a corporation duly organized, validly existing and in
good standing under the Delaware General Corporation Law and has all requisite
corporate power and corporate authority to carry on its business and to own,
lease and operate its properties and assets as described in the SEC Documents.
To our knowledge, the Company does not have any subsidiaries other than The
Auctionchannel, Inc., a Delaware corporation, Brilliant Interactive Ideas, Pty.
Ltd., a company incorporated in New South Wales, Australia, and Trojan
Television, Ltd., a corporation formed under the laws of England and Wales, and
does not own more than fifty percent (50%) of the outstanding capital stock of
any other business entity other than as disclosed in the SEC Documents. The
Company is duly qualified and is in good standing as a foreign corporation to do
business in the State of California. For purposes of this opinion, a
"subsidiary" of the Company shall mean any corporation, partnership, joint
venture, trust
EX 10.1 - D-3
or other entity, a majority of the outstanding voting securities or other
ownership interests (as the case may be) of which are owned directly or
indirectly by the Company.
2. The Company has the requisite corporate power and corporate authority to
enter into and perform its obligations under the Transaction Agreements, the
Convertible Debenture and the Warrants and to issue the Conversion Shares upon
conversion of the Convertible Debenture and the Warrant Shares upon exercise of
the Warrants. The execution and delivery of the Transaction Agreements, the
Convertible Debenture and the Warrants by the Company and the consummation by
the Company of the transactions contemplated thereby have been duly authorized
by all necessary corporate action. Each of the Transaction Agreements has been
duly executed and delivered by the Company; the Convertible Debenture and
Warrants have been duly executed, issued and delivered by the Company; and each
of the Transaction Agreements, the Convertible Debenture and the Warrants
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its respective terms.
3. The execution and delivery of the Transaction Agreements by the Company
and the performance by the Company of its obligations thereunder, including,
without limitation, the issuance of the Convertible Debenture and Warrants, do
not and will not (i) result in a violation of the Certificate or the By-Laws;
(ii) conflict with, or constitute a material default (or an event that with
notice or lapse of time or both would become a material default) under, or give
to others any rights of termination, amendment, acceleration or cancellation
with respect to any of the Material Agreements; or (iii) result in a violation
of any Applicable Laws, except for such violations as would not, individually or
in the aggregate, have a Material Adverse Effect. "Applicable Laws" means the
laws, rules and regulations of the United States of America, California and the
Delaware General Corporation Law that, in our experience, are normally
applicable to transactions of the type contemplated by the Purchase Agreement.
4. Assuming (i) the accuracy of the representations and warranties of the
Company set forth in Article IV of the Purchase Agreement and of the Investor in
Article III of the Purchase Agreement, and (ii) the due performance by the
Company and the Investor of their respective covenants and agreements set forth
in the Purchase Agreement, the offer, sale and delivery of the Convertible
Debenture and the Warrants to the Investor in the manner contemplated in the
Purchase Agreement are exempt from the registration requirements contained in
Section 5 of the Securities Act of 1933, as amended, and the qualification
requirements under the California Corporate Securities Law of 1968, it being
understood that we express no opinion as to any subsequent resale of the
Convertible Debenture or the Warrant Shares. When issued in accordance with the
EX 10.1 - D-4
Convertible Debenture and the Transaction Agreements, the Conversion Shares will
be duly and validly issued, fully paid and nonassessable. When issued in
accordance with the Warrants and the Transaction Agreements, the Warrant Shares
will be duly and validly issued, fully paid and nonassessable.
5. To our knowledge, there are no legal or governmental proceedings pending
or threatened against the Company or its subsidiaries, or to which the Company
or its subsidiaries or any of their respective properties is subject, that are
required to be described in any SEC Document that are not so described as
required.
6. To our knowledge, there are no outstanding Capital Share Equivalents
except as described in the SEC Documents, except for the Convertible Debenture
and the Warrants, and except for Capital Share Equivalents to purchase up to
350,000 shares of Common Stock.
7. Assuming the listing of the Conversion Shares and Warrant Shares on the
American Stock Exchange, the issuance of the Conversion Shares and Warrant
Shares as contemplated by the Convertible Debenture, the Warrants and the
Transaction Agreements will not violate the listing agreement between the
Company and the American Stock Exchange.
8. The authorized capital stock of the Company consists of 30,000,000
shares of Common Stock and 1,000,000 shares of Preferred Stock, $0.001 par value
per share.
Our opinion set forth in paragraph 1 regarding the good standing of the
Company under the Delaware General Corporation Law is based solely upon a
certificate of good standing issued by the Secretary of State of the State of
Delaware, dated March 24, 1999, and an oral bringdown of such good standing from
such office as of October 28, 1999.
