Exhibit 4.1
RIGHTS AGREEMENT AMENDMENT
THIS RIGHTS AGREEMENT AMENDMENT (this "AMENDMENT") to the Rights Agreement,
dated as of March 30, 1998, as amended (the "RIGHTS AGREEMENT"), is made and
entered into as of December 17, 2001, by and between Brilliant Digital
Entertainment, Inc., a Delaware corporation (the "COMPANY") and U.S. Stock
Transfer Corporation, as Rights Agent (the "RIGHTS AGENT").
The Company and the Rights Agent have heretofore executed and delivered the
Rights Agreement. Pursuant to Section 28 of the Rights Agreement, the Company
and the Rights Agent may from time to time supplement or amend the Rights
Agreement in accordance with the provisions of Section 28 thereof.
In consideration of the foregoing premises and mutual agreements set forth
in the Rights Agreement and this Amendment, the parties hereto agree as follows:
1. The definition of "Acquiring Person" in Section 1 of the Rights
Agreement is hereby amended and restated to read in its entirety as follows:
""Acquiring Person" shall mean (i) any Person (as hereinafter defined) who
is an Adverse Person (as hereinafter defined), or (ii) any Person who or which,
together with all Affiliates (as hereinafter defined) and Associates (as
hereinafter defined) of such Person, shall, subsequent to the Declaration Date,
become the Beneficial Owners (as hereinafter defined) of 15% or more of the
shares of Common Stock then outstanding, but shall not include (x) an Exempt
Person (as hereinafter defined), (y) any Permitted Holder (as hereinafter
defined) or (z) any Person who becomes a Beneficial Owner of 15% or more of the
shares of Common Stock then outstanding solely because (1) of a change in the
aggregate number of shares of Common Stock outstanding since the last date on
which such Person acquired Beneficial Ownership of any shares of Common Stock,
or (2) it acquired such Beneficial Ownership in the good faith belief that such
acquisition would not (A) cause such Beneficial Ownership to exceed 15% of the
shares of Common Stock then outstanding (or, in the case of a Permitted Holder,
the percentage a Permitted Holder may hold without ceasing to be a Permitted
Holder) and such Person relied in good faith in computing the percentage of its
Beneficial Ownership on publicly filed reports or documents of the Company which
are inaccurate or out-of-date, or (B) otherwise cause a Distribution Date or the
adjustment provided for in Section 14 to occur. Notwithstanding clause (z) of
the prior sentence, if any Person that is not an Acquiring Person because of the
operation of such clause (z) does not reduce its Beneficial Ownership of shares
of Common Stock to 15% or less (or, in the case of a Permitted Holder, the
percentage the Permitted Holder may hold without ceasing to be a Permitted
Holder) by the close of business on the fifth Business Day after notice from the
Company (the date of notice being the first day) that such Person's Beneficial
Ownership of Common stock so exceeds 15% (or, in the case of a Permitted Holder,
the percentage the Permitted Holder may hold without ceasing to be a Permitted
Holder), such Person shall, at the end of such five Business Day period, become
an Acquiring Person (and clause (z) shall no longer apply to such Person). For
purposes of this definition, the determination whether any Person acted in "good
faith" shall be conclusively
determined by the Board of Directors, acting by a vote of those directors of the
Company whose approval would be required to redeem the Rights under Section 25.
Notwithstanding anything in this Rights Agreement, none of Xxxxxx Xxxxx and/or
any of his Affiliates and/or Associates, whether or not acting together
(collectively, "Toibb"), or any other Person, shall become an "Acquiring Person"
as the result of (w) entering into, performing the terms of, or consummating the
transactions contemplated by the Note and Warrant Purchase Agreement, dated as
of April 19, 2001, as amended from time to time (the "Original Purchase
Agreement"), between the Company and Xxxxxx Xxxxx, (x) entering into, performing
the terms of, or consummating the transactions contemplated by the Note and
Warrant Purchase Agreement, dated as of December 19, 2001, as amended from time
to time (the "New Purchase Agreement"), between the Company and Xxxxxx Xxxxx,
(y) the conversion into Common Stock of the indebtedness underlying the
Convertible Promissory Notes issued or to be issued to Toibb pursuant to the
Original Purchase Agreement and/or the New Purchase Agreement, or (z) the
purchase of shares of Common Stock upon exercise of the Common Stock Purchase
Warrants issued or to be issued to Toibb pursuant to the Original Purchase
Agreement and/or the New Purchase Agreement (collectively, the "Toibb Investment
Agreements")."
2. The definition of "Exempt Person" in Section 1 of the Rights Agreement
is hereby amended and restated to read in its entirety as follows:
""Exempt Person" shall include (i) the Company, (ii) any Subsidiary (as
hereinafter defined) of the Company, (iii) any employee benefit plan of the
Company or any of its Subsidiaries, or any entity holding shares of Common Stock
which was organized, appointed or established by the Company or any Subsidiary
of the Company for or pursuant to the terms of any such plan, and (iv) Toibb."
3. Section 3(a) of the Rights Agreement is further amended by adding a new
sentence as the final sentence thereto, which shall read in its entirety as
follows:
"Notwithstanding anything in this Rights Agreement to the contrary, a
Distribution Date shall not be deemed to have occurred solely as a result of (i)
the approval, execution or delivery of the Toibb Investment Agreements, or (ii)
the performance of the terms of the Toibb Investment Agreements, or (iii) the
acquisition by Toibb of Beneficial Ownership of Common Stock."
4. This Amendment shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to conflict of law principles of
such state.
5. This Amendment may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed an original, and all such
counterparts shall together constitute but one and the same instrument.
6. Except as expressly set forth herein, this Amendment shall not by
implication or otherwise alter, modify, amend or in any way affect any of the
terms, conditions, obligations, covenants or agreements contained in the Rights
Agreement, all of which are ratified and affirmed in all respects and shall
continue in full force and effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
BRILLIANT DIGITAL ENTERTAINMENT, INC.
By: /S/ XXXXXX XXXXXX
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Xxxxxx Xxxxxx
Title: Chief Operating Officer and
Chief Financial Officer
U.S. STOCK TRANSFER CORPORATION
By: /S/ XXXXXXX X. XXXXX
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Xxxxxxx X. Xxxxx
Title: Vice President
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