Document:

exv4w7

 

EXHIBIT 4.7

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE 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. THIS
SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

Original Issue Date: July 12, 2005

Original Conversion Price (subject to adjustment herein): $2.63

$                    

4% CONVERTIBLE DEBENTURE

DUE JULY 12, 2008

          THIS DEBENTURE is one of a series of duly authorized and issued 4% Convertible Debentures of
Brillian Corporation, a Delaware corporation, having a principal place of business at
                                         (the “Company”), designated as its 4% Convertible Debenture,
due July 12, 2008 (the “Debenture” and collectively with the other such series of
debentures, the “Debentures”).

     FOR VALUE RECEIVED, the Company promises to pay to                                          or its registered
assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal
sum of $                     by July ___, 2008, or such earlier date as this Debenture is required or
permitted to be repaid as provided hereunder (the “Maturity Date”), and to pay interest to
the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in
accordance with the provisions hereof. This Debenture is subject to the following additional
provisions:

     Section 1. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Debenture: (a) capitalized terms not otherwise defined herein have the
meanings given to such terms in the Purchase Agreement, and (b) the following terms shall have the
following meanings:

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     “Alternate Consideration” shall have the meaning set forth in Section 5(d).

     “Base Conversion Price” shall have the meaning set forth in Section 5(b).

     “Business Day” means any day except Saturday, Sunday and any day which shall be
a federal legal holiday in the United States or a day on which banking institutions in the
State of New York are authorized or required by law or other government action to close.

     “Buy-In” shall have the meaning set forth in Section 4(d)(v).

     “Change of Control Transaction” means the occurrence after the date hereof of
any of (i) an acquisition after the date hereof by an individual or legal entity or “group”
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control
(whether through legal or beneficial ownership of capital stock of the Company, by contract
or otherwise) of in excess of 33% of the voting securities of the Company, or (ii) the
Company merges into or consolidates with any other Person, or any Person merges into or
consolidates with the Company and, after giving effect to such transaction, the stockholders
of the Company immediately prior to such transaction own less than 66% of the aggregate
voting power of the Company or the successor entity of such transaction, or (iii) the
Company sells or transfers its assets, as an entirety or substantially as an entirety, to
another Person and the stockholders of the Company immediately prior to such transaction own
less than 66% of the aggregate voting power of the acquiring entity immediately after the
transaction, (iv) a replacement at one time or within a three year period of more than
one-half of the members of the Company’s board of directors which is not approved by a
majority of those individuals who are members of the board of directors on the date hereof
(or by those individuals who are serving as members of the board of directors on any date
whose nomination to the board of directors was approved by a majority of the members of the
board of directors who are members on the date hereof), or (v) the execution by the Company
of an agreement to which the Company is a party or by which it is bound, providing for any
of the events set forth above in (i) or (iv).

     “Common Stock” means the common stock, par value $0.001 per share, of the
Company and stock of any other class of securities into which such securities may hereafter
have been reclassified or changed into.

     “Conversion Date” shall have the meaning set forth in Section 4(a).

     “Conversion Price” shall have the meaning set forth in Section 4(b).

     “Conversion Shares” means the shares of Common Stock issuable upon conversion
of this Debenture or as payment of interest in accordance with the terms.

     “Debenture Register” shall have the meaning set forth in Section 2(c).

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     “Dilutive Issuance” shall have the meaning set forth in Section 5(b).

     “Dilutive Issuance Notice” shall have the meaning set forth in Section 5(b).

     “Effectiveness Period” shall have the meaning given to such term in the
Registration Rights Agreement.

     “Equity Conditions” shall mean, during the period in question, (i) the Company
shall have duly honored all conversions and redemptions scheduled to occur or occurring by
virtue of one or more Notice of Conversions of the Holder, if any, (ii) all liquidated
damages and other amounts owing to the Holder in respect of this Debenture shall have been
paid; (iii) there is an effective Registration Statement pursuant to which the Holder is
permitted to utilize the prospectus thereunder to resell all of the shares issuable pursuant
to the Transaction Documents (and the Company believes, in good faith, that such
effectiveness will continue uninterrupted for the foreseeable future), (iv) the Common Stock
is trading on the Trading Market and all of the shares issuable pursuant to the Transaction
Documents are listed for trading on a Trading Market (and the Company believes, in good
faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for
the foreseeable future), (v) the daily dollar trading volume of the Common Stock on the
Trading Market for each Trading Day is at least $200,000, (vi) there is a sufficient number
of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance
of all of the shares issuable pursuant to the Transaction Documents, (vii) there is then
existing no Event of Default or event which, with the passage of time or the giving of
notice, would constitute an Event of Default, (viii) the issuance of the shares in question
to the Holder would not violate the limitations set forth in Sections 4(c)(i) and 4(c)(ii)
and (ix) no public announcement of a pending or proposed Fundamental Transaction, Change of
Control Transaction or acquisition transaction has occurred that has not been consummated.

     “Event of Default” shall have the meaning set forth in Section 8.

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

     “Forced Conversion Notice” shall have the meaning set forth in Section 6(c).

     “Force Conversion Notice Date” shall have the meaning set forth in Section
6(c).

     “Fundamental Transaction” shall have the meaning set forth in Section 5(d).

     “Interest Conversion Rate” means the lesser of (a) the Conversion Price and (b)
if Shareholder Approval has been obtained, 90% of the lesser of (i) the average of the 20
VWAPs immediately prior to the applicable Interest Payment Date or (ii) the average of

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the
20 VWAPs immediately prior to the date the applicable interest payment shares are issued and
delivered if after the Interest Payment Date.

     “Interest Payment Date” shall have the meaning set forth in Section 2(a).

     “Late Fees” shall have the meaning set forth in Section 2(d).

     “Mandatory Prepayment Amount” shall equal the sum of (i) the greater of: (A)
130% of the principal amount of this Debenture to be prepaid, plus all accrued and unpaid
interest thereon, or (B) the principal amount of this Debenture to be prepaid, plus all
other accrued and unpaid interest hereon, divided by the Conversion Price on (x) the date
the Mandatory Prepayment Amount is demanded or otherwise due or (y) the date the Mandatory
Prepayment Amount is paid in full, whichever is less, multiplied by the VWAP on (x) the date
the Mandatory Prepayment Amount is demanded or otherwise due or (y) the date the Mandatory
Prepayment Amount is paid in full, whichever is greater, and (ii) all other amounts, costs,
expenses and liquidated damages due in respect of this Debenture.

     “New York Courts” shall have the meaning set forth in Section 9(d).

     “Notice of Conversion” shall have the meaning set forth in Section 4(a).

     “Optional Redemption” shall have the meaning set forth in Section 6(a).

     “Optional Redemption Amount” shall mean the sum of (i) (x) if an Optional
Redemption occurs prior to the one year anniversary of the Original Issue Date, 120% of the
principal amount of this Debenture then outstanding, (y) if an Optional Redemption occurs on
or after the one year anniversary of the Original Issue Date but prior to the two year
anniversary of the Original Issue Date, 140% of the principal amount of this Debenture then
outstanding or (z) if an Optional Redemption occurs on or after the two year anniversary of
the Original Issue Date but prior to the Maturity Date, 160% of the principal amount of the
Debenture then outstanding, (ii) accrued but unpaid interest and (iii) all liquidated
damages and other amounts due in respect of the Debenture.

     “Optional Redemption Notice” shall have the meaning set forth in Section 6(a).

     “Optional Redemption Notice Date” shall have the meaning set forth in Section
6(a).

     “Original Issue Date” shall mean the date of the first issuance of the
Debentures regardless of the number of transfers of any Debenture and regardless of the
number of instruments which may be issued to evidence such Debenture.

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     “Person” means a corporation, an association, a partnership, organization, a
business, an individual, a government or political subdivision thereof or a governmental
agency.

     “Purchase Agreement” means the Securities Purchase Agreement, dated as of July
12, 2005, to which the Company and the original Holder are parties, as amended, modified or
supplemented from time to time in accordance with its terms.

     “Registration Rights Agreement” means the Registration Rights Agreement, dated
as of the date of the Purchase Agreement, to which the Company and the original Holder are
parties, as amended, modified or supplemented from time to time in accordance with its
terms.

     “Registration Statement” means a registration statement meeting the
requirements set forth in the Registration Rights Agreement, covering among other things the
resale of the Conversion Shares and naming the Holder as a “selling stockholder” thereunder.

     “Securities Act” means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.

     “Shareholder Approval” shall have the meaning given to such term in the
Purchase Agreement.

     “Subsidiary” shall have the meaning given to such term in the Purchase
Agreement.

     “Threshold Period” shall have the meaning given to such term in Section 6(d).

     “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 National Market,
the American Stock Exchange, the New York Stock Exchange or the Nasdaq SmallCap Market.

     “Transaction Documents” shall have the meaning set forth in the Purchase
Agreement.

     “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

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     listed or quoted on a Trading
Market and if prices for the Common Stock are then quoted on the OTC Bulletin Board, the
volume weighted average price of the Common Stock for such date (or the nearest preceding
date) on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted on the
OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets”
published by the 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) 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 Holder and reasonably acceptable to
the Company.