Our opinion set forth in paragraph 1 as to the Company's qualification to
do business and its good standing as a foreign corporation in the State of
California is based solely on a Certificate of Status of Foreign Corporation
issued by the Secretary of State of the State of California, dated March 24,
1999, a Certificate of Good Standing issued by the California Franchise Tax
Board, dated March 23, 1999, and an oral bringdown of such good standing from
such offices as of October 28, 1999.
As to our opinions set forth in Paragraph 2 above with respect to the
enforceability of the Convertible Debenture, the Warrants and the Transaction
Agreements against the Company, we do not opine as to, and we have not reviewed
or examined:
EX 10.1 - D-5
(a) any local, municipal, county, district or regional law, statute,
order, decree, administrative record, policy, procedure, guideline, rule,
requirement, regulation or notice; or
(b) any policy, procedure, guideline, rule, requirement or regulation
that is privileged, confidential, internal, unpublished, or not of public
record or widely disseminated at the date of this opinion.
Our opinions in Paragraph 2 above with respect to the enforceability of the
Convertible Debenture, the Warrants and the Transaction Agreements against the
Company are further subject to the following qualifications:
(i) Enforceability may be subject to or limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to or affecting creditors' rights generally, or the appointment of a
receiver or conservator pursuant to state or federal laws;
(ii) The availability of equitable remedies, specific performance
and injunctive relief is subject to the discretion of the court before
which any proceeding therefor is brought;
(iii) The enforceability of certain covenants may be limited to
the extent that the court before which any proceeding for the
enforcement thereof is brought concludes that such enforcement would
be unreasonable, unconscionable or unnecessary for the protection of
the parties to such agreement under existing circumstances;
(iv) Enforcement of certain rights may be unavailable if any of
the parties seek to enforce their rights other than in good faith and
in a manner in which it is commercially reasonable to do so;
(v) Rights to indemnity may be limited by applicable laws or the
public policy underlying such laws;
(vi) Waivers of statutes of limitations, notice, jury trial and
due process may contravene public policy and statutory and case law,
and therefore may be unenforceable;
(vii) Contractual provisions waiving broadly or vaguely stated
rights or unknown future rights, and/or provisions that rights or
remedies are not exclusive, that every right and remedy is cumulative
and may be exercised in addition to or
EX 10.1 - D-6
together with any other right or remedy or that the election of some particular
remedy or remedies does not preclude recourse to one or more others, may be
unenforceable; and
(viii) Enforceability may be subject to or limited by the effect
of general principles of equity, including without limitation concepts
of materiality, reasonableness, good faith and fair dealing,
regardless of whether considered in a proceeding in equity or at law.
As to our opinions set forth in Paragraph 3 above, we do not opine as to,
and we have not reviewed or examined:
(i) Any local, municipal, county, district or regional law,
statute, order, decree, administrative record, policy, procedure,
guideline, rule, requirement, regulation or notice; or
(ii) Any policy, procedure, guideline, rule, requirement or
regulation that is privileged, confidential, internal, unpublished, or
not of public record or widely disseminated at the date of this
opinion.
With your consent, we have not opined as to any issues other than those
expressly set forth herein. In rendering this opinion, we have reviewed the
Report of the Committee on Corporations Regarding Legal Opinions in Business
Transactions (1989), prepared by members of the Committee on Corporations of the
Business Law Section of the State Bar of California (the "Report"), and intend
that the terms used herein have the meaning ascribed to them in the Report. In
rendering this opinion, our review has been limited to laws, rules and
regulations currently in effect which we believe (based on our experience with
similar transactions) should be applicable to those transactions contemplated by
the Transaction Agreements, and we have not made any special investigation
concerning any other law, rule or regulation.
We have not been requested to opine, and we have not opined, as to any
matters other than those expressly set forth herein. This opinion extends only
to questions of the law of the State of California, the Delaware General
Corporation Law, and the federal law of the United States of America, and we
express no opinion with respect to any other laws or the law of any other
jurisdiction. We are attorneys licensed to practice law in the State of
California and we do not purport to be experts as to the law of any jurisdiction
other than the State of California or the federal law of the United States of
America and the Delaware General Corporate Law; accordingly, our opinions extend
only to questions of law of such jurisdictions. We note that the Transaction
Documents and the Convertible Debenture are, by their terms, governed by New
York law. We have, with your consent, assumed for the purposes of giving the
opinions set forth herein that the laws of the State of New York are identical
to the laws of the State of California.
EX 10.1 - D-7
This opinion is solely for your benefit in connection with the Transaction
Agreements and the transactions contemplated thereby, and this opinion is not to
be circulated or quoted or otherwise relied upon by you for any other purposes
or by any other person without our prior written consent.
Very truly yours,
TROOP XXXXXXX XXXXXX
XXXXXXX & XXXXX, LLP
EX 10.1 - D-8
EXHIBIT E
INSTRUCTIONS TO TRANSFER AGENT
BRILLIANT DIGITAL ENTERTAINMENT, INC.
