exv10w42



 







EXHIBIT 10.42




SECURITIES PURCHASE AGREEMENT




     This Securities Purchase Agreement (this “Agreement”) is dated as of March 29, 2006,
among Syntax-Brillan Corporation, a Delaware corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including its successors and assigns, a
“Purchaser” and collectively the “Purchasers”).



     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 each Purchaser, and each
Purchaser, severally and not jointly, 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 each Purchaser agree as follows:



ARTICLE I.

DEFINITIONS




     1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all
purposes of this Agreement, 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 such Purchaser will be deemed to be an Affiliate of such Purchaser.



     “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 (a) the
Purchasers’ obligations to pay the Subscription Amount and (b) the Company’s obligations to deliver
the Securities have been satisfied or waived.



     “Closing Price” means on any particular date (a) the last reported closing bid price
per share of Common Stock on such date on the Trading Market (as reported by Bloomberg L.P. at 4:15
PM (New York time)), or (b) if there is no such price on such date, then the closing bid price on
the Trading Market on the date nearest preceding such date (as reported by Bloomberg L.P. at 4:15
PM (New York time)), or (c) if the Common Stock is not then listed or quoted on the Trading Market
and if prices for the Common Stock are then reported in the “pink sheets”
published by Pink Sheets, LLC (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 (d)
if



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the shares of Common Stock are not then publicly traded, the fair market value of a share of
Common Stock as determined by an appraiser selected in good faith by the Purchasers of a majority
in interest of the Shares then outstanding.



     “Commission” means the Securities and Exchange Commission.



     “Common Stock” means the common stock of the Company, par value $0.001 per share, and
any other class of securities into which such securities may hereafter have been reclassified or
changed 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 exercisable or exchangeable for, or otherwise entitles the holder thereof
to receive, Common Stock.



     “Company Counsel” means Greenberg Traurig, LLP.



     “Disclosure Schedules” means the Disclosure Schedules of the Company delivered
concurrently herewith.



     “Discussion Time” shall have the meaning ascribed to such term in Section 3.2(f).



     “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.



     “Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(q).



     “Excess Shares” shall have the meaning ascribed to such term in Section 4.15.



     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.



     “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 or exchange of or conversion of any Securities issued hereunder or securities
exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding
on the date of this Agreement, provided that such securities have not been amended (except for
automatic adjustments pursuant to the terms of such securities) since the date of this Agreement to
increase the number of such securities or to decrease the exercise, exchange, or conversion price
of any 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



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securities
primarily for the purpose of raising capital or to an entity whose primary business is investing in
securities.



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



     “Intellectual Property Rights” shall have the meaning ascribed to such term in Section
3.1(o).



     “Issuable Maximum” shall have the meaning ascribed to such term in Section 4.15.



     “Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).



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



     “Material Adverse Effect” means any adverse effect on the business, results of
operations, properties, prospects, or financial condition of the Company and its Subsidiaries,
taken as a whole, and which is material to the Company and its Subsidiaries, or which is likely to
materially effect the Company’s obligations to perform under this Agreement and the other
Transaction Documents.



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



     “Per Share Purchase Price” equals $5.00, subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations or other similar transactions of the Common Stock
that occur after the date of this Agreement.



     “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.



     “Purchaser Party” shall have the meaning ascribed to such term in Section 4.8.



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



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



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



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     “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).



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



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



     “Shares” means the shares of Common Stock issued or issuable to each Purchaser
pursuant to this Agreement.



     “Short Sales” shall include all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or reservation of
borrowable shares of Common Stock).



     “Stockholder Approval” shall have the meaning ascribed to such term in Section 4.15.



     “Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for
Shares and Warrants purchased hereunder as specified below such 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.



     “Subsidiary” means any subsidiary 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 Capital 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 Warrants, and the Registration
Rights Agreement, and any other documents or agreements executed in connection with the
transactions contemplated hereunder.



     “Warrants” means collectively the Common Stock purchase warrants, in the form of
Exhibit B delivered to the Purchasers at the Closing in accordance with Section 2.2(a)
hereof, which Warrants shall be exercisable beginning on the 181st day following the
date of issuance of such Warrants and shall have a term of exercise equal to five 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 each Purchaser agrees to purchase in the aggregate, severally and not
jointly, up to $15,000,000 of Shares and Warrants. Each Purchaser shall deliver to the Company via
wire transfer or a certified check immediately available funds equal to their Subscription Amount
and the Company shall deliver to each Purchaser their respective Shares 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 Sections 2.2 and 2.3, the Closing shall occur at
the offices of Company Counsel, or such other location as the parties shall mutually agree.



