SECURITIES PURCHASE AGREEMENT

SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of December 21, 2007,
by and among Broadcast International, Inc., a Utah corporation, with
headquarters located at 7050 Union Park Avenue, #600, Salt Lake City, Utah 84047
(the "Company"), and the investors listed on the Schedule of Buyers attached
hereto (individually, a "Buyer" and collectively, the "Buyers").

WHEREAS:

A.

The Company and each Buyer is executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 Act"), and Rule 506 of
Regulation D ("Regulation D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the 1933 Act.

B.

The Company has authorized a new series of senior secured convertible notes of
the Company which notes shall be convertible into the Company's common stock,
par value $0.05 per share (the "Common Stock"), in accordance with the terms of
the Notes (as defined below).

C.

Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms
and conditions stated in this Agreement, (i) that aggregate principal amount of
the Notes, in substantially the form attached hereto as Exhibit A (the "Notes"),
set forth opposite such Buyer's name in column (3) on the Schedule of Buyers
attached hereto (which aggregate amount for all Buyers shall be $15,000,000,
which Notes are convertible into shares of the Company's Common Stock, as set
forth herein(as converted, collectively, the "Conversion Shares"), (ii) that
aggregate number of shares (the "Common Shares") of the Common Stock, set forth
opposite such Buyer's name in column (4) on the Schedule of Buyers (which
aggregate amount for all Buyers shall be one million (1,000,000)), and (iii)
warrants, in substantially the form attached hereto as Exhibit B (the
"Warrants"), to acquire that number of shares of Common Stock set forth opposite
such Buyer's name in column (5) on the Schedule of Buyers (as exercised, the
"Warrant Shares").

D.

The Notes bear interest, which at the option of the Company, subject to certain
conditions, may be paid in shares of Common Stock (the "Interest Shares").

E.

Contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit C (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Registrable Securities (as defined in
the Registration Rights Agreement) under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.

F.

The Notes, the Conversion Shares, the Interest Shares, the Common Shares, the
Warrants and the Warrant Shares collectively are referred to herein as the
"Securities".

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G.

The Notes will rank senior to all outstanding and future indebtedness of the
Company and will be secured by a first priority perfected security interest in
all of the assets of the Company and the stock, equity interests and assets of
each of the Company's subsidiaries, as evidenced by (i) a security agreement, in
the form attached hereto as Exhibit E (as amended or modified from time to time
in accordance with its terms, the "Security Agreement"), and (ii) the guaranties
of the subsidiaries of the Company in the form attached hereto as Exhibit F (as
amended or modified from time to time in accordance with its terms, the
"Guaranty" and, together with the Pledge Agreement, the Security Agreement and
any ancillary documents related thereto, collectively the "Security Documents").

NOW, THEREFORE, the Company and each Buyer hereby agree as follows:

1.

PURCHASE AND SALE OF NOTES, COMMON SHARES AND WARRANTS.

(a)

Purchase of Notes, Common Shares and Warrants.  Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall
issue and sell to each Buyer, and each Buyer severally, but not jointly, agrees
to purchase from the Company on the Closing Date (as defined below), (x) a
principal amount of Notes as is set forth opposite such Buyer's name in column
(3) on the Schedule of Buyers, (y) the number of Common Shares as is set forth
opposite such Buyer's name in column (4) on the Schedule of Buyers, and (z)
Warrants to acquire that number of Warrant Shares as is set forth opposite such
Buyer's name in column (5) on the Schedule of Buyers (the "Closing").

(b)

Closing.  The date and time of the Closing (the "Closing Date") shall be 10:00
a.m., New York City time, on the date hereof (or such later date as is mutually
agreed to by the Company and each Buyer) after notification of satisfaction (or
waiver) of the conditions to the Closing set forth in Sections 6 and 7 below at
the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York
10022.

(c)

Prepaid Interest.  The Company shall prepay the interest payable under the Notes
through the one year anniversary of the Closing Date in such amount set forth
opposite such Buyer's name in column (6) of the Schedule of Buyers (for each
Buyer, its "Prepaid Interest"), which Prepaid Interest shall be nonrefundable.

(d)

Purchase Price.

(i)

The aggregate purchase price for the Notes, the Common Shares and the Warrants
to be purchased by each such Buyer at the Closing (the "Purchase Price") shall
be the amount set forth opposite each Buyer's name in column (8) of the Schedule
of Buyers.  Each Buyer shall pay $1,000 for each $1,000 of principal amount of
Notes and related Common Shares and Warrants to be purchased by such Buyer at
the Closing.

