EXHIBIT 4.2
FORM
OF
RIGHTS AGREEMENT
BY AND BETWEEN
BRILLIAN CORPORATION
AND
THE BANK OF NEW YORK,
AS RIGHTS AGENT
EFFECTIVE AS OF
__________ ____, 2003
TABLE OF CONTENTS
PAGE
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Section 1 Definitions.....................................................................................1
Section 2 Appointment of Rights Agent.....................................................................4
Section 3 Issue of Right Certificates.....................................................................4
Section 4 Form of Right Certificates......................................................................6
Section 5 Countersignature and Registration...............................................................6
Section 6 Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed,
Lost or Stolen Right Certificates...........................................................7
Section 7 Exercise of Rights; Purchase Price; Expiration Date of Rights...................................7
Section 8 Cancellation and Destruction of Right Certificates..............................................8
Section 9 Availability of Preferred Shares................................................................8
Section 10 Preferred Shares Record Date....................................................................9
Section 11 Adjustment of Purchase Price, Number and Kind of Shares and Number of Rights...................10
Section 12 Certificate of Adjusted Purchase Price or Number of Shares.....................................15
Section 13 Consolidation, Merger or Sale or Transfer of Assets or Earning Power...........................16
Section 14 Fractional Rights and Fractional Shares........................................................18
Section 15 Rights of Action...............................................................................19
Section 16 Agreement of Right Holders.....................................................................19
Section 17 Right Certificate Holder Not Deemed a Stockholder..............................................20
Section 18 Concerning the Rights Agent....................................................................20
Section 19 Merger or Consolidation or Change of Name of Rights Agent......................................20
Section 20 Duties of Rights Agent.........................................................................21
Section 21 Change of Rights Agent.........................................................................22
Section 22 Issuance of New Right Certificates.............................................................23
Section 23 Redemption.....................................................................................23
Section 24 Exchange.......................................................................................24
Section 25 Notice of Certain Events.......................................................................25
Section 26 Notices........................................................................................25
Section 27 Supplements and Amendments.....................................................................26
Section 28 Successors.....................................................................................26
Section 29 Benefits of this Agreement.....................................................................26
Section 30 Determinations and Actions by the Board of Directors...........................................27
Section 31 Severability...................................................................................27
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TABLE OF CONTENTS
(CONT.)
PAGE
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Section 32 Governing Law..................................................................................27
Section 33 Counterparts...................................................................................27
Section 34 Descriptive Headings...........................................................................27
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EXHIBIT INDEX
Exhibit A - Form of Certificate of Designation............................................................ A-1
Exhibit B - Form of Right Certificate..................................................................... B-1
Exhibit C - Summary of Rights to Purchase Preferred Shares................................................ C-1
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of ________ __, 2003, between Brillian
Corporation, a Delaware corporation ("Brillian"), and The Bank of New York, a
__________ corporation, as rights agent (the "Rights Agent").
RECITALS
The Board of Directors of Brillian has authorized and declared a dividend
of one preferred share purchase right (a "Right" and, collectively, the
"Rights") for each Common Share (as defined below) of Brillian outstanding as of
the Close of Business (as defined below) on _______ __, 2003 (the "Record
Date"), each Right representing the right to purchase one one-thousandth of a
Preferred Share (as hereinafter defined), upon the terms and subject to the
conditions herein set forth, and has further authorized and directed the
issuance of one Right (subject to adjustment as provided herein) with respect to
each Common Share that shall become outstanding between the Record Date and the
earliest of the Distribution Date, the Redemption Date and the Final Expiration
Date (as such terms are defined below).
AGREEMENT
Accordingly, for and in consideration of the premises and the mutual
agreements set forth herein, and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
Section 1 DEFINITIONS. For purposes of this Agreement, the following
terms shall have the meanings indicated (other terms may be defined elsewhere in
this Agreement):
(a) "ACQUIRING PERSON" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the Common Shares of Brillian then
outstanding, but shall not include an Exempt Person (as such term is hereinafter
defined); provided, however, that (i) if the Board of Directors of Brillian
determines in good faith that a Person who would otherwise be an "Acquiring
Person" (as defined in this Section 1(a)) became or has become such
inadvertently (including, without limitation, because (A) such Person was
unaware that it beneficially owned an amount or percentage of Common Shares that
would otherwise cause such Person to be an "Acquiring Person" or (B) such Person
was aware of the extent of its Beneficial Ownership of Common Shares but had no
actual knowledge of the consequences of such Beneficial Ownership under this
Agreement) and without any intention of changing or influencing control of
Brillian, then such Person shall not be deemed to be or to have become an
"Acquiring Person" for any purposes of this Agreement unless and until such
Person shall have failed to divest itself, as soon as practicable (as
determined, in good faith, by the Board of Directors of Brillian), of Beneficial
Ownership of a sufficient number of Common Shares so that such Person would no
longer otherwise qualify as an "Acquiring Person" under this Agreement; (ii) if,
as of ____________, 2003, any Person is the Beneficial Owner of 15% or more of
the Common Shares then outstanding (an "Existing 15% Holder"), such Person shall
not be deemed to be or to become an "Acquiring Person" unless and until such
time as such Person shall, after the first public announcement of the adoption
of this Agreement, become the Beneficial Owner of 20% or more of the Common
Shares then outstanding (other than pursuant to a dividend or distribution paid
or made by Brillian on the outstanding Common Shares or pursuant to a split or
subdivision of the outstanding Common Shares), provided, however, that the
exception (from qualification as an "Acquiring Person" under this Agreement)
provided in this clause (ii) shall not apply to any Person who or which is not
an Affiliate or Associate of an Existing 15% Holder on the date of the first
public announcement of the adoption of this Agreement and who or which
subsequently acquires direct or indirect control of an
Existing 15% Holder without the prior written approval of the Board of Directors
of Brillian; and (iii) no Person shall become an "Acquiring Person" solely as
the result of the purchase or acquisition of Common Shares by Brillian which, by
reducing the number of shares outstanding, increases the proportionate number of
Common Shares beneficially owned by such Person to 15% (or such other percentage
as would otherwise result in such person becoming an "Acquiring Person" under
this Section 1(a)) or more of the Common Shares then outstanding; provided,
however, that if a Person shall become the Beneficial Owner of 15% (or such
other percentage) or more of the Common Shares then outstanding by reason of
such share purchase or acquisition by Brillian (as addressed in clause (iii) of
this Section 1(a)) and such Person shall thereafter become the Beneficial Owner
of any additional Common Shares (other than pursuant to a dividend or
distribution paid or made by Brillian on the outstanding Common Shares or
pursuant to a split or subdivision of the outstanding Common Shares), then such
Person shall be deemed to be an "Acquiring Person" unless upon becoming the
Beneficial Owner of such additional Common Shares such Person does not
beneficially own 15% (or such other percentage as would otherwise result in such
person becoming an "Acquiring Person" under this Section 1(a)) or more of the
Common Shares then outstanding. For all purposes of this Agreement, any
calculation of the number of Common Shares outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding Common Shares of which any Person is the Beneficial Owner, shall be
made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General
Rules and Regulations under the Exchange Act, as in effect on the date hereof.
(b) "AFFILIATE" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act as in
effect on the date of this Agreement.
(c) "ASSOCIATE" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act as in
effect on the date of this Agreement.
(d) A Person shall be deemed the "BENEFICIAL OWNER" of and
shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates
or Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates
or Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide underwritten
public offering of securities), or upon the exercise of conversion rights,
exchange rights, rights, warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the Beneficial Owner of, or to beneficially
own, (x) securities tendered pursuant to a tender or exchange offer made by or
on behalf of such Person or any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange, (y) securities
which such Person has a right to acquire upon the exercise of Rights at any time
prior to the time that any Person becomes an Acquiring Person, or (z) securities
issuable upon the exercise of Rights from and after the time that any Person
becomes an Acquiring Person if such Rights were acquired by such Person or any
of such Person's Affiliates or Associates prior to the Distribution Date or
pursuant to Section 3(a) or Section 22 hereof ("Original Rights") or pursuant to
Section 11(i) or Section 11(n) with respect to an adjustment to Original Rights;
or (B) the right to vote pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security if the agreement,
arrangement or understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
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applicable rules and regulations promulgated under the Exchange Act and (2) is
not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly,
by any other Person and with respect to which such Person or any of such
Person's Affiliates or Associates has any agreement, arrangement or
understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of securities)
for the purpose of acquiring, holding, voting (except to the extent contemplated
by the proviso to Section 1(d)(ii)(B) hereof) or disposing of any securities of
Brillian.
Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, the phrase "then outstanding," when used with
reference to a Person's Beneficial Ownership of securities of Brillian, shall
mean the number of such securities then issued and outstanding together with the
number of such securities not then actually issued and outstanding which such
Person would be deemed to own beneficially hereunder.
(e) "BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in the state of New York are
authorized or obligated by law or executive order to close.
(f) "CLOSE OF BUSINESS" on any given date shall mean 5:00 P.M.,
New York City time, on such date; provided, however, that, if such date is not a
Business Day, it shall mean 5:00 P.M., New York City time, on the next
succeeding Business Day.
(g) "COMMON SHARES" when used with reference to Brillian shall
mean the shares of common stock, par value $0.001 per share, of Brillian.
"Common Shares" when used with reference to any Person other than Brillian shall
mean the capital stock (or, in the case of a non-corporation entity, equivalent
or similar equity interest) with the greatest voting power of such other Person
or, if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
(h) "DISTRIBUTION DATE" shall have the meaning set forth in
Section 3(a) hereof.
(i) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
(j) "EXCHANGE RATIO" shall have the meaning set forth in
Section 24(a) hereof.
(k) "EXEMPT PERSON" shall mean (i) Brillian or any Subsidiary
(as such term is hereinafter defined) of Brillian, in each case including,
without limitation, in its fiduciary capacity, or any employee benefit plan of
Brillian or of any Subsidiary of Brillian, or any entity or trustee holding
Common Shares for or pursuant to the terms of any such plan or for the purpose
of funding any such plan or funding other employee benefits for employees of
Brillian or of any Subsidiary of Brillian, and (ii) TFS or any Subsidiary (as
such term is hereinafter defined) of TFS, in each case including, without
limitation, in its fiduciary capacity, or any employee benefit plan of TFS or of
any Subsidiary of TFS, or any entity or trustee holding Common Shares for or
pursuant to the terms of any such plan or for the purpose of funding any such
plan or funding other employee benefits for employees of TFS or of any
Subsidiary of TFS.
(l) "FINAL EXPIRATION DATE" shall have the meaning set forth in
Section 7(a) hereof.
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(m) "NASDAQ" shall mean the National Association of Securities
Dealers, Inc. Automated Quotation System.
(n) "PERSON" shall mean any individual, firm, corporation,
partnership, limited liability company, trust or other entity, and shall include
any successor (by merger or otherwise) of such entity.
(o) "PREFERRED SHARES" shall mean shares of Series A Junior
Participating Preferred Stock, par value $0.001 per share, of Brillian having
the rights and preferences set forth in the Form of Certificate of Designations
attached to this Agreement as Exhibit A.
(p) "PURCHASE PRICE" shall have the meaning set forth in
Section 4 hereof.
(q) "RECORD DATE" shall have the meaning set forth in the
second paragraph hereof.