October 29, 1999
U.S. Stock Transfer Corporation
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Dear Sirs:
Reference is made to the Debenture and Warrant Purchase Agreement and all
Exhibits thereto (the "Agreement") dated as of October 29, 1999, between
Roseworth Group, Ltd. (the "Investor") and Brilliant Digital Entertainment, Inc.
(the "Company"). Pursuant to the Agreement, the Company has agreed to issue to
the Investor one or more convertible debentures in the aggregate principal
amount of $1,500,000 (the "Debentures"), a number of shares of Common Stock
issuable at each closing as a fee under the Purchase Agreement not to exceed
more than $30,000 worth of shares in the aggregate and has granted warrants (the
"Warrants") to purchase up to 50,000 shares of the Company's common stock, par
value $0.001 per share (the "Common Stock"), at an exercise price of $5.50 per.
The Debentures are convertible into shares of the Company's Common Stock. As a
condition to the effectiveness of the Agreement, the Company has agreed to issue
to you, as the transfer agent for the Common Stock (the "Transfer Agent"), these
instructions relating to the Common Stock to be issued to the Investor (or a
permitted assignee) pursuant to the Agreement upon conversion of the Debentures
and exercise of the Warrants. All capitalized terms used herein and not
otherwise defined shall have the meaning set forth in the Agreement.
1. ISSUANCE OF COMMON STOCK WITHOUT THE LEGEND
Pursuant to the Agreement and the Registration Rights Agreement, the
Company is required to prepare and file with the Commission, and maintain the
effectiveness of, a registration statement or registration statements
registering the resale of the Common Stock to be acquired by the Investor as a
fee, at each Closing upon conversion of the Debentures and upon exercise of the
Warrants. The Company will advise the Transfer Agent in writing (and the
Transfer Agent will receive an opinion of the Company's counsel in form
satisfactory to the Transfer Agent) of the effectiveness of any such
registration statement promptly upon its being declared effective. The Transfer
Agent shall be entitled to rely on such advice and opinion and shall assume that
such registration statement remains in effect unless the Transfer Agent is
otherwise advised in writing by the Company and such counsel and the Transfer
Agent shall not be required to independently confirm the continued effectiveness
of such registration statement. In the circumstances set forth in the following
two paragraphs, the Transfer Agent shall deliver to the Investor certificates
representing Common Stock not bearing the Legend without requiring further
advice or instruction or additional documentation from the Company or its
counsel or the Investor or its counsel or any other party (other than as
described in such paragraphs).
(a) At any time after the effective date of the applicable registration
statement (provided that the Company and the Company's counsel has not informed
the Transfer Agent in writing that such registration statement is not effective)
upon any surrender of one or more certificates evidencing Common Stock which
bear the Legend, to the extent accompanied by a notice requesting the issuance
of new certificates free of the Legend to replace those surrendered, in such
names and in such denominations as the Investor may request, provided that in
connection with any such event, the Investor (or its permitted assignee) shall
confirm in writing to the Transfer Agent that (i) the Investor has sold, pledged
or otherwise transferred or agreed to sell, pledge or otherwise transfer such
Common Stock in a bona fide transaction to a third party that is not an
affiliate of the Company; and (ii) the Investor confirms to the transfer agent
that the Investor has complied with the prospectus delivery requirement.
(b) In the event a registration statement is not filed by the Company, or
for any reason the registration statement which is filed by the Company is not
declared effective by the Securities and Exchange Commission, the Investor, or
its permitted assignee, or either of their brokers confirms to the Transfer
Agent that (i) the Investor has beneficially owned the shares of Common Stock
for at least one year, (ii) counting the shares surrendered as being sold upon
the date the unlegended Certificates would be delivered to the Investor (or the
Trading Day immediately following if such date is not a Trading Day), the
Investor will not have sold more than the greater of (a) one percent (1%) of the
total number of outstanding shares of Common Stock or (b) the average weekly
trading volume of the Common Stock for the preceding four weeks during the three
months ending upon such delivery date (or the Trading Day immediately following
if such date is not a Trading Day), and (iii) the Investor has complied with the
manner of sale and notice requirements of Rule 144 under the Securities Act; or
(c) The Investor (or its permitted assignee) shall represent that it is
permitted to dispose of such shares of Common Stock without limitation as to
amount or manner of sale pursuant to Rule 144(k) under the Securities Act.
Any advice, notice, or instructions to the Transfer Agent required or permitted
to be given hereunder may be transmitted via facsimile to the Transfer Agent's
facsimile number of (000) 000-0000.