(ii)

The Purchase Price consideration shall be allocated to the Notes, the Common
Shares and the Warrants in a manner consistent with the Company's treatment
thereof in accordance with GAAP.

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(e)

Form of Payment.  On the Closing Date, (i) each Buyer shall pay its Purchase
Price less its Prepaid Interest (such net amount as set forth opposite such
Buyer's name in Column (7) of the Schedule of Buyers, its "Net Purchase Price")
to the Company for the Notes, the Common Shares and the Warrants to be issued
and sold to such Buyer at the Closing, by wire transfer of immediately available
funds in accordance with the Company's written wire instructions and (ii) the
Company shall deliver to each Buyer the Notes (allocated in the principal
amounts as such Buyer shall request) which such Buyer is then purchasing
hereunder along with the Common Shares (allocated in the amounts as such Buyer
shall request) and Warrants (allocated in the amounts as such Buyer shall
request) which such Buyer is purchasing, in each case duly executed on behalf of
the Company and registered in the name of such Buyer or its designee.

2.

BUYER'S REPRESENTATIONS AND WARRANTIES.  Each Buyer, severally and not jointly,
represents and warrants with respect to only itself that:

(a)

No Public Sale or Distribution.  Such Buyer is (i) acquiring the Notes, the
Common Shares and the Warrants and (ii) upon conversion of the Notes and
exercise of the Warrants (other than pursuant to a Cashless Exercise (as defined
in the Warrants)) will acquire the Conversion Shares issuable upon conversion of
the Notes and the Warrant Shares issuable upon exercise of the Warrants, for its
own account and not with a view towards, or for resale in connection with, the
public sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act; provided, however, that by making the
representations herein, such Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.  Such Buyer is acquiring the
Securities hereunder in the ordinary course of its business.  Such Buyer does
not presently have any agreement or understanding, directly or indirectly, with
any Person to distribute any of the Securities.

(b)

Accredited Investor Status.  Such Buyer is an "accredited investor" as that term
is defined in Rule 501(a) of Regulation D.

(c)

Reliance on Exemptions.  Such Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and such Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of such Buyer to acquire the
Securities.

(d)

Information.  Such Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities which have been
requested by such Buyer.  Such Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company.  Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
herein.  Such Buyer

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understands that its investment in the Securities involves a high degree of
risk.  Such Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.

(e)

No Governmental Review.  Such Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.

(f)

Transfer or Resale.  Such Buyer understands that except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company an
opinion of counsel, in a generally acceptable form, to the effect that such
Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) such Buyer
provides the Company with reasonable assurance that such Securities can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the
1933 Act, as amended, (or a successor rule thereto) (collectively, "Rule 144");
(ii) any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the Person (as defined in Section 3(s)) through whom the sale is made) may
be deemed to be an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
Person is under any obligation to register the Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.  The Securities may be pledged in connection with a bona
fide margin account or other loan or financing arrangement secured by the
Securities and such pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Buyer effecting a pledge
of Securities shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document (as defined in Section 3(b)), including, without
limitation, this Section 2(f).

(g)

Legends.  Such Buyer understands that the certificates or other instruments
representing the Notes and the Warrants and, until such time as the resale of
the Conversion Shares, the Common Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares, the Common
Shares and the Warrant Shares, except as set forth below, shall bear any legend
as required by the "blue sky" laws of any state and a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):

[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]
HAVE BEEN][THE SECURITIES REPRESENTED

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BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO
RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped or issue to such holder by electronic delivery at the applicable balance
account at DTC (as defined below), unless otherwise required by state securities
laws, (i) such Securities are registered for resale under the 1933 Act, (ii) in
connection with a sale, assignment or other transfer, such holder provides the
Company with an opinion of counsel, in a generally acceptable form, to the
effect that such sale, assignment or transfer of the Securities may be made
without registration under the applicable requirements of the 1933 Act, or (iii)
such holder provides the Company with reasonable assurance that the Securities
can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A.

(h)

Validity; Enforcement.  This Agreement, the Registration Rights Agreement and
the Security Documents to which such Buyer is a party have been duly and validly
authorized, executed and delivered on behalf of such Buyer and shall constitute
the legal, valid and binding obligations of such Buyer enforceable against such
Buyer in accordance with their respective terms, except as such enforceability
may be limited by general principles of equity or to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.

