Exhibit 10.20

SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this “Agreement”) is dated as of
April 18, 2005, among Brillian Corporation, a Delaware corporation (the
“Company”), and Regenmacher Holdings Ltd. (“Purchaser”).

     WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”) and Rule 506 promulgated thereunder, the Company desires to
issue and sell to Purchaser, and Purchaser desires to purchase from the Company,
securities of the Company as more fully described in this Agreement.

     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and Purchaser agrees as
follows:

ARTICLE I.
DEFINITIONS

     1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debentures (as defined herein), and (b) the
following terms have the meanings indicated in this Section 1.1:

     “Action” shall have the meaning ascribed to such term in Section 3.1(j).

     “Affiliate” means any Person that, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 144 under the
Securities Act. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as Purchaser will be deemed to be an Affiliate of Purchaser.

     “Agent” shall have the meaning ascribed to such term in the Security
Agreement.

     “Closing” means the closing of the purchase and sale of the Securities
pursuant to Section 2.1.

     “Closing Date” means the Trading Day when all of the Transaction Documents
have been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to pay the Subscription
Amount and (ii) the Company’s obligations to deliver the Securities have been
satisfied or waived.

     “Commission” means the Securities and Exchange Commission.

 

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     “Common Stock” means the common stock of the Company, par value $0.001 per
share, and any securities into which such common stock shall hereinafter have
been reclassified into.

     “Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

     “Company Counsel” means Greenberg Traurig, P.A.

     “Debenture” means the 9% Senior Secured Debentures due, subject to the
terms therein, April 20, 2008, issued by the Company to the Purchaser, in the
form of Exhibit A.

     “Disclosure Schedules” shall have the meaning ascribed to such term in
Section 3.1 hereof.

     “Effective Date” means the date that the initial Registration Statement
filed by the Company pursuant to the Registration Rights Agreement is first
declared effective by the Commission.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     “Exempt Issuance” means the issuance of (a) shares of Common Stock or
options to employees, officers or directors of the Company pursuant to any stock
or option plan duly adopted by a majority of the non-employee members of the
Board of Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose, (b) securities upon the
exercise of or conversion of any securities issued hereunder, convertible
securities, options or warrants issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of
this Agreement to increase the number of such securities, and (c) securities
issued pursuant to acquisitions or strategic transactions, provided any such
issuance shall only be to a Person which is, itself or through its subsidiaries,
an operating company in a business synergistic with the business of the Company
and in which the Company receives benefits in addition to the investment of
funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities.

     “FW” means Feldman Weinstein LLP with offices at 420 Lexington Avenue,
Suite 2620, New York, New York 10170-0002.

     “GAAP” shall have the meaning ascribed to such term in Section 3.1(h)
hereof.

     “Liens” means a lien, charge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction.

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     “Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(b) hereof.

     “Material Permits” shall have the meaning ascribed to such term in Section
3.1(m).

     “Person” means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.

     “Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

     “Registration Rights Agreement” means the Registration Rights Agreement,
dated the date hereof, among the Company and the Purchaser, in the form of
Exhibit B attached hereto.

     “Registration Statement” means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale of the Warrant Shares as provided for in the Registration Rights
Agreement.

     “Required Approvals” shall have the meaning ascribed to such term in
Section 3.1(e).

     “Required Minimum” means, as of any date, the maximum aggregate number of
shares of Common Stock then issued or potentially issuable in the future
pursuant to the Transaction Documents, including any Warrant Shares issuable
upon exercise in full of all Warrants, ignoring any conversion or exercise
limits set forth therein.

     “Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

     “SEC Reports” shall have the meaning ascribed to such term in
Section 3.1(h) hereof.

     “Securities” means the Debentures, the Warrants and the Warrant Shares.

     “Securities Act” means the Securities Act of 1933, as amended.

     “Security Agreement” means the Security Agreement, dated the date hereof,
among the Company and the Purchaser, in the form of Exhibit E attached hereto.

     “Security Documents” shall mean the Security Agreement and any other
documents and filing required thereunder in order to grant the Purchaser a first
priority

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security interest in the assets of the Company as provided in the Security
Agreement, including all UCC-1 filing receipts.

     “Subscription Amount” means the aggregate amount to be paid for Debentures
and Warrants purchased hereunder as specified below Purchaser’s name on the
signature page of this Agreement and next to the heading “Subscription Amount”,
in United States Dollars and in immediately available funds.

     “Subsequent Financing” shall have the meaning ascribed to such term in
Section 4.13.