2. MECHANICS OF DELIVERY OF CERTIFICATES REPRESENTING COMMON STOCK
In connection with either (i) any conversion of the Debentures or (ii) any
exercise of the Warrants, pursuant to which the Investor acquires Common Stock,
the Transfer Agent shall deliver to the Investor certificates representing
Common Stock (with or without the Legend, as appropriate) as promptly as
possible upon request of the Company and delivery of an opinion of counsel in
form acceptable to the Transfer Agent, and, if the Transfer Agent is able to
deliver such Common Stock to the Investor's account pursuant to the DWAC system
of the Depository Trust Company, the Transfer Agent shall make delivery pursuant
to such system and provide the Investor with confirmation thereof in lieu of
such Common Stock certificates.
EX 10.1 - E-2
3. FEES OF TRANSFER AGENT; INDEMNIFICATION
The Company agrees to pay the Transfer Agent for all fees incurred in
connection with these Irrevocable Instructions. The Company agrees to indemnify
the Transfer Agent and its officers, employees and agents, against any losses,
claims, damages or liabilities, joint or several, to which it or they become
subject based upon the performance by the Transfer Agent of its duties in
accordance with the Irrevocable Instructions, other than as a result of the
Transfer Agent's gross negligence or willful misconduct.
4. THIRD PARTY BENEFICIARY
The Company and the Transfer Agent acknowledge and agree that the Investor
is an express third party beneficiary of these Irrevocable Instructions and
shall be entitled to rely upon, and enforce, the provisions thereof.
BRILLIANT DIGITAL ENTERTAINMENT, INC.
By:
-----------------------------------
Xxxxxxx Xxxx
Chief Financial Officer
AGREED:
U.S. STOCK TRANSFER CORPORATION
By:
-----------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President
EX 10.1 - E-3
EXHIBIT F
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF COMMON STOCK
ISSUABLE HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION
UNDER THE ACT UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE
SALE OF SUCH SECURITIES IS MADE PURSUANT TO SECURITIES AND EXCHANGE COMMISSION
RULE 144.
WARRANT TO PURCHASE COMMON STOCK
OF
BRILLIANT DIGITAL ENTERTAINMENT, INC.
NO. 1 October 29, 1999
THIS CERTIFIES THAT, for value received, Roseworth Group, Ltd., or its permitted
registered assigns ("HOLDER"), is entitled, subject to the terms and conditions
of this Warrant, at any time or from time to time after the issuance date of
this Warrant (the "EFFECTIVE Date"), and before 5:00 p.m. Pacific Time on the
Expiration Date (as defined below), to purchase from Brilliant Digital
Entertainment, Inc., a Delaware corporation (the "COMPANY"), fifty thousand
(50,000) shares of Common Stock of the Company at a price per share of $5.50
(the "PURCHASE PRICE"). Both the number of shares of Common Stock purchasable
upon exercise of this Warrant and the Purchase Price are subject to adjustment
and change as provided herein.
1. CERTAIN DEFINITIONS. As used in this Warrant the following terms shall have
the following respective meanings:
1.1 "EXPIRATION DATE" shall mean the date which is eighteen months
following the date the shares of Common Stock purchasable upon
exercise of this Warrant are first registered for resale under the
Securities Act of 1933, as amended (the "SECURITIES ACT").
1.2 "FAIR MARKET VALUE" of a share of Common Stock as of a particular date
shall mean:
(a) If traded on a securities exchange or the Nasdaq National Market,
the Fair Market Value shall be deemed to be the average of the
closing prices of the Common Stock of the Company on such
exchange or market over the five (5) trading days ending
immediately prior to the applicable date of valuation;
(b) If actively traded overthecounter, the Fair Market Value shall
be deemed to be the average of the closing bid prices over the
thirty (30)day period ending immediately prior to the applicable
date of valuation; and
(c) If there is no active public market, the Fair Market Value shall
be the value thereof, as agreed upon by the Company and the
Holder; provided, however, that if the Company and the Holder
cannot agree on such value, such value shall be determined by an
independent valuation firm experienced in valuing businesses such
as the Company and jointly selected in good faith by the Company
and the Holder. Fees and expenses of the valuation firm shall be
paid for by the Company.
1.3. "REGISTERED HOLDER" shall mean any Holder in whose name this Warrant
is registered upon the books and records maintained by the Company.
1.4. "WARRANT" as used herein, shall include this Warrant and any warrant
delivered in substitution or exchange therefore as provided herein.
1.5. "COMMON STOCK" shall mean the Common Stock of the Company and any
other securities at any time receivable or issuable upon exercise of
this Warrant.