(i)

No Conflicts.  The execution, delivery and performance by such Buyer of this
Agreement, the Registration Rights Agreement and the Security Documents to which
such Buyer is a party and the consummation by such Buyer of the transactions
contemplated hereby and thereby will not (i) result in a violation of the
organizational documents of such Buyer or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
such Buyer is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment  or decree (including federal and state securities
laws) applicable to such Buyer, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.

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(j)

Residency.  Such Buyer is a resident of that jurisdiction specified below its
address on the Schedule of Buyers.

(k)

Certain Trading Activities.  Other than with respect to the transactions
contemplated herein, since the time that such Buyer was first contacted by the
Company, the Placement Agent or any other Person regarding the transactions
contemplated hereby, neither the Buyer nor any Affiliate of such Buyer which (x)
had knowledge of the transactions contemplated hereby, (y) has or shares
discretion relating to such Buyer’s investments or trading or information
concerning such Buyer’s investments, including in respect of the Securities, and
(z) is subject to such Buyer’s review or input concerning such Affiliate’s
investments or trading (collectively, “Trading Affiliates”) has directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Buyer or Trading Affiliate, effected or agreed to effect
any purchases or sales of the securities of the Company (including, without
limitation, any Short Sales involving the Company’s securities). Notwithstanding
the foregoing, in the case of a Buyer and/or Trading Affiliate that is,
individually or collectively, a multi-managed investment bank or vehicle whereby
separate portfolio managers manage separate portions of such Buyer's or Trading
Affiliate’s assets and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other portions of
such Buyer's or Trading Affiliate’s assets, the representation set forth above
shall apply only with respect to the portion of assets managed by the portfolio
manager that have knowledge about the financing transaction contemplated by this
Agreement.  Other than to officers, directors, partners, members, advisors and
affiliates of Buyer and other Persons party to this Agreement, such Buyer has
maintained the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction).

3.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to each of the Buyers that:

(a)

Organization and Qualification.  Except as set forth on Schedule 3(a)(i), each
of the Company and its "Subsidiaries" (which for purposes of this Agreement
means any entity in which the Company, directly or indirectly, owns any of the
capital stock or holds an equity or similar interest) are entities duly
organized and validly existing in good standing under the laws of the
jurisdiction in which they are formed, and have the requisite power and
authorization to own their properties and to carry on their business as now
being conducted.  Each of the Company and its Subsidiaries is duly qualified as
a foreign entity to do business and is in good standing in every jurisdiction in
which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be
so qualified or be in good standing would not have a Material Adverse Effect.
 As used in this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations, results of operations,
condition (financial or otherwise) or prospects of the Company and its
Subsidiaries, taken as a whole, or on the transactions contemplated hereby and
the other Transaction Documents or by the agreements and instruments to be
entered into in connection herewith or therewith, or on the authority or ability
of the Company to perform its obligations under the Transaction Documents (as
defined below).  The Company has no Subsidiaries except as set forth on Schedule
3(a)(ii).

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(b)

Authorization; Enforcement; Validity.  The Company has the requisite power and
authority to enter into and perform its obligations under this Agreement, the
Notes, the Registration Rights Agreement, the Security Documents, the
Irrevocable Transfer Agent Instructions (as defined in Section 5(b)), the
Warrants, and each of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement (collectively,
the "Transaction Documents") and to issue the Securities in accordance with the
terms hereof and thereof.  The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Notes, the Common Shares and the Warrants, the reservation for issuance and
the issuance of the Conversion Shares issuable upon conversion of the Notes, the
reservation for issuance and issuance of Warrant Shares issuable upon exercise
of the Warrants, the reservation for issuance and the issuance of Interest
Shares, if any, and the granting of a security interest in the Collateral (as
defined in the Security Documents) have been duly authorized by the Company's
Board of Directors and (other than (i) the filing of appropriate UCC financing
statements with the appropriate states and other authorities pursuant to the
Security Agreement, (ii) the filing with the SEC and applicable state securities
commissions of Form D and related filings, (iii) the filings with the U.S.
Patent and Trademark Office and the U.S. Copyright Office as may be required
with respect to the perfection of a security interest against the Company’s
patents, trademarks and copyrights, and (iv ) the filing with the SEC of one or
more Registration Statements in accordance with the requirements of the
Registration Rights Agreement) no further filing, consent, or authorization is
required by the Company, its Board of Directors or its stockholders.  This
Agreement and the other Transaction Documents of even date herewith have been
duly executed and delivered by the Company, and constitute the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.