     Section 2. Interest.

     a) Payment of Interest in Cash or Kind. The Company shall pay interest to the
Holder on the aggregate unconverted and then outstanding principal amount of this Debenture
at the rate of 4% per annum, payable quarterly on March 31, June 30, September 30 and
December 31, beginning on the first such date after the Original Issue Date, on each
Conversion Date (as to that principal amount then being converted), on each Optional
Redemption Date (as to that principal amount being redeemed) and on the Maturity Date
(except that, if any such date is not a Business Day, then such payment shall be due on the
next succeeding Business Day) (each such date, an “Interest Payment Date”), in cash
or shares of Common Stock at the Interest Conversion Rate, or a combination thereof;
provided, however, payment in shares of Common Stock may only occur if (i)
during the 10 Trading Days immediately prior to the applicable Interest Payment Date and
through and including the date such shares of Common Stock are issued to the Holder all of
the Equity Conditions have been met, (ii) the Company has obtained Shareholder Approval and
(iii) the VWAP is equal to or greater than 115% of the then applicable Conversion Price for
the 10 Trading Days immediately prior to the applicable Interest Payment Date and through
and including the date such shares of Common Stock are issued to the Holder and the Company
shall have given the Holder notice in accordance with the notice requirements set forth
below.

     b) Company’s Election to Pay Interest in Kind. Subject to the terms and
conditions herein, the decision whether to pay interest hereunder in shares of Common Stock
or cash shall be at the discretion of the Company. Not less than 10 Trading Days prior to
each Interest Payment Date, the Company shall provide the Holder with written notice of its
election to pay interest hereunder either in cash or shares of Common Stock (the Company may
indicate in such notice that the election contained in such notice shall continue for later
periods until revised). Within 10 Trading Days prior to an Interest Payment Date, the
Company’s election (whether specific to an Interest Payment Date or continuous) shall be
irrevocable as to such Interest Payment Date. Subject to the aforementioned conditions,
failure to timely provide such written notice shall be deemed an election by the Company to
pay the interest on such Interest Payment Date in cash.

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     c) Interest Calculations. Interest shall be calculated on the basis of a
360-day year and shall accrue daily commencing on the Original Issue Date until payment in
full of the principal sum, together with all accrued and unpaid interest and other amounts
which may become due hereunder, has been made. Payment of interest in shares of Common
Stock shall otherwise occur pursuant to Section 4(d)(ii) and only for purposes of the
payment of interest in shares, the Interest Payment Date shall be deemed the Conversion
Date. Interest shall cease to accrue with respect to any principal amount converted,
provided that the Company in fact delivers the Conversion Shares within the time period
required by Section 4(d)(ii). Interest hereunder will be paid to the Person in whose name
this Debenture is registered on the records of the Company regarding
registration and transfers of this Debenture (the “Debenture Register”). Except
as otherwise provided herein, if at any time the Company pays interest partially in cash and
partially in shares of Common Stock, then such payment shall be distributed ratably among
the Holders based upon the principal amount of Debentures held by each Holder.

     d) Late Fee. All overdue accrued and unpaid interest to be paid hereunder
shall entail a late fee at the rate of 18% per annum (or such lower maximum amount of
interest permitted to be charged under applicable law) (“Late Fees”) which will
accrue daily, from the date such interest is due hereunder through and including the date of
payment. Notwithstanding anything to the contrary contained herein, if on any Interest
Payment Date the Company has elected to pay interest in Common Stock and is not able to pay
accrued interest in the form of Common Stock because it does not then satisfy the conditions
for payment in the form of Common Stock set forth above, then, at the option of the Holder,
the Company, in lieu of delivering either shares of Common Stock pursuant to this Section 2
or paying the regularly scheduled cash interest payment, shall deliver, within three Trading
Days of each applicable Interest Payment Date, an amount in cash equal to the product of the
number of shares of Common Stock otherwise deliverable to the Holder in connection with the
payment of interest due on such Interest Payment Date and the highest VWAP during the period
commencing on the Interest Payment Date and ending on the Trading Day prior to the date such
payment is made.

     e) Prepayment. Except as otherwise set forth in this Debenture, the Company
may not prepay any portion of the principal amount of this Debenture without the prior
written consent of the Holder.

     Section 3. Registration of Transfers and Exchanges.

     a) Different Denominations. This Debenture is exchangeable for an equal
aggregate principal amount of Debentures of different authorized denominations, as requested
by the Holder surrendering the same. No service charge will be made for such registration
of transfer or exchange.

     b) Investment Representations. This Debenture has been issued subject to
certain investment representations of the original Holder set forth in the Purchase

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Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement
and applicable federal and state securities laws and regulations.

     c) Reliance on Debenture Register. Prior to due presentment to the Company for
transfer of this Debenture, the Company and any agent of the Company may treat the Person in
whose name this Debenture is duly registered on the Debenture Register as the owner hereof
for the purpose of receiving payment as herein provided and for all other purposes, whether
or not this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.

Section 4. Conversion.

     a) Voluntary Conversion. At any time after the Original Issue Date until this
Debenture is no longer outstanding, this Debenture shall be convertible into shares of
Common Stock at the option of the Holder, in whole or in part at any time and from time to
time (subject to the limitations on conversion set forth in Section 4(c) hereof). The
Holder shall effect conversions by delivering to the Company the form of Notice of
Conversion attached hereto as Annex A (a “Notice of Conversion”), specifying
therein the principal amount of this Debenture to be converted and the date on which such
conversion is to be effected (a “Conversion Date”). If no Conversion Date is
specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice
of Conversion is provided hereunder. To effect conversions hereunder, the Holder shall not
be required to physically surrender this Debenture to the Company unless the entire
principal amount of this Debenture plus all accrued and unpaid interest thereon has been so
converted. Conversions hereunder shall have the effect of lowering the outstanding principal
amount of this Debenture in an amount equal to the applicable conversion. The Holder and
the Company shall maintain records showing the principal amount converted and the date of
such conversions. The Company shall deliver any objection to any Notice of Conversion
within 1 Business Day of receipt of such notice. In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and determinative in the absence
of manifest error. The Holder and any assignee, by acceptance of this Debenture, acknowledge
and agree that, by reason of the provisions of this paragraph, following conversion of a
portion of this Debenture, the unpaid and unconverted principal amount of this Debenture may
be less than the amount stated on the face hereof.

     b) Conversion Price. The conversion price in effect on any Conversion Date
shall be equal to $2.63 (subject to adjustment herein)(the “Conversion Price”).

     c) Conversion Limitations.

     i. Trading Market Limitations. Notwithstanding anything herein to the
contrary, if the Company has not obtained Shareholder Approval (as defined below),
if required by the applicable rules and regulations of the Trading Market (or any
successor entity), then the Company may not issue upon conversion of this Debenture,
a number of shares of Common Stock which, when aggregated

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with any shares of Common
Stock issued prior to such Conversion Date (A) pursuant to any Debentures issued
pursuant to the Purchase Agreement or those certain Securities Purchase Agreements
dated as of April 18, 2005, as amended, and (B) pursuant to any Warrants issued
pursuant to the Purchase Agreement and the Securities Purchase Agreements dated as
of April 18, 2005, as amended, would exceed 19.999% of the number of shares of
Common Stock outstanding on the Trading Day immediately preceding the Original Issue
Date (such number of shares, the “Issuable Maximum”). Each Holder shall be
entitled to a portion of the Issuable Maximum equal to the quotient obtained by
dividing (x) the aggregate principal amount of the Debenture(s) issued and sold to
such Holder on the Original Issue Date by (y) the aggregate principal amount of all
Debentures issued and sold by the Company on the Original Issue Date. If any Holder
shall no longer hold the Debenture(s), then such Holder’s remaining portion of the
Issuable Maximum shall be allocated pro-rata among the remaining Holders. If
on any Conversion Date: (1) the applicable Conversion Price then in effect is such
that the shares issuable under this Debenture on any Conversion Date together with
the aggregate number of shares of Common Stock that would then be issuable upon
conversion in full of all then outstanding Debentures would exceed the Issuable
Maximum, and (2) the Company’s shareholders shall not have previously approved the
transactions contemplated by the Transaction Documents, as may be required by the
applicable rules and regulations of the Nasdaq National Market, if any (the
“Shareholder Approval”), then the Company shall issue to the Holder
requesting a conversion a number of shares of Common Stock equal to such Holder’s
pro-rata portion (which shall be calculated pursuant to the terms hereof) of the
Issuable Maximum and, with respect to the remainder of the aggregate principal
amount of the Debentures (including any accrued interest) then held by such Holder
for which a conversion in accordance with the applicable conversion price would
result in an issuance of shares of Common Stock in excess of such Holder’s pro-rata
portion (which shall be calculated pursuant to the terms hereof) of the Issuable
Maximum (the “Excess Principal”), the Company shall be prohibited from
converting such Excess Principal, and shall notify the Holder of the reason
therefor. This Debenture shall thereafter be unconvertible to such extent until and
unless Shareholder Approval is subsequently obtained or is otherwise not required,
but this Debenture shall otherwise remain in full force and effect.

     ii. Holder’s Restriction on Conversion. The Company shall not effect
any conversion of this Debenture, and the Holder shall not have the right to convert
any portion of this Debenture, pursuant to Section 4(a) or otherwise, to the extent
that after giving effect to such conversion, the Holder (together with the Holder’s
affiliates), as set forth on the applicable Notice of Conversion, would beneficially
own in excess of 4.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to such conversion. For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by the Holder and
its affiliates shall include the number of

