SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. _____)
Filed by the registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2)
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
BRILLIANT DIGITAL ENTERTAINMENT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE>
BRILLIANT DIGITAL ENTERTAINMENT, INC.
-----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 23, 2000
-----------
TO OUR STOCKHOLDERS:
Notice is hereby given that the 2000 Annual Meeting of Stockholders of
Brilliant Digital Entertainment, Inc. (the "Company") will be held at the Hilton
Hotel, 6360 Canoga Avenue, Woodland Hills, California 91367, on Friday, June 23,
2000 at 12:00 p.m., Pacific Daylight Savings time. The Annual Meeting is being
held for the following purposes:
1. To elect one Class I director to hold office for three years and
until his respective successor has been elected. The person nominated
by the Board of Directors of the Company (Mr. Garth Saloner) is
described in the accompanying Proxy Statement;
2. To approve an amendment to the Company's 1996 Stock Option Plan to
increase the maximum number of shares of Common Stock that may be
issued pursuant to awards granted under the plan from 2,500,000 shares
to 3,500,000; and
3. To transact such other business as may properly come before the Annual
Meeting or any of its adjournments or postponements.
Only stockholders of record of the Common Stock of the Company at the close
of business on April 28, 2000 are entitled to notice of, and to vote at, the
Annual Meeting and at any of its adjournments or postponements.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the Annual Meeting, you are
urged to mark, sign and return the enclosed Proxy as promptly as possible in the
postage prepaid envelope enclosed for that purpose. Any stockholder of record
attending the Annual Meeting may vote in person, even though he or she has
returned a Proxy. Any stockholder whose shares are held in the name of a bank,
broker or other holder of record must obtain a proxy, executed in the
stockholder's favor, from the holder of record to be able to vote in person at
the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Michael Ozen
Michael Ozen
CHIEF FINANCIAL OFFICER AND SECRETARY
Woodland Hills, California
May 16, 2000
IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE AS PROMPTLY AS
POSSIBLE. IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOU OWN SHARES
REGISTERED IN DIFFERENT NAMES OR AT DIFFERENT ADDRESSES, EACH CARD SHOULD BE
COMPLETED AND RETURNED.
<PAGE>
BRILLIANT DIGITAL ENTERTAINMENT, INC.
6355 TOPANGA CANYON BOULEVARD, SUITE 120
WOODLAND HILLS, CALIFORNIA 91367
(818) 615-1500
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 23, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Brilliant Digital Entertainment, Inc., a
Delaware corporation (the "Company"), for use at the 2000 Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Hilton Hotel, 6360 Canoga
Avenue, Woodland Hills, California 91367, on Friday, June 23, 2000 at 12:00
p.m., Pacific Daylight Savings time, and at any of its adjournments or
postponements, for the purposes set forth herein and in the attached Notice of
Annual Meeting of Stockholders. Accompanying this Proxy Statement is the Board
of Directors' Proxy for the Annual Meeting, which you may use to indicate your
vote on the proposals described in this Proxy Statement.
All Proxies which are properly completed, signed and returned to the
Company prior to the Annual Meeting, and which have not been revoked, will,
unless otherwise directed by the stockholder, be voted in accordance with the
recommendations of the Board of Directors set forth in this Proxy Statement. A
stockholder who submits the enclosed proxy will not limit his or her right to
vote at the Annual Meeting if the stockholder later decides to attend in person.
A stockholder whose shares are held in the name of a bank, broker or other
holder of record must obtain a proxy, executed in the stockholder's favor, from
the holder of record to be able to vote in person at the Annual Meeting. A
stockholder of record may revoke his or her Proxy at any time before it is voted
either by filing with the Secretary of the Company, at its principal executive
offices, a written notice of revocation or a duly executed proxy bearing a later
date, or by attending the Annual Meeting and expressing a desire to vote his or
her shares in person.
The close of business on April 28, 2000 has been fixed as the record date
for the determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting or at any adjournments or postponements of the Annual Meeting. At
the record date, 14,386,001 shares of Common Stock, par value $.001 per share
(the "Common Stock"), were outstanding. The Common Stock is the only outstanding
class of capital stock of the Company entitled to vote at the Annual Meeting.
It is anticipated that this Proxy Statement and the accompanying Proxy will
be mailed to stockholders on or about May 16, 2000.
VOTING PROCEDURES
A stockholder is entitled to cast one vote for each share of Common Stock
held on the record date on all matters to be considered at the Annual Meeting. A
majority of the outstanding shares of Common Stock must be represented in person
or by proxy at the Annual Meeting in order to constitute a quorum for the
transaction of business. The nominee for election as a Class I director at the
Annual Meeting who receives the highest number of affirmative votes will be
elected. The amendment of the 1996 Stock Option Plan to increase by 1,000,000
the number of shares of Common Stock that may be issued pursuant to awards under
the 1996 Stock Option Plan will require the affirmative vote of a majority of
the votes entitled to be cast by holders of outstanding shares of Common Stock
that are present or represented by proxy at the Annual Meeting. Abstentions and
broker non-votes will be included in the number of shares present at the Annual
Meeting for the purpose of determining the presence of a quorum. Abstentions
will be counted toward the tabulation of votes cast on proposals submitted to
stockholders and will have the same effect as negative votes, while broker
non-votes will not be counted as votes cast for or against such matters.
<PAGE>
ELECTION OF DIRECTORS
In accordance with the Certificate of Incorporation of the Company, the
Board of Directors is divided into three classes. At each annual meeting of
stockholders, directors constituting one class are elected, each for a
three-year term. One Class I director will be elected at the Annual Meeting.
Unless otherwise instructed, the Proxy holders will vote the Proxies
received by them for the nominee named below. If the nominee is unable or
unwilling to serve as a director at the time of the Annual Meeting or at any of
its postponements or adjournments, the Proxies will be voted for such other
nominee as shall be designated by the current Board of Directors to fill any
vacancy. The Company has no reason to believe that the nominee will be unable or
unwilling to serve if elected as a director.
The Board of Directors proposes the election of the following nominee as a
Class I director:
Garth Saloner
If elected, the nominee is expected to serve until the 2003 Annual Meeting
of Stockholders. The nominee for election as a Class I director at the Annual
Meeting who receives the highest number of affirmative votes will be elected.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE NOMINEE LISTED ABOVE.