2. EXERCISE OF WARRANT
2.1. PAYMENT. Subject to compliance with the terms and conditions of this
Warrant and applicable securities laws, this Warrant may be exercised,
in whole or in part at any time or from time to time, on or before the
Expiration Date by the delivery (including, without limitation,
delivery by facsimile) of the form of Notice of Exercise attached
hereto as EXHIBIT 1 (the "NOTICE OF Exercise"), duly executed by the
Holder, at the principal office of the Company, and as soon as
practicable after such date, surrendering
(a) this Warrant at the principal office of the Company, and
(b) payment, (i) in cash (by check) or by wire transfer, (ii) by
cancellation by the Holder of indebtedness of the Company to the
Holder; or (iii) by a combination of (i) and (ii), of an amount
equal to the product obtained by multiplying the number of shares
of Common Stock being purchased upon such exercise by the
then effective Purchase Price (the "EXERCISE AMOUNT").
2.2. STOCK CERTIFICATES; FRACTIONAL SHARES. As soon as practicable on or
after the date of any exercise of this Warrant, the Company shall
issue and deliver to the person or persons entitled to receive the
same a certificate or certificates for the number of whole shares of
Common Stock issuable upon such exercise, together with cash in lieu
of any fraction of a share equal to such fraction of the current Fair
Market Value of one whole share of Common Stock as of such date of
exercise. No fractional shares or scrip representing fractional shares
shall be issued upon an exercise of this Warrant.
2.3. PARTIAL EXERCISE; EFFECTIVE DATE OF EXERCISE. In case of any partial
exercise of this Warrant, the Company shall cancel this Warrant upon
surrender hereof and shall
EX 10.1 - F-2
execute and deliver a new Warrant of like tenor and date for the
balance of the shares of Common Stock purchasable hereunder. This
Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date of its surrender for exercise as
provided above. The person entitled to receive the shares of Common
Stock issuable upon exercise of this Warrant shall be treated for all
purposes as the holder of record of such shares as of the close of
business on the date the Holder is deemed to have exercised this
Warrant.
2.4. VESTING. The warrants shall vest fully upon issuance.
3. VALID ISSUANCE: TAXES. All shares of Common Stock issued upon the exercise
of this Warrant shall be validly issued, fully paid and nonassessable, and
the Company shall pay all taxes and other governmental charges that may be
imposed in respect of the issue or delivery thereof. The Company shall not
be required to pay any tax or other charge imposed in connection with any
transfer involved in the issuance of any certificate for shares of Common
Stock in any name other than that of the Registered Holder of this Warrant,
and in such case the Company shall not be required to issue or deliver any
stock certificate or security until such tax or other charge has been paid,
or it has been established to the Company's reasonable satisfaction that no
tax or other charge is due.
4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number of shares of
Common Stock issuable upon exercise of this Warrant (or any shares of stock
or other securities or property receivable or issuable upon exercise of
this Warrant) and the Purchase Price are subject to adjustment upon
occurrence of the following events:
4.1. ADJUSTMENT FOR STOCK SPLITS, STOCK SUBDIVISIONS OR COMBINATIONS OF
Shares. The Purchase Price of this Warrant shall be proportionally
decreased and the number of shares of Common Stock issuable upon
exercise of this Warrant (or any shares of stock or other securities
at the time issuable upon exercise of this Warrant) shall be
proportionally increased to reflect any stock split or subdivision of
the Company's Common Stock. The Purchase Price of this Warrant shall
be proportionally increased and the number of shares of Common Stock
issuable upon exercise of this Warrant (or any shares of stock or
other securities at the time issuable upon exercise of this Warrant)
shall be proportionally decreased to reflect any combination of the
Company's Common Stock.
4.2. ADJUSTMENT FOR DIVIDENDS OR DISTRIBUTIONS OF STOCK OR OTHER SECURITIES
OR PROPERTY. In case the Company shall make or issue, or shall fix a
record date for the determination of eligible holders entitled to
receive, a dividend or other distribution with respect to the Common
Stock (or any shares of stock or other securities at the time issuable
upon exercise of the Warrant) payable in (a) securities of the Company
or (b) assets (excluding cash dividends paid or payable solely out of
retained earnings), then, in each such case, the Holder of this
Warrant on exercise hereof at any time after the consummation,
effective date or record date of such dividend or other distribution,
shall receive, in addition to the
EX 10.1 - F-3
shares of Common Stock (or such other stock or securities) issuable on
such exercise prior to such date, and without the payment of
additional consideration therefore, the securities or such other
assets of the Company to which such Holder would have been entitled
upon such date if such Holder had exercised this Warrant on the date
hereof and had thereafter, during the period from the date hereof to
and including the date of such exercise, retained such shares and all
such additional securities or other assets distributed with respect to
such shares as aforesaid during such period giving effect to all
adjustments called for by this Section 4.
4.3. RECLASSIFICATION. If the Company, by reclassification of securities or
otherwise, shall change any of the securities as to which purchase
rights under this Warrant exist into the same or a different number of
securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change
with respect to the securities that were subject to the purchase
rights under this Warrant immediately prior to such reclassification
or other change, and the Purchase Price therefore shall be
appropriately adjusted, all subject to further adjustment as provided
in this Section 4. No adjustment shall be made pursuant to this
Section 4.3 upon any conversion or redemption of the Common Stock
which is the subject of Section 4.5.