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shares of Common Stock issuable upon
conversion of this Debenture with respect to which the determination of such
sentence is being made, but shall exclude the number of shares of Common Stock which
would be issuable upon (A) conversion of the remaining, nonconverted portion of this
Debenture beneficially owned by the Holder or any of its affiliates and (B) exercise
or conversion of the unexercised or nonconverted portion of any other securities of
the Company (including, without limitation, any other Debentures or the Warrants)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its affiliates. Except
as set forth in the preceding sentence, for purposes of this Section 4(c)(ii),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act. To the extent that the limitation contained in this section applies,
the determination of whether this Debenture is convertible (in relation to other
securities owned by the Holder) and of which a portion of this Debenture is
convertible shall be in the sole
discretion of such Holder. To ensure compliance with this restriction, the
Holder will be deemed to represent to the Company each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the restrictions set
forth in this paragraph and the Company shall have no obligation to verify or
confirm the accuracy of such determination. For purposes of this Section 4(c)(ii),
in determining the number of outstanding shares of Common Stock, the Holder may rely
on the number of outstanding shares of Common Stock as reflected in (x) the
Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent
public announcement by the Company or (z) any other notice by the Company or the
Company’s Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of the Holder, the Company shall
within two Trading Days confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including this Debenture, by the Holder or
its affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. The provisions of this Section 4(c) may be waived by the
Holder, at the election of the Holder, upon not less than 61 days’ prior notice to
the Company, and the provisions of this Section 4(c) shall continue to apply until
such 61st day (or such later date, as determined by the Holder, as may be specified
in such notice of waiver).

     d) Mechanics of Conversion

     i. Conversion Shares Issuable Upon Conversion of Principal Amount. The
number of shares of Common Stock issuable upon a conversion hereunder shall be
determined by the quotient obtained by dividing (x) the outstanding principal amount
of this Debenture to be converted by (y) the Conversion Price.

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     ii. Delivery of Certificate Upon Conversion. Not later than three
Trading Days after any Conversion Date, the Company will deliver or cause to be
delivered to the Holder (A) a certificate or certificates representing the
Conversion Shares which shall be free of restrictive legends and trading
restrictions (other than those required by the Purchase Agreement) representing the
number of shares of Common Stock being acquired upon the conversion of this
Debenture (including, if so timely elected by the Company, shares of Common Stock
representing the payment of accrued interest) and (B) a bank check in the amount of
accrued and unpaid interest (if the Company is required to pay accrued interest in
cash). The Company shall, if available and if allowed under applicable securities
laws, use its best efforts to deliver any certificate or certificates required to be
delivered by the Company under this Section electronically through the Depository
Trust Corporation or another established clearing corporation performing similar
functions.

     iii. Failure to Deliver Certificates. If in the case of any Notice of
Conversion such certificate or certificates are not delivered to or as directed by
the applicable Holder by the third Trading Day after a Conversion Date, the Holder
shall be entitled by written notice to the Company at any time on or before its
receipt of such certificate or certificates thereafter, to rescind such conversion,
in which event the Company shall immediately return the certificates representing
the principal amount of this Debenture tendered for conversion.

     iv. Obligation Absolute; Partial Liquidated Damages. If the Company
fails for any reason to deliver to the Holder such certificate or certificates
pursuant to Section 4(d)(ii) by the third Trading Day after the Conversion Date, the
Company shall pay to such Holder, in cash, as liquidated damages and not as a
penalty, for each $1000 of principal amount being converted, $10 per Trading Day
(increasing to $20 per Trading Day after 5 Trading Days after such damages begin to
accrue) for each Trading Day after such third Trading Day until such certificates
are delivered. The Company’s obligations to issue and deliver the Conversion Shares
upon conversion of this Debenture in accordance with the terms hereof are absolute
and unconditional, irrespective of any action or inaction by the Holder to enforce
the same, any waiver or consent with respect to any provision hereof, the recovery
of any judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged breach
by the Holder or any other Person of any obligation to the Company or any violation
or alleged violation of law by the Holder or any other person, and irrespective of
any other circumstance which might otherwise limit such obligation of the Company to
the Holder in connection with the issuance of such Conversion Shares;
provided, however, such delivery shall not operate as a waiver by
the Company of any such action the Company may have against the Holder. In the
event a Holder of this Debenture shall elect to convert any or all of the
outstanding principal amount hereof, the Company

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may not refuse conversion based on
any claim that the Holder or any one associated or affiliated with the Holder has
been engaged in any violation of law, agreement or for any other reason, unless, an
injunction from a court, on notice, restraining and or enjoining conversion of all
or part of this Debenture shall have been sought and obtained and the Company posts
a surety bond for the benefit of the Holder in the amount of 150% of the principal
amount of this Debenture outstanding, which is subject to the injunction, which bond
shall remain in effect until the completion of arbitration/litigation of the dispute
and the proceeds of which shall be payable to such Holder to the extent it obtains
judgment. In the absence of an injunction precluding the same, the Company shall
issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion.
Nothing herein shall limit a Holder’s right to pursue actual damages or declare an
Event of Default pursuant to Section 8 herein for the Company’s failure to deliver
Conversion Shares within the period specified herein and such Holder 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. The
exercise of any such rights shall not prohibit the Holder from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.

     v. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to the Holder such certificate or
certificates pursuant to Section 4(d)(ii) by the third Trading Day after the
Conversion Date, and if after such third Trading Day the Holder is required by its
brokerage firm to purchase (in an open market transaction or otherwise) Common Stock
to deliver in satisfaction of a sale by such Holder of the Conversion Shares which
the Holder anticipated receiving upon such conversion (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder (in addition to any remedies available
to or elected by the Holder) the amount by which (x) the Holder’s total purchase
price (including brokerage commissions, if any) for the Common Stock so purchased
exceeds (y) the product of (1) the aggregate number of shares of Common Stock that
such Holder anticipated receiving from the conversion at issue multiplied by (2) the
actual sale price of the Common Stock at the time of the sale (including brokerage
commissions, if any) giving rise to such purchase obligation and (B) at the option
of the Holder, either reissue this Debenture in a principal amount equal to the
principal amount of the attempted conversion or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company timely complied
with its delivery requirements under Section 4(d)(ii). For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In
with respect to an attempted conversion of this Debenture with respect to which the
actual sale price of the Conversion Shares at the time of the sale (including
brokerage commissions, if any) giving rise to such purchase obligation was a total
of $10,000 under clause (A) of the immediately preceding sentence, the Company

12

 

shall
be required to pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the Buy-In.
Notwithstanding anything contained herein to the contrary, if a Holder requires the
Company to make payment in respect of a Buy-In for the failure to timely deliver
certificates hereunder and the Company timely pays in full such payment, the Company
shall not be required to pay such Holder liquidated damages under Section 4(d)(iv)
in respect of the certificates resulting in such Buy-In.

     vi. Reservation of Shares Issuable Upon Conversion. The Company
covenants that it will at all times reserve and keep available out of its authorized
and unissued shares of Common Stock solely for the purpose of issuance upon
conversion of this Debenture and payment of interest on this Debenture, each as
herein provided, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holder (and the other holders of the Debentures),
not less than such number of shares of the Common Stock as shall (subject to any
additional requirements of the Company as to reservation of such
shares set forth in the Purchase Agreement) be issuable (taking into account
the adjustments and restrictions of Section 5) upon the conversion of the
outstanding principal amount of this Debenture and payment of interest hereunder.
The Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid,
nonassessable and, if the Registration Statement is then effective under the
Securities Act, registered for public sale in accordance with such Registration
Statement.

     vii. Fractional Shares. Upon a conversion hereunder the Company shall
not be required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the VWAP at such time. If the Company elects
not, or is unable, to make such a cash payment, the Holder shall be entitled to
receive, in lieu of the final fraction of a share, one whole share of Common Stock.

     viii. Transfer Taxes. The issuance of certificates for shares of the
Common Stock on conversion of this Debenture shall be made without charge to the
Holder hereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in a
name other than that of the Holder of this Debenture so converted and the Company
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the

13

 

Company the
amount of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.