     “Subsidiary” means any of the subsidiaries of the Company as set forth on
Schedule 3.1(a).

     “Trading Day” means a day on which the Common Stock is traded on a Trading
Market.

     “Trading Market” means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the Nasdaq
SmallCap Market, the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the OTC Bulletin Board.

     “Transaction Documents” means this Agreement, the Debentures, the Security
Agreement, the Warrants, the Registration Rights Agreement and any other
documents or agreements executed in connection with the transactions
contemplated hereunder.

     “VWAP” means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on a Trading Market, the daily volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg Financial L.P.
(based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
(b) if the Common Stock is not then listed or quoted on a Trading Market and if
prices for the Common Stock are then reported in the “Pink Sheets” published by
the National Quotation Bureau Incorporated (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (c) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Purchaser and reasonably acceptable to
the Company.

     “Warrants” means collectively the Common Stock purchase warrants, in the
form of Exhibit C delivered to the Purchaser at the Closing in accordance with
Section 2.2 hereof, which Warrants shall be exercisable immediately and have a
term of exercise equal to 5 years.

     “Warrant Shares” means the shares of Common Stock issuable upon exercise of
the Warrants.

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ARTICLE II.
PURCHASE AND SALE

     2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and Purchaser
agrees to purchase $2,000,000 principal amount of the Debentures. Purchaser
shall deliver to the Company via wire transfer or a certified check immediately
available funds equal to its Subscription Amount and the Company shall deliver
to the Purchaser the Debenture and Warrants as determined pursuant to
Section 2.2(a) and the other items set forth in Section 2.2 issuable at the
Closing. Upon satisfaction of the conditions set forth in Section 2.2, the
Closing shall occur at the offices of FW, or such other location as the parties
shall mutually agree.

     2.2 Deliveries.

     a) On the Closing Date, the Company shall deliver or cause to be delivered
to Purchaser the following:

     (i) this Agreement duly executed by the Company;

     (ii) the Debenture, registered in the name of Purchaser;

     (iii) a Warrant registered in the name of Purchaser to purchase up to
150,000 shares of Common Stock, with an exercise price equal to $1.57 , subject
to adjustment therein;

     (iv) the Registration Rights Agreement duly executed by the Company;

     (v) the Security Agreement duly executed by the Company; and

     (vi) a legal opinion of Company Counsel, in the form of Exhibit D attached
hereto.

     b) On the Closing Date, Purchaser shall deliver or cause to be delivered to
the Company the following:

     (i) this Agreement duly executed by Purchaser;

     (ii) Purchaser’s Subscription Amount by wire transfer to such accounts as
specified in writing by the Company;

     (iii) the Security Agreement, duly executed by Purchaser; and

     (iv) the Registration Rights Agreement duly executed by Purchaser.

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     2.3 Closing Conditions.

     a) The obligations of the Company hereunder in connection with the Closing
are subject to the following conditions being met:

     (i) the accuracy in all material respects when made and on the Closing Date
of the representations and warranties of the Purchaser contained herein;

     (ii) all obligations, covenants and agreements of the Purchaser required to
be performed at or prior to the Closing Date shall have been performed; and

     (iii) the delivery by Purchaser of the items set forth in Section 2.2(b) of
this Agreement.

     b) The obligations of the Purchaser hereunder in connection with the
Closing are subject to the following conditions being met:

     (i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained herein;

     (ii) all obligations, covenants and agreements of the Company required to
be performed at or prior to the Closing Date shall have been performed;

     (iii) the delivery by the Company of the items set forth in Section 2.2(a)
of this Agreement;

     (iv) the $2,500,000 convertible debt financing shall have closed or all
conditions met such that a closing on such financing shall occur simultaneously
with the Closing;

     (v) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and

     (vi) From the date hereof to the Closing Date, trading in the Common Stock
shall not have been suspended by the Commission (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities generally as reported by Bloomberg Financial Markets shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or on any
Trading Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or
international

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calamity of such magnitude in its effect on, or any material adverse change in,
any financial market which, in each case, in the reasonable judgment of
Purchaser, makes it impracticable or inadvisable to purchase the Debentures at
the Closing.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES

     3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the disclosure schedules delivered to the
Purchaser concurrently herewith (the “Disclosure Schedules”) which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to Purchaser.

     (a) Subsidiaries. All of the direct and indirect subsidiaries of the
Company are set forth on Schedule 3.1(a). The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe for
or purchase securities. If the Company has no subsidiaries, then references in
the Transaction Documents to the Subsidiaries will be disregarded.