4.4. ADJUSTMENT FOR CAPITAL REORGANIZATION, MERGER OR CONSOLIDATION. In
case of any capital reorganization of the capital stock of the Company
(other than a combination, reclassification, exchange or subdivision
of shares otherwise provided for herein), or any merger or
consolidation of the Company with or into another corporation, or the
sale of all or substantially all the assets of the Company then, and
in each such case, as a part of such reorganization, merger,
consolidation, sale or transfer, lawful provision shall be made so
that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified
herein and upon payment of the Purchase Price then in effect, the
number of shares of stock or other securities or property of the
successor corporation resulting from such reorganization, merger,
consolidation, sale or transfer that a holder of the shares
deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or
transfer if this Warrant had been exercised immediately before such
reorganization, merger, consolidation, sale or transfer, all subject
to further adjustment as provided in this Section 4. The foregoing
provisions of this Section 4.4 shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to
the stock or securities of any other corporation that are at the time
receivable upon the exercise of this Warrant. If the pershare
consideration payable to the Holder hereof for shares in connection
with any such transaction is in a form other than cash or marketable
securities, then the value of such consideration shall be determined
in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's
Board of Directors) shall be made in
EX 10.1 - F-4
the application of the provisions of this Warrant with respect to the
rights and interests of the Holder after the transaction, to the end
that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or
other property deliverable after that event upon exercise of this
Warrant.
4.5. CONVERSION OF COMMON STOCK. In case all or any portion of the
authorized and outstanding shares of Common Stock of the Company are
redeemed or converted or reclassified into other securities or
property pursuant to the Company's Certificate of Incorporation or
otherwise, or the Common Stock otherwise ceases to exist, then, in
such case, the Holder of this Warrant, upon exercise hereof at any
time after the date on which the Common Stock is so redeemed or
converted, reclassified or ceases to exist (the "TERMINATION DATE"),
shall receive, in lieu of the number of shares of Common Stock that
would have been issuable upon such exercise immediately prior to the
Termination Date, the securities or property that would have been
received if this Warrant had been exercised in full and the Common
Stock received thereupon had been simultaneously converted immediately
prior to the Termination Date, all subject to further adjustment as
provided in this Warrant. Additionally, the Purchase Price shall be
immediately adjusted to equal the quotient obtained by dividing (x)
the aggregate Purchase Price of the maximum number of shares of Common
Stock for which this Warrant was exercisable immediately prior to the
Termination Date by (y) the number of shares of Common Stock of the
Company for which this Warrant is exercisable immediately after the
Termination Date, all subject to further adjustment as provided
herein.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the
Purchase Price, or number or type of shares issuable upon exercise of this
Warrant, the Chief Financial Officer or Controller of the Company shall
compute such adjustment in accordance with the terms of this Warrant and
prepare a certificate setting forth such adjustment and showing in detail
the facts upon which such adjustment is based, including a statement of the
adjusted Purchase Price. The Company shall promptly send (by facsimile and
by either first class mail, postage prepaid or overnight delivery) a copy
of each such certificate to the Holder.
6. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory to the
Company of the ownership of and the loss, theft, destruction or mutilation
of this Warrant, and of indemnity reasonably satisfactory to it, and (in
the case of mutilation) upon surrender and cancellation of this Warrant,
the Company will execute and deliver in lieu thereof a new Warrant of like
tenor as the lost, stolen, destroyed or mutilated Warrant.
7. RESERVATION OF COMMON STOCK. The Company hereby covenants that at all times
there shall be reserved for issuance and delivery upon exercise of this
Warrant such number of shares of Common Stock or other shares of capital
stock of the Company as are from time to time issuable upon exercise of
this Warrant and, from time to time, will
EX 10.1 - F-5
take all steps necessary to amend its Certificate of Incorporation to
provide sufficient reserves of shares of Common Stock issuable upon
exercise of this Warrant. All such shares shall be duly authorized, and
when issued upon such exercise, shall be validly issued, fully paid and
nonassessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free and clear of all
preemptive rights, except encumbrances or restrictions arising under
federal or state securities laws. Issuance of this Warrant shall constitute
full authority to the Company's Officers who are charged with the duty of
executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock upon the exercise of this Warrant.