     Section 5. Certain Adjustments.

     a) Stock Dividends and Stock Splits. If the Company, at any time while this
Debenture is outstanding: (A) pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or equity equivalent
securities payable in shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company pursuant to this Debenture,
including as interest thereon), (B) subdivides outstanding shares of Common Stock into a
larger number of shares, (C) combines (including by way of reverse stock split) outstanding
shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of
shares of the Common Stock any shares of capital stock of the Company, then the Conversion
Price shall be multiplied by a fraction of which the numerator shall be the number of shares
of Common Stock (excluding treasury shares, if any) outstanding immediately before such
event and of which the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to this Section shall become
effective immediately after the
record date for the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in the case of
a subdivision, combination or re-classification.

     b) Subsequent Equity Sales. If the Company or any Subsidiary thereof, as
applicable, at any time while this Debenture is outstanding, shall offer, sell, grant any
option to purchase or offer, sell or grant any right to reprice its securities, or otherwise
dispose of or issue (or announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents entitling any Person to acquire
shares of Common Stock, at an effective price per share less than the then Conversion Price
(such lower price, the “Base Conversion Price” and such issuances collectively, a
“Dilutive Issuance”), as adjusted hereunder (if the holder of the Common Stock or
Common Stock Equivalents so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices or
otherwise, or due to warrants, options or rights per share which is issued in connection
with such issuance, be entitled to receive shares of Common Stock at an effective price per
share which is less than the Conversion Price, such issuance shall be deemed to have
occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the
Conversion Price shall be reduced to equal the Base Conversion Price; provided,
however, if the Company achieves at least $20,000,000 in revenue for the fiscal year
ending December 31, 2005, the Conversion Price shall be reduced by multiplying the
Conversion Price by a fraction, the numerator of which is the number of shares of Common
Stock issued and outstanding immediately prior to the Dilutive Issuance plus the number of
shares of Common Stock and Common Stock Equivalents which the aggregate consideration
received or receivable by the Company in connection with such

14

 

Dilutive Issuance would
purchase at the then effective Conversion Price, and the denominator of which shall be the
sum of the number of shares of Common Stock issued and outstanding immediately prior to the
Dilutive Issuance plus the number of shares of Common Stock and Common Stock Equivalents so
issued or issuable in connection with the Dilutive Issuance; provided,
further, until Shareholder Approval is obtained and deemed effective, the Conversion
Price shall not be adjusted to be less than $2.63, subject to adjustment for reverse and
forward stock splits, stock dividends, stock combinations and other similar transactions of
the Common Stock that occur after the date of this Debenture. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the
foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt
Issuance. The Company shall notify the Holder in writing, no later than the Business Day
following the issuance of any Common Stock or Common Stock Equivalents subject to this
section, indicating therein the applicable issuance price, or of applicable reset price,
exchange price, conversion price and other pricing terms (such notice the “Dilutive
Issuance Notice”). For purposes of clarification, whether or not the Company provides a
Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive
Issuance, after the date of such Dilutive Issuance the Holder is entitled to receive a
number of Conversion Shares based upon the Base Conversion Price regardless of whether the
Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

     c) Pro Rata Distributions. If the Company, at any time while this Debenture is
outstanding, shall distribute to all holders of Common Stock (and not to the holders of the
Debentures) evidences of its indebtedness or assets (including cash and cash dividends) or
rights or warrants to subscribe for or purchase any security, then in each such case the
Conversion Price shall be adjusted by multiplying such Conversion Price in effect
immediately prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the VWAP
determined as of the record date mentioned above, and of which the numerator shall be such
VWAP on such record date less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so distributed applicable to one outstanding
share of the Common Stock as determined by the Board of Directors in good faith. In either
case the adjustments shall be described in a statement provided to the Holder of the portion
of assets or evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock. Such adjustment shall be made whenever any such distribution
is made and shall become effective immediately after the record date mentioned above.

     d) Fundamental Transaction. If, at any time while this Debenture is
outstanding, (A) the Company effects any merger or consolidation of the Company with or into
another Person, (B) the Company effects any sale of all or substantially all of its assets
in one or a series of related transactions, (C) any tender offer or exchange offer (whether
by the Company or another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash

15

 

or property, or (D)
the Company effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or exchanged for
other securities, cash or property (in any such case, a “Fundamental Transaction”),
then upon any subsequent conversion of this Debenture, the Holder shall have the right to
receive, for each Conversion Share that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental Transaction, the same kind and
amount of securities, cash or property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been, immediately prior to such
Fundamental Transaction, the holder of one share of Common Stock (the “Alternate
Consideration”). For purposes of any such conversion, the determination of the
Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price
among the Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration. If holders of Common Stock are
given any choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this Debenture following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any successor
to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder
a new
debenture consistent with the foregoing provisions and evidencing the Holder’s right to
convert such debenture into Alternate Consideration. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms requiring any such successor
or surviving entity to comply with the provisions of this paragraph (d) and insuring that
this Debenture (or any such replacement security) will be similarly adjusted upon any
subsequent transaction analogous to a Fundamental Transaction.

e) Calculations. All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this
Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding treasury
shares, if any) issued and outstanding.

f) Notice to the Holder.

     i. Adjustment to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any of this Section 5, the Company shall promptly mail to each
Holder a notice setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment. If the Company
issues a variable rate security, despite the prohibition thereon in the Purchase
Agreement, the Company shall be deemed to have issued Common Stock or Common Stock
Equivalents at the lowest possible conversion or exercise

16

 

price at which such
securities may be converted or exercised in the case of a Variable Rate Transaction
(as defined in the Purchase Agreement).

     ii. Notice to Allow Conversion by Holder. If (A) the Company shall
declare a dividend (or any other distribution) on the Common Stock; (B) the Company
shall declare a special nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital stock of
any class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or transfer of all
or substantially all of the assets of the Company, of any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property; (E)
the Company shall authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company; then, in each case, the Company shall
cause to be filed at each office or agency maintained for the purpose of conversion
of this Debenture, and shall cause to be mailed to the Holder at its last addresses
as it shall appear upon the stock books of the Company, at least 20 calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of record to be entitled
to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected that
holders of the Common Stock of record shall be entitled to exchange their shares of
the Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange;
provided, that the failure to mail such notice or any defect therein or in
the mailing thereof shall not affect the validity of the corporate action required
to be specified in such notice. The Holder is entitled to convert this Debenture
during the 20-day period commencing the date of such notice to the effective date of
the event triggering such notice.

     Section 6. Redemption and Forced Conversion.

     a) Optional Redemption at Election of Company. Subject to the provisions of
this Section 6, at any time after the Effective Date, the Company may deliver a notice to
the Holder (an “Optional Redemption Notice” and the date such notice is deemed
delivered hereunder, the “Optional Redemption Notice Date”) of its irrevocable
election to redeem some or all of the then outstanding Debentures, for an amount, in cash,
equal to the Optional Redemption Amount on the 10th Trading Day following the
Optional Redemption Notice Date (such date, the “Optional Redemption Date” and such

17

 

redemption, the “Optional Redemption”). The Optional Redemption Amount is due in
full on the Optional Redemption Date. The Company may only effect an Optional Redemption if
during the period commencing on the Optional Redemption Notice Date through to the Optional
Redemption Date and through and including the date such shares of Common Stock are issued to
the Holder, each of the Equity Conditions shall have been met. If any of the Equity
Conditions shall cease to be satisfied at any time during the required period, then the
Holder may elect to nullify the Optional Redemption Notice by notice to the Company within 3
Trading Days after the first day on which any such Equity Condition has not been met
(provided that if, by a provision of the Transaction Documents the Company is obligated to
notify the Holder of the non-existence of an Equity Condition, such notice period shall be
extended to the third Trading Day after proper notice from the Company) in which case the
Optional Redemption Notice shall be null and void, ab initio. The Company
covenants and agrees that it will honor all Notice of Conversions tendered from the time of
delivery of the Optional Redemption Notice through the date all amounts owing thereon are
due and paid in full.

     b) Redemption Procedure. The payment of cash pursuant to the Optional
Redemption shall be made on the Optional Redemption Date. If any portion of the cash
payment for an Optional Redemption shall not be paid by the Company by its due date,
interest shall accrue thereon at the rate of 18% per annum (or the maximum rate permitted by
applicable law, whichever is less) until the payment of the Optional Redemption Amount, plus
all amounts owing thereon is paid in full. Alternatively, if any portion of the Optional
Redemption Amount, as applicable, remains unpaid after such date, the Holders subject to
such redemption may elect, by written notice to the Company
given at any time thereafter, to invalidate ab initio such redemption,
notwithstanding anything herein contained to the contrary, and, with respect the failure to
honor the Optional Redemption as applicable, the Company shall have no further right to
exercise such Optional Redemption. Notwithstanding anything to the contrary in this Section
6, the Company’s determination to redeem in cash or its elections under Section 6(b) shall
be applied among the Holders of Debentures ratably. The Holder may elect to convert the
outstanding principal amount of the Debenture pursuant to Section 4 prior to actual payment
in cash for any redemption under this Section 6 by fax delivery of a Notice of Conversion to
the Company.

     c) Forced Conversion. Notwithstanding anything herein to the contrary, if after
the 12 month anniversary of the Closing Date, each of the Closing Prices for the Common
Stock for any 30 consecutive Trading Days (such period commencing only after the one year
anniversary of the Closing Date, such period the “Threshold Period”)) exceeds $6.575
(subject to adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after the
Original Issue Date), the Company may, within 1 Trading Day of the end of any such period,
deliver a notice to the Holder (a “Forced Conversion Notice” and the date such
notice is received by the Holder, the “Forced Conversion Notice Date”) to cause the
Holder to immediately convert all or part of the then outstanding principal

18

 

amount of
Debentures pursuant to Section 4. The Company may only effect a Forced Conversion Notice if
all of the Equity Conditions are met through the applicable Threshold Period until the date
of the applicable Forced Conversion and through and including the date such shares of Common
Stock are issued to the Holder. Any Forced Conversion shall be applied ratably to all
Holders based on their initial purchases of Debentures pursuant to the Purchase Agreement.
For purposes of clarification, a Forced Conversion shall be subject to all of the provisions
of Section 4, including, without limitation, the provision requiring payment of liquidated
damages and limitations on conversions.