     (b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
or default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to result
in (i) a material adverse effect on the legality, validity or enforceability of
any Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or financial condition of the Company
and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on
the Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material Adverse Effect”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.

     (c) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and

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the consummation by it of the transactions contemplated thereby, including the
issuance of the Securities, have been duly authorized by all necessary action on
the part of the Company and no further action is required by the Company in
connection therewith. Each Transaction Document has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.

     (d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
other transactions contemplated thereby do not and will not: (i) conflict with
or violate any provision of the Company’s or any Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) subject to the Required Approvals, conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the properties or
assets of the Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such
as could not have or reasonably be expected to result in a Material Adverse
Effect.

     (e) Filings, Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) filings required pursuant to Section 4.6, (ii) the filing with the
Commission of the Registration Statement, (iii) the notice and/or application(s)
to each applicable Trading Market for the issuance and sale of the Debentures
and Warrants and the listing of the Warrant Shares for trading thereon in the
time and manner required thereby, (iv) the filing of Form D with the Commission
and such filings as are required to be made under applicable state securities
laws and (vi) Shareholder Approval (collectively, the “Required Approvals”).

     (f) Issuance of the Warrant Shares. The Warrant Shares, when issued and
upon payment of the exercise price in accordance with the terms of the
Transaction Documents, will be validly issued, fully paid and nonassessable,
free and clear of all

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Liens imposed by the Company. The Company has reserved from its duly authorized
capital stock a number of shares of Common Stock for issuance of the Warrant
Shares at least equal to the Required Minimum on the date hereof.

     (g) Capitalization. The capitalization of the Company is as described in
the Company’s most recent periodic report filed with the Commission. The Company
has not issued any capital stock since such filing other than pursuant to the
exercise of employee stock options under the Company’s stock option plans, the
issuance of shares of Common Stock to employees pursuant to the Company’s
employee stock purchase plan and pursuant to the conversion or exercise of
outstanding Common Stock Equivalents. No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by the Transaction Documents. Except as a result
of the purchase and sale of the Securities, there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. The issuance and sale of the
Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Purchaser) and will not result in
a right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities. All of the outstanding shares of
capital stock of the Company are validly issued, fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws or
pursuant to an exception therefrom, and none of such outstanding shares was
issued in violation of any preemptive rights or similar rights to subscribe for
or purchase securities. No further approval or authorization of any stockholder,
the Board of Directors of the Company or others is required for the issuance and
sale of the Securities. Except as disclosed in the SEC Reports, there are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.

     (h) SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials, including the exhibits
thereto, being collectively referred to herein as the “SEC Reports”) on a timely
basis or has received a valid extension of such time of filing and has filed any
such SEC Reports prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light

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of the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments. Except as set
forth in the SEC Reports as a reserve for bad debt or uncollected accounts, all
of the Company’s receivables are expected to be collectible in the ordinary
course of business and the inventories shown on the latest balance sheet are
expected to be liquidated at their carried values in the ordinary course of
business.

     (i) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP
or required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting, (iv) the Company has not
declared or made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing
Company stock option plans. The Company does not have pending before the
Commission any request for confidential treatment of information.

     (j) Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”) which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any Subsidiary, nor any director or officer thereof, is or has been
the subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty. There
has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company or any
current or former director or officer of the Company. The

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Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.

     (k) Labor Relations. No material labor dispute exists or, to the knowledge
of the Company, is imminent with respect to any of the employees of the Company
which could reasonably be expected to result in a Material Adverse Effect.

     (l) Compliance. Neither the Company nor any Subsidiary (i) is in default
under or in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any Subsidiary received
notice of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws
applicable to its business except in each case as could not have a Material
Adverse Effect.

     (m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not have or reasonably be expected to result in a
Material Adverse Effect (“Material Permits”), and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any Material Permit.

     (n) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in compliance.

     (o) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure to so have
could have a Material Adverse Effect (collectively, the “Intellectual Property
Rights”). Neither the Company nor any Subsidiary has received a

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written notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights of others.

     (p) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged. To the best of Company’s knowledge, such insurance
contracts and policies are accurate and complete. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost. The Company does not have any
claims for an insured loss pending with any of its insurers.

     (q) Transactions With Affiliates and Employees. Except as set forth in the
SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $25,000 other than (i) for payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) for other employee benefits,
including stock option agreements under any stock option plan of the Company.