(r) "REDEMPTION DATE" shall have the meaning set forth in
Section 7(a) hereof.
(s) "REDEMPTION PRICE" shall have the meaning set forth in
Section 23(a) hereof.
(t) "RIGHT" and "RIGHTS" shall have the meanings set forth in
the second paragraph hereof.
(u) "RIGHT CERTIFICATE" shall have the meaning set forth in
Section 3(a) hereof.
(v) "SHARES ACQUISITION DATE" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) of the Exchange
Act) by Brillian or an Acquiring Person that an Acquiring Person has become
such, or such earlier date that the Board of Directors has become aware that an
Acquiring Person has become such.
(w) "SUBSIDIARY" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
(x) "SUMMARY OF RIGHTS" shall have the meaning set forth in
Section 3(b) hereof.
(y) "TRADING DAY" shall have the meaning set forth in Section
11(d) hereof.
Section 2 APPOINTMENT OF RIGHTS AGENT. Brillian hereby appoints the
Rights Agent to act as agent for Brillian and the holders of the Rights (who, in
accordance with Section 3 hereof, shall, prior to the Distribution Date, also be
the holders of the Common Shares of Brillian) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment.
Brillian may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3 ISSUE OF RIGHT CERTIFICATES.
(a) Until the Close of Business on the earlier of (i) the tenth
day after the Shares Acquisition Date or (ii) the tenth Business Day (or such
later date as may be determined by action of the Board of Directors of Brillian
prior to such time as any Person becomes an Acquiring Person) after the date of
the commencement by any Person (other than an Exempt Person) of, or of the first
public announcement of the intention of such Person (other than an Exempt
Person) to commence, a tender or
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exchange offer the consummation of which would result in any Person (other than
an Exempt Person) becoming the Beneficial Owner of Common Shares of Brillian
aggregating 15% or more of the then outstanding Common Shares of Brillian
(including any such date which is after the date of this Agreement and prior to
the issuance of the Rights; the earlier of such dates being herein referred to
as the "Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of Section 3(b) hereof) by the certificates for Common Shares of
Brillian registered in the names of the holders thereof (which certificates
shall also be deemed to be Right Certificates) and not by separate Right
Certificates, and (y) Rights (and any right to receive Right Certificates) will
be transferable only in connection with the transfer of Common Shares of
Brillian. As soon as practicable after the Distribution Date, Brillian will
prepare and execute, the Rights Agent will countersign, and Brillian will send
or cause to be sent (and the Rights Agent will, if requested, send) by
first-class, insured, postage-prepaid mail, to each record holder of Common
Shares of Brillian as of the Close of Business on the Distribution Date (other
than any Acquiring Person or any Affiliate or Associate of any Acquiring
Person), at the address of such holder shown on the records of Brillian, a Right
Certificate, in substantially the form of Exhibit B hereto (a "Right
Certificate"), evidencing one Right (subject to adjustment as provided herein)
for each Common Share so held. As of the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter,
Brillian will send a copy of a Summary of Rights to Purchase Preferred Shares,
in substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Shares as of
the Close of Business on the Record Date, at the address of such holder shown on
the records of Brillian. With respect to certificates for Common Shares of
Brillian outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof together with a copy of the Summary of Rights. Until the
Distribution Date (or, if earlier, the Redemption Date or the Final Expiration
Date), the surrender for transfer of any certificate for Common Shares of
Brillian outstanding on the Record Date, with or without a copy of the Summary
of Rights, shall also constitute the transfer of the Rights associated with the
Common Shares of Brillian represented thereby.
(c) Rights shall be issued in respect of all Common Shares
issued or disposed of (including, without limitation, upon disposition of Common
Shares out of treasury stock or issuance or reissuance of Common Shares out of
authorized but unissued shares) after the Record Date but prior to the earlier
of the Distribution Date and the Expiration Date, or in certain circumstances
provided in Section 22 hereof, after the Distribution Date. Certificates issued
for Common Shares (including, without limitation, upon transfer of outstanding
Common Shares, disposition of Common Shares out of treasury stock or issuance or
reissuance of Common Shares out of authorized but unissued shares) after the
Record Date but prior to the earlier of the Distribution Date and the Expiration
Date shall have impressed on, printed on, written on or otherwise affixed to
them the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN
BRILLIAN CORPORATION AND THE BANK OF NEW YORK, DATED AS
OF _________ __, 2003, AS IT MAY BE AMENDED FROM TIME TO TIME (THE
"AGREEMENT"), THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY
REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF BRILLIAN CORPORATION UNDER CERTAIN
CIRCUMSTANCES, AS SET FORTH IN THE AGREEMENT, SUCH RIGHTS (AS
DEFINED IN THE AGREEMENT) WILL BE EVIDENCED BY SEPARATE
CERTIFICATES AND WILL NO
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LONGER BE EVIDENCED BY THIS CERTIFICATE. THREE-FIVE MICRODISPLAY,
INC. WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE
AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST
THEREFOR. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON (AS
DEFINED IN THE AGREEMENT) WHO IS OR BECOMES AN ACQUIRING PERSON
(AS DEFINED IN THE AGREEMENT) AND CERTAIN TRANSFEREES THEREOF
BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares of Brillian
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any such certificate (except as otherwise
provided herein) shall also constitute the transfer of the Rights associated
with the Common Shares of Brillian represented thereby. In the event that
Brillian purchases or otherwise acquires any Common Shares of Brillian after the
Record Date but prior to the Distribution Date, any Rights associated with such
Common Shares of Brillian shall be deemed cancelled and retired so that Brillian
shall not be entitled to exercise any Rights associated with the Common Shares
of Brillian which are no longer outstanding.
Notwithstanding this paragraph (c), the omission of a legend shall not
affect the enforceability of any part of this Agreement or the rights of any
holder of the Rights.
Section 4 FORM OF RIGHT CERTIFICATES. The Right Certificates (and the
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially in the form set forth in Exhibit
B hereto, and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as Brillian may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any applicable
rule or regulation made pursuant thereto or with any applicable rule or
regulation of the National Association of Securities Dealers, Inc. or any stock
exchange or interdealer quotation system on which Rights may from time to time
be listed, or to conform to usage. Subject to the provisions of this Agreement,
the Right Certificates shall entitle the holders thereof to purchase such number
of one one-thousandths of a Preferred Share as shall be set forth therein at the
price per one one-thousandth of a Preferred Share set forth therein (the
"Purchase Price"), but the number of such one one-thousandths of a Preferred
Share and the Purchase Price shall be subject to adjustment as provided herein.
Section 5 COUNTERSIGNATURE AND REGISTRATION. The Right Certificates
shall be executed on behalf of Brillian by its Chief Executive Officer or its
President, either manually or by facsimile signature, shall have affixed thereto
Brillian's seal or a facsimile thereof, and shall be attested by the Secretary
of Brillian, either manually or by facsimile signature. The Right Certificates
shall be manually countersigned by the Rights Agent and shall not be valid for
any purpose unless countersigned. In case any officer of Brillian who shall have
signed any of the Right Certificates shall cease to be such officer of Brillian
before countersignature by the Rights Agent and issuance and delivery by
Brillian, such Right Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by Brillian with the same force and effect
as though the individual who signed such Right Certificates had not ceased to be
such officer of Brillian; and any Right Certificate may be signed on behalf of
Brillian by any individual who, at the actual date of the execution of such
Right Certificate, shall be a proper officer of Brillian to sign such Right
Certificate, although at the date of the execution of this Agreement any such
individual was not such an officer.
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Following the Distribution Date, the Rights Agent will keep or cause to be
kept, at its principal office or agency designated for such purpose, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
Section 6 TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. Subject
to the provisions of this Agreement, at any time after the Distribution Date and
prior to the Expiration Date, any Right Certificate or Right Certificates (other
than Right Certificates representing Rights that have become void pursuant to
Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24
hereof) may be transferred, split up, combined or exchanged for another Right
Certificate or Right Certificates entitling the registered holder to purchase a
like number of one one-thousandths of a Preferred Share as the Right Certificate
or Right Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Right
Certificate or Right Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged at the office or
agency of the Rights Agent designated for such purpose. Thereupon the Rights
Agent shall countersign and deliver to the Person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested. Brillian
may require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer, split up, combination or
exchange of Right Certificates.
Subject to the provisions of this Agreement, at any time after the
Distribution Date and prior to the Expiration Date, upon receipt by Brillian and
the Rights Agent of evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Right Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them, and, at
Brillian's request, reimbursement to Brillian and the Rights Agent of all
reasonable expenses incidental thereto, and upon surrender to the Rights Agent
and cancellation of the Right Certificate if mutilated, Brillian will make and
deliver a new Right Certificate of like tenor to the Rights Agent for delivery
to the registered holder in lieu of the Right Certificate so lost, stolen,
destroyed or mutilated.
Section 7 EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) Except as otherwise provided herein, the Rights shall
become exercisable on the Distribution Date, and thereafter the registered
holder of any Right Certificate may (subject to Section 11(a)(ii) and except as
otherwise provided herein) exercise the Rights evidenced thereby, in whole or in
part, upon surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at the
office or agency of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the total number of one
one-thousandths of Preferred Shares (or other securities, cash or other assets,
as the case may be) as to which the Rights are exercised, at any time which is
both after the Distribution Date and prior to the time (the "Expiration Date")
that is the earliest of (i) the Close of Business on _____________ __, 2013 (the
"Final Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "Redemption Date"), or (iii) the time at
which such Rights are exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each one one-thousandth of a
Preferred Share purchasable pursuant to the exercise of a Right shall initially
be $_________.00. The Purchase Price and the number of one one-thousandths of a
Preferred Share (or other securities or property) to be acquired upon exercise
of a Right shall be subject to adjustment from time to time as provided in
Sections 11 and 13 hereof, and shall
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be payable in lawful money of the United States of America in accordance with
paragraph (c) of this Section 7.
(c) Except as otherwise provided herein, upon receipt of a
Right Certificate representing exercisable Rights, with the form of election to
purchase duly executed, accompanied by payment of the aggregate Purchase Price
for the Preferred Shares to be purchased and an amount equal to any applicable
transfer tax required to be paid by the holder of such Right Certificate in
accordance with Section 9 hereof, in cash or by certified check, cashier's check
or money order payable to the order of Brillian, the Rights Agent shall
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Shares, or make available if the Rights Agent is such transfer agent,
certificates for the number of Preferred Shares to be purchased, and Brillian
hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) requisition from a depositary agent appointed by Brillian
depositary receipts representing (interests in) such number of one
one-thousandths of a Preferred Share as are to be purchased (in which case
certificates for the Preferred Shares represented by such receipts shall be
deposited by the transfer agent with such depositary agent), and Brillian hereby
directs such depositary agent to comply with such request; (ii) when
appropriate, requisition from Brillian the amount of cash to be paid in lieu of
the issuance of fractional shares in accordance with Section 14 hereof; (iii)
promptly after receipt of such certificates or depositary receipts, cause the
same to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may properly be designated by
such holder; and (iv) when appropriate, after receipt, promptly deliver such
cash to or upon the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate
shall exercise less than all of the Rights evidenced thereby, a new Right
Certificate evidencing Rights equivalent to the exercisable Rights remaining
unexercised shall be issued by the Rights Agent to the registered holder of such
Right Certificate or to such holder's duly authorized assigns, subject to the
provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor Brillian shall be obligated to undertake any action
with respect to a registered holder of Rights upon the occurrence of any
purported transfer or purported exercise of Rights pursuant to Section 6 hereof
or this Section 7 unless such registered holder shall have (i) completed and
signed the certificate contained in the form of assignment or form of election
to purchase set forth on the reverse side of the Right Certificate surrendered
for such transfer or exercise and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) thereof as
Brillian may reasonably request.