Page 2
<PAGE>
INFORMATION WITH RESPECT TO THE NOMINEE, CONTINUING DIRECTORS AND EXECUTIVE
OFFICERS
The following table sets forth certain information with respect to the
nominee, continuing directors and executive officers of the Company as of April
14, 2000.
<TABLE>
<CAPTION>
YEAR
FIRST
ELECTED
OR
APPOINTED
NAME AGE DIRECTOR POSITION
---- --- -------- --------
<S> <C> <C> <C> <C>
NOMINEE:
CLASS I DIRECTOR (1)
(term to expire in 2003)
Garth Saloner (2)........... 45 1996 Director
CONTINUING DIRECTORS:
CLASS II DIRECTORS
(terms to expire in 2001)
Ray Musci (2)(3)............ 39 1996 Director
Jeff Scheinrock (2)(3)...... 49 1996 Director
Mark Miller................. 40 1996 Vice President, Production
and Operations and
Director
CLASS III DIRECTOR
(terms to expire in 2002)
Mark Dyne................... 39 1996 Chairman of the Board of
Directors and Chief
Executive Officer
Kevin Bermeister............ 39 1996 President and Director
Diana Maranon (3)........... 41 1996 Director
OTHER EXECUTIVE OFFICERS:
Ron Chaimowitz.............. 52 Chief Executive Officer of
The Auctionchannel
Michael Ozen................ 45 Chief Financial Officer
and Secretary
Anthony Rose................ 35 Vice President, Technology
- ----------------------
<FN>
(1) There currently is a vacancy in the Class I directors.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
</FN>
</TABLE>
MARK DYNE has served as Chairman of the Board of Directors and Chief
Executive Officer of the Company since October 1996. Mr. Dyne currently is
Chairman of the Board of Directors of Tag-It Pacific, Inc., a publicly traded
corporation, a position he has held since September 1997. He is a founder and
director of Ozisoft Pty Ltd., a leading distributor of entertainment software in
both Australia and New Zealand. Mr. Dyne also serves as Chairman of Sega Gaming
Technology Inc., a Las Vegas based gaming company. Mr. Dyne has served as Chief
Executive Officer of Sega Enterprises (Australia) Pty. Ltd., a theme park
developer, and as a director of Monto Holdings Pty., Ltd., a private investment
company. Mr. Dyne was a founder of Packard Bell NEC Australia Pty. Ltd., a
manufacturer and distributor of personal computers through the Australian mass
merchant channel. Until January 2000, Mr. Dyne was Chairman and Chief Executive
Officer of Virgin Interactive Entertainment Ltd., a distributor of computer
software programs and video games that is based in London, England.
KEVIN BERMEISTER has served as President of the Company since October 1996
and as a Director since August 1996. Mr. Bermeister is a director of Sega
Ozisoft Pty. Ltd. and previously served as its Co-Chief Executive Officer. Mr.
Bermeister is a founder of Sega Ozisoft which commenced business in 1982. Mr.
Bermeister also is a director of Packard Bell NEC Australia Pty. Ltd., Jacfun
Pty. Ltd. and Tag-It Pacific, Inc. Jacfun owns the Darling Harbour property
occupied by the Sega World indoor theme park in Sydney, Australia. Mr.
Bermeister has served on numerous advisory boards, including Virgin Interactive
Entertainment Ltd.
Page 3
<PAGE>
DIANA MARANON has served as a Director of the Company since October 1996,
and served as Secretary of the Company from August 1996 until March 1997. Ms.
Maranon is the President and Managing Director of Averil Capital Markets Group,
Inc. ("Averil"), a financial advisory firm, and a member of the National
Association of Securities Dealers. Prior to founding Averil in 1994, Ms. Maranon
was a Vice President with Wasserstein Perella & Co., Inc. ("Wasserstein"), an
investment banking firm, with whom she started in 1988. At Wasserstein, Ms.
Maranon was responsible for covering companies headquartered in the Western
United States. From 1985 to 1988, Ms. Maranon practiced securities law with
Skadden Arps Slate Meagher & Flom. Ms. Maranon is a member of the California
Bar.
GARTH SALONER has served as a Director of the Company since October 1996.
From 1990 to the present, Mr. Saloner has served as the Robert A. Magowan
Professor of Strategic Management and Economics at the Graduate School of
Business at Stanford University. He also has served as Associate Dean for
Academic Affairs and Director of Research and Course Development at the Stanford
Graduate School of Business. From 1982 to 1990 Mr. Saloner taught as a professor
in the Economics Department of the Massachusetts Institute of Technology. Mr.
Saloner also is a director and a member of the audit and compensation committees
of Quick Response Services, Inc., a corporation that provides electronic data
interchange services in the retail market, a director and a member of the
governance and audit committees of Charles River Associates, a corporation that
provides economic consulting services, and a director and a member of the
compensation and audit committees of NextStage Entertainment, a corporation
involved in the construction and management of live entertainment theatres.
RAY MUSCI has served as a Director of the Company since October 1996. From
October 1999, Mr Musci has served as the President and Chief Executive Officer
of Bay Area Multimedia, a company that develops, publishes and distributes
entertainment software products and video games. From May 1990 to July 1999, Mr.
Musci served as the President, Chief Executive Officer and as a Director of
Infogrames Entertainment, Inc. (formerly Ocean of America, Inc.), a company that
develops, publishes and distributes software products. From September 1994 to
July 1996, Mr. Musci served as a director of Ocean International, Ltd., the
holding company of Ocean of America, Inc. and Ocean Software, Ltd. From August
1985 to March 1990, Mr. Musci was Executive Vice President/General Manager of
Data East USA, Inc., a subsidiary of Data East Corp., a Japanese company, where
he established a consumer division to develop, manufacture, market and
distribute consumer video games, entertainment software and coin-operated video
arcade games and pinball machines.
JEFF SCHEINROCK has served as a Director of the Company since October 1996.
Since September 1999, Mr. Mr. Scheinrock has been Chief Executive Officer,
President and Chief Financial Officer of Tornado Development, Inc., a unified
messaging company. Mr. Scheinrock also has served as Chief Executive Officer of
Scheinrock Advisory Group, Inc. since May 1997. From July 1, 1996 until May 2,
1997, Mr. Scheinrock served as Vice Chairman, Chief Financial Officer and
Assistant Secretary of Kistler Aerospace Corporation, a company involved in the
development, marketing and manufacture of reusable satellite launch vehicles.