     (r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in
material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which
are applicable to it as of the Closing Date. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its Subsidiaries, is made known
to the certifying officers by others within those entities, particularly during
the period in which the Company’s most recently filed periodic report under the
Exchange Act, as the case may be, is being prepared. The Company’s certifying
officers have evaluated the effectiveness of the Company’s controls

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and procedures as of the date prior to the filing date of the most recently
filed periodic report under the Exchange Act (such date, the “Evaluation Date”).
The Company presented in its most recently filed periodic report under the
Exchange Act the conclusions of the certifying officers about the effectiveness
of the disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company’s internal controls (as such term is defined in Item
307(b) of Regulation S-K under the Exchange Act) or, to the Company’s knowledge,
in other factors that could significantly affect the Company’s internal
controls.

     (s) Certain Fees. No brokerage or finder’s fees or commissions are or will
be payable by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by this Agreement. The Purchaser shall have no
obligation with respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement.

     (t) Private Placement. Assuming the accuracy of the Purchaser
representations and warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Securities by the
Company to the Purchaser as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Trading Market.

     (u) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an
Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended. The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.

     (v) Registration Rights. No Person has any right to cause the Company to
effect the registration under the Securities Act of any securities of the
Company.

     (w) Listing and Maintenance Requirements. The Company’s Common Stock is
registered pursuant to Section 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the Commission is
contemplating terminating such registration. The Company has not, in the
12 months preceding the date hereof, received notice from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such Trading Market. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements. Subject to the receipt of the Required
Approvals, the issuance and sale of the Securities hereunder does not contravene
the rules and regulations of the Trading Market.

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     (x) Application of Takeover Protections. The Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s Certificate of Incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchaser as a result of the Purchaser and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the Company’s
issuance of the Securities and the Purchasers’ ownership of the Securities.

     (y) Disclosure. The Company confirms that neither it nor any other Person
acting on its behalf has provided the Purchaser or its agents or counsel with
any information that constitutes or might constitute material, nonpublic
information. The Company understands and confirms that the Purchaser will rely
on the foregoing representations and covenants in effecting transactions in
securities of the Company. All disclosure provided to the Purchaser regarding
the Company, its business and the transactions contemplated hereby, including
the Disclosure Schedules to this Agreement, furnished by or on behalf of the
Company with respect to the representations and warranties made herein are true
and correct with respect to such representations and warranties and do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2 hereof.

     (z) No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the Company,
nor any of its affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of the Securities to be integrated with prior offerings by the Company
for purposes of the Securities Act or any applicable shareholder approval
provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of the
Company are listed or designated.

     (aa) Solvency. Based on the financial condition of the Company as of the
Closing Date after giving effect to the receipt by the Company of the proceeds
from the sale of the Securities hereunder, (i) the Company’s fair saleable value
of its assets exceeds the amount that will be required to be paid on or in
respect of the Company’s existing debts and other liabilities (including known
contingent liabilities) as they mature; (ii) the Company’s assets do not
constitute unreasonably small capital to carry on its business for the current
fiscal year as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and
capital availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the

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Company would receive, were it to liquidate all of its assets, after taking into
account all anticipated uses of the cash, would be sufficient to pay all amounts
on or in respect of its debt when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such debts as
they mature (taking into account the timing and amounts of cash to be payable on
or in respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any jurisdiction
within one year from the Closing Date. The SEC Reports set forth as of the dates
thereof all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments. For the
purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for
borrowed money or amounts owed in excess of $50,000 (other than trade accounts
payable incurred in the ordinary course of business), (b) all guaranties,
endorsements and other contingent obligations in respect of Indebtedness of
others, whether or not the same are or should be reflected in the Company’s
balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (c) the present value of any lease payments in
excess of $50,000 due under leases required to be capitalized in accordance with
GAAP. Neither the Company nor any Subsidiary is in default with respect to any
Indebtedness.

     (bb) Form S-3 Eligibility. The Company is eligible to register the resale
of the Warrant Shares for resale by the Purchaser on Form S-3 promulgated under
the Securities Act.

     (cc) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any Subsidiary.

     (dd) No General Solicitation. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form of
general solicitation or general advertising. The Company has offered the
Securities for sale only to the Purchaser and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.

     (ee) Foreign Corrupt Practices. Neither the Company, nor to the knowledge
of the Company, any agent or other person acting on behalf of the Company, has
(i) directly or indirectly, used any corrupt funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in

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any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended

     (ff) Accountants. The Company’s accountants are set forth on Schedule
3.1(ff) of the Disclosure Schedule. To the Company’s knowledge, such
accountants, who expressed their opinion with respect to the financial
statements included in the Company’s Annual Report on Form 10-KSB for the year
ended December 31, 2004 are a registered public accounting firm as required by
the Securities Act.