     2.2 Deliveries.



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




               (i) this Agreement duly executed by the Company;



               (ii) a copy of the irrevocable instructions to the Company’s transfer agent instructing the
transfer agent to deliver, on an expedited basis, a certificate evidencing a number of Shares equal
to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price, registered in the
name of such Purchaser;



               (iii) a Warrant registered in the name of such Purchaser to purchase up to a number of shares
of Common Stock determined as follows:



                    (A) if the Closing Price of the Common Stock on the Trading Day immediately preceding the
Closing Date is greater than or equal to $5.00 per share, then 15 shares of Common Stock for each
100 shares of Common Stock purchased by the Purchaser; or



                    (B) if the Closing Price of the Common Stock on the Trading Day immediately preceding the
Closing Date is less than $5.00 but greater than or equal to $4.00 per share, then 20 shares of
Common Stock for each 100 shares of Common Stock purchased by the Purchaser; or



                    (C) if the Closing Price of the Common Stock on the Trading Day immediately preceding the
Closing Date is less than $4.00 per share, then 25 shares of Common Stock for each 100 shares of
Common Stock purchased by the Purchaser;



               in each such case with an exercise price equal to the Per Share Purchase Price, subject to
adjustment as provided therein; and



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



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



                    (i) this Agreement duly executed by such Purchaser;



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



                    (iii) the Registration Rights Agreement duly executed by such Purchaser.



     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 Purchasers contained herein;



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



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



          (b) The respective obligations of the Purchasers 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;
and



                    (iv) there shall have been no Material Adverse Effect with respect to the Company since the
date hereof.



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 Purchasers 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 each Purchaser:



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          (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.




          (b) Organization and Qualification. The Company and each of 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. 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 reasonably be expected to result in a Material Adverse Effect.




          (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 hereunder and thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary action on the part of
the Company and no further action is required by the Company, its board of directors or its
stockholders in connection therewith other than in connection with the Required Approvals. 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 and thereof, 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, the issuance and sale of the Shares, and the consummation by the Company
of the other transactions contemplated hereby and 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) 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


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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 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 4.4 of this Agreement, (ii) the
filing with the Commission of the Registration Statement, (iii) application(s) to each applicable
Trading Market for the listing of the Shares and Warrant Shares for trading thereon in the time and
manner required thereby, and (iv) the filing of Form D with the Commission and such filings as are
required to be made under applicable state securities laws (collectively, the “Required
Approvals”).




          (f) Issuance of the Securities. The Securities are duly authorized and, when issued
and paid for in accordance with the applicable Transaction Documents, will be duly and validly
issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents. The Warrant Shares, when
issued in accordance with the terms of the Transaction Documents, will be validly issued, fully
paid and nonassessable, free and clear of all Liens imposed by the Company. The Company has
reserved from its duly authorized capital stock the maximum number of shares of Common Stock
issuable pursuant to this Agreement and the Warrants.




          (g) Capitalization. The capitalization of the Company as of March 28, 2006 is as set
forth on Schedule 3.1(g). 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 or as set
forth on Schedule 3.1(g), 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 exercisable 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 Common Stock Equivalents. 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 Purchasers) 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, 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. 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.




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          (h) SEC Reports; Financial Statements. The Company has filed all reports, schedules,
forms, statements, and other documents 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 and documents incorporated by reference
therein, 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 the light 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.




          (i) Material Changes; Undisclosed Events, Liabilities or Developments. Since December
31, 2005, the Company has not experienced or suffered any Material Adverse Effect. Neither the
Company nor any of its Subsidiaries has any liabilities, obligations, claims, or losses (contingent
or otherwise) other than (A) those incurred in the
ordinary course of business, (B) those set forth in the SEC Reports, and (C) 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. Except for the issuance of the Securities
contemplated by this Agreement or as set forth in the SEC Reports, since December 31, 2005, no
event or circumstance has occurred or exists with respect to the Company or its Subsidiaries or
their respective business, properties, prospects, operations or financial condition, that, under
applicable law, rule, or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly disclosed or announced.