From March 1, 1989 to July 1, 1996, Mr. Scheinrock was the Vice Chairman of
Finance and Strategic Planning of Packard Bell NEC. Mr. Scheinrock is a director
of SRS Labs, Inc., a corporation listed on the Nasdaq Stock Market's National
Market. Mr. Scheinrock also is a director of various other private companies.
MARK MILLER has served as Vice President, Production and Operations since
October 1996 and as a Director of the Company since August 1996. Mr. Miller
served as President and Chief Financial Officer of the Company from August 1996
through September 1996. Mr. Miller also is Managing Director of the Company's
Australian subsidiary, Brilliant Interactive Ideas Pty. Ltd. ("BII Australia"),
a position he has held since March 1994. From February 1993 through December
1994, Mr. Miller was Managing Director of Pacific Interactive Education Pty.
Limited ("PIE"), where he was primarily engaged in the development and
maintenance of educational and multimedia software for use by schools and other
educational institutions. Mr. Miller currently is a director of PIE. From 1989
through 1992, Mr. Miller was Director of Sales and Marketing of Dealing
Information Systems Pty. Ltd., a developer of proprietary modular software
treasury systems for managing financial transactions.
RON CHAIMOWITZ has served as Chief Executive Officer of the Company's
subsidiary, The Auctionchannel, Inc., since October 1999. Mr. Chaimowitz has
been an entertainment and media entrepreneur for more than 20 years. Most
recently, Mr. Chaimowitz served as President and Chief Executive Officer of GT
Interactive Software, a public interactive entertainment software company that
he co-founded in 1993. From December 1990 to December 1992, Mr. Chaimowitz was
President of Entertainment Consultants, a management consultant firm to the
entertainment industry. Prior thereto, Mr. Chaimowitz served as Executive Vice
President of GTHV, and served in
Page 4
<PAGE>
various capacities with CBS for thirteen years, where he launched three separate
divisions in CBS' music and broadcast groups.
MICHAEL OZEN has served as Chief Financial Officer of the Company since
October 1996 and Secretary of the Company since March 1997. Mr. Ozen also serves
as a director of the New Museum for Children. From May 1991 through June 1996,
Mr. Ozen served as Manager --International Taxes at Coopers & Lybrand, LLP. In
July 1996, Mr. Ozen became Director -International Taxes at Coopers & Lybrand,
LLP, a position he held until October 1996.
ANTHONY ROSE has served as a consultant to BII Australia since April 1994
and currently serves as Vice President, Technology of the Company. Mr. Rose also
is the owner and director of and, prior to April 1994, was employed by, A.R.
Technology Pty. Ltd. ("A.R. Technology"), an Australian company founded by Mr.
Rose in 1988 which is involved in the design and manufacture of digital
electronics hardware and software. A.R. Technology has completed design
assignments for Apple, Epson, Panasonic and other corporations and government
institutions. Mr. Rose holds several international patents relating to
anti-virus hardware circuits for personal computers.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held six meetings and acted nine additional times by
unanimous written consent during fiscal 1999. All of the directors attended at
least 75% of all the meetings of the Board of Directors and those committees on
which he or she served in fiscal 1999.
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee currently consists of Messrs. Musci, Saloner and Scheinrock.
The Audit Committee recommends the engagement of the Company's independent
public accountants, reviews the scope of the audit to be conducted by such
independent public accountants and meets with the independent public accountants
and the Chief Financial Officer of the Company to review matters relating to the
Company's financial statements, the Company's accounting principles and its
system of internal accounting controls, and the committee reports its
recommendations as to the approval of the financial statements of the Company to
the Board of Directors. Four meetings of the Audit Committee were held during
fiscal 1999.
The Compensation Committee currently consists of Ms. Maranon and Messrs.
Musci and Scheinrock. The Compensation Committee is responsible for considering
and making recommendations to the Board of Directors regarding executive
compensation and is responsible for administering the Company's stock option and
executive incentive compensation plans. The Compensation Committee acted seven
times by unanimous written consent during fiscal 1999.
COMPENSATION OF DIRECTORS
Nonemployee directors of the Company currently are paid $1,500 for their
personal attendance at any meeting of the Board of Directors and $500 for
attendance at any telephonic meeting of the Board of Directors or at any meeting
of a committee of the Board of Directors. Nonemployee directors also received
options to purchase 20,000 shares of Common Stock in fiscal 1999. Directors also
are reimbursed for their reasonable travel expenses incurred in attending Board
or committee meetings.
Page 5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, as to the Chief Executive Officer and as to
each of the other four most highly compensated officers whose compensation
exceeded $100,000 during the last fiscal year (the "Named Executive Officers"),
information concerning all compensation paid for services to the Company in all
capacities during the last three fiscal years.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
NUMBER OF
OTHER SECURITIES
NAME AND PRINCIPAL FISCAL ANNUAL UNDERLYING
POSITION (1) YEAR ENDED SALARY COMPENSATION OPTIONS(2)
------------ ---------- ------ ------------ ----------
<S> <C> <C> <C> <C>
Mark Dyne................. December 31, 1999 $ 225,000 -- 80,000
Chief Executive Officer December 31, 1998 $ 225,000 -- 100,000 (3)
December 31, 1997 $ 225,000 -- --
Kevin Bermeister.......... December 31, 1999 $ 225,000 -- 80,000
President December 31, 1998 $ 225,000 -- 100,000 (3)
December 31, 1997 $ 225,000 -- --
Michael Ozen.............. December 31, 1999 $ 165,000 -- 50,000
Chief Financial Officer December 31, 1998 $ 165,000 -- 50,000 (4)
and Secretary December 31, 1997 $ 165,000 -- --
Mark Miller............... December 31, 1999 $ 115,000 -- 25,000
Vice President, December 31, 1998 $ 126,000 -- 20,000 (3)
Production December 31, 1997 $ 89,000 $ 15,000 (5) --
and Operations
Anthony Rose.............. December 31, 1999 $ 139,000 -- 35,000
Vice President, December 31, 1998 $ 107,000 -- 50,000 (4)
Technology December 31, 1997 $ 126,000 -- --
- ----------------------
<FN>
(1) For a description of employment agreements between certain executive
officers and the Company, see "Employment Agreements with Executive
Officers" below.