     Section 7. Negative Covenants. So long as any portion of this Debenture is
outstanding, the Company will not and will not permit any of its Subsidiaries to directly or
indirectly:

     a) enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for
borrowed money of any kind, including but not limited to, a guarantee, on or with respect to
any of its property or assets now owned or hereafter acquired or any interest therein or any
income or profits therefrom that is senior to, or pari passu with, in any
respect, the Company’s obligations hereunder (other than pursuant to the Regenmacher
Transaction, the 7% Convertible Debentures, due April 20, 2006, in the original principal
amount of $4,075,000, or pursuant to any capital lease or purchase money financing for items
purchased after the date hereof, the security for which is limited to the asset so leased or
financed);

     b) enter into, create, incur, assume or suffer to exist any liens of any kind, on or
with respect to any of its property or assets now owned or hereafter acquired or any
interest therein or any income or profits therefrom that is senior to, in any respect,
the Company’s obligations hereunder (other than pursuant to the Regenmacher Transaction or
pursuant to any capital lease or purchase money financing for items purchased after the date
hereof, the security for which is limited to the asset so leased or financed);

     c) amend its certificate of incorporation, bylaws or other charter documents so as to
adversely affect any rights of the Holder;

     d) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a
de minimis number of shares of its Common Stock or Common Stock Equivalents other
than as to the Conversion Shares to the extent permitted or required under the Transaction
Documents or as otherwise permitted by the Transaction Documents;

     e) enter into any agreement with respect to any of the foregoing; or

     f) pay cash dividends on any equity securities of the Company.

     Section 8. Events of Default.

19

 

     a) “Event of Default”, wherever used herein, means any one of the following
events (whatever the reason and whether it shall be voluntary or involuntary or effected by
operation of law or pursuant to any judgment, decree or order of any court, or any order,
rule or regulation of any administrative or governmental body):

     i. any default in the payment of (A) the principal amount of any Debenture, or
(B) interest (including Late Fees) on, or liquidated damages in respect of, any
Debenture, as and when the same shall become due and payable (whether on a
Conversion Date or the Maturity Date or by acceleration or otherwise) which default,
solely in the case of an interest payment or other default under clause (B) above,
is not cured, within 3 Trading Days;

     ii. the Company shall fail to observe or perform any other covenant or
agreement contained in this Debenture (other than a breach by the Company of its
obligations to deliver shares of Common Stock to the Holder upon conversion which
breach is addressed in clause (xi) below) which failure is not cured, if possible to
cure, within the earlier to occur of (A) 5 Trading Days after notice of such default
sent by the Holder or by any other Holder and (B)10 Trading Days after the Company
shall become or should have become aware of such failure;

     iii. a default or event of default (subject to any grace or cure period
provided for in the applicable agreement, document or instrument) shall occur under
(A) any of the Transaction Documents other than the Debentures, or (B) any other
material agreement, lease, document or instrument to which the Company or any
Subsidiary is bound;

     iv. any representation or warranty made herein, in any other Transaction
Documents, in any written statement pursuant hereto or thereto, or in any other
report, financial statement or certificate made or delivered to the Holder or any
other holder of Debentures shall be untrue or incorrect in any material respect as
of the date when made or deemed made;

     v. (i) the Company or any of its Subsidiaries shall commence, or there shall be
commenced against the Company or any such Subsidiary, a case under any applicable
bankruptcy or insolvency laws as now or hereafter in effect or any successor
thereto, or the Company or any Subsidiary commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Company or any Subsidiary thereof or (ii) there
is commenced against the Company or any Subsidiary thereof any such bankruptcy,
insolvency or other proceeding which remains undismissed for a period of 60 days; or
(iii) the Company or any Subsidiary thereof is adjudicated by a court of competent
jurisdiction insolvent or bankrupt; or any order of relief or other order approving
any such case or proceeding is entered; or

20

 

(iv) the Company or any Subsidiary
thereof suffers any appointment of any custodian or the like for it or any
substantial part of its property which continues undischarged or unstayed for a
period of 60 days; or (v) the Company or any Subsidiary thereof makes a general
assignment for the benefit of creditors; or (vi) the Company shall fail to pay, or
shall state that it is unable to pay, or shall be unable to pay, its debts generally
as they become due; or (vii) the Company or any Subsidiary thereof shall call a
meeting of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (viii) the Company or any Subsidiary thereof shall by
any act or failure to act expressly indicate its consent to, approval of or
acquiescence in any of the foregoing; or (ix) any corporate or other action is taken
by the Company or any Subsidiary thereof for the purpose of effecting any of the
foregoing;

     vi. the Company or any Subsidiary shall default in any of its obligations under
any mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there may
be secured or evidenced any indebtedness for borrowed money or money due under any
long term leasing or factoring arrangement of the Company in an amount exceeding
$150,000, whether such indebtedness now exists or shall hereafter be created and
such default shall result in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due and payable;

     vii. the Common Stock shall not be eligible for quotation on or quoted for
trading on a Trading Market and shall not again be eligible for and quoted or listed
for trading thereon within five Trading Days;

     viii. the Company shall redeem or repurchase more than a de minimis number of
its outstanding shares of Common Stock or other equity securities of the Company
(other than redemptions of Conversion Shares and repurchases of shares of Common
Stock or other equity securities of departing officers and directors of the Company;
provided such repurchases shall not exceed $100,000, in the aggregate, for all
officers and directors during the term of this Debenture);

     ix. a Registration Statement shall not have been declared effective by the
Commission on or prior to the 240th calendar day after the Closing Date;

     x. if, during the Effectiveness Period (as defined in the Registration Rights
Agreement), the effectiveness of the Registration Statement lapses for any reason or
the Holder shall not be permitted to resell Registrable Securities (as defined in
the Registration Rights Agreement) under the Registration Statement, in either case,
for more than 10 consecutive Trading Days or 15 non-consecutive Trading Days during
any 12 month period; provided, however, that in the event that the
Company is negotiating a merger, consolidation, acquisition or sale of all

21

 

or
substantially all of its assets or a similar transaction and in the written opinion
of counsel to the Company, the Registration Statement, would be required to be
amended to include information concerning such transactions or the parties thereto
that is not available or may not be publicly disclosed at the time, the Company
shall be permitted an additional 10 consecutive Trading Days during any 12 month
period relating to such an event;

     xi. the Company shall fail for any reason to deliver certificates to a Holder
prior to the third Trading Day after a Conversion Date or any Forced Conversion Date
pursuant to and in accordance with Section 4(d) or the Company shall provide notice
to the Holder, including by way of public announcement, at any time, of its
intention not to comply with requests for conversions of any Debentures in
accordance with the terms hereof;

     xii. the Company does not hold a shareholder meeting to obtain Shareholder
Approval by November 15, 2005, but the failure to obtain Shareholder Approval at any
such meeting shall not constitute an Event of Default.

     b) Remedies Upon Event of Default. If any Event of Default occurs, the full
principal amount of this Debenture, together with interest and other amounts owing in
respect thereof, to the date of acceleration shall become, at the Holder’s election,
immediately due and payable in cash. The aggregate amount payable upon an Event of Default
shall be equal to the Mandatory Prepayment Amount. Commencing 5 days after the occurrence
of any Event of Default that results in the eventual acceleration of this Debenture, the
interest rate on this Debenture shall accrue at the rate of 18% per annum, or such lower
maximum amount of interest permitted to be charged under applicable law. All Debentures for
which the full Mandatory Prepayment Amount hereunder shall have
been paid in accordance herewith shall promptly be surrendered to or as directed by the
Company. The Holder need not provide and the Company hereby waives any presentment, demand,
protest or other notice of any kind, and the Holder may immediately and without expiration
of any grace period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such declaration may be rescinded and
annulled by Holder at any time prior to payment hereunder and the Holder shall have all
rights as a Debenture holder until such time, if any, as the full payment under this Section
shall have been received by it. No such rescission or annulment shall affect any subsequent
Event of Default or impair any right consequent thereon.