          (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 not, if there were an unfavorable decision, 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


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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 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.
None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such
employee’s relationship with the Company, and neither the Company nor any of its Subsidiaries is a
party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their
relationships with their employees are good. No executive officer, to the knowledge of the
Company, is, or is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any of its Subsidiaries
to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries
are in compliance with all U.S. federal, state, local, and foreign laws and regulations relating to
employment and employment practices, terms and conditions of employment and wages and hours, except
where the failure to be in compliance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.




          (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
and all such laws that affect the environment, 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 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


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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 and enforceable leases of which
the Company and the Subsidiaries are in substantial 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, trade secrets, inventions, copyrights, licenses, and other similar intellectual property
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 notice (written or otherwise) 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. The Company
and its Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where failure to do
so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse
Effect.




          (p) 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 $60,000, 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.




          (q) 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,


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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 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 knowledge of the Company, in other
factors that could significantly affect the Company’s internal controls.




          (r) 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 the Transaction
Documents. The Purchasers 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 the Transaction Documents.




          (s) Private Placement. Assuming the accuracy of the Purchasers’ 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 Purchasers as contemplated hereby. The
issuance and sale of the Securities hereunder does not contravene the rules and regulations of the
Trading Market.




          (t) 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.




          (u) Disclosure. The Company confirms that neither it nor any other Person acting on
its behalf has provided any of the Purchasers or their agents or counsel with any information that
constitutes or might constitute material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. All disclosure provided to the Purchasers 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.




12









 








          (v) Tax Status. Except for matters that could not, individually or in the aggregate,
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.




          (w) 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 Purchasers and certain other
“accredited investors” within the meaning of Rule 501 under the Securities Act.




     3.2 Representations and Warranties of the Purchasers. Each Purchaser hereby, for itself and
for no other Purchaser, represents and warrants as of the date hereof and as of the Closing Date to
the Company as follows:



          (a) Organization; Authority. Such 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
hereunder and thereunder. The execution, delivery, and performance by such Purchaser of the
transactions contemplated by this Agreement have been duly authorized by all necessary corporate or
similar action on the part of such Purchaser. Each Transaction Document to which it is a party has
been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the
terms hereof, will constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except (i) as 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) Own Account. Such 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 in violation of the
Securities Act or any applicable state securities law, has no present intention of distributing any
of such Securities in violation of the Securities Act or any applicable state securities law and
has no arrangement or understanding with any other persons regarding the distribution of such
Securities (this representation and warranty not limiting such Purchaser’s right to sell the
Securities pursuant to the Registration Statement or otherwise in compliance with applicable
federal and state securities laws) in violation of the Securities Act or any applicable state
securities law. Such Purchaser is acquiring the Securities hereunder in the ordinary course of its
business. Such Purchaser does not have any agreement or understanding, directly or indirectly, with
any Person to distribute any of the Securities.




13









 








          (c) Purchaser Status. At the time such 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. Such Purchaser is not required to be registered as a broker-dealer under
Section 15 of the Exchange Act.




          (d) Experience of Such Purchaser. Such 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. Such 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. Such 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.




          (f) Short Sales and Confidentiality Prior To The Date Hereof. Other than the
transaction contemplated hereunder, such Purchaser has not directly or indirectly, nor has any
Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any
disposition, including Short Sales, in the securities of the Company during the period commencing
from the time that such Purchaser first received a term sheet from the Company or any other Person
setting forth the material terms of the transactions contemplated hereunder until the date hereof
(“Discussion Time”). Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers manage separate portions of
such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of assets managed by
the portfolio manager that made the investment decision to purchase the Securities covered by this
Agreement. Other than to other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction).




ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES




     4.1 Transfer Restrictions.



          (a) The Securities may only be disposed of in compliance with foreign, state, and federal
securities laws. In connection with any transfer of Securities, 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


14









 







registration of such
transferred Securities 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 Purchasers agree to the imprinting, so long as is required by this Section 4.1(b), of
a legend on any of the Securities 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 TO SUCH EFFECT,
THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR
OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT.