(2) In October 1998, all of the Company's then outstanding stock options were
repriced under the Company's option repricing program. Under the program,
options to purchase a total of 747,000 shares of Common Stock were
exchanged by the holders thereof for repriced stock options to purchase the
same number of shares at a lower exercise price.
(3) These options, which were initially granted in March 1998, were repriced in
October 1998 under the Company's option repricing program.
(4) Consists of options to purchase 30,000 shares and 20,000 shares of Common
Stock granted in October 1996 and March 1998, respectively, all of which
were repriced in October 1998 under the Company's option repricing program.
(5) Consists of motor vehicle and income protection insurance premiums.
</FN>
</TABLE>
Page 6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding the grant of
stock options made during the fiscal year ended December 31, 1999 to the Named
Executive Officers.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTION EMPLOYEES IN EXERCISE OR EXPIRATION
NAME GRANTED FISCAL YEAR(2) BASE PRICE(3) DATE
---- ------- -------------- ------------- ----
<S> <C> <C> <C> <C>
Mark Dyne.................... 9,850 1.5 % $ 4.13 5/17/09
70,150 10.7 % $ 2.94 10/11/09
Kevin Bermeister............. 9,850 1.5 % $ 4.13 5/17/09
70,150 10.7 % $ 2.94 10/11/09
Michael Ozen................. 6,150 0.9 % $ 4.13 5/17/09
43,850 6.7 % $ 2.94 10/11/09
Mark Miller.................. 3,075 0.5 % $ 4.13 5/17/09
21,925 3.4 % $ 2.94 10/11/09
Anthony Rose................. 4,300 0.7 % $ 4.13 5/17/09
30,700 4.7 % $ 2.94 10/11/09
- ------------------------
<FN>
(1) All of the options vest and become exercisable as follows: 25% vest on
each of January 1, 2000, 2001, 2002 and 2003.
(2) Options covering an aggregate of 653,625 shares of Common Stock were
granted to employees during the fiscal year ended December 31, 1999.
(3) The exercise price and tax withholding obligations related to exercise may
be paid by delivery of already owned shares, subject to certain conditions.
</FN>
</TABLE>
STOCK OPTIONS HELD AT FISCAL YEAR END
The following table sets forth, for each of the Named Executive Officers,
certain information regarding the number of shares of Common Stock underlying
stock options held at fiscal year end and the value of options held at fiscal
year end based upon the last reported sales price of the Common Stock on the
American Stock Exchange on December 31, 1999 ($3.94 per share). No stock options
were exercised by any Named Executive Officer during fiscal 1999.
<TABLE>
AGGREGATED FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999 (1)
----------------- ---------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mark Dyne.................. 70,000 110,000 $ 139,544 $174,882
Kevin Bermeister........... 70,000 110,000 $ 139,544 $174,882
Michael Ozen............... 52,500 47,500 $ 108,543 $ 57,508
Mark Miller................ 16,250 28,750 $ 29,898 $ 40,942
Anthony Rose............... 48,750 36,250 $ 105,233 $ 47,573
- ------------
<FN>
(1) Based on a closing price of $3.94 per share of Common Stock on December 31,
1999, 556,775 of the 590,000 shares underlying options held by the Named
Executive Officers were in-the-money at fiscal year end.
</FN>
</TABLE>
Page 7
<PAGE>
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
Effective October 1, 1996, the Company entered into an employment agreement
with Michael Ozen pursuant to which Mr. Ozen serves as the Company's Chief
Financial Officer at a base salary of $165,000 per year. Mr. Ozen received
options to purchase an aggregate of 30,000 shares of Common Stock which vest in
four equal annual installments commencing on the date of grant. In October 1998,
Mr. Ozen's options were repriced under the Company's option repricing program.
Mr. Ozen's employment is terminable by the Company at will. In the event the
Company terminates Mr. Ozen's employment without cause, Mr. Ozen is entitled to
three months severance payment (the "Initial Payment") if termination occurs
during the first or second year of employment (the "Initial Period"), and in
addition to the Initial Payment, one month severance payment for each year
served after the Initial Period, not to exceed an aggregate of 12 months
severance payment, if termination occurs after the Initial Period. For purposes
of the agreement, "cause" means the willful disregard of, or failure to perform,
duties where such willful disregard or failure is not discontinued within a
reasonable period of time from receipt of written notice relating thereto.
Effective October 27, 1999, the Company's subsidiary, The Auctionchannel,
Inc., entered into a three year employment agreement with Ronald Chaimowitz
pursuant to which Mr. Chaimowitz serves as the Chief Executive Officer of The
Auction Channel. The agreement provides for payment to Mr. Chaimowitz of an
initial base salary of $200,000 per year, and for mandatory adjustments to the
base salary each January 1 in proportion to any increase in the Consumer Price
Index over the prior year. The agreement also provides for payment to Mr.
Chaimowitz of a bonus of up to 100% of his base salary, determined at the
discretion of The Auction Channel's Board of Directors, upon Mr. Chaimowitz
achieving certain operational and financial targets agreed upon by Mr.
Chaimowitz and the board at the beginning of each year during the term of the
agreement. Mr. Chaimowitz also received options to purchase an aggregate of
250,000 shares of Common Stock of the Company which vest in four equal annual
installments, and options to purchase an aggregate of 3,333,440 shares of Common
Stock of The Auction Channel which vest in eight semi-annual installments. Mr.
Chaimowitz's employment is terminable by The Auction Channel at will upon 30
days' prior written notice. In the event The Auction Channel terminates Mr.
Chaimowitz's employment without cause, or if Mr. Chaimowitz terminates his
employment for good reason, Mr. Chaimowitz is entitled to a lump sum severance
payment equal to the greater of (i) the sum of 12 months' current base salary,
or (ii) the sum of the current monthly base salary for each month during the
remaining term of the agreement. Mr. Chaimowitz is also entitled to receive
three months' base salary if he voluntarily terminates his employment.
STOCK OPTION PLAN
The Company adopted the Brilliant Digital Entertainment, Inc. 1996 Stock
Option Plan (the "1996 Plan") in September 1996. The purpose of the 1996 Plan is
to attract, retain and motivate certain key employees of the Company and its
subsidiaries by giving them incentives which are linked directly to increases in
the value of the Common Stock of the Company. Each director, officer, employee
or consultant of the Company or any of its subsidiaries is eligible to be
considered for the grant of awards under the 1996 Plan. The maximum number of
shares of Common Stock that may be issued pursuant to awards granted under the
1996 Plan is 2,500,000, subject to certain adjustments to prevent dilution. Any
shares of Common Stock subject to an award which for any reason expires or
terminates unexercised are again available for issuance under the 1996 Plan.