Section 8 CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to Brillian or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. Brillian shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by Brillian otherwise
than upon the exercise thereof. The Rights Agent shall deliver all cancelled
Right Certificates to Brillian, or shall, at the written request of Brillian,
destroy such cancelled Right Certificates, and, in such case, shall deliver a
certificate of destruction thereof to Brillian.
Section 9 AVAILABILITY OF PREFERRED SHARES. Brillian covenants and
agrees that it will cause to be reserved and kept available out of its
authorized and unissued shares of preferred stock or any Preferred Shares held
in its treasury the number of Preferred Shares that will be sufficient to permit
the exercise in full of all outstanding Rights in accordance with Section 7
hereof. Brillian covenants and
8
agrees that it will take all such action as may be necessary to ensure that all
Preferred Shares delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such Preferred Shares (subject to payment of
the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable shares.
So long as the Preferred Shares issuable upon the exercise of Rights may
be listed or admitted to trading on any national securities exchange, or quoted
on NASDAQ, Brillian shall use its best efforts to cause, from and after such
time as the Rights become exercisable, all shares reserved for such issuance to
be listed or admitted to trading on such exchange, or quoted on NASDAQ, upon
official notice of issuance upon such exercise.
From and after such time as the Rights become exercisable, Brillian shall
use its best efforts, if then necessary to permit the issuance of Preferred
Shares upon the exercise of Rights, to register and qualify such Preferred
Shares under the Securities Act and any applicable state securities or "Blue
Sky" laws (to the extent exemptions therefrom are not available), cause such
registration statement and qualifications to become effective as soon as
practicable after such filing and keep such registration and qualifications
effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the earlier of the date as of which the Rights are no
longer exercisable for such securities and the Expiration Date. Brillian may
temporarily suspend, for a period of time not to exceed 90 days, the
exercisability of the Rights in order to prepare and file a registration
statement under the Securities Act and permit it to become effective. Upon any
such suspension, Brillian shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained and until a registration statement
under the Securities Act shall have been declared effective, unless an exemption
therefrom is available.
Brillian further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares upon the exercise of Rights. Brillian shall not, however,
be required to pay any transfer tax which may be payable in respect of any
transfer or delivery of Right Certificates to a Person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Shares in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any certificates or depositary receipts for Preferred Shares upon the exercise
of any Rights until any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been established to Brillian's reasonable satisfaction that no such
tax is due.
Section 10 PREFERRED SHARES RECORD DATE. Each Person in whose name
any certificate for Preferred Shares is issued upon the exercise of Rights shall
for all purposes be deemed to have become the holder of record of the Preferred
Shares represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that, if the date of such surrender and payment is a date
upon which the Preferred Shares transfer books of Brillian are closed, such
Person shall be deemed to have become the record holder of such shares on, and
such certificate shall be dated, the next succeeding Business Day on which the
Preferred Shares transfer books of Brillian are open. Prior to the exercise of
the Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Preferred Shares for which the Rights
shall be exercisable, including, without limitation, the right to vote or to
receive dividends or other distributions, and shall not be entitled to receive
any notice of any proceedings of Brillian, except as provided herein.
9
Section 11 ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES
AND NUMBER OF RIGHTS. The Purchase Price, the number of Preferred Shares or
other securities or property purchasable upon exercise of each Right and the
number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) In the event Brillian shall at any time after the date
of this Agreement (A) declare and pay a dividend on the Preferred Shares payable
in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which Brillian is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a), the number and kind of shares of
capital stock issuable upon exercise of a Right as of the record date for such
dividend or the effective date of such subdivision, combination or
reclassification, shall be proportionately adjusted so that the holder of any
Right exercised after such time shall be entitled to receive the aggregate
number and kind of shares of capital stock which, if such Right had been
exercised immediately prior to such date and at a time when the Preferred Shares
transfer books of Brillian were open, such holder would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification.
(ii) Subject to Section 24 of this Agreement, in the event
any Person becomes an Acquiring Person (the first occurrence of such event being
referred to hereinafter as the "Flip-In Event"), then (A) the Purchase Price
shall be adjusted to be the Purchase Price in effect immediately prior to the
Flip-In Event multiplied by the number of one one-thousandths of a Preferred
Share for which a Right was exercisable immediately prior to such Flip-In Event,
whether or not such Right was then exercisable, and (B) each holder of a Right,
except as otherwise provided in this Section 11(a)(ii) and Section 11(a)(iii)
hereof, shall thereafter have the right to receive, upon exercise thereof at a
price equal to the Purchase Price (as so adjusted), in accordance with the terms
of this Agreement and in lieu of Preferred Shares, such number of Common Shares
as shall equal the result obtained by dividing the Purchase Price (as so
adjusted) by 50% of the current per share market price of the Common Shares
(determined pursuant to Section 11(d) hereof) on the date of such Flip-In Event;
provided, however, that the Purchase Price (as so adjusted) and the number of
Common Shares so receivable upon exercise of a Right shall, following the
Flip-In Event, be subject to further adjustment as appropriate in accordance
with Section 11(f) hereof. Notwithstanding anything in this Agreement to the
contrary, however, from and after the Flip-In Event, any and all Rights that are
beneficially owned by (x) any Acquiring Person (or any Affiliate or Associate of
any Acquiring Person), (y) a transferee of any Acquiring Person (or any such
Affiliate or Associate thereof) who becomes a transferee after the Flip-In Event
or (z) a transferee of any Acquiring Person (or any such Affiliate or Associate)
who became a transferee prior to or concurrently with the Flip-In Event pursuant
to either (I) a transfer from the Acquiring Person to holders of its equity
securities or to any Person with whom it has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (II) a transfer
which the Board of Directors has determined is part of a plan, arrangement or
understanding which has the purpose or effect of avoiding the provisions of this
paragraph, and subsequent transferees of such Persons, shall be void without any
further action and any holder of such Rights shall thereafter have no rights
whatsoever with respect to such Rights under any provision of this Agreement.
Brillian shall use all reasonable efforts to ensure that the provisions of this
Section 11(a)(ii) are complied with, but shall have no liability to any holder
of Right Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder. From and after the Flip-In Event, no Right Certificate
shall be issued pursuant to Section 3 or Section 6 hereof that represents Rights
that are or have become void pursuant to the provisions of this paragraph, and
any Right Certificate delivered to the Rights Agent that represents Rights that
are or have become void pursuant to the provisions of this paragraph shall be
canceled. From and after the occurrence of an event specified in Section 13(a)
hereof, any Rights that
10
theretofore have not been exercised pursuant to this Section 11(a)(ii) shall
thereafter be exercisable only in accordance with Section 13 and not pursuant to
this Section 11(a)(ii).
(iii) Brillian may at its option substitute for a Common
Share issuable upon the exercise of Rights in accordance with the foregoing
subparagraph (ii) a number of Preferred Shares or fraction thereof such that the
current per share market price of one Preferred Share multiplied by such number
or fraction is equal to the current per share market price of one Common Share.
In the event that there shall not be sufficient Common Shares authorized but
unissued (or issued but not outstanding) to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii), the Board of
Directors shall, with respect to such deficiency, to the extent permitted by
applicable law and any material agreements then in effect to which Brillian is a
party, (A) determine the excess (such excess, the "Spread") of (1) the value of
the Common Shares issuable upon the exercise of a Right in accordance with the
foregoing subparagraph (ii) (the "Current Value") over (2) the Purchase Price
(as adjusted in accordance with the foregoing subparagraph (ii)), and (B) with
respect to each Right (other than Rights which have become void pursuant to the
foregoing subparagraph (ii)), make adequate provision to substitute for the
Common Shares issuable in accordance with the foregoing subparagraph (ii) upon
exercise of the Right and payment of the Purchase Price (as adjusted in
accordance therewith), (1) cash, (2) a reduction in such Purchase Price, (3)
Preferred Shares or other equity securities of Brillian (including, without
limitation, shares or fractions of shares of preferred stock which, by virtue of
having dividend, voting, liquidation and other rights substantially comparable
to those of the Common Shares, are deemed in good faith by the Board of
Directors to have substantially the same value as the Common Shares (such
Preferred Shares and shares or fractions of shares of preferred stock are
hereinafter referred to as "Common Stock Equivalents")), (4) debt securities of
Brillian, (5) other assets, or (6) any combination of the foregoing, having a
value which, when added to the value of the Common Shares issued upon exercise
of such Right, shall have an aggregate value equal to the Current Value (less
the amount of any reduction in such Purchase Price), where such aggregate value
has been determined by the Board of Directors upon the advice of a nationally
recognized investment banking firm selected in good faith by the Board of
Directors; provided, however, that if Brillian shall not make adequate provision
to deliver value pursuant to clause (B) above within thirty (30) days following
the Flip-In Event (the date of the Flip-In Event being the "Section 11(a)(ii)
Trigger Date"), then Brillian shall be obligated to deliver, to the extent
permitted by applicable law and any material agreements then in effect to which
Brillian is a party, upon the surrender for exercise of a Right and without
requiring payment of such Purchase Price, Common Shares (to the extent
available), and then, if necessary, such number or fractions of Preferred Shares
(to the extent available) and then, if necessary, cash, which shares and/or cash
have an aggregate value equal to the Spread. If, upon the occurrence of the
Flip-In Event, the Board of Directors shall determine in good faith that it is
likely that sufficient additional Common Shares could be authorized for issuance
upon exercise in full of the Rights, then, if the Board of Directors so elects,
the thirty (30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that Brillian may seek stockholder approval for the
authorization of such additional shares (such thirty (30) day period, as it may
be extended, is herein called the "Substitution Period"). To the extent that
Brillian determines that some action need be taken pursuant to the second and/or
third sentence of this Section 11(a)(iii), Brillian (x) shall provide, subject
to Section 11(a)(ii) hereof and the last sentence of this Section 11(a)(iii)
hereof, that such action shall apply uniformly to all outstanding Rights and (y)
may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant to
such second sentence and to determine the value thereof. In the event of any
such suspension, Brillian shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. For purposes
of this Section 11(a)(iii), the value of the Common Shares shall be the current
per share market price (as determined pursuant to Section 11(d)(i)) on the
Section 11(a)(ii) Trigger Date and the per share or fractional value of any
"Common Stock Equivalent" shall be
11
deemed to equal the current per share market price of the Common Shares. The
Board of Directors of Brillian may, but shall not be required to, establish
procedures to allocate the right to receive Common Shares upon the exercise of
the Rights among holders of Rights pursuant to this Section 11(a)(iii).