     The Company acknowledges and agrees that a 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, such
Purchaser may transfer pledged or 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 the Shares and 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 Shares or Warrant Shares pursuant to Rule
144, or (iii) if such Shares or Warrant Shares are eligible for sale under Rule 144(k), or (iv) if
such legend is not required under applicable requirements of the Securities Act (including judicial



15









 







interpretations and pronouncements issued by the staff 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, 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 Shares or Warrant Shares, as the case may be, issued with a restrictive
legend (such third Trading Day, the “Legend Removal Date”), deliver or cause to be
delivered to such 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. Certificates for Securities subject to legend removal hereunder shall be
transmitted by the transfer agent of the Company to the Purchasers by crediting the account of the
Purchaser’s prime broker with the Depository Trust Company System.



          (d) Nothing herein shall limit such Purchaser’s right to pursue actual damages for the
Company’s failure to deliver certificates representing any Securities as required by the
Transaction Documents, and such 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 or
injunctive relief.




          (e) Each Purchaser, severally and not jointly with the other Purchasers, 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 Furnishing of Information. As long as any Purchaser owns Securities, 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 any Purchaser owns Securities, if the Company is not required to file
reports pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and make
publicly available in accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Securities under Rule 144. The Company further covenants that it will take
such further action as any holder of Securities may reasonably request, all to the extent required
from time to time to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.



     4.3 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 Purchasers or that would be integrated with the
offer or sale of the Securities for purposes of the rules and regulations of any Trading Market
such that it would require stockholder approval prior to the closing of such



16









 







other transaction unless stockholder approval is obtained before the closing of such subsequent transaction.



     4.4 Securities Laws Disclosure; Publicity. The Company shall, no later than by 5:30 p.m.
Eastern time on the fourth business day immediately following the date hereof, file a Current
Report on Form 8-K disclosing the material terms of the transactions contemplated hereby and shall
attach the Transaction Documents thereto. The Company and each Purchaser shall consult with each
other in issuing any press releases with respect to the transactions contemplated hereby, and no
Purchaser shall issue any press release or otherwise make any such public statement without the
prior consent 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 any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the
prior written consent of such 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 Purchasers with prior notice of such disclosure permitted under
subclause (i) or (ii).



     4.5 Stockholder Rights Plan. No claim will be made or enforced by the Company or, to the
knowledge of the Company, any other Person that any Purchaser is an “Acquiring Person” under any
stockholder rights plan or similar plan or arrangement in effect or hereafter adopted by the
Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or
arrangement, by virtue of receiving Securities under the Transaction Documents or under any other
agreement between the Company and the Purchasers. The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.



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



     4.7 Use of Proceeds. Except as set forth on Schedule 4.7 attached hereto, the Company shall use the net
proceeds from the sale of the Securities hereunder for working capital purposes and not to redeem
any Common Stock or Common Stock Equivalents or to settle any outstanding litigation.



     4.8 Indemnification of Purchasers. Subject to the provisions of this Section 4.8, the
Company will indemnify and hold each Purchaser and its directors, officers, stockholders, members,
partners, employees, and agents (and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or any other title), each Person
who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act), and the directors, officers, agents, members, partners, or



17









 







employees (and any
other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (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 such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents (unless such action is
based upon a breach of such Purchaser’s representations, warranties, or covenants under the
Transaction Documents or any agreements or understandings such Purchaser may have with any such
stockholder or any violations by the Purchaser of state or federal securities laws or any conduct
by such 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 Purchasers in this Agreement or in the other Transaction Documents.



     4.9 Reservation of Common Stock. As of the date hereof, the Company has reserved and the
Company shall continue to reserve and keep available at all times, free of preemptive rights, a
sufficient number of shares of
Common Stock for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants.



     4.10 Listing of Common Stock. The Company hereby agrees to use its reasonable best efforts to
maintain the listing of the Common Stock on a Trading Market, and as soon as reasonably practicable
following the Closing (but not later than the earlier of the Effective Date and the first
anniversary of the Closing Date), to list all of the Shares and Warrant Shares on such Trading
Market. The Company further agrees, if the Company applies to have the Common Stock traded on any
other Trading Market, it will include in such application all of the Shares and Warrant Shares, and
will take such other action as is necessary to cause all of the Shares and Warrant Shares to be
listed on such other Trading Market as promptly as possible. The Company will take all action
reasonably necessary to continue the listing and trading of its



18









 







Common Stock on a Trading Market
and will comply in all material respects with the Company’s reporting, filing, and other
obligations under the bylaws or rules of the Trading Market.