The 1996 Plan authorizes its administrator to enter into any type of
arrangement with an eligible employee that, by its terms, involves or might
involve the issuance of (1) shares of Common Stock, (2) an option, warrant,
convertible security, stock appreciation right or similar right with an exercise
or conversion privilege at a price related to the Common Stock, or (3) any other
security or benefit with a value derived from the value of the Common Stock. Any
stock option granted may be an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or a
nonqualified stock option. The 1996 Plan currently is administered by the
Compensation Committee of the Board of Directors of the Company. Subject to the
provisions of the 1996 Plan, the Compensation Committee will have full and final
authority to select the executives and other employees to whom awards will be
granted thereunder, to grant the awards and to determine the terms and
conditions of the awards and the number of shares to be issued pursuant thereto.
The maximum number of shares of Common Stock with respect to which awards may be
granted under the 1996 Plan to any executive or employee during any fiscal year
is 100,000, subject to adjustment to prevent dilution.
As of December 31, 1999, 799,793 shares of Common Stock remained available
for grant of awards to eligible participants under the 1996 Plan.
Page 8
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, requires the
Company's executive officers, directors, and persons who own more than ten
percent of a registered class of the Company's equity securities to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission (the "SEC"). Executive officers, directors and greater-than-ten
percent stockholders are required by SEC regulations to furnish the Company with
all Section 16(a) forms they file. Based solely on its review of the copies of
the forms received by it and written representations from certain reporting
persons that they have complied with the relevant filing requirements, the
Company believes that, during the year ended December 31, 1999, all the
Company's executive officers, directors and greater-than-ten percent
stockholders complied with all Section 16(a) filing requirements with the
exception of Diana Maranon, Mark Dyne and Kevin Bermeister. Ms. Maranon did not
report on a Form 4 her purchase of 40,222 shares of Common Stock upon exercise
of a common stock purchase warrant. Mark Dyne and Kevin Bermeister did not
report on a Form 4 the acquisition by a partnership, of which they are partners,
of an option to purchase 430,000 shares from a stockholder of the Company.
CERTAIN RELATIONSHIPS AND REALTED TRANSACTIONS
Certain of the Company's directors and officers, including Mark Dyne and
Kevin Bermeister, are also directors or officers of potential competitors and/or
strategic partners of the Company. These relationships may give rise to
conflicts of interest between the Company, on the one hand, and one or more of
the directors, officers, and/or their affiliates, on the other hand. The
Company's Certificate of Incorporation provides that Mark Dyne and Kevin
Bermeister are required to present to the Company any corporate opportunities
for the development of any type of interactive digital entertainment with the
exception of opportunities for participation in the development by others of
interactive digital entertainment where publishing and/or distribution rights
for the product to be developed are offered to Messrs. Dyne and/or Bermeister
solely for Australia, New Zealand and/or Southern Africa.
On October 27, 1999, Ronald Chaimowitz entered into an agreement with the
Company granting him the right to purchase 1,200,000 shares of Common Stock of
the Company's subsidiary, The Auctionchannel, Inc., for an aggregate purchase
price of $250,000. The closing of the sale will occur immediately following the
Company's reorganization of The Auction Channel, which is expected to occur in
the second quarter of 2000. Concurrently with his purchase of the shares of The
Auction Channel, Mr. Chaimowitz, the Company and The Auction Channel will enter
into an Equityholders Agreement pursuant to which Mr. Chaimowitz will agree to
certain restrictions on his ability to transfer his shares of The Auction
Channel. The Equityholders Agreement will also provide Mr. Chaimowitz with
certain rights to sell his shares of The Auction Channel in the event of a sale
of the company.
BII Australia purchases computer hardware and software products from
Pacific Interactive Education Pty. Limited ("PIE"), a company owned and
controlled by Mark Miller. For fiscal 1998 and fiscal 1999, BII Australia
purchased approximately $52,000 and $107,000, respectively, of computer hardware
and software products from PIE.
Page 9
<PAGE>
PROPOSAL TO AMEND THE 1996 STOCK OPTION PLAN
GENERAL
The Board of Directors has approved an amendment (the "Amendment") to the
Brilliant Digital Entertainment, Inc. 1996 Stock Option Plan to increase the
number of shares of Common Stock available for issuance under the 1996 Plan from
2,500,000 shares to 3,500,000 shares. The Amendment is being submitted to the
Company's stockholders for approval.
The Board of Directors approved the Amendment to ensure that a sufficient
number of shares of Common Stock are available for issuance under the 1996 Plan.
At April 1, 2000, 798,543 shares remained available for grants of awards under
the 1996 Plan. The Board of Directors believes that the ability to grant
stock-based awards is important to the future success of the Company. The grant
of stock options and other stock-based awards can motivate high levels of
performance and provide an effective means of recognizing employee contributions
to the success of the Company. In addition, stock-based compensation can be
valuable in recruiting and retaining highly qualified technical and other key
personnel who are in great demand as well as rewarding and providing incentives
to its current employees. The increase in the number of shares available for
awards under the 1996 Plan will enable the Company to continue to realize the
benefits of granting stock-based compensation.
At April 14, 2000, the closing sale price of the Common Stock on the
American Stock Exchange was $5.00 per share.
SUMMARY OF THE 1996 PLAN
PURPOSE. The purpose of the 1996 Plan is to advance the interests of the
Company and its stockholders by strengthening the Company's ability to obtain
and retain the services of the types of employees, consultants, officers and
directors who will contribute to the Company's long term success and to provide
incentives which are linked directly to increases in stock value which will
inure to the benefit of all stockholders of the Company.