(c)

Issuance of Securities.  The issuance of the Notes, the Common Shares and the
Warrants are duly authorized and are free from all taxes, liens and charges with
respect to the issue thereof.  As of the Closing, a number of shares of Common
Stock shall have been duly authorized and reserved for issuance which equals or
exceeds 130% of the aggregate of the maximum number of shares of Common Stock
(i) issuable upon conversion of the Notes, (ii) as Interest Shares pursuant to
the terms of the Notes (assuming the Notes are held until the Maturity Date (as
defined in the Notes) without conversion), and (iii) upon exercise of the
Warrants, (in the case of clauses (i) and (iii) without taking into account any
limitations on the conversion of the Notes or exercise of the Warrants set forth
in the Notes and Warrants, respectively).  Upon conversion or payment in
accordance with the Notes or exercise in accordance with the Warrants, as the
case may be, the Conversion Shares, the Interest Shares and the Warrant Shares,
respectively, will be validly issued, fully paid and nonassessable and free from
all preemptive or similar rights, taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock.  The offer and issuance by the Company of the Securities
is exempt from registration under the 1933 Act.

(d)

No Conflicts.  Except as set forth on Schedule 3(d), the execution, delivery and
performance of the Transaction Documents by the Company and the consummation

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by the Company of the transactions contemplated hereby and thereby (including,
without limitation, the issuance of the Notes, the Common Shares and the
Warrants, the granting of a security interest in the Collateral and reservation
for issuance and issuance of the Conversion Shares, the Interest Shares and the
Warrant Shares) will not (i) result in a violation of any articles of
incorporation, certificate of formation, any certificate of designations or
other constituent documents of the Company or any of its Subsidiaries, any
capital stock of the Company or any of its Subsidiaries or the bylaws of the
Company or any of its Subsidiaries or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) in any respect under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including foreign, federal and state securities laws and regulations and the
rules and regulations The OTC Bulletin Board (the "Principal Market"))
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected.

(e)

Consents.  Except as set forth in Section 3(b) the Company nor any of its
Subsidiaries is required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency or any
regulatory or self-regulatory agency or any other Person in order for it to
execute, deliver or perform any of its obligations under or contemplated by the
Transaction Documents, in each case in accordance with the terms hereof or
thereof.  All consents, authorizations, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the Closing Date, and the Company and its
Subsidiaries are unaware of any facts or circumstances which might prevent the
Company from obtaining or effecting any of the registration, application or
filings pursuant to the preceding sentence.  The Company is not in violation of
the listing requirements of the Principal Market and has no knowledge of any
facts which would reasonably lead to delisting or suspension of the Common Stock
in the foreseeable future.

(f)

Acknowledgment Regarding Buyer's Purchase of Securities.  The Company
acknowledges and agrees that each Buyer is acting solely in the capacity of
arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company, (ii) an "affiliate" of the Company or any of its
Subsidiaries (as defined in Rule 144) or (iii) to the knowledge of the Company,
a "beneficial owner" of more than 10% of the shares of Common Stock (as defined
for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as amended
(the "1934 Act")).  The Company further acknowledges that no Buyer is acting as
a financial advisor or fiduciary of the Company or any of its Subsidiaries (or
in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby, and any advice given by a Buyer or
any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to such Buyer's purchase of the Securities.  The Company further
represents to each Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.

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(g)

No General Solicitation; Placement Agent's Fees.  Neither the Company, nor any
of its Subsidiaries or affiliates, nor any Person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D) in connection with the offer or sale of the
Securities.  The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or brokers' commissions (other than for
persons engaged by any Buyer or its investment advisor) relating to or arising
out of the transactions contemplated hereby.  The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, attorney's fees and out-of-pocket expenses) arising in connection
with any such claim.  The Company acknowledges that it has engaged BMO Capital
Markets Corp. as placement agent (the "Placement Agent") in connection with the
sale of the Securities.  Other than the Placement Agent, the Company has not
engaged any placement agent or other agent in connection with the sale of the
Securities.

(h)

No Integrated Offering.  None of the Company, its Subsidiaries, any of their
affiliates, and any Person acting on their behalf has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would require registration of any of the
Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated.  None of
the Company, its Subsidiaries, their affiliates and any Person acting on their
behalf will take any action or steps referred to in the preceding sentence that
would require registration of any of the Securities under the 1933 Act or cause
the offering of the Securities to be integrated with other offerings.