8. TRANSFER AND EXCHANGE. Subject to the terms and conditions of this Warrant
and compliance with all applicable securities laws, this Warrant and all
rights hereunder may be transferred to any Registered Holder's parent,
subsidiary or affiliate, in whole or in part, on the books of the Company
maintained for such purpose at the principal office of the Company referred
to above, by the Registered Holder hereof in person, or by duly authorized
attorney, upon surrender of this Warrant properly endorsed and upon payment
of any necessary transfer tax or other governmental charge imposed upon
such transfer. Upon any permitted partial transfer, the Company will issue
and deliver to the Registered Holder a new Warrant or Warrants with respect
to the shares of Common Stock not so transferred. Each taker and holder of
this Warrant, by taking or holding the same, consents and agrees that when
this Warrant shall have been so endorsed, the person in possession of this
Warrant may be treated by the Company, and all other persons dealing with
this Warrant, as the absolute owner hereof for any purpose and as the
person entitled to exercise the rights represented hereby, any notice to
the contrary notwithstanding; provided, however that until a transfer of
this Warrant is duly registered on the books of the Company, the Company
may treat the Registered Holder hereof as the owner for all purposes.
9. RESTRICTIONS ON TRANSFER. The Holder, by acceptance hereof, agrees that,
absent an effective registration statement filed with the Securities and
Exchange Commission (the "SEC") under the Securities Act covering the
disposition or sale of this Warrant or the Common Stock issued or issuable
upon exercise hereof, as the case may be, and registration or qualification
under applicable state securities laws, such Holder will not sell,
transfer, pledge, or hypothecate any or all of this Warrant or such Common
Stock, as the case may be, unless either (i) the Company has received an
opinion of counsel, in form and substance reasonably satisfactory to the
Company, to the effect that such registration is not required in connection
with such disposition or (ii) the sale of such securities is made pursuant
to SEC Rule 144.
10. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant, the Holder
hereby represents, warrants and covenants that any shares of stock
purchased upon exercise of this Warrant shall be acquired for investment
only and not with a view to, or for sale in connection with, any
distribution thereof; that the Holder has had such opportunity as such
Holder has deemed adequate to obtain from representatives of the Company
such information as is necessary to permit the Holder to evaluate the
merits and risks of its investment in the Company; that the Holder is able
to bear the economic risk
EX 10.1 - F-6
of holding such shares as may be acquired pursuant to the exercise of this
Warrant for an indefinite period; that the Holder understands that the
shares of stock acquired pursuant to the exercise of this Warrant will not
be registered under the 1933 Act (unless otherwise required pursuant to
exercise by the Holder of the registration rights, if any, granted to the
Registered Holder) and will be "restricted securities" within the meaning
of Rule 144 under the 1933 Act and that the exemption from registration
under Rule 144 will not be available for at least one (1) year from the
date of exercise of this Warrant, and even then will not be available
unless a public market then exists for the stock, adequate information
concerning the Company is then available to the public, and other terms and
conditions of Rule 144 are complied with; and that all stock certificates
representing shares of stock issued to the Holder upon exercise of this
Warrant or upon conversion of such shares may have affixed thereto a legend
substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS
ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT
FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE
WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
11. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not entitle
the Holder to any voting rights or other rights as a stockholder of the
Company. In the absence of affirmative action by such Holder to purchase
Common Stock by exercise of this Warrant or Common Stock upon conversion
thereof, no provisions of this Warrant, and no enumeration herein of the
rights or privileges of the Holder hereof shall cause such Holder hereof to
be a stockholder of the Company for any purpose.
12. NOTICES. Except as may be otherwise provided herein, all notices, requests,
waivers and other communications made pursuant to this Agreement shall be
in writing and shall be conclusively deemed to have been duly given (a)
when hand delivered to the other party; (b) when received when sent by
facsimile at the address and number set forth below; (c) three business
days after deposit in the U.S. mail with first class or certified mail
receipt requested postage prepaid and addressed to the other party as set
forth below; or (d) the next business day after deposit with a national
overnight delivery service, postage prepaid, addressed to the parties as
set forth below with nextbusinessday delivery guaranteed, provided that the
sending party receives a confirmation of delivery from the delivery service
provider.
EX 10.1 - F-7
To Holder: To the Company:
ROSEWORTH GROUP, LTD. BRILLIANT DIGITAL ENTERTAINMENT, INC.
Xxxxxxxxxx 00, FI9490 0000 Xxxxxxx Xxxxxx Xxxx., Xxxxx 000
Vaduz, Liechtenstein Xxx Xxxxxxx, XX 00000
Attn: Xx. Xxxxxxxx & Partners Attn: Chief Financial Officer
Fax Number: 00000000000000 Fax Number: (000) 0000000
With a copy to:
Curzon Capital Corp.
00 0xx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 10014
Attn: Xxxxxx Xxxxxx
Facsimile: (000) 0000000
Each person making a communication hereunder by facsimile shall promptly
confirm by telephone to the person to whom such communication was addressed
each communication made by it by facsimile pursuant hereto but the absence
of such confirmation shall not affect the validity of any such
communication. A party may change or supplement the addresses given above,
or designate additional addresses, for purposes of this Section 12 by
giving the other party written notice of the new address in the manner set
forth above.