     Section 9. Miscellaneous.

     a) Notices. Any and all notices or other communications or deliveries to be
provided by the Holder hereunder, including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile, sent by a

22

 

nationally recognized
overnight courier service, addressed to the Company, at the address set forth above,
facsimile number 602-389-8869, Attn: Chief Financial Officer or such other address or
facsimile number as the Company may specify for such purposes by notice to the Holder
delivered in accordance with this Section. Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier service
addressed to each Holder at the facsimile telephone number or address of such Holder
appearing on the books of the Company, or if no such facsimile telephone number or address
appears, at the principal place of business of the Holder. Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section prior to 5:30 p.m. (New York City
time), (ii) the date after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this Section later
than 5:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the second Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by the party to
whom such notice is required to be given.

     b) Absolute Obligation. Except as expressly provided herein, no provision of
this Debenture shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, interest and liquidated damages (if any) on, this
Debenture at the time, place, and rate, and in the coin or currency, herein prescribed.
This Debenture is a direct debt obligation of the Company. This Debenture ranks
pari passu with all other Debentures now or hereafter issued under the terms
set forth herein and with the 7% Convertible Debentures, due April 20, 2008. This Debenture
is expressly subordinated in right of payment of principal (but, in the absence of an Event
of Default under the Regenmacher Debenture, not in right of payment of interest) to the
Company’s prior repayment of the Regenmacher Debenture.

     c) Lost or Mutilated Debenture. If this Debenture shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for
and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost,
stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so
mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft
or destruction of such Debenture, and of the ownership hereof, and indemnity, if requested,
all reasonably satisfactory to the Company.

     d) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture 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
any of the Transaction Documents (whether brought against a party hereto or its

23

 

respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced in
the state and federal courts sitting in the City of New York, Borough of Manhattan (the
“New York Courts”). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts 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, or such New York
Courts are 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 Debenture 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. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to this
Debenture or the transactions contemplated hereby. If either party shall commence an action
or proceeding to enforce any provisions of this Debenture, 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.

     e) Waiver. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this Debenture. The
failure of the Company or the Holder to insist upon strict adherence to any term of this
Debenture on one or more occasions shall not be considered a waiver or deprive that party of
the right thereafter to insist upon strict adherence to that term or any other term of this
Debenture. Any waiver must be in writing.

     f) Severability. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any provision is
inapplicable to any person or circumstance, it shall nevertheless remain applicable to all
other persons and circumstances. If it shall be found that any interest or other amount
deemed interest due hereunder violates applicable laws governing usury, the applicable rate
of interest due hereunder shall automatically be lowered to equal the maximum permitted rate
of interest. The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay, extension or usury law or other law which would prohibit or forgive
the Company from paying all or any portion of the principal of or interest on this Debenture
as contemplated herein, wherever enacted, now or at any time hereafter in force, or which
may affect the covenants or the performance of this indenture, and the Company (to the
extent it may lawfully do so) hereby expressly waives

24

 

all benefits or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the
execution of any power herein granted to the Holder, but will suffer and permit the
execution of every such as though no such law has been enacted.

     g) Next Business Day. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the next succeeding
Business Day.

     h) Headings. The headings contained herein are for convenience only, do not
constitute a part of this Debenture and shall not be deemed to limit or affect any of the
provisions hereof.

*********************

25

 

     IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a duly
authorized officer as of the date first above indicated.

	 	 	 	 	 
	 	 	BRILLIAN CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 

	 

	 	 	 	Name:
	 

	 	 	 	Title:

26

 

ANNEX A

NOTICE OF CONVERSION

     The undersigned hereby elects to convert principal under the 4% Convertible Debenture of
Brillian Corporation, a Delaware corporation (the “Company”), due on July 12, 2008, into
shares of common stock, par value $0.001 per share (the “Common Stock”), of the Company
according to the conditions hereof, as of the date written below. If shares are to be issued in
the name of a person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be charged to the holder
for any conversion, except for such transfer taxes, if any.

     By the delivery of this Notice of Conversion the undersigned represents and warrants to the
Company that its ownership of the Common Stock does not exceed the amounts determined in accordance
with Section 13(d) of the Exchange Act, specified under Section 4 of this Debenture.

     The undersigned agrees to comply with the prospectus delivery requirements under the
applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

Conversion calculations:

	 	 	 
	 

	 	Date to Effect Conversion:
	 
	 	 
	 

	 	Principal Amount of Debenture to be Converted:
	 
	 	 
	 

	 	Payment of Interest in Common Stock ___yes ___no
	 

	 	          If yes, $___of Interest Accrued on Account of
	 

	 	          Conversion at Issue.
	 
	 	 
	 

	 	Number of shares of Common Stock to be issued:
	 
	 	 
	 

	 	Signature:
	 
	 	 
	 

	 	Name:
	 
	 	 
	 

	 	Address:

27

 

Schedule 1

CONVERSION SCHEDULE

The 4% Convertible Debentures due on July 12, 2008, in the aggregate principal amount of $5,000,000
issued by Brillian Corporation. This Conversion Schedule reflects conversions made under Section 4
of the above referenced Debenture.

Dated:

	 	 	 
	 	 	 	 	 	Aggregate Principal	 	 	 
	 	 	 	 	 	Amount Remaining	 	 	 
	Date of Conversion	 	 	 	 	Subsequent to	 	 	 
	(or for first	 	 	 	 	Conversion	 	 	 
	entry, Original	 	Amount of	 	 	(or original	 	 	 
	Issue Date)	 	Conversion	 	 	Principal Amount)	 	 	Company Attest

28exv4w8

 

EXHIBIT 4.8

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE 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. THIS
SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

COMMON STOCK PURCHASE WARRANT

To Purchase                      Shares of Common Stock of

BRILLIAN CORPORATION

          THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received,
                     (the “Holder”), is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after the 181st day
after the date hereof (the “Initial Exercise Date”) and on or prior to the close of
business on the fifth anniversary of the Initial Exercise Date (the “Termination Date”) but
not thereafter, to subscribe for and purchase from Brillian Corporation, a Delaware corporation
(the “Company”), up to                      shares (the “Warrant Shares”) of Common Stock, par
value $0.001 per share, of the Company (the “Common Stock”). The purchase price of one
share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in
Section 2(b).

     Section 1. Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase Agreement (the
“Purchase Agreement”), dated July 12, 2005, among the Company and the purchasers signatory
thereto.

     Section 2. Exercise.

     a) Exercise of Warrant. Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the Initial
Exercise Date and on or before the Termination Date by delivery to the Company of a duly
executed facsimile copy of the Notice of Exercise Form annexed hereto (or such other office
or agency of the Company as it may designate by notice in writing to the

1

 

registered Holder at the address of such Holder appearing on the books of the Company);
provided, however, within 5 Trading Days of the date said Notice of Exercise
is delivered to the Company, the Holder shall have surrendered this Warrant to the Company
and the Company shall have received payment of the aggregate Exercise Price of the shares
thereby purchased by wire transfer or cashier’s check drawn on a United States bank.

     b) Exercise Price. The exercise price of the Common Stock under this Warrant
shall be $2.63, subject to adjustment hereunder (the “Exercise Price”).

     c) Cashless Exercise. If at any time after one year from the date of issuance
of this Warrant there is no effective Registration Statement registering, or no current
prospectus available for, the resale of the Warrant Shares by the Holder, then this Warrant
may also be exercised at such time by means of a “cashless exercise” in which the Holder
shall be entitled to receive a certificate for the number of Warrant Shares equal to the
quotient obtained by dividing [(A-B) (X)] by (A), where:

	(A) =	 	the VWAP on the Trading Day immediately preceding the date
of such election;

	(B) =	 	the Exercise Price of this Warrant, as adjusted; and

	(X) =	 	the number of Warrant Shares issuable upon exercise of this
Warrant in accordance with the terms of this Warrant by means of a cash
exercise rather than a cashless exercise.

     Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant
shall be automatically exercised via cashless exercise pursuant to this Section 2(c).

     d) Exercise Limitations.

     i. Holder’s Restrictions. A Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2(c) or otherwise,
to the extent that after giving effect to such issuance after exercise, such
Holder (together with such Holder’s affiliates), as set forth on the
applicable Notice of Exercise, would beneficially own in excess of 4.99% of
the number of shares of the Common Stock outstanding immediately after
giving effect to such issuance. For purposes of the foregoing sentence, the
number of shares of Common Stock beneficially owned by such Holder and its
affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by such Holder or
any of its affiliates and (B) exercise or conversion of the unexercised or
nonconverted portion of any other securities of the Company (including,
without limitation, any other

2

 

Debentures or Warrants) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially owned by
such Holder or any of its affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 2(d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act, it being
acknowledged by a Holder that the Company is not representing to such Holder
that such calculation is in compliance with Section 13(d) of the Exchange
Act and such Holder is solely responsible for any schedules required to be
filed in accordance therewith. To the extent that the limitation contained
in this Section 2(d) applies, the determination of whether this Warrant is
exercisable (in relation to other securities owned by such Holder) and of
which a portion of this Warrant is exercisable shall be in the sole
discretion of a Holder, and the submission of a Notice of Exercise shall be
deemed to be each Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by such Holder) and of
which portion of this Warrant is exercisable, in each case subject to such
aggregate percentage limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. For purposes of this
Section 2(d), in determining the number of outstanding shares of Common
Stock, a Holder may rely on the number of outstanding shares of Common Stock
as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the
case may be, (y) a more recent public announcement by the Company or (z) any
other notice by the Company or the Company’s Transfer Agent setting forth
the number of shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within two Trading Days confirm
orally and in writing to such Holder the number of shares of Common Stock
then outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or exercise
of securities of the Company, including this Warrant, by such Holder or its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. The provisions of this Section 2(d) may be
waived by such Holder, at the election of such Holder, upon not less than 61
days’ prior notice to the Company, and the provisions of this Section 2(d)
shall continue to apply until such 61st day (or such later date,
as determined by such Holder, as may be specified in such notice of waiver).

     ii. Trading Market Restrictions. If the Company has not
obtained Shareholder Approval (as defined below) if required by the
applicable rules and regulations of the Trading Market (or any successor
entity), then the Company may not issue upon exercise of this Warrant a
number of shares of Common Stock, which, when aggregated with any shares of
Common Stock issued (A) upon conversion of or as payment of interest on the
Debentures issued pursuant to the Purchase Agreement or that certain
Securities Purchase Agreement dated April 18, 2005, as amended, and (B) upon
prior exercise of this or any other Warrant issued pursuant to the