     (gg) Seniority. As of the Closing Date, no indebtedness of the Company is
senior to the Debentures in right of payment, whether with respect to interest
or upon liquidation or dissolution, or otherwise, other than indebtedness
secured by purchase money security interests (which is senior only as to
underlying assets covered thereby) and capital lease obligations (which is
senior only as to the property covered thereby).

     (hh) No Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise, between the accountants and lawyers formerly or presently
employed by the Company and the Company is current with respect to any fees owed
to its accountants and lawyers.

     (ii) Acknowledgment Regarding Purchasers’ Purchase of Securities. The
Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents
and the transactions contemplated hereby. The Company further acknowledges that
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by Purchaser or any representatives or
agents in connection with this Agreement and the transactions contemplated
hereby is merely incidental to the Purchasers’ purchase of the Securities. The
Company further represents to Purchaser that the Company’s decision to enter
into this Agreement has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.

     3.2 Representations and Warranties of the Purchaser. Purchaser hereby
represents and warrants as of the date hereof and as of the Closing Date to the
Company as follows:

     (a) Organization; Authority. Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. The execution,
delivery and performance by Purchaser of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate or similar action
on the part of Purchaser. Each Transaction Document to which it is a party has
been duly executed by Purchaser, and when delivered by Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding obligation
of Purchaser, enforceable against it in accordance with its terms, except (i) as

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limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

     (b) Purchaser Representation. Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Securities as principal
for its own account and not with a view to or for distributing or reselling such
Securities or any part thereof, has no present intention of distributing any of
such Securities and has no arrangement or understanding with any other persons
regarding the distribution of such Securities (this representation and warranty
not limiting Purchaser’s right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable federal and
state securities laws). Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities.

     (c) Purchaser Status. At the time Purchaser was offered the Securities, it
was, and at the date hereof it is, and on each date on which it exercises any
Warrants it will be either: (i) an “accredited investor” as defined in
Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or
(ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the
Securities Act. Purchaser is not required to be registered as a broker-dealer
under Section 15 of the Exchange Act.

     (d) Experience of Purchaser. Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment. Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.

     (e) General Solicitation. Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

     The Company acknowledges and agrees that Purchaser does not make or has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.

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ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES

     4.1 Transfer Restrictions.

     (a) The Warrants and Warrant Shares may only be disposed of in compliance
with state and federal securities laws. In connection with any transfer of
Warrants or Warrant Shares other than pursuant to an effective registration
statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in
connection with a pledge as contemplated in Section 4.1(b), the Company may
require the transferor thereof to provide to the Company an opinion of counsel
selected by the transferor and reasonably acceptable to the Company, the form
and substance of which opinion shall be reasonably satisfactory to the Company,
to the effect that such transfer does not require registration of such
transferred Warrants or Warrant Shares under the Securities Act. As a condition
of transfer, any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights of a Purchaser under this Agreement
and the Registration Rights Agreement.

     (b) The Purchaser agrees to the imprinting, so long as is required by this
Section 4.1(b), of a legend on any of the Warrants and Warrant Shares in the
following form:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
SUCH SECURITIES.

     The Company acknowledges and agrees that Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such
arrangement, Purchaser may transfer pledged or

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secured Securities to the pledgees or secured parties. Such a pledge or transfer
would not be subject to approval of the Company and no legal opinion of legal
counsel of the pledgee, secured party or pledgor shall be required in connection
therewith. Further, no notice shall be required of such pledge. At the
appropriate Purchaser’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities,
including, if the Securities are subject to registration pursuant to the
Registration Rights Agreement, the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
Selling Stockholders thereunder.