13. HEADINGS. The headings in this Warrant are for purposes of convenience in
reference only, and shall not be deemed to constitute a part hereof.
14. LAW GOVERNING. This Warrant shall be construed and enforced in accordance
with, and governed by, the laws of the State of California.
15. NO IMPAIRMENT. The Company will not, by amendment of its Certificate of
Incorporation or bylaws, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other
voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of
the Registered Holder of this Warrant against impairment. Without limiting
the generality of the foregoing, the Company (a) will not increase the par
value of any shares of stock issuable upon the exercise of this Warrant
above the amount payable therefore upon such exercise, and (b) will take
all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares
of Common Stock upon exercise of this Warrant.
16. NOTICES OF RECORD DATE. In case:
EX 10.1 - F-8
16.1. the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time receivable upon the exercise
of this Warrant), for the purpose of entitling them to receive any
dividend or other distribution, or any right to subscribe for or
purchase any shares of stock of any class or any other securities or
to receive any other right; or
16.2. of any consolidation or merger of the Company with or into another
corporation, any capital reorganization of the Company, any
reclassification of the Capital Stock of the Company, or any
conveyance of all or substantially all of the assets of the Company to
another corporation in which holders of the Company's stock are to
receive stock, securities or property of another corporation; or
16.3. of any voluntary dissolution, liquidation or winding-up of the
Company; or
16.4. of any redemption or conversion of all outstanding Common Stock;
then, and in each such case, the Company will mail or cause to be mailed to
the Registered Holder of this Warrant a notice specifying, as the case may
be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, or (ii) the date on which such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation, windingup, redemption or conversion is to take
place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock or (such stock or securities as at the time are
receivable upon the exercise of this Warrant), shall be entitled to
exchange their shares of Common Stock (or such other stock or securities),
for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, dissolution,
liquidation or windingup. Such notice shall be delivered at least thirty
(30) days prior to the date therein specified.
17. SEVERABILITY. If any term, provision, covenant or restriction of this
Warrant is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Warrant shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
18. COUNTERPARTS. For the convenience of the parties, any number of
counterparts of this Warrant may be executed by the parties hereto and each
such executed counterpart shall be, and shall be deemed to be, an original
instrument.
19. REGISTRATION RIGHTS. All shares of Common Stock issuable upon exercise of
this Warrant shall be "REGISTRABLE SECURITIES" or such other definition of
securities entitled to registration rights pursuant to that certain
Registration Rights Agreement, dated as of the date hereof, between the
Holder and the Company.
EX 10.1 - F-9
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as
of the Effective Date.
Roseworth Group, Ltd. Brilliant Digital Entertainment, Inc.
----------------------------------- -------------------------------------
By By
Xxxx Xxxxxxx Xxxxxxx Xxxx
----------------------------------- -------------------------------------
Printed Name Printed Name
Director Chief Financial Officer
----------------------------------- -------------------------------------
Title Title
SIGNATURE PAGE TO WARRANT TO PURCHASE COMMON STOCK
EX 10.1 - F-10
EXHIBIT 1
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
Brilliant Digital Entertainment, Inc.
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the securities Brilliant Digital Entertainment, Inc., as provided for therein,
and tenders herewith payment of the exercise price in full in the form of cash
or a certified or official bank check in sameday funds in the amount of
$____________ for _________ of such securities.
Please issue a certificate or certificates for such securities in the name of,
and pay any cash for any fractional share to (please print name, address and
social security number):
Name: ____________________________________________________________________
Address: ____________________________________________________________________
Signature:____________________________________________________________________
Note: The above signature should correspond exactly with the name on the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form below.
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher whole number of shares.
EXHIBIT 2
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, hereby sells, assigns and transfers unto __________________
the within Warrant Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint ___________________
attorney, to transfer said Warrant Certificate on the books of the within-named
Company with respect to the number of Warrants set forth below, with full power
of substitution in the premises:
NAME(S) OF ASSIGNEE(S) ADDRESS # OF WARRANTS
----------------------- --------------------------- -------------
----------------------- --------------------------- -------------
----------------------- --------------------------- -------------
----------------------- --------------------------- -------------
----------------------- --------------------------- -------------
And if said number of Warrants shall not be all the Warrants represented by the
Warrant Certificate, a new Warrant Certificate is to be issued in the name of
said undersigned for the balance remaining of the Warrants registered by said
Warrant Certificate.
_____________________________________________________________
Dated: _____________________________________________________________
Signature: _____________________________________________________________
Notice: The signature to the foregoing Assignment must correspond to the name as
written upon the face of this security in every particular, without alteration
or any change whatsoever; signature(s) must be guaranteed by an eligible
guarantor institution (banks, stock brokers, savings and loan associations and
credit unions with membership in an approved signature guarantee medallion
program) pursuant to Securities and Exchange Commission Rule 17Ad-15.