3

 

Purchase Agreement or those certain Securities Purchase Agreements
dated April 18, 2005, would exceed 19.999% of the number of shares of Common
Stock outstanding on the Trading Day immediately preceding the Closing Date
(such number of shares, the “Issuable Maximum”). If on any
attempted exercise of this Warrant, the issuance of Warrant Shares would
exceed the Issuable Maximum and the Company shall not have previously
obtained the vote of shareholders (the “Shareholder Approval”), if
any, as may be required by the applicable rules and regulations of the
Nasdaq National Market (or any successor entity) to approve the issuance of
 shares of Common Stock in excess of the Issuable Maximum pursuant to the
terms hereof, then the Company shall issue to the Holder requesting a
Warrant exercise such number of Warrant Shares as may be issued below the
Issuable Maximum and, with respect to the remainder of the aggregate number
of Warrant Shares, this Warrant shall not be exercisable until and unless
Shareholder Approval has been obtained.

     e) Mechanics of Exercise.

     i. Authorization of Warrant Shares. The Company covenants that
all Warrant Shares which may be issued upon the exercise of the purchase
rights represented by this Warrant will, upon exercise of the purchase
rights represented by this Warrant, be duly authorized, validly issued,
fully paid and nonassessable and free from all taxes, liens and charges in
respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).

     ii. Delivery of Certificates Upon Exercise. Certificates for
 shares purchased hereunder shall be transmitted by the transfer agent of the
Company to the Holder by crediting the account of the Holder’s prime broker
with the Depository Trust Company through its Deposit Withdrawal Agent
Commission (“DWAC”) system if the Company is a participant in such
system, and otherwise by physical delivery to the address specified by the
Holder in the Notice of Exercise within 3 Trading Days from the delivery to
the Company of the Notice of Exercise Form, surrender of this Warrant and
payment of the aggregate Exercise Price as set forth above (“Warrant
Share Delivery Date”). This Warrant shall be deemed to have been
exercised on the date the Exercise Price is received by the Company. The
Warrant Shares shall be deemed to have been issued, and Holder or any other
person so designated to be named therein shall be deemed to have become a
holder of record of such shares for all purposes, as of the date the Warrant
has been exercised by payment to the Company of the Exercise Price and all
taxes required to be paid by the Holder, if any, pursuant to Section
2(e)(vii) prior to the issuance of such shares, have been paid.

4

 

     iii. Delivery of New Warrants Upon Exercise. If this Warrant
shall have been exercised in part, the Company shall, at the time of
delivery of the certificate or certificates representing Warrant Shares,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase
the unpurchased Warrant Shares called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant.

     iv. Rescission Rights. If the Company fails to cause its
transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to this Section 2(e)(iv) by the
Warrant Share Delivery Date, then the Holder will have the right to rescind
such exercise.

     v. Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Exercise. In addition to any other rights available
to the Holder, if the Company fails to cause its transfer agent to transmit
to the Holder a certificate or certificates representing the Warrant Shares
pursuant to an exercise on or before the Warrant Share Delivery Date, and if
after such date the Holder is required by its broker to purchase (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Warrant Shares that the Company was required
to deliver to the Holder in connection with the exercise at issue times (B)
the price at which the sell order giving rise to such purchase obligation
was executed, and (2) at the option of the Holder, either reinstate the
portion of the Warrant and equivalent number of Warrant Shares for which
such exercise was not honored or deliver to the Holder the number of shares
of Common Stock that would have been issued had the Company timely complied
with its exercise and delivery obligations hereunder. For example, if the
Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of Common
Stock with an aggregate sale price giving rise to such purchase obligation
of $10,000, under clause (1) of the immediately preceding sentence the
Company shall be required to pay the Holder $1,000. The Holder shall provide
the Company written notice indicating the amounts payable to the Holder in
respect of the Buy-In, together with applicable confirmations and other
evidence reasonably requested by the Company. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at
law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure
to timely deliver certificates representing shares of

5

 

Common Stock upon exercise of the Warrant as required pursuant to the
terms hereof.

     vi. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of
this Warrant. As to any fraction of a share which Holder would otherwise be
entitled to purchase upon such exercise, the Company shall pay a cash
adjustment in respect of such final fraction in an amount equal to such
fraction multiplied by the Exercise Price.

     vii. Charges, Taxes and Expenses. Issuance of certificates for
Warrant Shares shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company,
and such certificates shall be issued in the name of the Holder or in such
name or names as may be directed by the Holder; provided,
however, that in the event certificates for Warrant Shares are to be
issued in a name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form
attached hereto duly executed by the Holder; and the Company may require, as
a condition thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto.

     viii. Closing of Books. The Company will not close its
stockholder books or records in any manner which prevents the timely
exercise of this Warrant, pursuant to the terms hereof.

     Section 3. Certain Adjustments.

     a) Stock Dividends and Splits. If the Company, at any time while this Warrant
is outstanding: (A) pays a stock dividend or otherwise make a distribution or distributions
on shares of its Common Stock or any other equity or equity equivalent securities payable in
 shares of Common Stock (which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company pursuant to this Warrant), (B) subdivides outstanding
 shares of Common Stock into a larger number of shares, (C) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or
(D) issues by reclassification of shares of the Common Stock any shares of capital stock of
the Company, then in each case the Exercise Price shall be multiplied by a fraction of which
the numerator shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding immediately before such event and of which the denominator shall be the
number of shares of Common Stock outstanding immediately after such event and the number of
 shares issuable upon exercise of this Warrant shall be proportionately adjusted. Any
adjustment made pursuant to this Section 3(a) shall become effective immediately after the
record date for the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in the case of
a subdivision, combination or re-classification.

6

 

     b) Subsequent Equity Sales. At ant time after Shareholder Approval, if the
Company or any Subsidiary thereof, as applicable, at any time while this Warrant is
outstanding, shall offer, sell, grant any option to purchase or offer, sell or grant any
right to reprice its securities, or otherwise dispose of or issue (or announce any offer,
sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock
Equivalents entitling any Person to acquire shares of Common Stock, at an effective price
per share less than the then Exercise Price (such lower price, the “Base Share
Price” and such issuances collectively, a “Dilutive Issuance”), as adjusted
hereunder (if the holder of the Common Stock or Common Stock Equivalents so issued shall at
any time, whether by operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights
per share which is issued in connection with such issuance, be entitled to receive shares of
Common Stock at an effective price per share which is less than the Exercise Price, such
issuance shall be deemed to have occurred for less than the Exercise Price on such date of
the Dilutive Issuance), then the Exercise Price shall be reduced and only reduced to equal
the Base Share Price; provided, however, if the Company achieves at least
$20,000,000 in revenue for the fiscal year ending December 31, 2005, the Exercise Price
shall be reduced by multiplying the Exercise Price by a fraction, the numerator of which is
the number of shares of Common Stock issued and outstanding immediately prior to the
Dilutive Issuance plus the number of shares of Common Stock and Common Stock Equivalents
which the aggregate consideration received or receivable by the Company in connection with
such Dilutive Issuance would purchase at the then effective Exercise Price, and the
denominator of which shall be the sum of the number of shares of Common Stock issued and
outstanding immediately prior to the Dilutive Issuance plus the number of shares of Common
Stock and Common Stock Equivalents so issued or issuable in connection with the Dilutive
Issuance. Additionally, the number of Warrant Shares issuable hereunder shall be increased
such that the aggregate Exercise Price payable hereunder after taking into account the
decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such
adjustment. Such adjustment shall be made whenever such Common Stock or Common Stock
Equivalents are issued. Notwithstanding the foregoing, no adjustments shall be made, paid
or issued under this Section 3(b) in respect of an Exempt Issuance. The Company shall
notify the Holder in writing, no later than the Trading Day following the issuance of any
Common Stock or Common Stock Equivalents subject to this section, indicating therein the
applicable issuance price, or of applicable reset price, exchange price, conversion price
and other pricing terms (such notice the “Dilutive Issuance Notice”). For purposes
of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to
this Section 3(b), upon the occurrence of any Dilutive Issuance, after the date of such
Dilutive Issuance the Holder is entitled to receive a number of Warrant Shares based upon
the Base Share Price regardless of whether the Holder accurately refers to the Base Share
Price in the Notice of Exercise.

     c) Pro Rata Distributions. If the Company, at any time prior to the
Termination Date, shall distribute to all holders of Common Stock (and not to Holders of the
Warrants) evidences of its indebtedness or assets (including cash and cash dividends) or
rights or warrants to subscribe for or purchase any security other than the Common Stock
(which shall be subject to Section 3(b)), then in each such case the Exercise Price

7

 

shall be adjusted by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the VWAP determined as of the record date
mentioned above, and of which the numerator shall be such VWAP on such record date less the
then per share fair market value at such record date of the portion of such assets or
evidence of indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith. In either case the adjustments
shall be described in a statement provided to the Holder of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable to one share
of Common Stock. Such adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned above.