     (c) Certificates evidencing Warrant Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)): (i) while a registration
statement (including the Registration Statement) covering the resale of such
security is effective under the Securities Act, or (ii) following any sale of
such Securities pursuant to Rule 144, or (iii) while such Securities are
eligible for sale under Rule 144(k), or (iv) if such legend is not required
under the applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission);
provided, however, in connection with the issuance of the Warrant Shares,
Purchaser hereby agrees to adhere to and abide by all prospectus delivery
requirements under the Securities Act and rules and regulations of the
Commission. The Company shall cause its counsel to issue a legal opinion to the
Company’s transfer agent promptly after the Effective Date if required by the
Company’s transfer agent to effect the removal of the legend hereunder. If all
or any portion of a Warrant is exercised at a time when there is an effective
registration statement to cover the resale of the Warrant Shares, or if such
Warrant Shares may be sold under Rule 144(k) or if such legend is not otherwise
required under applicable requirements of the Securities Act (including judicial
interpretations thereof) then such Warrant Shares shall be issued free of all
legends. The Company agrees that following the Effective Date or at such time as
such legend is no longer required under this Section 4.1(c), it will, no later
than three Trading Days following the delivery by a Purchaser to the Company or
the Company’s transfer agent of a certificate representing Warrant Shares, as
applicable, issued with a restrictive legend (such third Trading Day, the
“Legend Removal Date”), deliver or cause to be delivered to Purchaser a
certificate representing such shares that is free from all restrictive and other
legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section.

     (d) In addition to Purchaser’s other available remedies, the Company shall
pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty,
for each $500 of Warrant Shares (based on the VWAP of the Common Stock on the
date such Securities are submitted to the Company’s transfer agent) delivered
for removal of the restrictive legend and subject to this Section 4.1(c), $5 per
Trading Day (increasing to $10 per Trading Day 5 Trading Days after such damages
have begun to accrue) for each Trading Day after the Legend Removal Date until
such certificate is delivered without a legend. Nothing herein shall limit
Purchaser’s right to pursue actual damages for the

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Company’s failure to deliver certificates representing any Securities as
required by the Transaction Documents, and Purchaser shall have the right to
pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief.

     (e) Purchaser agrees that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 4.1 is
predicated upon the Company’s reliance that the Purchaser will sell any
Securities pursuant to either the registration requirements of the Securities
Act, including any applicable prospectus delivery requirements, or an exemption
therefrom.

     4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Securities may result in dilution of the outstanding shares of Common
Stock, which dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligations under the Transaction
Documents, including without limitation its obligation to issue the Warrant
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have
against Purchaser and regardless of the dilutive effect that such issuance may
have on the ownership of the other stockholders of the Company.

     4.3 Furnishing of Information. As long as Purchaser owns Warrants or
Warrant Shares, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as Purchaser owns Warrants or Warrant Shares, if the
Company is not required to file reports pursuant to the Exchange Act, it will
prepare and furnish to the Purchaser and make publicly available in accordance
with Rule 144(c) such information as is required for the Purchaser to sell the
Warrant Shares under Rule 144. The Company further covenants that it will take
such further action as any holder of Warrants or Warrant Shares may reasonably
request, all to the extent required from time to time to enable such Person to
sell such Warrants or Warrant Shares without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144.

     4.4 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchaser or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.

     4.5 Exercise Procedures. The form of Notice of Exercise included in the
Warrants set forth the totality of the procedures required of the Purchaser in
order to exercise the Warrants. No additional legal opinion or other information
or instructions shall be required of the Purchaser to exercise their Warrants.
The Company shall honor exercises of the Warrants and shall deliver Warrant
Shares in accordance with the terms, conditions and time periods set forth in
the Transaction Documents.

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     4.6 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
Eastern time on the Trading Day following the date hereof, issue a press release
reasonably acceptable to each Purchaser disclosing the material terms of the
transactions contemplated hereby, and shall file a Current Report on Form 8-K
within the time required by such form, which report shall attach the Transaction
Documents thereto. The Company and Purchaser shall consult with each other in
issuing any other press releases with respect to the transactions contemplated
hereby, and neither the Company nor Purchaser shall issue any such press release
or otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of Purchaser, or without the prior
consent of Purchaser, with respect to any press release of the Company, which
consent shall not unreasonably be withheld, except if such disclosure is
required by law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement or communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of Purchaser, or include the name of Purchaser in any filing with the Commission
or any regulatory agency or Trading Market, without the prior written consent of
Purchaser, except (i) as required by federal securities law in connection with
the registration statement contemplated by the Registration Rights Agreement and
(ii) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchaser with prior
notice of such disclosure permitted under subclause (i) or (ii).

     4.7 Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.

     4.8 Use of Proceeds. Except as set forth on Schedule 4.9 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and not for the satisfaction of any portion of the
Company’s debt (other than payment of trade payables in the ordinary course of
the Company’s business and prior practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation.