(b) In case Brillian shall fix a record date for the issuance
of rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same rights,
privileges and preferences as the Preferred Shares ("Equivalent Preferred
Shares")) or securities convertible into Preferred Shares or Equivalent
Preferred Shares at a price per Preferred Share or Equivalent Preferred Shares
(or having a conversion price per share, if a security convertible into
Preferred Shares or Equivalent Preferred Shares) less than the then current per
share market price of the Preferred Shares (determined pursuant to Section 11(d)
hereof) on such record date, the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of Preferred Shares and Equivalent Preferred Shares
outstanding on such record date plus the number of Preferred Shares and
Equivalent Preferred Shares which the aggregate offering price of the total
number of Preferred Shares and/or Equivalent Preferred Shares so to be offered
(and/or the aggregate initial conversion price of the convertible securities so
to be offered) would purchase at such current market price, and the denominator
of which shall be the number of Preferred Shares and Equivalent Preferred Shares
outstanding on such record date plus the number of additional Preferred Shares
and/or Equivalent Preferred Shares to be offered for subscription or purchase
(or into which the convertible securities so to be offered are initially
convertible); provided, however, that in no event shall the consideration to be
paid upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of Brillian issuable upon exercise of one Right. In case
such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of Brillian, whose
determination shall be described in a statement filed with the Rights Agent.
Preferred Shares and Equivalent Preferred Shares owned by or held for the
account of Brillian shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case Brillian shall fix a record date for the making of
a distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which Brillian
is the continuing or surviving corporation) of evidences of indebtedness or
assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Preferred Shares
(determined pursuant to Section 11(d) hereof) on such record date, less the fair
market value (as determined in good faith by the Board of Directors of Brillian
whose determination shall be described in a statement filed with the Rights
Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one
Preferred Share, and the denominator of which shall be such current per share
market price (determined pursuant to Section 11(d) hereof) of the Preferred
Shares; provided, however, that in no event shall the consideration to be paid
upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of Brillian to be issued upon exercise of one Right.
Such adjustments shall be made successively whenever such a record date is
fixed; and in the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
12
(d) (i) Except as otherwise provided herein, for the purpose of any
computation hereunder, the "current per share market price" of any security (a
"Security" for the purpose of this Section 11(d)(i)) on any date shall be deemed
to be the average of the daily closing prices per share of such Security for the
30 consecutive Trading Days immediately prior to such date; provided, however,
that, in the event that the current per share market price of the Security is
determined during a period following the announcement by the issuer of such
Security of (A) a dividend or distribution on such Security payable in shares of
such Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such Security and prior to the
expiration of 30 Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case, as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Security is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Security is listed or admitted to trading or, if the Security is
not listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use, or, if on any such date the Security is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Security selected by the
Board of Directors of Brillian. The term "Trading Day" shall mean a day on which
the principal national securities exchange or quotation system on which the
Security is listed or admitted to trading is open for the transaction of
business, or, if the Security is not listed or admitted to trading on any
national securities exchange or quotation system, a Business Day.
(ii) For the purpose of any computation hereunder, if the Preferred
Shares are publicly traded, the "current per share market price" of the
Preferred Shares shall be determined in accordance with the method set forth in
Section 11(d)(i). If the Preferred Shares are not publicly traded but the Common
Shares are publicly traded, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be the current per share market
price of the Common Shares as determined pursuant to Section 11(d)(i) hereof
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by one thousand (as
adjusted in accordance with the Certificate of Designation for the Preferred
Shares). If neither the Common Shares nor the Preferred Shares are publicly
traded, "current per share market price" shall mean the fair value per share as
determined in good faith by the Board of Directors of Brillian, whose
determination shall be described in a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one one-hundred-thousandth
of a Preferred Share or one one-hundredth of a Common Share or of any other
share or security as the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 shall be made no later
than the earlier of (i) three years from the date of the transaction which
requires such adjustment or (ii) the Expiration Date.
(f) If, as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of Brillian
13
other than Preferred Shares, thereafter the Purchase Price and the number of
such other shares so receivable upon exercise of any Right shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Shares contained in
Sections 11(a), 11(b), 11(c), 11(e), 11(h), 11(i) and 11(m) hereof, as
applicable, and the provisions of Sections 7, 9, 10, 13 and 14 hereof with
respect to the Preferred Shares shall apply on like terms to any such other
shares.
(g) All Rights originally issued by Brillian subsequent to any adjustment
made to the Purchase Price hereunder shall evidence the right to purchase, at
the adjusted Purchase Price, the number of one one-thousandths of a Preferred
Share purchasable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.
(h) Unless Brillian shall have exercised its election as provided in
Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and (c) hereof, each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of one
one-thousandths of a Preferred Share (calculated to the nearest one
one-hundred-thousandth of a Preferred Share) obtained by (i) multiplying (x) the
number of one one-thousandths of a share purchasable upon the exercise of a
Right immediately prior to this adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment.
(i) Brillian may elect, on or after the date of any adjustment of the
Purchase Price pursuant to Sections 11(b) or 11(c) hereof to adjust the number
of Rights in substitution for any adjustment in the number of one
one-thousandths of a Preferred Share purchasable upon the exercise of a Right.
Each of the Rights outstanding after such adjustment of the number of Rights
shall be exercisable for the number of one one-thousandths of a Preferred Share
for which a Right was exercisable immediately prior to such adjustment. Each
Right held of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest one one-hundredth)
obtained by dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. Brillian shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. Such record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), Brillian may, as promptly
as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of Brillian, shall cause to be
distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by Brillian, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein, and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or in
the number of one one-thousandths of a Preferred Share issuable upon the
exercise of a Right, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number of one one-thousandths
of a Preferred Share which were expressed in the initial Right Certificates
issued hereunder.
14
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then applicable par value, if any, of the fraction of
Preferred Shares issuable upon exercise of a Right, Brillian shall take any
corporate action which may, in the opinion of its counsel, be necessary in order
that Brillian may validly and legally issue fully paid and nonassessable
Preferred Shares, or other capital stock or securities, at such adjusted
Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, Brillian may elect to defer until the occurrence of such event issuing to
the holder of any Right exercised after such record date of the Preferred Shares
and other capital stock or securities of Brillian, if any, issuable upon such
exercise over and above the Preferred Shares and other capital stock or
securities of Brillian, if any, issuable upon such exercise on the basis of the
Purchase Price in effect prior to such adjustment; provided, however, that
Brillian shall deliver to such holder a due xxxx or other appropriate instrument
evidencing such holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, Brillian
shall be entitled to make such adjustments in the Purchase Price, in addition to
those adjustments expressly required by this Section 11, as and to the extent
that it, in its sole discretion, shall determine to be advisable in order that
any consolidation or subdivision of the Preferred Shares, issuance wholly for
cash of any Preferred Shares at less than the current market price, issuance
wholly for cash of Preferred Shares or securities which by their terms are
convertible into or exchangeable for Preferred Shares, dividends on Preferred
Shares payable in Preferred Shares or issuance of rights, options or warrants
referred to above in Section 11(b), hereafter made by Brillian to holders of its
Preferred Shares shall not be taxable to such stockholders.
(n) Anything in this Agreement to the contrary notwithstanding, in the
event that, at any time after the date of this Agreement and prior to the
Distribution Date, Brillian shall (i) declare and pay any dividend on the Common
Shares payable in Common Shares, or (ii) effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of a dividend payable in Common Shares) into a greater or lesser number
of Common Shares, then, in each such case, (A) the number Rights associated with
each Common Share then outstanding, or issued or delivered thereafter, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each Common Share following any such event shall equal the result obtained by
multiplying the number of Rights associated with each Common Share outstanding
immediately prior to such event by a fraction the numerator of which shall be
the total number of Common Shares outstanding immediately prior to the
occurrence of the event and the denominator of which shall be the total number
of Common Shares outstanding immediately following the occurrence of such event.
(o) Brillian agrees that, after the earlier of the Distribution Date or
the Shares Acquisition Date, it will not, except as permitted by Sections 23, 24
or 27 hereof, take (or permit any Subsidiary to take) any action if at the time
such action is taken it is reasonably foreseeable that such action will diminish
substantially or eliminate the benefits intended to be afforded by the Rights as
provided in this Agreement.
Section 12 CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 or 13 hereof, Brillian
shall promptly (a) prepare a certificate setting forth such adjustment and a
brief statement of the facts accounting for such adjustment, (b) file with the
Rights Agent and with each transfer agent for the Common Shares or the Preferred
Shares a copy of such certificate, and (c) mail a brief summary thereof to each
holder of a Right Certificate in accordance with Section 25 hereof. The Rights
Agent shall be fully protected in relying on any such
15
certificate and on any adjustment therein contained and shall not be deemed to
have knowledge of any such adjustment unless and until it shall have received
such certificate.
Section 13 CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER.
(a) In the event, directly or indirectly, at any time after the Flip-in
Event, (i) Brillian shall consolidate with, or merge with and into, any other
Person, (ii) any Person shall merge with and into Brillian and Brillian shall be
the continuing or surviving corporation of such merger and, in connection with
such merger, all or part of the Common Shares shall be changed into or exchanged
for stock or other securities of any other Person (or Brillian) or cash or any
other property, or (iii) Brillian shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of Brillian and its Subsidiaries (taken as a whole) to any other
Person other than Brillian or one or more of its wholly-owned Subsidiaries,
then, upon the first occurrence of any such event, proper provision shall be
made so that: (A) each holder of a Right (other than Rights which have become
void pursuant to Section 11(a)(ii) hereof) shall thereafter have the right to
receive, upon the exercise thereof at the Purchase Price (as theretofore
adjusted in accordance with Section 11(a)(ii) hereof), in accordance with the
terms of this Agreement and in lieu of Preferred Shares or Common Shares of
Brillian, such number of validly authorized and issued, fully paid,
non-assessable and freely tradeable Common Shares of the Principal Party (as
such term is hereinafter defined), not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall equal the result
obtained by dividing the Purchase Price (as theretofore adjusted in accordance
with Section 11(a)(ii) hereof) by 50% of the current per share market price of
the Common Shares of such Principal Party (determined pursuant to Section 11(d)
hereof) on the date of consummation of such consolidation, merger, sale or
transfer; provided, however, that the Purchase Price (as theretofore adjusted in
accordance with Section 11(a)(ii) hereof) and the number of Common Shares of
such Principal Party so receivable upon exercise of a Right shall be subject to
further adjustment as appropriate in accordance with Section 11(f) hereof to
reflect any events occurring in respect of the Common Shares of such Principal
Party after the occurrence of such consolidation, merger, sale or transfer; (B)
such Principal Party shall thereafter be liable for, and shall assume, by virtue
of such consolidation, merger, sale or transfer, all the obligations and duties
of Brillian pursuant to this Agreement; (C) the term "Company" shall thereafter
be deemed to refer to such Principal Party; and (D) such Principal Party shall
take such steps (including, but not limited to, the reservation of a sufficient
number of its Common Shares in accordance with Section 9 hereof) in connection
with such consummation of any such transaction as may be necessary to assure
that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to the Common Shares thereafter deliverable upon
the exercise of the Rights; provided, however, that, upon the subsequent
occurrence of any consolidation, merger, sale or transfer of assets or other
extraordinary transaction in respect of such Principal Party, each holder of a
Right shall thereupon be entitled to receive, upon exercise of a Right and
payment of the Purchase Price as provided in this Section 13(a), such cash,
shares, rights, warrants and other property which such holder would have been
entitled to receive had such holder, at the time of such transaction, owned the
Common Shares of the Principal Party receivable upon the exercise of a Right
pursuant to this Section 13(a), and such Principal Party shall take such steps
(including, but not limited to, reservation of shares of stock) as may be
necessary to permit the subsequent exercise of the Rights in accordance with the
terms hereof for such cash, shares, rights, warrants and other property.