ADMINISTRATION. The 1996 Plan may be administered by the Board of
Directors, or a committee of two or more directors appointed by the Board of
Directors whose members serve at the pleasure of the Board. The 1996 Plan
currently is administered by the Compensation Committee of the Board of
Directors. The party administering the 1996 Plan is referred to as the
"Administrator." Subject to the provisions of the 1996 Plan, the Administrator
has full and final authority to (i) select from among eligible directors,
officers, employees and consultants, those persons to be granted awards under
the 1996 Plan, (ii) determine the type, size and terms of individual awards to
be made to each person selected, (iii) determine the time when awards will be
granted and to establish objectives and conditions (including, without
limitation, vesting and performance conditions), if any, for earning awards,
(iv) amend the terms or conditions of any outstanding award, subject to
applicable legal restrictions and to the consent of the other party to such
award, (v) authorize any person to execute, on behalf of the Company, any
instrument required to carry out the purposes of the 1996 Plan, and (vii) make
any and all other determinations which the Administrator determines to be
necessary or advisable in the administration of the 1996 Plan. The Administrator
has full power and authority to administer and interpret the 1996 Plan and to
adopt, amend and revoke such rules, regulations, agreements, guidelines and
instruments for the administration of the 1996 Plan and for the conduct of its
business as the Administrator deems necessary or advisable.
ELIGIBILITY. Any person who is a director, officer, employee or consultant
of the Company, or any of its subsidiaries (a "Participant"), is eligible to be
considered for the grant of awards under the 1996 Plan. No executive officer or
other employee of the Company may receive in any fiscal year awards under the
1996 Plan representing more than 100,000 shares of Common Stock. At April 1,
2000, approximately 100 officers, directors, employees and independent
contractors of the Company were eligible to receive awards under the 1996 Plan.
TYPES OF AWARDS. Awards authorized under the 1996 Plan may consist of any
type of arrangement with a Participant that, by its terms, involves or might
involve or be made with reference to the issuance of shares of the Company's
Common Stock, or a derivative security with an exercise or conversion price
related to the Common Stock or with a value derived from the value of the Common
Stock. Awards are not restricted to any specified form or structure and may
include sales, bonuses and other transfers of stock, restricted stock, stock
options, reload stock options, stock purchase warrants, other rights to acquire
stock or securities convertible into or redeemable for stock, stock appreciation
rights, phantom stock, dividend equivalents, performance units or performance
shares, or any other type of award which the Administrator shall determine is
consistent with the objectives and limitations of the
Page 10
<PAGE>
1996 Plan. An award may consist of one such security or benefit, or two or more
of them in tandem or in the alternative.
CONSIDERATION. The Common Stock or other property underlying an award may
be issued for any lawful consideration as determined by the Administrator,
including, without limitation, a cash payment, services rendered, or the
cancellation of indebtedness. An award may provide for a purchase price of the
Common Stock or other property at a value less than the fair market value of the
Common Stock or other property on the date of grant. In addition, an award may
permit the recipient to pay the purchase price of the Common Stock or other
property or to pay such recipient's tax withholding obligation with respect to
such issuance, in whole or in part, by delivering previously owned shares of
capital stock of the Company or other property, or by reducing the number of
shares of Common Stock or the amount of other property otherwise issuable
pursuant to such award.
TERMINATION OF AWARDS. All awards granted under the 1996 Plan expire ten
years from the date of grant, or such shorter period as is determined by the
Administrator. No option is exercisable by any person after such expiration. If
an award expires, terminates or is canceled, the shares of Common Stock not
purchased thereunder shall again be available for issuance under the 1996 Plan.
AMENDMENT AND TERMINATION OF THE 1996 PLAN. The Administrator may amend the
1996 Plan at any time, may suspend it from time to time or may terminate it
without approval of the stockholders; provided, however, that stockholder
approval is required for any amendment which materially increases the number of
shares for which awards may be granted, materially modifies the requirements of
eligibility, or materially increases the benefits which may accrue to recipients
of awards under the 1996 Plan. However, no such action by the Board of Directors
or stockholders may unilaterally alter or impair any award previously granted
under the 1996 Plan without the consent of the recipient of the award. In any
event, the 1996 Plan shall terminate on September 13, 2006 (ten years following
the date it was approved by the Company's stockholders) unless sooner terminated
by action of the Board of Directors. The 1996 Plan was amended in fiscal 1999 to
increase the number of shares of Common Stock available for issuance under the
1996 Plan from 1,080,000 shares to 2,500,000 shares. The Company's stockholders
approved this amendment to the plan at the 1999 Annual Meeting of Stockholders.
FEDERAL INCOME TAX CONSEQUENCES FOR STOCK OPTIONS
As of April 1, 2000, the only type of award granted by the Company under
the 1996 Plan had been stock options. The following is a general discussion of
the principal United States federal income tax consequences of both "incentive
stock options" within the meaning of Section 422 of the Code ("Incentive Stock
Options") and non-statutory stock options ("Non-statutory Stock Options") based
upon the United States Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder, all of which are subject to
modification at any time. The 1996 Plan does not constitute a qualified
retirement plan under Section 401(a) of the Code (which generally covers trusts
forming part of a stock bonus, pension or profit-sharing plan funded by employer
and/or employee contributions which are designed to provide retirement benefits
to participants under certain circumstances) and is not subject to the Employee
Retirement Income Security Act of 1974 (the pension reform law which regulates
most types of privately funded pension, profit sharing and other employee
benefit plans).
CONSEQUENCES TO EMPLOYEES: INCENTIVE STOCK OPTIONS. No income is recognized
for federal income tax purposes by an optionee at the time an Incentive Stock
Option is granted, and, except as discussed below, no income is recognized by an
optionee upon his or her exercise of an Incentive Stock Option. If the optionee
makes no disposition of the Common Stock received upon exercise within two years
from the date such option was granted or one year from the date such option is
exercised (the "ISO Holding Period Requirements"), the optionee will recognize
long-term capital gain or loss when he or she disposes of his or her Common
Stock. Such gain or loss generally will be measured by the difference between
the exercise price of the option and the amount received for the Common Stock at
the time of disposition.
If the optionee disposes of the Common Stock acquired upon exercise of an
Incentive Stock Option without satisfying the ISO Holding Period Requirements,
any amount realized from such "disqualifying disposition" will be taxed at
ordinary income tax rates in the year of disposition to the extent that (i) the
lesser of (a) the fair market value of the shares of Common Stock on the date
the Incentive Stock Option was exercised or (b) the fair market value of such
shares at the time of such disposition exceeds (ii) the Incentive Stock Option
exercise price. Any amount realized upon disposition in excess of the fair
market value of the shares of Common Stock on the date of exercise will be
treated as long-term or short-term capital gain depending upon the length of
time the shares have been held.