     4.11 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. For clarification purposes, this provision constitutes a separate right granted to each
Purchaser by the Company and negotiated separately by each Purchaser, and shall not in any way be
construed as the Purchasers acting in concert or as a group with respect to the purchase,
disposition, or voting of Securities or otherwise.



     4.12 Short Sales and Confidentiality After The Date Hereof. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that neither it nor any Affiliates acting on its
behalf or pursuant to any understanding with it will execute any Short Sales during the period
after the Discussion Time and ending at the time that the transactions contemplated by this
Agreement are first publicly announced as described in Section 4.4. Each Purchaser, severally and
not jointly with the other Purchasers, covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company as described in Section 4.4,
such Purchaser will maintain, the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction). Each Purchaser
understands and acknowledges, severally and not jointly with any other Purchaser, that the
Commission currently takes the position that coverage of short sales of shares of the Common Stock
“against the box” prior to the Effective Date of the Registration Statement with the Securities is
a violation of Section 5 of the Securities Act, as set forth in Item 65, Section 5 under Section A,
of the Manual of Publicly Available Telephone Interpretations, dated July 1997, compiled by the
Office of Chief Counsel, Division of Corporation Finance. Notwithstanding the foregoing, no
Purchaser makes any representation, warranty, or covenant hereby that it will not engage in Short
Sales in the securities of the Company after the time that the transactions contemplated by this
Agreement are first publicly announced as described in Section 4.4. Notwithstanding the foregoing,
in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such
Purchaser’s assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the
covenant set forth above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities covered by this
Agreement.



     4.13 Delivery of Securities After Closing. The Company shall deliver, or cause to be
delivered, the respective Securities purchased by each Purchaser to such Purchaser within five
Trading Days of the Closing Date.



     4.14 Beneficial Ownership Restrictions. Notwithstanding anything to the contrary set forth in
this Agreement or any other Transaction Document, at no time may a Purchaser convert or exercise
any securities of the Company if the number of shares of Common Stock to be issued pursuant to such
conversion or exercise, when aggregated with all other shares of Common Stock beneficially owned by
the Purchaser at such time, would result in the Purchaser



19









 







beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess
of 14.99% of the then issued and outstanding shares of Common Stock outstanding at such time.



     4.15 Trading Market Limitations. Notwithstanding anything herein to the contrary, the Company
shall not issue any Warrant Shares which, when aggregated with the Shares issued prior to such date
of issuance, would exceed 19.999% of the number of shares of Common Stock outstanding on the
business day immediately preceding the Closing Date (such number of shares, the “Issuable
Maximum”). If on the date of exercise of Warrants (a) the applicable Exercise Price in effect
is such that the shares issuable upon exercise of the Warrants together with the aggregate number
of shares of Common Stock that would then be issuable upon exercise in full of all then outstanding
Warrants would exceed the Issuable Maximum, and (b) the Company’s stockholders shall not have
previously approved the issuance of 20% or more of the Company’s capital stock in connection with
the transactions contemplated by the Transaction Documents (the “Stockholder Approval”),
then the Company shall issue to the Purchaser requesting exercise of Warrants a number of shares of
Common Stock equal to such Purchaser’s pro-rata portion of the Issuable Maximum and, with respect
to the remainder of the Warrants then held by such Purchaser for which exercise would result in an
issuance of shares of Common Stock in excess of such Purchaser’s pro-rata portion of the Issuable
Maximum (the “Excess Shares”), the Company shall be prohibited from issuing such Excess
Shares, and shall notify the Purchaser of the reason therefor. The Warrants would be unconvertible
and unexercisable to such extent until and unless Stockholder Approval is subsequently obtained,
but shall otherwise remain in full force and effect. If Stockholder Approval is required under
this Section 4.15, the Company shall use commercially reasonable efforts to obtain, as promptly as
practicable, Stockholder Approval that is necessary to issue shares of Common Stock in excess of
the Issuable Maximum.



ARTICLE V.