(b) For purposes of this Agreement, "Principal Party" shall mean:
(i) in the case of any transaction described in clause (i) or clause
(ii) of the first sentence of Section 13(a) hereof: (A) the Person that is the
issuer of the securities into which the Common Shares are converted in such
merger or consolidation, or, if there is more than one such issuer, the issuer
the Common Shares of which have the greatest aggregate market value of shares
outstanding,
16
or (B) if no securities are so issued, (x) the Person that is the other party to
the merger, if such Person survives said merger, or, if there is more than one
such Person, the Person the Common Shares of which have the greatest aggregate
market value of shares outstanding or (y) if the Person that is the other party
to the merger does not survive the merger, the Person that does survive the
merger (including Brillian, if it survives) or (z) the Person resulting from the
consolidation; and
(ii) in the case of any transaction described in clause (iii) of the
first sentence of Section 13(a) hereof, the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions, or, if each Person that is a party to such
transaction or transactions receives the same portion of the assets or earning
power so transferred or if the Person receiving the greatest portion of the
assets or earning power cannot be determined, whichever of such Persons is the
issuer of Common Shares having the greatest aggregate market value of shares
outstanding;
provided, however, that in any such case described in the foregoing clause
(b)(i) or (b)(ii), if the Common Shares of such Person are not at such time or
have not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, then (1) if such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, the term "Principal Party" shall refer to such other Person, or (2)
if such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Shares of all of which are and have been so registered, the term
"Principal Party" shall refer to whichever of such Persons is the issuer of
Common Shares having the greatest aggregate market value of shares outstanding,
or (3) if such Person is owned, directly or indirectly, by a joint venture
formed by two or more Persons that are not owned, directly or indirectly, by the
same Person, the rules set forth in clauses (1) and (2) above shall apply to
each of the owners having an interest in the venture as if the Person owned by
the joint venture was a Subsidiary of both or all of such joint venturers, and
the Principal Party in each such case shall bear the obligations set forth in
this Section 13 in the same ratio as its interest in such Person bears to the
total of such interests.
(c) Brillian shall not consummate any consolidation, merger, sale or
transfer referred to in Section 13(a) hereof unless prior thereto Brillian and
the Principal Party involved therein shall have executed and delivered to the
Rights Agent an agreement confirming that the requirements of Sections 13(a) and
(b) hereof shall promptly be performed in accordance with their terms and that
such consolidation, merger, sale or transfer of assets shall not result in a
breach or default by the Principal Party of or under this Agreement as the same
shall have been assumed by the Principal Party pursuant to Sections 13(a) and
(b) hereof and providing that, as soon as practicable after executing such
agreement pursuant to this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Securities Act,
if necessary, with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, use its best efforts to cause
such registration statement to become effective as soon as practicable after
such filing and use its best efforts to cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date and similarly comply with all
applicable state securities laws;
(ii) use its best efforts, if the Common Shares of the Principal Party
shall be listed or admitted to trading on the New York Stock Exchange or on
another national securities exchange, to list or admit to trading (or continue
the listing of) the Rights and the securities purchasable upon exercise of the
Rights on the New York Stock Exchange or such securities exchange, or, if the
Common Shares of the Principal Party shall not be listed or admitted to trading
on the New York Stock Exchange or a national securities exchange, to cause the
Rights and the securities receivable upon exercise of the Rights to be
authorized for quotation on NASDAQ or on such other system then in use;
17
(iii) deliver to holders of the Rights historical financial statements
for the Principal Party which comply in all respects with the requirements for
registration on Form 10 (or any successor form) under the Exchange Act; and
(iv) obtain waivers of any rights of first refusal or preemptive rights
in respect of the Common Shares of the Principal Party subject to purchase upon
exercise of outstanding Rights.
(d) In case the Principal Party has a provision in any of its authorized
securities or in its certificate of incorporation or by-laws or other
instrument(s) governing its affairs, which provision would have the effect of
(i) causing such Principal Party to issue (other than to holders of Rights
pursuant to this Section 13), in connection with, or as a consequence of, the
consummation of a transaction referred to in this Section 13, Common Shares or
Common Stock Equivalents of such Principal Party at less than the then current
market price per share thereof (determined pursuant to Section 11(d) hereof) or
securities exercisable for, or convertible into, Common Shares or Common Stock
Equivalents of such Principal Party at less than the then current market price,
or (ii) providing for any special payment, tax or similar provision in
connection with the issuance of the Common Shares of such Principal Party
pursuant to the provisions of Section 13, then, in such event, Brillian hereby
agrees with each holder of Rights that it shall not consummate any such
transaction unless prior thereto Brillian and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
that the provision in question of such Principal Party shall have been canceled,
waived or amended, or that the authorized securities shall be redeemed, so that
the applicable provision will have no effect in connection with, or as a
consequence of, the consummation of the proposed transaction.
(e) Brillian covenants and agrees that it shall not, at any time after
the Flip-In Event, enter into any transaction of the type described in clauses
(i) through (iii) of Section 13(a) hereof if (i) at the time of or immediately
after such consolidation, merger, sale, transfer or other transaction there are
any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights, (ii) prior to,
simultaneously with or immediately after such consolidation, merger, sale,
transfer or other transaction, the stockholders of the Person who constitutes,
or would constitute, the Principal Party for purposes of Section 13(b) hereof
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates or Associates, or (iii) the form or nature of organization
of the Principal Party would preclude or limit the exercisability of the Rights.
Section 14 FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) Brillian shall not be required to issue fractions of Rights (except,
prior to the Distribution Date, in accordance with Section 11(n) hereof) or to
distribute Right Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case, as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities
18
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of Brillian. If on any such date no such
market maker is making a market in the Rights, the fair value of the Rights on
such date as determined in good faith by the Board of Directors of Brillian
shall be used.
(b) Brillian shall not be required to issue fractions of Preferred Shares
(other than fractions which are integral multiples of one one-thousandth of a
Preferred Share) upon exercise of the Rights or to distribute certificates which
evidence fractional Preferred Shares (other than fractions which are integral
multiples of one one-thousandth of a Preferred Share) upon the exercise or
exchange of Rights. Interests in fractions of Preferred Shares in integral
multiples of one one-thousandth of a Preferred Share may, at the election of
Brillian, be evidenced by depositary receipts, pursuant to an appropriate
agreement between Brillian and a depositary selected by it; provided, however,
that such agreement shall provide that the holders of such depositary receipts
shall have all the rights, privileges and preferences to which they are entitled
as beneficial owners of the Preferred Shares represented by such depositary
receipts. In lieu of fractional Preferred Shares that are not integral multiples
of one one-thousandth of a Preferred Share, Brillian shall pay to the registered
holders of Right Certificates at the time such Rights are exercised or exchanged
as herein provided an amount in cash equal to the same fraction of the current
market value of a whole Preferred Share (as determined in accordance with
Section 14(a) hereof) for the Trading Day immediately prior to the date of such
exercise or exchange.
(c) Brillian shall not be required to issue fractions of Common Shares or
to distribute certificates which evidence fractional Common Shares upon the
exercise or exchange of Rights. In lieu of such fractional shares, Brillian
shall pay to the registered holders of the Right Certificates with regard to
which such fractional Common Shares would otherwise be issuable an amount in
cash equal to the same fraction of the current market value of a whole Common
Share (as determined in accordance with Section 14(a) hereof) for the Trading
Day immediately prior to the date of such exercise or exchange.
(d) The holder of a Right by the acceptance of the Right expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise or exchange of a Right (except as expressly provided above).
Section 15 RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), on his own behalf and for his own
benefit, may enforce, and may institute and maintain any suit, action or
proceeding against Brillian to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate (or, prior to
the Distribution Date, of the Common Shares) in the manner provided therein and
in this Agreement. Without limiting the foregoing or any remedies available to
the holders of Rights, it is specifically acknowledged that the holders of
Rights would not have an adequate remedy at law for any breach of this
Agreement, and will be entitled to specific performance of the obligations
under, and injunctive relief against actual or threatened violations of the
obligations of any Person subject to, this Agreement.
Section 16 AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with Brillian and the Rights Agent and
with every other holder of a Right that:
19
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the office or
agency of the Rights Agent designated for such purpose, duly endorsed or
accompanied by a proper instrument of transfer; and
(c) Brillian and the Rights Agent may deem and treat the person in whose
name the Right Certificate (or, prior to the Distribution Date, the Common
Shares certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or writing
on the Right Certificates or the Common Shares certificate made by anyone other
than Brillian or the Rights Agent) for all purposes whatsoever, and neither
Brillian nor the Rights Agent (subject to Section 7(e) hereof) shall be affected
by any notice to the contrary.
Section 17 RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as
such, of any Right Certificate shall be entitled to vote, receive dividends or
distributions or be deemed for any purpose the holder of the Preferred Shares or
any other securities of Brillian which may at any time be issuable on the
exercise or exchange of the Rights represented thereby, nor shall anything
contained herein or in any Right Certificate be construed to confer upon the
holder of any Right Certificate, as such, any of the rights of a stockholder of
Brillian or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action, or to receive notice of meetings or other actions
affecting stockholders (except as expressly provided in this Agreement), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have been exercised or
exchanged in accordance with the provisions hereof.
Section 18 CONCERNING THE RIGHTS AGENT.
(a) Brillian agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder, and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder. Brillian also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability, or expense incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability arising therefrom, directly or indirectly.
(b) The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
Brillian, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons, or
otherwise upon the advice of counsel as set forth in Section 20 hereof.
Section 19 MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust powers of the Rights Agent or any
20
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Right Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and, in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and, in all such cases, such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and, in case at that time any
of the Right Certificates shall not have been countersigned, the Rights Agent
may countersign such Right Certificates either in its prior name or in its
changed name; and, in all such cases, such Right Certificates shall have the
full force provided in the Right Certificates and in this Agreement.
Section 20 DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which Brillian and the holders of Right Certificates, by
their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for Brillian), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by Brillian prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chief Executive Officer,
the President or the Chief Financial Officer of Brillian, and the Secretary of
Brillian, and delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good faith
by it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to Brillian and any other
Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by Brillian only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by Brillian of any covenant or condition
contained in this Agreement or in any Right Certificate; nor shall it be
responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in
the terms of the Rights provided for in Sections 3, 11, 13, 23 and 24 hereof, or
the ascertaining of the
21
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after receipt
of a certificate furnished pursuant to Section 12, describing such change or
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Preferred Shares or other securities to be issued pursuant to this Agreement or
any Right Certificate or as to whether any Preferred Shares or other securities
will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) Brillian agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person reasonably believed by the Rights Agent to be one of the Chief Executive
Officer, the President, the Chief Financial Officer or the Secretary of
Brillian, and to apply to such officers for advice or instructions in connection
with its duties, and it shall not be liable for any action taken or suffered by
it in good faith in accordance with instructions of any such officer or for any
delay in acting while waiting for those instructions. Any application by the
Rights Agent for written instructions from Brillian may, at the option of the
Rights Agent, set forth in writing any action proposed to be taken or omitted by
the Rights Agent under this Agreement and the date on and/or after which such
action shall be taken or such omission shall be effective. The Rights Agent
shall not be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or after the date
specified in such application (which date shall not be less than five Business
Days after the date any officer of Brillian actually receives such application
unless any such officer shall have consented in writing to an earlier date)
unless, prior to taking any such action (or the effective date in the case of an
omission), the Rights Agent shall have received written instructions in response
to such application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of Brillian or become pecuniarily interested in any transaction in
which Brillian may be interested, or contract with or lend money to Brillian or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for Brillian or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to Brillian resulting from any such act, default, neglect
or misconduct, provided that reasonable care was exercised in the selection and
continued employment thereof.