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<PAGE>
The use of stock acquired through exercise of an Incentive Stock Option to
exercise an Incentive Stock Option will constitute a disqualifying disposition
if the ISO Holding Period Requirements have not been satisfied.
For alternative minimum tax purposes, the excess of the fair market value
of the shares of Common Stock as of the date of exercise over the exercise price
of the Incentive Stock Option is included in computing that year's alternative
minimum taxable income. However, if the shares of Common Stock are disposed of
in the same year, the maximum alternative minimum taxable income with respect to
those shares is the gain on disposition of the shares. There is no alternative
minimum taxable income from a disqualifying disposition in subsequent years.
CONSEQUENCES TO EMPLOYEES: NON-STATUTORY STOCK OPTIONS. No income generally
is recognized by a holder of Non-statutory Stock Options at the time
Non-statutory Stock Options are granted under the 1996 Plan. In general, at the
time shares of Common Stock are issued to a holder pursuant to the exercise of
Non-statutory Stock Options, the holder will recognize ordinary income equal to
the excess of the fair market value of the shares on the date of exercise over
the exercise price.
A holder will recognize gain or loss on the subsequent sale of Common Stock
acquired upon exercise of Non-statutory Stock Options in an amount equal to the
difference between the sales price and the tax basis of the Common Stock, which
will include the exercise price paid plus the amount included in the holder's
income by reason of the exercise of the Non-statutory Stock Options. Provided
the shares of Common Stock are held as a capital asset, any gain or loss
resulting from a subsequent sale will be short-term or long-term capital gain or
loss depending upon the length of time the shares have been held.
CONSEQUENCES TO THE COMPANY: INCENTIVE STOCK OPTIONS. The Company will not
be allowed a deduction for federal income tax purposes at the time of the grant
or exercise of an Incentive Stock Option. There are also no federal income tax
consequences to the Company as a result of the disposition of Common Stock
acquired upon exercise of an Incentive Stock Option if the disposition is not a
"disqualifying disposition." At the time of a disqualifying disposition by an
optionee, the Company will be entitled to a deduction for the amount received by
the optionee to the extent that such amount is taxable to the optionee at
ordinary income tax rates.
CONSEQUENCES TO THE COMPANY: NON-STATUTORY STOCK OPTIONS. Generally, the
Company will be entitled to a deduction for federal income tax purposes in the
Company's taxable year in which the optionee's taxable year of income inclusion
ends and in the same amount as the optionee is considered to have realized
ordinary income in connection with the exercise of Non-statutory Stock Options.
REQUIRED VOTE
The approval of the Amendment requires the affirmative vote of a majority
of the votes entitled to be cast by the holders of shares of the Company's
Common Stock present or represented and entitled to vote on this matter at the
Annual Meeting. An abstention will be counted toward the tabulation of votes
cast and will have the same effect as a vote against the proposal. A broker
non-vote, however, will not be treated as a vote cast for or against approval of
the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE AMENDMENT TO THE 1996 STOCK PLAN.
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<PAGE>
OTHER INFORMATION
PRINCIPAL STOCKHOLDERS
The following table sets forth as of April 14, 2000 certain information
relating to the ownership of the Common Stock by (i) each person known by us to
be the beneficial owner of more than five percent of the outstanding shares of
the Company's Common Stock, (ii) each of the Company's directors, (iii) each of
the Named Executive Officers, and (iv) all of the Company's executive officers
and directors as a group. Except as may be indicated in the footnotes to the
table and subject to applicable community property laws, each such person has
the sole voting and investment power with respect to the shares owned. The
address of each person listed is in care of Brilliant Digital Entertainment,
Inc., 6355 Topanga Canyon Boulevard, Suite 120, Woodland Hills, California
91367, unless otherwise set forth below such person's name.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
BENEFICIALLY OWNED (1)
----------------------
NAME AND ADDRESS NUMBER PERCENT
- ---------------- ------ -------
<S> <C> <C> <C>
Kevin Bermeister (2)....................................... 1,292,600 9.0 %
Mark Dyne (2).............................................. 1,285,600 8.9
Reefknot Limited (3)....................................... 1,200,118 8.4
One Stokes Place
St. Stephens Green
Dublin 2
Republic of Ireland
Harris Toibb............................................... 1,151,540 8.0
6355 Topanga Canyon Boulevard
Woodland Hills, California 91367
Sega Enterprises Limited................................... 780,001 5.4
2-12 Haneda 1-Chome
Ohta-Ku, Tokyo 144
Japan
Mark Miller (4)............................................ 516,263 3.6
Diana Maranon (5).......................................... 92,762 *
Anthony Rose (6)........................................... 68,750 *
Ray Musci (7).............................................. 37,500 *
Garth Saloner (7).......................................... 37,500 *
Jeff Scheinrock (7)........................................ 37,500 *
Michael Ozen (8)........................................... 52,500 *
Directors and executive officers
as a group (9 persons) (9)................................. 2,990,975 20.2 %
- ------------------------------
<FN>
* Less than one percent.
(1) Under Rule 13d-3, certain shares may be deemed to be beneficially owned by
more than one person (if, for example, persons share the power to vote or
the power to dispose of the shares). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire the
shares (for example, upon exercise of an option) within 60 days of the date
as of which the information is provided. In computing the percentage
ownership of any person, the amount of shares outstanding is deemed to
include the amount of shares beneficially owned by such person (and only
such person) by reason of these acquisition rights. As a result, the
percentage of outstanding shares of any person as shown in this table does
not necessarily reflect the person's actual ownership or voting power with
respect to the number of shares of common stock actually outstanding at
April 14, 2000.
(2) Includes (i) 70,000 shares of common stock reserved for issuance upon
exercise of stock options which currently are exercisable or will become
exercisable on or before June 13, 2000, and (ii) 430,000 shares of common
stock that may be acquired by a general partnership, of which Messrs.
Bermeister and Dyne are general partners, from Pacific Interactive Education
Pty. Limited upon exercise of an option that currently is exercisable.
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<PAGE>
(3) Nicholas Landor, a director of Reefknot Limited, has the authority to vote
and dispose of the shares of common stock held by Reefknot Limited.