     d) Fundamental Transaction. If, at any time while this Warrant is outstanding,
(A) the Company effects any merger or consolidation of the Company with or into another
Person, (B) the Company effects any sale of all or substantially all of its assets in one or
a series of related transactions, (C) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or property, or (D)
the Company effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or exchanged for
other securities, cash or property (in any such case, a “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the right to
receive, for each Warrant Share that would have been issuable upon such exercise immediately
prior to the occurrence of such Fundamental Transaction, at the option of the Holder, (a)
upon exercise of this Warrant, the number of shares of Common Stock of the successor or
acquiring corporation or of the Company, if it is the surviving corporation, and any
additional consideration (the “Alternate Consideration”) receivable upon or as a
result of such reorganization, reclassification, merger, consolidation or disposition of
assets by a Holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event or (b) if the Company is acquired in an all cash
transaction, cash equal to the value of this Warrant as determined in accordance with the
Black-Scholes option pricing formula. For purposes of any such exercise, the determination
of the Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect of one
share of Common Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any successor
to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder
a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to
exercise such warrant into Alternate Consideration. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall

8

 

include terms requiring any such successor or surviving entity to comply with the
provisions of this Section 3(d) and insuring that this Warrant (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous to a
Fundamental Transaction.

     e) Calculations. All calculations under this Section 3 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this
Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding treasury
 shares, if any) issued and outstanding.

     f) Voluntary Adjustment By Company. The Company may at any time during the term
of this Warrant reduce the then current Exercise Price to any amount and for any period of
time deemed appropriate by the Board of Directors of the Company.

     g) Notice to Holders.

     i. Adjustment to Exercise Price. Whenever the Exercise Price is
adjusted pursuant to this Section 3, the Company shall promptly mail to each
Holder a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. If
the Company issues a variable rate security, despite the prohibition thereon
in the Purchase Agreement, the Company shall be deemed to have issued Common
Stock or Common Stock Equivalents at the lowest possible conversion or
exercise price at which such securities may be converted or exercised in the
case of a Variable Rate Transaction (as defined in the Purchase Agreement).

     ii. Notice to Allow Exercise by Holder. If (A) the Company
shall declare a dividend (or any other distribution) on the Common Stock;
(B) the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock; (C) the Company shall authorize the granting
to all holders of the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights; (D) the
approval of any stockholders of the Company shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger
to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any compulsory share
exchange whereby the Common Stock is converted into other securities, cash
or property; (E) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company; then,
in each case, the Company shall cause to be mailed to the Holder at its last
address as it shall appear upon the Warrant Register of the Company, at
least 20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to
be taken for the purpose of such dividend, distribution, redemption, rights
or warrants, or if a record is not to be

9

 

taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or
warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided, that the failure to mail
such notice or any defect therein or in the mailing thereof shall not affect
the validity of the corporate action required to be specified in such
notice. The Holder is entitled to exercise this Warrant during the 20-day
period commencing on the date of such notice to the effective date of the
event triggering such notice.

     Section 4. Transfer of Warrant.

     a) Transferability. Subject to compliance with any applicable securities laws
and the conditions set forth in Sections 5(a) and 4(d) hereof and to the provisions of
Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder are
transferable, in whole or in part, upon surrender of this Warrant at the principal office of
the Company, together with a written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to
pay any transfer taxes payable upon the making of such transfer. Upon such surrender and,
if required, such payment, the Company shall execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees and in the denomination or denominations specified
in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing
the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.
A Warrant, if properly assigned, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant issued.

     b) New Warrants. This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants are to be issued, signed
by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any
transfer which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.

     c) Warrant Register. The Company shall register this Warrant, upon records to
be maintained by the Company for that purpose (the “Warrant Register”), in the name
of the record Holder hereof from time to time. The Company may deem and treat the
registered Holder of this Warrant as the absolute owner hereof for the purpose of any
exercise hereof or any distribution to the Holder, and for all other purposes, absent actual
notice to the contrary.

10

 

     d) Transfer Restrictions. If, at the time of the surrender of this Warrant in
connection with any transfer of this Warrant, the transfer of this Warrant shall not be
registered pursuant to an effective registration statement under the Securities Act and
under applicable state securities or blue sky laws, the Company may require, as a condition
of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may
be, furnish to the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable transactions) to the
effect that such transfer may be made without registration under the Securities Act and
under applicable state securities or blue sky laws, (ii) that the holder or transferee
execute and deliver to the Company an investment letter in form and substance acceptable to
the Company and (iii) that the transferee be an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or a
qualified institutional buyer as defined in Rule 144A(a) under the Securities Act.

     Section 5. Miscellaneous.

     a) Title to Warrant. Prior to the Termination Date and subject to compliance
with applicable laws and Section 4 of this Warrant, this Warrant and all rights hereunder
are transferable, in whole or in part, at the office or agency of the Company by the Holder
in person or by duly authorized attorney, upon surrender of this Warrant together with the
Assignment Form annexed hereto properly endorsed. The transferee shall sign an investment
letter in form and substance reasonably satisfactory to the Company.

     b) No Rights as Shareholder Until Exercise. This Warrant does not entitle the
Holder to any voting rights or other rights as a shareholder of the Company prior to the
exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate
Exercise Price (or by means of a cashless exercise), the Warrant Shares so purchased shall
be and be deemed to be issued to such Holder as the record owner of such shares as of the
close of business on the later of the date of such surrender or payment.

     c) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock certificate relating to the
Warrant Shares, and in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it (which, in the case of the Warrant, shall not include the
posting of any bond), and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.

     d) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein shall be a
Saturday, Sunday or a legal holiday, then such action may be taken or such right may be
exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

     e) Authorized Shares.

11

 

     The Company covenants that during the period the Warrant is outstanding, it
will reserve from its authorized and unissued Common Stock a sufficient number of
 shares to provide for the issuance of the Warrant Shares upon the exercise of any
purchase rights under this Warrant. The Company further covenants that its issuance
of this Warrant shall constitute full authority to its officers who are charged with
the duty of executing stock certificates to execute and issue the necessary
certificates for the Warrant Shares upon the exercise of the purchase rights under
this Warrant. The Company will take all such reasonable action as may be necessary
to assure that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the Trading
Market upon which the Common Stock may be listed.

     Except and to the extent as waived or consented to by the Holder, the Company
shall not by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all such
terms and in the taking of all such actions as may be necessary or appropriate to
protect the rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will (a) not increase
the par value of any Warrant Shares above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (b) take all such action
as may be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant,
and (c) use commercially reasonable efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction thereof
as may be necessary to enable the Company to perform its obligations under this
Warrant.

     Before taking any action which would result in an adjustment in the number of
Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.

     f) Jurisdiction. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be determined in accordance with the
provisions of the Purchase Agreement.

     g) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon
the exercise of this Warrant, if not registered, will have restrictions upon resale imposed
by state and federal securities laws.

     h) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of such right

12

 

or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact
that all rights hereunder terminate on the Termination Date. If the Company willfully and
knowingly fails to comply with any provision of this Warrant, which results in any material
damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

     i) Notices. Any notice, request or other document required or permitted to be
given or delivered to the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.

     j) Limitation of Liability. No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant or purchase Warrant Shares, and no
enumeration herein of the rights or privileges of Holder, shall give rise to any liability
of Holder for the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the Company.

     k) Remedies. Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific performance of
its rights under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate.

     l) Successors and Assigns. Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of and be binding
upon the successors of the Company and the successors and permitted assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of all Holders from time to
time of this Warrant and shall be enforceable by any such Holder or holder of Warrant
Shares.

     m) Amendment. This Warrant may be modified or amended or the provisions hereof
waived with the written consent of the Company and the Holder.

     n) Severability. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of this Warrant.

     o) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.

********************

13

 

     IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer
thereunto duly authorized.

Dated: July __, 2005

	 	 	 	 	 
	 	BRILLIAN CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

14

 

NOTICE OF EXERCISE

TO: BRILLIAN CORPORATION

          (1) The undersigned hereby elects to purchase                      Warrant Shares of the Company pursuant
to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of
the exercise price in full, together with all applicable transfer taxes, if any.

          (2) Payment shall take the form of (check applicable box):

o in lawful money of the United States; or

o the cancellation of such number of Warrant Shares as is necessary, in
accordance with the formula set forth in subsection 2(c), to exercise this
Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in subsection 2(c).

          (3) Please issue a certificate or certificates representing said Warrant Shares in the name of
the undersigned or in such other name as is specified below:

 

The Warrant Shares shall be delivered to the following:

 

 

 

          (4) Accredited Investor. The undersigned is an “accredited investor” as defined in
Regulation D promulgated under the Securities Act of 1933, as amended.

[SIGNATURE OF HOLDER]

	 	 	 
	Name of Investing Entity:

	 	 

	 	 	 
	Signature of Authorized Signatory of Investing Entity:

	 	 

	 	 	 
	Name of Authorized Signatory:

	 	 

	 	 	 
	Title of Authorized Signatory:

	 	 

	 	 	 
	Date:

	 	 

 

 

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

          FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned
to

                                                                                whose address is

                                                                                                                                            .

                                                                                                                                            

Dated:                                         ,                     

	 	 	 
	Holder’s Signature:

	 	 

	 
	 	 
	Holder’s Address:

	 	 

	 
	 	 
	 

	 	 

	 	 	 
	Signature Guaranteed:

	 	 

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the
face of the Warrant, without alteration or enlargement or any change whatsoever, and must be
guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign the foregoing
Warrant.

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