(j) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate contained in the form of
assignment or the form of election to purchase set forth on the reverse thereof,
as the case may be, has not been completed in a manner sufficient to certify
that the holder is not an Acquiring Person (or an Affiliate or Associate
thereof) or a transferee thereof, the Rights Agent shall not take any further
action with respect to such requested exercise or transfer without first
consulting with Brillian.
Section 21 CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Agreement upon 30
days' notice in writing mailed to
22
Brillian and to each transfer agent of the Common Shares or Preferred Shares by
registered or certified mail, and, following the Distribution Date, to the
holders of the Right Certificates by first-class mail. Brillian may remove the
Rights Agent or any successor Rights Agent upon 30 days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Shares or Preferred Shares by registered or
certified mail, and, following the Distribution Date, to the holders of the
Right Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, Brillian shall appoint a
successor to the Rights Agent. If Brillian shall fail to make such appointment
within a period of 30 days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (which holder
shall, with such notice, submit his Right Certificate for inspection by
Brillian), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by Brillian or by such a court, shall
be a corporation organized and doing business under the laws of the United
States or of any State of the United States or the District of Columbia, in good
standing, having an office in the State of California or New York, which is
authorized under such laws to exercise corporate trust or stock transfer powers
and is subject to supervision or examination by federal or state authority and
which has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50 million. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, Brillian shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares or Preferred Shares, and, following the Distribution Date,
mail a notice thereof in writing to the registered holders of the Right
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22 ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, Brillian may, at
its option, issue new Right Certificates evidencing Rights in such form(s) as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Right Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of Common Shares following the Distribution Date and prior to the
Expiration Date, Brillian may with respect to Common Shares so issued or sold
pursuant to (i) the exercise of stock options, (ii) under any employee plan or
arrangement, (iii) upon the exercise, conversion or exchange of securities,
notes or debentures issued by Brillian or (iv) a contractual obligation of
Brillian, in each case existing prior to the Distribution Date, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale.
Section 23 REDEMPTION.
(a) The Board of Directors of Brillian may, at its option and in its sole
discretion, at any time prior to the Flip-In Event, redeem all but not less than
all the then outstanding Rights at a redemption price of $0.01 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring in respect of the Common Shares after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price").
The redemption of the Rights by the Board of Directors may be made effective at
such time, on such basis and with such conditions as the Board of Directors, in
its sole discretion, may establish. The Redemption Price shall be payable, at
the option of
23
Brillian, in cash, Common Shares, or such other form of consideration as the
Board of Directors shall determine.
(b) Immediately upon the action of the Board of Directors ordering the
redemption of the Rights pursuant to paragraph (a) of this Section 23 (or at
such later time as the Board of Directors may establish for the effectiveness of
such redemption), and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right of the holders of
Rights thereafter shall be to receive the Redemption Price. Brillian shall
promptly give public notice of any such redemption; provided, however, that the
failure to give, or any defect in, any such notice shall not affect the validity
of such redemption. Within 10 days after such action of the Board of Directors
ordering the redemption of the Rights (or such later time as the Board of
Directors may establish for the effectiveness of such redemption), Brillian
shall mail a notice of redemption to all the holders of the then outstanding
Rights at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption shall state the method by which the
payment of the Redemption Price will be made.
Section 24 EXCHANGE.
(a) The Board of Directors of Brillian may, at its option and in its sole
discretion, at any time after the Flip-In Event, exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 11 (a)(ii) hereof) for
Common Shares at an exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring in respect of the Common Shares after the date hereof (such amount per
Right being hereinafter referred to as the "Exchange Ratio"). Notwithstanding
the foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after an Acquiring Person shall have become the Beneficial
Owner of Common Shares aggregating 50% or more of the Common Shares then
outstanding. From and after the occurrence of an event specified in Section
13(a) hereof, any Rights that theretofore have not been exchanged pursuant to
this Section 24(a) shall thereafter be exercisable only in accordance with
Section 13 and may not be exchanged pursuant to this Section 24(a). The exchange
of Rights by the Board of Directors may be made effective at such time, on such
basis and with such conditions as the Board of Directors, in its sole
discretion, may establish.
(b) Immediately upon the effectiveness of the action of the Board of
Directors of Brillian ordering the exchange of any Rights pursuant to paragraph
(a) of this Section 24 and without any further action and without any notice,
the right to exercise such Rights shall terminate and the only right thereafter
of a holder of such Rights shall be to receive that number of Common Shares
equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. Brillian shall promptly give public notice of any such exchange;
provided, however, that the failure to give, or any defect in, such notice shall
not affect the validity of such exchange. Brillian shall promptly mail a notice
of any such exchange to all of the holders of the Rights so exchanged at their
last addresses as they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the Common Shares for Rights will be
effected, and, in the event of any partial exchange, the number of Rights which
will be exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become void pursuant to the
provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
24
(c) Brillian may at its option substitute and, in the event that there shall
not be sufficient Common Shares authorized but unissued (or issued but not
outstanding) to permit any exchange of Rights as contemplated in accordance with
this Section 24, Brillian shall substitute to the extent of such insufficiency,
for each Common Share that would otherwise be issuable upon exchange of a Right,
a number of Preferred Shares or fraction thereof (or Equivalent Preferred
Shares, as such term is defined in Section 11(b)) such that the current per
share market price (determined pursuant to Section 11(d) hereof) of one
Preferred Share (or Equivalent Preferred Share) multiplied by such number or
fraction is equal to the current per share market price of one Common Share
(determined pursuant to Section 11(d) hereof) as of the date of such exchange.
Section 25 NOTICE OF CERTAIN EVENTS.
(a) In case Brillian shall, at any time after the earlier of the
Distribution Date or the Shares Acquisition Date, propose (i) to pay any
dividend payable in shares of any class to the holders of the Preferred Shares
or to make any other distribution to the holders of the Preferred Shares (other
than a regular quarterly cash dividend), (ii) to offer to the holders of the
Preferred Shares rights or warrants to subscribe for or to purchase any
additional Preferred Shares or shares of stock of any class or any other
securities, rights or options, (iii) to effect any reclassification of the
Preferred Shares (other than a reclassification involving only the subdivision
or combination of outstanding Preferred Shares), (iv) to effect the liquidation,
dissolution or winding up of Brillian, or (v) to pay any dividend on the Common
Shares payable in Common Shares or to effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares), then, in each such case, Brillian shall
give to each holder of a Right Certificate, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such dividend or distribution or offering of rights or
warrants, or the date on which such liquidation, dissolution, winding up,
reclassification, subdivision, combination or consolidation is to take place and
the date of participation therein by the holders of the Common Shares and/or
Preferred Shares, if any such date is to be fixed, and such notice shall be so
given in the case of any action covered by clause (i) or (ii) above at least 10
days prior to the record date for determining holders of the Preferred Shares
for purposes of such action, and in the case of any such other action, at least
10 days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the Common Shares and/or Preferred
Shares, whichever shall be the earlier.
(b) In case any event set forth in Section 11(a)(ii) or Section 13 hereof
shall occur, then Brillian shall, as soon as practicable thereafter, give to
each holder of a Right Certificate (or, if occurring prior to the Distribution
Date, to each holder of Common Shares), in accordance with Section 26 hereof, a
notice of the occurrence of such event, which notice shall describe such event
and the consequences of such event to holders of Rights under Section 11 (a)(ii)
and/or Section 13 hereof.
Section 26 NOTICES. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on Brillian shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Rights Agent) as follows:
Brillian Corporation
0000 X. Xxxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
Attn: Chief Executive Officer
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by Brillian or by the holder of any Right
Certificate to or on the Rights Agent shall be
25
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with Brillian) as follows:
The Bank of New York
Xxx Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention:__________________
Notices or demands authorized by this Agreement to be given or made by Brillian
or the Rights Agent to the holder of any Right Certificate shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed to such
holder at the address of such holder as shown on the registry books of Brillian.
Section 27 SUPPLEMENTS AND AMENDMENTS. Except as provided in the
penultimate sentence of this Section 27, for so long as the Rights are
outstanding and then redeemable, Brillian may, in its sole and absolute
discretion, and the Rights Agent shall if Brillian so directs, supplement or
amend this Agreement, and/or any term, provision or condition of this Agreement,
in any respect without the consent or approval of any holder or holders of the
Rights. Without limiting the foregoing, Brillian may, at any time prior to the
Flip-In Event, amend this Agreement to lower the percentage thresholds set forth
in Sections 1(a) and 3(a) hereof to not less than 10% (the "Reduced Threshold");
provided, however, that no Person who beneficially owns a number of Common
Shares equal to or greater than the Reduced Threshold shall become an Acquiring
Person unless such Person shall, after the public announcement of the Reduced
Threshold, increase its beneficial ownership of the then outstanding Common
Shares (other than as a result of the purchase or acquisition of Common Shares
by Brillian) to an amount equal to or greater than the greater of (x) the
Reduced Threshold and (y) the sum of (i) the lowest beneficial ownership of such
Person as a percentage of the outstanding Common Shares as of any date on or
after the date of the public announcement of the Reduced Threshold, plus (ii)
..001%. At any time when the Rights are no longer redeemable, except as provided
in the penultimate sentence of this Section 27, Brillian may, and the Rights
Agent shall, if Brillian so directs, supplement or amend this Agreement without
the consent or approval of any holder or holders of Rights, provided that no
such supplement or amendment may (a) adversely affect the interests of the
holders of Rights as such (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person), (b) cause this Agreement again to become
amendable other than in accordance with this sentence, or (c) cause the Rights
again to become redeemable. Notwithstanding anything contained in this Agreement
to the contrary, no supplement or amendment shall be made to this Agreement
which changes the Redemption Price. Upon the delivery of a certificate from an
appropriate officer of Brillian which states that the supplement or amendment is
in compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment, provided that any supplement or amendment that
does not amend Sections 18, 19, 20 or 21 hereof in a manner adverse to the
Rights Agent shall become effective immediately upon execution by Brillian,
whether or not also executed by the Rights Agent.
Section 28 SUCCESSORS. All the terms, conditions, covenants and
provisions of this Agreement by or for the benefit of Brillian or the Rights
Agent shall bind and inure to the benefit of their respective successors and
assigns hereunder.
Section 29 BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any Person other than Brillian, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares) any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and exclusive benefit
of Brillian, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares).
26
Section 30 DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS. The Board
of Directors of Brillian shall have the exclusive power and authority to
administer this Agreement and to exercise the rights and powers specifically
granted to the Board of Directors of Brillian or to Brillian, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including, without limitation, a determination
to redeem or not redeem the Rights, to exchange or not to exchange the Rights or
to amend or not amend this Agreement). All such actions, calculations,
interpretations and determinations that are effected, done or made by the Board
of Directors of Brillian in good faith shall be final, conclusive and binding on
Brillian, the Rights Agent, the holders of the Rights, as such, and all other
parties.