(4) Consists of (i) 430,013 shares of common stock held by Pacific Interactive
Education Pty. Limited, (ii) 70,000 shares of common stock held by the Mark
Miller Family Trust, of which Pacific Interactive Pty. Limited is trustee,
and (iii) 16,250 shares of common stock reserved for issuance upon exercise
of stock options which currently are exercisable or will become exercisable
on or before June 13, 2000. Mark Miller and his wife are the sole
stockholders of Pacific Interactive Education Pty. Limited and Pacific
Interactive Pty. Limited.
(5) Includes (i) 37,500 shares of common stock reserved for issuance upon
exercise of stock options which currently are exercisable or will become
exercisable on or before June 13, 2000, and (ii) 15,040 shares of common
stock underlying warrants which currently are exercisable.
(6) Consists of (i) 20,000 shares of common stock held by HiTech Corporation
Limited over which Mr. Rose has exclusive voting and investment power, and
(ii) 48,750 shares of common stock reserved for issuance upon exercise of
stock options which currently are exercisable or will become exercisable on
or before June 13, 2000.
(7) Consists of 37,500 shares of common stock reserved for issuance upon
exercise of stock options which currently are exercisable or will become
exercisable on or before June 13, 2000.
(8) Consists of 52,500 shares of common stock reserved for issuance upon
exercise of stock options which currently are exercisable or will become
exercisable on or before June 13, 2000.
(9) Includes (i) 407,500 shares of common stock reserved for issuance upon
exercise of stock options which currently are exercisable or will become
exercisable on or before June 13, 2000, and (ii) 15,040 shares of common
stock underlying warrants which currently are exercisable.
</FN>
</TABLE>
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<PAGE>
STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal at the next Annual
Meeting of Stockholders, for inclusion in the Company's Proxy Statement and
Proxy form relating to such Annual Meeting, must submit that proposal to the
Company at its principal executive offices by January 15, 2001.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers, LLP, independent public accountants, were selected
by the Board of Directors to serve as independent public accountants of the
Company for the year ended December 31, 1999 and have been selected by the Board
of Directors to serve as independent auditors for the fiscal year ending
December 31, 2000. Representatives of PricewaterhouseCoopers, LLP are expected
to be present at the Annual Meeting, and will be afforded the opportunity to
make a statement if they desire to do so, and will be available to respond to
appropriate questions from stockholders.
SOLICITATION OF PROXIES
It is expected that the solicitation of proxies will be primarily by mail.
The cost of solicitation by management will be borne by the Company. The Company
will reimburse brokerage firms and other persons representing beneficial owners
of shares for their reasonable disbursements in forwarding solicitation material
to such beneficial owners. Proxies may also be solicited by certain of the
Company's directors and officers, without additional compensation, personally or
by mail, telephone, telegram or otherwise for the purpose of soliciting such
proxies.
ANNUAL REPORT ON FORM 10-KSB
THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB, WHICH HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 1999, WILL BE
MADE AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO MICHAEL
OZEN, CHIEF FINANCIAL OFFICER, BRILLIANT DIGITAL ENTERTAINMENT, INC., 6355
TOPANGA CANYON BOULEVARD, SUITE 120, WOODLAND HILLS, CALIFORNIA 91367.
ON BEHALF OF THE BOARD OF DIRECTORS
/s/ Michael Ozen
Michael Ozen
CHIEF FINANCIAL OFFICER AND SECRETARY
Woodland Hills, California
May 16, 2000
Page 15
<PAGE>
BRILLIANT DIGITAL ENTERTAINMENT, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
The undersigned, a stockholder of BRILLIANT DIGITAL ENTERTAINMENT, INC., a
Delaware corporation (the "Company"), hereby appoints MARK DYNE and MICHAEL
OZEN, and each of them, the proxy of the undersigned, with full power of
substitution, to attend, vote and act for the undersigned at the Company's
Annual Meeting of Stockholders (the "Annual Meeting"), to be held on June 23,
2000, and at any of its postponements or adjournments, and in connection
herewith, to vote and represent all of the shares of the Company which the
undersigned would be entitled to vote, as follows:
The Board of Directors recommends a WITH vote on Proposal 1 and a FOR vote
on Proposal 2.
1. ELECTION OF DIRECTOR, as provided in the Company's Proxy Statement:
___ WITH ___ WITHOUT Authority to vote for the nominee
listed below.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY FOR A NOMINEE, LINE THROUGH
OR OTHERWISE STRIKE OUT THE NAME OF THE NOMINEE BELOW)
Garth Saloner
2. The approval of the amendment to the Company's 1996 Stock Option Plan
to increase the maximum number of shares of Common Stock that may be
issued pursuant to awards granted under the plan.
FOR _______ AGAINST _______ ABSTAIN _______
The undersigned hereby revokes any other proxy to vote at the Annual
Meeting, and hereby ratifies and confirms all that the proxy holders may
lawfully do by virtue of this Proxy. AS TO ANY OTHER BUSINESS THAT MAY PROPERLY
COME BEFORE THE ANNUAL MEETING AND ANY OF ITS POSTPONEMENTS OR ADJOURNMENTS, THE
PROXY HOLDER IS AUTHORIZED TO VOTE IN ACCORDANCE WITH HIS BEST JUDGMENT.
This Proxy will be voted in accordance with the instructions set forth
above. THIS PROXY WILL BE TREATED AS A GRANT OF AUTHORITY TO VOTE FOR THE
ELECTION OF THE DIRECTOR NAMED, THE APPROVAL OF THE AMENDMENT TO THE COMPANY'S
1996 STOCK OPTION PLAN, AND AS THE PROXY HOLDER SHALL DEEM ADVISABLE ON ANY
OTHER BUSINESS THAT MAY COME BEFORE THE ANNUAL MEETING, UNLESS OTHERWISE
DIRECTED.
<PAGE>
The undersigned acknowledges receipt of a copy of the Notice of Annual
Meeting and accompanying Proxy Statement dated May 16, 2000 relating to the
Annual Meeting.
Date: , 2000
------------------------------
---------------------------------------
---------------------------------------
Signature(s) of Stockholder(s)
(See Instructions Below)
The above signature(s) should
correspond exactly with the name(s) of
the Stockholder(s) appearing on the
Stock Certificate. If stock is jointly
held, all joint owners should sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
signer is a corporation, please sign
the full corporation name, and give
title of signing officer.
THIS PROXY IS SOLICITED BY THE
BOARD OF DIRECTORS OF
BRILLIANT DIGITAL ENTERTAINMENT, INC.