     4.9 Reimbursement. If Purchaser becomes involved in any capacity in any
Proceeding by or against any Person who is a stockholder of the Company (except
as a result of sales, pledges, margin sales and similar transactions by
Purchaser to or with any current stockholder), solely as a result of Purchaser’s
acquisition of the Securities under this Agreement, the Company will reimburse
Purchaser for its reasonable legal and other expenses (including the cost of any
investigation preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any Affiliates of the Purchaser who are actually named in such
action, proceeding or investigation, and partners, directors, agents, employees
and controlling persons (if any), as the case may be, of the Purchaser and any
such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal

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representatives of the Company, the Purchaser and any such Affiliate and any
such Person. The Company also agrees that neither the Purchaser nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement.

     4.10 Indemnification of Purchaser. Subject to the provisions of this
Section 4.11, the Company will indemnify and hold the Purchaser and its
directors, officers, shareholders, partners, employees and agents (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder of
the Company who is not an Affiliate of Purchaser, with respect to any of the
transactions contemplated by the Transaction Documents (unless such action is
based upon a breach of Purchaser’s representation, warranties or covenants under
the Transaction Documents or any agreements or understandings Purchaser may have
with any such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance). If any action shall be brought
against any Purchaser Party in respect of which indemnity may be sought pursuant
to this Agreement, such Purchaser Party shall promptly notify the Company in
writing, and the Company shall have the right to assume the defense thereof with
counsel of its own choosing. Any Purchaser Party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such Purchaser
Party except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or
(iii) in such action there is, in the reasonable opinion of such separate
counsel, a material conflict on any material issue between the position of the
Company and the position of such Purchaser Party. The Company will not be liable
to any Purchaser Party under this Agreement (i) for any settlement by a
Purchaser Party effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (ii) to the extent, but only
to the extent that a loss, claim, damage or liability is attributable to any
Purchaser Party’s breach of any of the representations, warranties, covenants or
agreements made by the Purchaser in this Agreement or in the other Transaction
Documents.

     4.11 Reservation and Listing of Securities.

     (a) The Company shall maintain a reserve from its duly authorized shares of
Common Stock for issuance pursuant to the Transaction Documents in such amount
as may be required to fulfill its obligations in full under the Transaction
Documents.

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     (b) If, on any date, the number of authorized but unissued (and otherwise
unreserved) shares of Common Stock is less than the Required Minimum on such
date, then the Board of Directors of the Company shall use commercially
reasonable efforts to amend the Company’s certificate or articles of
incorporation to increase the number of authorized but unissued shares of Common
Stock to at least the Required Minimum at such time, as soon as possible and in
any event not later than the 75th day after such date.

     (c) The Company shall, if applicable: (i) in the time and manner required
by the Trading Market or if the Common Stock is listed on another Trading
Market, promptly prepare and file with such Trading Market an additional shares
listing application covering a number of shares of Common Stock at least equal
to the Required Minimum on the date of such application, (ii) take all steps
necessary to cause such shares of Common Stock to be approved for listing on the
Trading Market as soon as possible thereafter, (iii) provide to the Purchaser
evidence of such listing, and (iv) maintain the listing of such Common Stock on
any date at least equal to the Required Minimum on such date on such Trading
Market or another Trading Market.

     4.12 Other Financing. The Company shall not incur any indebtedness which is
not expressly subordinated in right of payment of principal and interest to the
debt represented by the Debentures; provided, that the Company may (i) enter
into any capital lease or vendor purchase money financing arrangement, which
such lease or financing is expressly secured only by the asset so leased or
purchased, and by no other assets of the Company, and (ii) enter into the
convertible debt financing referred to in Section 2.3(b)(iv), as to which
Purchaser gives its express permission to the Company to pay scheduled interest,
so long as no Event of Default has occurred under the Debenture or the Security
Agreement.

     4.13 Equal Treatment of Purchasers. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. Further, the
Company shall not make any payment of principal or interest on the Debentures in
amounts which are disproportionate to the respective principal amounts
outstanding on the Debentures at any applicable time. For clarification
purposes, this provision constitutes a separate right granted to Purchaser by
the Company and negotiated separately by Purchaser, and is intended to treat for
the Company the Debenture holders as a class and shall not in any way be
construed as the Purchasers, if more than one, acting in concert or as a group
with respect to the purchase, disposition or voting of Securities or otherwise.

ARTICLE V.
MISCELLANEOUS

     5.1 Fees and Expenses. At the Closing, the Company has agreed to reimburse
Sandhurst for $15,000, for its actual, reasonable, out-of-pocket legal fees and
expenses. The Company shall deliver, prior to the Closing, a completed and
executed copy of the Closing Statement, attached hereto as Annex A. Except as
expressly set forth in the Transaction Documents to the contrary, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to

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the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all transfer agent fees, stamp taxes and other
taxes and duties levied in connection with the issuance of any Securities.