MISCELLANEOUS




     5.1 Termination. This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations
hereunder only and without any effect whatsoever on the obligations between the Company and the
other Purchasers, by written notice to the other parties, if the Closing has not been consummated
on or before April 15, 2006; provided, however, that no such termination will affect the right of
any party to sue for any breach by the other party (or parties).



     5.2 Fees and Expenses. 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 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 delivery
of any Securities.



     5.3 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.



20









 





     5.4 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.



     5.5 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 each 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
any party to exercise any right hereunder in any manner impair the exercise of any such right.



     5.6 Headings. 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.



     5.7 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 each Purchaser. Any
Purchaser may assign any or all of its rights under this Agreement to any Person to whom such
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
“Purchasers.”



     5.8 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, nor may
any provision hereof be enforced by, any other Person, except as otherwise set forth in Section
4.8.



     5.9 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 Delaware, 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, stockholders, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of Phoenix, state of Arizona. Each



21









 







party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in the City of
Phoenix, state of Arizona, 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.



     5.10 Survival. The representations and warranties contained herein shall survive the Closing
and the delivery of the Shares and Warrant Shares.



     5.11 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 Company, it being understood that
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.



     5.12 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.



     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 Purchasers and the Company will be
entitled to specific performance under the Transaction Documents. The parties agree that



22









 







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 agree 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 any
Purchaser pursuant to any Transaction Document or a 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, a 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 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each
Purchaser under any Transaction Document are several and not joint with the obligations of any
other Purchaser, 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 any Purchaser pursuant thereto, shall be deemed to
constitute the Purchasers 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 Documents.
Each 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. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. The Company has elected to provide
all Purchasers with the same terms and Transaction Documents for the convenience of the Company and
not because it was required or requested to do so by the Purchasers.



     5.17 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.



     5.18 Construction. The parties agree that each of them or their respective counsel has
reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule
of construction to the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of the Transaction Documents or any amendments hereto.



23









 







     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.



	 	 	 	 	 	 	 
	 	 	SYNTAX-BRILLIAN CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Wayne A. Pratt
	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Wayne A. Pratt	 	 
	 	 	Title: Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notice:	 	 
	 
	 	 	 	 	 	 
	 	 	1600 N. Desert Drive	 	 
	 	 	Tempe, Arizona 85281	 	 
	 	 	Attn: Wayne A. Pratt	 	 
	 
	 	 	 	 	 	 
	 	 	Email: wayne.pratt@syntaxbrillian.com	 	 
	 	 	Telephone: (602) 389-8888	 	 
	 	 	Facsimile: (602) 389-8801	 	 
	 
	 	 	 	 	 	 
	 	 	With a copy to:	 	 
	 
	 	 	 	 	 	 
	 	 	Greenberg Traurig, LLP	 	 
	 	 	2375 E. Camelback Road, Suite 700	 	 
	 	 	Phoenix, Arizona 85016	 	 
	 	 	Attn: Brian H. Blaney, Esq.	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Email: blaneyb@gtlaw.com	 	 
	 	 	Telephone: (602) 445-8322	 	 
	 	 	Facsimile: (602) 445-8603	 	 






[SIGNATURE PAGE FOR PURCHASERS FOLLOWS]




24









 





PURCHASER SIGNATURE PAGE TO

SYNTAX-BRILLIAN SECURITIES PURCHASE AGREEMENT




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



	 	 	 	 	 	 	 
	 	 	Purchaser Name: Taiwan Kolin Company, Ltd.	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	By: /s/  Christopher C.L. Liu	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Christopher C.L. Liu	 	 
	 	 	Title: President	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notice:	 	 
	 
	 	 	 	 	 	 
	 	 	10F. #86 Sect. 1, Chung-King S. Rd	 	 
	 	 	Taipei, Taiwan	 	 
	 
	 	 	 	 	 	 
	 	 	Email:	 	 
	 

	 	 	 	 
	 	 
	 	 	Telephone: 886-2-2314-3151	 	 
	 	 	Facsimile: 886-2-2311-3855	 	 
	 
	 	 	 	 	 	 
	 	 	With a copy to:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Email:	 	 
	 

	 	 	 	 
	 	 
	 	 	Telephone:	 	 
	 

	 	 	 	 
	 	 
	 	 	Facsimile:	 	 
	 

	 	 	 	 
	 	 
	 
	 	 	 	 	 	 
	 	 	Subscription Amount:
$15,000,000 USD