Section 31 SEVERABILITY. The parties intend that this Agreement be enforced
and interpreted as written. If, however, any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 32 GOVERNING LAW. This Agreement and each Right Certificate issued
hereunder shall be deemed to be a contract made under the laws of the state of
Delaware and for all purposes shall be governed by and construed in accordance
with the laws of such state applicable to contracts to be made and performed
entirely within such state.
Section 33 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 34 DESCRIPTIVE HEADINGS. Descriptive headings of the several
sections, subsections and provisions of this Agreement are inserted for
convenience of reference only and shall not control or affect the meaning,
interpretation or construction of any of the terms or provisions hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
Attest: Brillian Corporation
By: By:
------------------------- -------------------------
Name: Name:
----------------------- -----------------------
Title: Title:
---------------------- ----------------------
Attest: THE BANK OF NEW YORK
By: By:
------------------------- -------------------------
Name: Name:
----------------------- -----------------------
Title: Title:
---------------------- ----------------------
28
EXHIBIT A
FORM
OF
CERTIFICATE OF DESIGNATION
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
BRILLIAN CORPORATION
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
Brillian Corporation, a corporation organized and existing under
the General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), in accordance with the provisions of Section 103 thereof, DOES
HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Certificate of Incorporation of the said
Corporation, the said Board of Directors on ______ __, 2003 adopted the
following resolution creating a series of ___,000 shares of Preferred Stock
designated as "Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of the Certificate of
Incorporation, a series of Preferred Stock, par value $.001 per share, of the
Corporation be and hereby is created, and that the designation and number of
shares thereof, and the voting and other powers, preferences and relative,
participating, optional or other rights of the shares of such series, and the
qualifications, limitations and restrictions thereof, are as follows:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. Designation and Amount. There shall be a series of Preferred Stock
that shall be designated as "Series A Junior Participating Preferred Stock," and
the number of shares constituting such series shall be ___,000. Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, however, that no decrease shall reduce the number of shares of Series
A Junior Participating Preferred Stock to less than the number of shares then
issued and outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
2. Dividends and Distribution.
(A) Subject to the prior and superior rights of the holders of any
shares of any class or series of stock of the Corporation ranking prior and
superior to the shares of Series A Junior Participating Preferred Stock with
respect to dividends, the holders of shares of Series A Junior
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Participating Preferred Stock, in preference to the holders of shares of any
class or series of stock of the Corporation ranking junior to the Series A
Junior Participating Preferred Stock in respect thereof, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the last day
of March, June, September and December, in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Junior Participating Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00
or (b) the Adjustment Number (as defined below) times the aggregate per share
amount of all cash dividends, and the Adjustment Number times the aggregate per
share amount (payable in kind) of all non-cash dividends or other distributions
other than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock, par value $.001 per share, of the Corporation (the "Common
Stock") since the immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Junior Participating
Preferred Stock. The "Adjustment Number" shall initially be 1000. In the event
the Corporation shall at any time after ______ __, 2003 (i) declare and pay any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such Adjustment
Number by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 60 days prior to the date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Junior Participating
Preferred Stock shall have the following voting rights:
(A) Each share of Series A Junior Participating Preferred Stock shall
entitle the holder thereof to a number of votes equal to the Adjustment Number
on all matters submitted to a vote of the stockholders of the Corporation.
A-2
(B) Except as required by law, by Section 3(C) and by Section 10
hereof, holders of Series A Junior Participating Preferred Stock shall have no
special voting rights and their consent shall not be required (except to the
extent they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
(C) If, at the time of any annual meeting of stockholders for the
election of directors, the equivalent of six quarterly dividends (whether or not
consecutive) payable on any share or shares of Series A Junior Participating
Preferred Stock are in default, the number of directors constituting the Board
of Directors of the Corporation shall be increased by two. In addition to voting
together with the holders of Common Stock for the election of other directors of
the Corporation, the holders of record of the Series A Junior Participating
Preferred Stock, voting separately as a class to the exclusion of the holders of
Common Stock, shall be entitled at said meeting of stockholders (and at each
subsequent annual meeting of stockholders), unless all dividends in arrears on
the Series A Junior Participating Preferred Stock have been paid or declared and
set apart for payment prior thereto, to vote for the election of two directors
of the Corporation, the holders of any Series A Junior Participating Preferred
Stock being entitled to cast a number of votes per share of Series A Junior
Participating Preferred Stock as is specified in paragraph (A) of this Section
3. Until the default in payments of all dividends which permitted the election
of said directors shall cease to exist, any director who shall have been so
elected pursuant to the provisions of this Section 3(C) may be removed at any
time, with or without cause, only by the affirmative vote of the holders of the
shares of Series A Junior Participating Preferred Stock at the time entitled to
cast a majority of the votes entitled to be cast for the election of any such
director at a special meeting of such holders called for that purpose, and any
vacancy thereby created may be filled by the vote of such holders. If and when
such default shall cease to exist, the holders of the Series A Junior
Participating Preferred Stock shall be divested of the foregoing special voting
rights, subject to revesting in the event of each and every subsequent like
default in payments of dividends. Upon the termination of the foregoing special
voting rights, the terms of office of all persons who may have been elected
directors pursuant to said special voting rights shall forthwith terminate, and
the number of directors constituting the Board of Directors shall be reduced by
two. The voting rights granted by this Section 3(C) shall be in addition to any
other voting rights granted to the holders of the Series A Junior Participating
Preferred Stock in this Section 3.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior Participating
Preferred Stock, except dividends paid ratably on the Series A Junior
Participating Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the holders of
all such shares are then entitled; or
(iii) purchase or otherwise acquire for consideration any shares of
Series A Junior Participating Preferred Stock, or any shares of stock ranking on
a parity with the Series A Junior Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by
A-3
publication (as determined by the Board of Directors) to all holders of Series A
Junior Participating Preferred Stock, or to such holders and holders of any such
shares ranking on a parity therewith, upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the respective
series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired promptly after the acquisition thereof. All such
shares shall upon their retirement become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
any conditions and restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation, dissolution or winding up of the Corporation,
voluntary or otherwise, no distribution shall be made to the holders of shares
of stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Junior Participating Preferred Stock unless,
prior thereto, the holders of shares of Series A Junior Participating Preferred
Stock shall have received an amount per share (the "Series A Liquidation
Preference") equal to the greater of (i) $1.00 plus an amount equal to accrued
and unpaid dividends and distributions thereon, whether or not declared, to the
date of such payment, or (ii) the Adjustment Number times the per share amount
of all cash and other property to be distributed in respect of the Common Stock
upon such liquidation, dissolution or winding up of the Corporation.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other classes and series of stock of the
Corporation, if any, that rank on a parity with the Series A Junior
Participating Preferred Stock in respect thereof, then the assets available for
such distribution shall be distributed ratably to the holders of the Series A
Junior Participating Preferred Stock and the holders of such parity shares in
proportion to their respective liquidation preferences.
(C) Neither the merger or consolidation of the Corporation into or with
another entity nor the merger or consolidation of any other entity into or with
the Corporation shall be deemed to be a liquidation, dissolution or winding up
of the Corporation within the meaning of this Section 6.
7. Consolidation, Merger, Etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the
outstanding shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case each share
of Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share equal to the Adjustment
Number times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged.
8. No Redemption. Shares of Series A Junior Participating Preferred Stock
shall not be subject to redemption by the Corporation.
A-4
9. Ranking. The Series A Junior Participating Preferred Stock shall rank
junior to all other series of the Preferred Stock as to the payment of dividends
and as to the distribution of assets upon liquidation, dissolution or winding
up, unless the terms of any such series shall provide otherwise, and shall rank
senior to the Common Stock as to such matters.
10. Amendment. At any time that any shares of Series A Junior
Participating Preferred Stock are outstanding, the Certificate of Incorporation
of the Corporation shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Series A Junior Participating Preferred Stock, voting separately as a class.
11. Fractional Shares. Series A Junior Participating Preferred Stock may
be issued in fractions of a share that shall entitle the holder, in proportion
to such holder's fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, this Certificate of Designation has been executed on
behalf of the Corporation by its Chief Executive Officer, and attested by its
Secretary, this __ day of __________, 2003.
-----------------------------------
-----------------------------------
-----------------------------------
Attest:
-----------------------------
Secretary
A-5
EXHIBIT B
FORM OF RIGHT CERTIFICATE
Certificate No. R-
NOT EXERCISABLE AFTER ______ __, 2013 OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER
RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS
AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR
BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT)
AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL
NO LONGER BE TRANSFERABLE.
RIGHT CERTIFICATE
Brillian Corporation
This certifies that ____________________________ or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of ___________, 2003, as the same may be amended
from time to time (the "Rights Agreement"), between Brillian Corporation, a
Delaware corporation (the "Company"), and The Bank of New York, as Rights Agent
(the "Rights Agent"), to purchase from Brillian at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and prior to
5:00 P.M., New York City time, on ____________, 2013 at the office or agency of
the Rights Agent designated for such purpose, or of its successor as Rights
Agent, one one-thousandth of a fully paid and non-assessable share of Series A
Junior Participating Preferred Stock, par value $.001 per share (the "Preferred
Stock"), of the Company at a purchase price of $__.00 per one one-thousandth of
a share of Preferred Stock (the "Purchase Price"), upon presentation and
surrender of this Right Certificate with the Form of Election to Purchase duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of one one-thousandths of a share of Preferred Stock which may be
purchased upon exercise hereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of ____________, 2003, based
on the Preferred Stock as constituted at such date. As provided in the Rights
Agreement, the Purchase Price, the number of one one-thousandths of a share of
Preferred Stock (or other securities or property) which may be purchased upon
the exercise of the Rights and the number of Rights evidenced by this Right
Certificate are subject to modification and adjustment upon the happening of
certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned office or agency of the Rights Agent. The
B-1
Company will mail to the holder of this Right Certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or agency of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (i) may be redeemed by the Company at a redemption price of
$.01 per Right or (ii) may be exchanged in whole or in part for shares of the
Company's Common Stock, par value $.001 per share, or shares of Preferred Stock.
No fractional shares of Preferred Stock or Common Stock will be issued
upon the exercise or exchange of any Right or Rights evidenced hereby (other
than fractions of Preferred Stock which are integral multiples of one
one-thousandth of a share of Preferred Stock, which may, at the election of the
Company, be evidenced by depository receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote
or receive dividends or distributions or be deemed for any purpose the holder of
the Preferred Stock or of any other securities of the Company which may at any
time be issuable on the exercise or exchange hereof, nor shall anything
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement) or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised or exchanged as
provided and subject to the conditions in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
B-2
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of _________ __, 2003.
Attest: Brillian Corporation
By: By:
------------------------- -------------------------
Name: Name:
----------------------- -----------------------
Title: Title:
---------------------- ----------------------
Countersigned:
THE BANK OF NEW YORK
By:
-------------------------
Name:
-----------------------
Title:
----------------------
B-3
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH
HOLDER DESIRES TO TRANSFER THE RIGHT CERTIFICATE)
FORM OF ASSIGNMENT
(TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH
HOLDER DESIRES TO TRANSFER THE RIGHT CERTIFICATE)
FOR VALUE RECEIVED __________________________ hereby sells, assigns and
transfers unto _________________________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
_______ Rights represented by this Right Certificate, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ______________________________ Attorney, to transfer said Rights on the
books of the within-named Company, with full power of substitution.