     5.2 Entire Agreement. The Transaction Documents, together with the exhibits
and schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

     5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

     5.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and Purchaser or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought. No waiver of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.

     5.5 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

     5.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of Purchaser. Purchaser may assign any or all
of its rights under this Agreement to any Person to whom Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the “Purchaser”.

     5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of,

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nor may any provision hereof be enforced by, any other Person, except as
otherwise set forth in Section 4.11.

     5.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. The parties hereby waive all
rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.

     5.9 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable for the applicable statue of limitations.

     5.10 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

     5.11 Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

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     5.12 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever Purchaser exercises a right, election, demand or
option under a Transaction Document and the Company does not timely perform its
related obligations within the periods therein provided, then Purchaser may
rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights; provided, however, in
the case of a rescission of a conversion of a Debenture or exercise of a
Warrant, the Purchaser shall be required to return any shares of Common Stock
subject to any such rescinded conversion or exercise notice.

     5.13 Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.

     5.14 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchaser and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.

     5.15 Payment Set Aside. To the extent that the Company makes a payment or
payments to Purchaser pursuant to any Transaction Document or Purchaser enforces
or exercises its rights thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

     5.16 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner whatsoever claim, and will resist
any and all efforts to be compelled to take the benefit or advantage of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by Purchaser in order to
enforce any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate

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authorized under applicable law (the “Maximum Rate”), and, without limiting the
foregoing, in no event shall any rate of interest or default interest, or both
of them, when aggregated with any other sums in the nature of interest that the
Company may be obligated to pay under the Transaction Documents exceed such
Maximum Rate. It is agreed that if the maximum contract rate of interest allowed
by law and applicable to the Transaction Documents is increased or decreased by
statute or any official governmental action subsequent to the date hereof, the
new maximum contract rate of interest allowed by law will be the Maximum Rate
applicable to the Transaction Documents from the effective date of such increase
or decrease forward, unless such application is precluded by applicable law. If
under any circumstances whatsoever, interest in excess of the Maximum Rate is
paid by the Company to Purchaser with respect to indebtedness, if any, evidenced
by the Transaction Documents, such excess shall be applied by Purchaser to the
unpaid principal balance of any such indebtedness or be refunded to the Company,
the manner of handling such excess to be at Purchaser’s election in the event
any principal amount remains outstanding.

     5.17 Independent Nature of Purchasers’ Obligations and Rights. The
obligations of Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, if any, and no Purchaser
shall be responsible in any way for the performance of the obligations of any
other Purchaser under any Transaction Document. Nothing contained herein or in
any Transaction Document, and no action taken by Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers, if more than one, as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by the
Transaction Document. Purchaser shall be entitled to independently protect and
enforce its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.

     5.18 Liquidated Damages. The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.

(Signature Pages Follow)

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

          BRILLIAN CORPORATION   Address for Notice:
 
       
By:
  /s/ Wayne Pratt   1600 N. Desert Drive

  Name: Wayne Pratt   Tempe, AZ 85281

  Title: Vice President and Chief Financial Officer    

With a copy to (which shall not constitute notice):

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]

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[PURCHASER SIGNATURE PAGES TO BRILLIAN SECURITIES PURCHASE AGREEMENT]

     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

Name of Investing Entity: Regenmacher Holdings Ltd.
Signature of Authorized Signatory of Investing Entity: /s/ Jonathan P. Knight
Name of Authorized Signatory: Jonathan P. Knight
Title of Authorized Signatory: President
Email Address of Authorized Entity: jonathan@siamus.com

Address for Notice of Investing Entity:

 

Address for Delivery of Securities for Investing Entity (if not same as above):

 

 

Subscription Amount:
Warrant Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

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Annex A

CLOSING STATEMENT

Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase up to $2,000,000 of Debentures and
Warrants from Brillian Corporation (the “Company”). All funds will be disbursed
in accordance with this Closing Statement.

Disbursement Date: April ___, 2005

--------------------------------------------------------------------------------

             
I.
  PURCHASE PRICE        
 
           
 
  Gross Proceeds to be Received in Trust   $    
 
           
II.
  DISBURSEMENTS        
 
      $    
 
      $    
 
      $    
 
      $    
 
      $    
 
            Total Amount Disbursed:   $    

WIRE INSTRUCTIONS:

To:                                                             

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