(i)

Dilutive Effect.  The Company understands and acknowledges that the number of
Conversion Shares issuable upon conversion of the Notes and the Warrant Shares
issuable upon exercise of the Warrants will increase in certain circumstances.
 The Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Notes in accordance with this Agreement and the Notes and
its obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants is, in each case, is absolute
and unconditional regardless of the dilutive effect that such issuance may have
on the ownership interests of other stockholders of the Company.

(j)

Application of Takeover Protections; Rights Agreement.  The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Articles of Incorporation or the laws of the
jurisdiction of its formation which is or could become applicable to any Buyer
as a result of the transactions contemplated by this Agreement, including,
without limitation, the Company's issuance of the Securities and any Buyer's
ownership of the Securities.  The Company has not adopted a stockholder rights
plan or similar arrangement relating to accumulations of beneficial ownership of
Common Stock or a change in control of the Company .

(k)

SEC Documents; Financial Statements.  Except as disclosed in Schedule 3(k),
during the two (2) years prior to the date hereof, the Company has filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC

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pursuant to the reporting requirements of the 1934 Act (all of the foregoing
filed prior to the date hereof and all exhibits included therein and financial
statements, notes and schedules thereto and documents incorporated by reference
therein being hereinafter referred to as the "SEC Documents").  The Company has
delivered to the Buyers or their respective representatives true, correct and
complete copies of the SEC Documents not available on the EDGAR system.  As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.  As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto.  Such financial statements have been prepared in accordance
with generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).  No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or
were made, not misleading.

(l)

Absence of Certain Changes.  Except as disclosed in Schedule 3(l), since
December 31, 2006, there has been no material adverse change and no material
adverse development in the business, properties, operations, condition
(financial or otherwise), results of operations or prospects of the Company or
its Subsidiaries.  Except as disclosed in Schedule 3(l), since December 31,
2006, the Company has not (i) declared or paid any dividends, (ii) sold any
assets, individually or in the aggregate, in excess of $100,000 outside of the
ordinary course of business or (iii) had capital expenditures, individually or
in the aggregate, in excess of $300,000.  Neither the Company nor any of its
Subsidiaries has taken any steps to seek protection pursuant to any bankruptcy
law nor does the Company have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact which would reasonably lead a creditor to do so.  The
Company is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing, will not be Insolvent
(as defined below).  For purposes of this Section 3(l), "Insolvent" means, with
respect to any Person (as defined in Section 3(s), (i) the present fair saleable
value of such Person's assets is less than the amount required to pay such
Person's total Indebtedness (as defined in Section 3(s)), (ii) such Person is
unable to pay its debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured, (iii) the Company
intends to incur or believes that it will incur debts that would be beyond its
ability to pay as such debts mature or (iv) such Person has unreasonably small
capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted.

10573421.7

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(m)

No Undisclosed Events, Liabilities, Developments or Circumstances.  No event,
liability, development or circumstance has occurred or exists, or to the
knowledge of the Company is contemplated to occur with respect to the Company,
its Subsidiaries or their respective business, properties, prospects, operations
or financial condition, that would be required to be disclosed by the Company
under applicable securities laws and which has not been publicly disclosed.

(n)

Conduct of Business; Regulatory Permits.  Neither the Company nor its
Subsidiaries is in violation of any term of or in default under any certificate
of designations of any outstanding series of preferred stock of the Company, its
Articles of Incorporation or Bylaws or their organizational charter or articles
of incorporation or bylaws, respectively.  Neither the Company nor any of its
Subsidiaries is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Company or its Subsidiaries, and
neither the Company nor any of its Subsidiaries will conduct its business in
violation of any of the foregoing, except for possible violations which would
not, individually or in the aggregate, have a Material Adverse Effect.  Without
limiting the generality of the foregoing, the Company is not in violation of any
of the rules, regulations or requirements of the Principal Market and has no
knowledge of any facts or circumstances which would reasonably lead to delisting
or suspension of the Common Stock by the Principal Market in the foreseeable
future.  During the two years prior to the date hereof, the Common Stock has
been designated for quotation on the Principal Market.  During the two years
prior to the date hereof, (i) trading in the Common Stock has not been suspended
by the SEC or the Principal Market and (ii) the Company has received no
communication, written or oral, from the SEC or the Principal Market regarding
the suspension or delisting of the Common Stock from the Principal Market.  The
Company and its Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate regulatory authorities necessary to conduct
their respective businesses, except where the failure to possess such
certificates, authorizations or permits would not have, individually or in the
aggregate, a Material Adverse Effect, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.