Dated: ____________________________
__________________________________
Signature
SIGNATURE GUARANTEE:
Signatures must be guaranteed by a bank, trust company, broker, dealer or
other eligible institution participating in a recognized signature guarantee
medallion program.
--------------------------------------------------------------------------------
(To be completed)
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, were not acquired by the undersigned
from, and are not being transferred or assigned to an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
----------------------------------
Signature
B-4
Form of Reverse Side of Right Certificate - continued
FORM OF ELECTION TO PURCHASE
(TO BE EXECUTED IF HOLDER DESIRES TO EXERCISE
RIGHTS REPRESENTED BY THE RIGHTS CERTIFICATE)
To Brillian Corporation:
The undersigned hereby irrevocably elects to exercise ________ Rights
represented by this Right Certificate to purchase the shares of Preferred Stock
(or other securities or property) issuable upon the exercise of such Rights and
requests that certificates for such shares of Preferred Stock (or such other
securities) be issued in the name of:
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance remaining of such
Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number:
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
Dated:
-------------------------------------
-------------------------------------------
Signature
(Signature must conform to holder
specified on Right Certificate)
SIGNATURE GUARANTEE:
Signature must be guaranteed by a bank, trust company, broker, dealer or
other eligible institution participating in a recognized signature guarantee
medallion program.
B-5
Form of Reverse Side of Right Certificate - continued
--------------------------------------------------------------------------------
(To be completed)
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, were not acquired by the undersigned
from, and have not been transferred or assigned to an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
---------------------------------------
Signature
--------------------------------------------------------------------------------
NOTICE
The signature in the Form of Assignment or Form of Election to Purchase,
as the case may be, must conform to the name as written upon the face of this
Right Certificate in every particular, without alteration or enlargement or any
change whatsoever.
In the event the certification set forth above in the Form of Assignment
or the Form of Election to Purchase, as the case may be, is not completed, such
Assignment or Election to Purchase will not be honored.
B-6
EXHIBIT C
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT,
RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN
ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN
TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE
TRANSFERABLE.
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
OF BRILLIAN CORPORATION
INTRODUCTION
On __________, 2003, the Board of Directors of our Company, Brillian
Corporation, a Delaware corporation, declared a dividend of one preferred share
purchase right (a "Right") for each outstanding share of common stock, par value
$.001 per share. The dividend is payable on __________, 2003 to the stockholders
of record on __________, 2003. Each Right entitles the registered holder to
purchase from the Company one one-thousandth of a share of Series A Junior
Participating Preferred Stock, par value $.001 per share, of the Company (the
"Preferred Stock"), at a price of $__.00 per one one-thousandth of a share of
Preferred Stock (the "Purchase Price"), subject to adjustment.
Our Board has adopted this Rights Agreement, and declared the Rights
dividend, to protect stockholders from abusive, coercive or otherwise unfair
takeover tactics. In general terms, it works by imposing a significant penalty
upon any person or group that acquires 15% or more of our outstanding common
stock without the approval of our Board. The Rights Agreement should not
interfere with any merger or other business combination approved by our Board.
RIGHTS AGREEMENT
For those interested in the specific terms and provisions of the Rights
Agreement as entered into between our Company and The Bank of New York, as the
Rights Agent, as of __________, 2003, we provide the following summary
description. Please note, however, that this description is only a summary, and
is not complete, and should be read together with the entire Rights Agreement,
which has been filed with the Securities and Exchange Commission as an exhibit
to a Registration Statement on Form 10 dated __________, 2003. A copy of the
agreement is available free of charge from our Company.
THE RIGHTS; CERTIFICATES
The Rights will initially trade with, and will be inseparable from, the
Common Stock. Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (with
certain exceptions provided in the Rights Agreement, an "Acquiring Person") has
acquired beneficial ownership of 15% or more of the outstanding shares of Common
Stock or (ii) 10 business days (or such later date as may be determined by
action of the Board of Directors prior to such time as any person or group of
affiliated persons becomes an Acquiring Person) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 15% or more of
C-1
the outstanding shares of Common Stock (the earlier of such dates being called
the "Distribution Date"), the Rights will be evidenced, with respect to any of
the Common Stock certificates outstanding as of the Record Date, by such Common
Stock certificate together with this Summary of Rights. Among other exceptions,
any existing Board member or other stockholder owning (as of specified dates, on
or prior to the announcement of the Plan's adoption) 15% or more of the
Company's outstanding Common Stock is "grandfathered" (and thus not deemed to be
an "Acquiring Person") under the Plan, and would be permitted to acquire up to
20% of the outstanding shares before becoming an "Acquiring Person", as provided
(and subject to the conditions) in the Rights Agreement.
The Rights Agreement provides that, until the Distribution Date (or
earlier expiration of the Rights), the Rights will be transferred with and only
with the Common Stock. Until the Distribution Date (or earlier expiration of the
Rights), new Common Stock certificates issued after the Record Date upon
transfer or new issuances of Common Stock will contain a notation incorporating
the Rights Agreement by reference. Until the Distribution Date (or earlier
expiration of the Rights), the surrender for transfer of any certificates for
shares of Common Stock outstanding as of the Record Date, even without such
notation or a copy of this Summary of Rights, will also constitute the transfer
of the Rights associated with the shares of Common Stock represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights.
EXERCISABILITY; EXERCISE PRICE; ADJUSTMENTS
The Rights are not exercisable until the Distribution Date. Until a
Right is exercised (or exchanged), the holder thereof, as such, will have no
rights as a stockholder of Brillian, including, without limitation, the right to
vote or to receive dividends.
Once exercisable, each Right entitles the registered holder to purchase
from the Company one one-thousandth of a share of Preferred Stock, at the
Purchase Price of $__.00 per one one-thousandth of a share of Preferred Stock,
subject to adjustment.
The Purchase Price payable, and the number of shares of Preferred Stock
or other securities or property issuable, upon exercise of the Rights is subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights
or warrants to subscribe for or purchase Preferred Stock at a price, or
securities convertible into Preferred Stock with a conversion price, less than
the then-current market price of the Preferred Stock or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness or
assets (excluding regular periodic cash dividends or dividends payable in
Preferred Stock) or of subscription rights or warrants (other than those
referred to above). The number of outstanding Rights is subject to adjustment in
the event of a stock dividend on the Common Stock payable in shares of Common
Stock or subdivisions, consolidations or combinations of the Common Stock
occurring, in any such case, prior to the Distribution Date.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Preferred Stock (or Common Stock)
will be issued (other than fractions of Preferred Stock which are integral
multiples of one one-thousandth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), and in lieu
thereof an adjustment in cash will be made based on the current market price of
the Preferred Stock or the Common Stock.
C-2
PREFERRED STOCK PROVISIONS
Shares of Preferred Stock purchasable upon exercise of the Rights will
not be redeemable. Each share of Preferred Stock will be entitled, when, as and
if declared, to a minimum preferential quarterly dividend payment of the greater
of (a) $1.00 per whole share, and (b) an amount equal to 1,000 times the
dividend declared per share of Common Stock. In the event of liquidation,
dissolution or winding up of the Company, the holders of the Preferred Stock
will be entitled to a minimum preferential payment of the greater of (a) $1.00
per whole share (plus any accrued but unpaid dividends), and (b) an amount equal
to 1,000 times the payment made per share of Common Stock. Each share of
Preferred Stock will have 1,000 votes, voting together with the Common Stock.
Finally, in the event of any merger, consolidation or other transaction in which
outstanding shares of Common Stock are converted or exchanged, each share of
Preferred Stock will be entitled to receive 1,000 times the amount received per
share of Common Stock. These rights are protected by customary antidilution
provisions.
Because of the nature of the Preferred Stock's dividend, liquidation
and voting rights, the value of the one one-thousandth interest in a share of
Preferred Stock purchasable upon exercise of each Right should approximate the
value of one share of Common Stock.
FLIP-IN, FLIP-OVER RIGHTS
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereupon become void),
will thereafter have the right to receive upon exercise of a Right that number
of shares of Common Stock having a market value of two times the exercise price
of the Right. This is the so-called "flip-in" provision.
In the event that, after a person or group has become an Acquiring
Person, the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are sold,
proper provisions are required to be made so that each holder of a Right (other
than Rights beneficially owned by an Acquiring Person which will have become
void) will thereafter have the right to receive upon the exercise of a Right
that number of shares of common stock of the person with whom the Company has
engaged in the foregoing transaction (or its parent) that at the time of such
transaction have a market value of two times the exercise price of the Right.
This is the so-called "flip-over" provision.
EXCHANGE PROVISION
At any time after any person or group becomes an Acquiring Person and
prior to the earlier of one of the events described in the previous paragraph or
the acquisition by such Acquiring Person of 50% or more of the outstanding
shares of Common Stock, the Board of Directors of the Company may exchange the
Rights (other than Rights owned by such Acquiring Person which will have become
void), in whole or in part, for shares of Common Stock or Preferred Stock (or a
series of the Company's preferred stock having equivalent rights, preferences
and privileges), at an exchange ratio of one share of Common Stock, or a
fractional share of Preferred Stock (or other preferred stock) equivalent in
value thereto, per Right.
REDEMPTION
At any time prior to the time an Acquiring Person becomes such, the
Board of Directors of the Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (the "Redemption Price") payable, at the
option of the Company, in cash, shares of Common Stock or such other form of
consideration as the Board of Directors of the Company shall determine. The
redemption of the Rights
C-3
may be made effective at such time, on such basis and with such conditions as
the Board of Directors in its sole discretion may establish. Immediately upon
any redemption of the Rights, the right to exercise the Rights will terminate
and the only right of any and all holders of Rights will be to receive the
Redemption Price.
AMENDMENT
For so long as the Rights are outstanding and then redeemable, the
Company may, except with respect to the Redemption Price, amend the Rights
Agreement in any manner. This includes the ability to lower the ownership
threshold which triggers the "flip-in" provision to as low as 10%. After the
Rights are no longer redeemable, the Company may, except with respect to the
Redemption Price, amend the Rights Agreement in any manner that does not
adversely affect the interests of holders of the Rights.
INTERPRETATION; BOARD APPROVALS
The Board of Directors of the Company has the sole authority to
administer the Rights Plan and to exercise all rights and powers granted to the
Board or to the Company, or as are advisable in the administration of the Rights
Plan, including the power to (i) interpret the provisions of the Rights Plan and
(ii) make all determinations appropriate for the administration of the Rights
Plan (including a determination to redeem or not redeem the Rights, to exchange
the Rights or to amend the Rights Plan). All such interpretations and
determinations in good faith are final and binding on the parties (including the
Rights holders) and do not subject the Board (or the directors) to any liability
to the holders of Rights.
EXPIRATION
The Rights will expire on ____________, 2013, unless this date is
extended or unless the Rights are earlier redeemed or exchanged by the Company,
in each case as provided in the Rights Agreement.
OBTAINING A COPY OF THE RIGHTS AGREEMENT
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 10 dated
__________, 2003. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
as the same may be amended from time to time, which is hereby incorporated
herein by reference.
C-4