(o)

Foreign Corrupt Practices.  Neither the Company, nor any of its Subsidiaries,
nor any director, officer, agent, employee or other Person acting on behalf of
the Company or any of its Subsidiaries has, in the course of its actions for, or
on behalf of, the Company or any of its Subsidiaries (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.

(p)

Sarbanes-Oxley Act.  The Company is in compliance in all material respects with
any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are
effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the SEC thereunder that are effective as of the date
hereof.

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(q)

 Transactions With Affiliates.  Except as set on Schedule 3(q), none of the
officers, directors or employees of the Company is presently a party to any
transaction with the Company or any of its Subsidiaries (other than for ordinary
course services as employees, officers or directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company or any of its Subsidiaries, any corporation,
partnership, trust or other entity in which any such officer, director, or
employee has a substantial interest or is an officer, director, trustee or
partner.

(r)

Equity Capitalization.  As of the date hereof, the authorized capital stock of
the Company consists of (i) 180,000,000 shares of Common Stock, of which as of
the date hereof, 36,499,658 are issued and outstanding, 5,770,540 shares are
reserved for issuance pursuant to the Company's stock option and purchase plans
and 9,851,800 shares are reserved for issuance pursuant to securities (other
than the aforementioned options, the Notes and the Warrants) exercisable or
exchangeable for, or convertible into, shares of Common Stock and (ii)
20,000,000 shares of preferred stock, no par value, of which as of the date
hereof, none are issued and outstanding. All of such outstanding shares have
been, or upon issuance will be, validly issued and are fully paid and
nonassessable.  Except as disclosed in Schedule 3(r): (i) none of the Company's
capital stock is subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by the Company; (ii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries; (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing Indebtedness of the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries is or may become
bound; (iv) there are no financing statements securing obligations in any
material amounts, either singly or in the aggregate, filed in connection with
the Company or any of its Subsidiaries; (v) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act (except pursuant
to the Registration Rights Agreement); (vi) there are no outstanding securities
or instruments of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company's or
its Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect.  The Company has
furnished or made available to the Buyers true,

10573421.7

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correct and complete copies of the Company's Articles of Incorporation, as
amended and as in effect on the date hereof (the "Articles of Incorporation"),
and the Company's Bylaws, as amended and as in effect on the date hereof (the
"Bylaws"), and as set forth on Schedule 3(r), the material terms of all
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock and the material rights of the holders thereof in respect thereto.

(s)

Indebtedness and Other Contracts.  Except as disclosed in Schedule 3(s), neither
the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness (as
defined below), (ii) is a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument would result in a Material Adverse Effect,
(iii) is in violation of any term of or in default under any contract, agreement
or instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Material
Adverse Effect, or (iv) is a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the judgment of the
Company's officers, has or is expected to have a Material Adverse Effect.
 Schedule 3(s) provides a description of the material terms of any such
outstanding Indebtedness.  For purposes of this Agreement:  (x) "Indebtedness"
of any Person means, without duplication (A) all indebtedness for borrowed
money, (B) all obligations issued, undertaken or assumed as the deferred
purchase price of property or services, including (without limitation) "capital
leases" in accordance with generally accepted accounting principles (other than
trade payables entered into in the ordinary course of business), (C) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (D) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses,
(E) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with respect
to any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) "Contingent Obligation" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
"Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.

10573421.7

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(t)

Absence of Litigation.  There is no action, suit, proceeding, inquiry or
investigation before or by the Principal Market, any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries, the Common Stock or any of the Company's Subsidiaries or any
of the Company's or its Subsidiaries' officers or directors in their capacities
as such, except as set forth in Schedule 3(t).

(u)

Insurance.  The Company and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged.  Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.

(v)

Employee Relations.  i)  Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or employs any member of a union.
 The Company and its Subsidiaries believe that their relations with their
employees are good.  No executive officer of the Company or any of its
Subsidiaries (as defined in Rule 501(f) of the 1933 Act) has notified the
Company or any such Subsidiary that such officer intends to leave the Company or
any such Subsidiary or otherwise terminate such officer's employment with the
Company or any such Subsidiary.  No executive officer of the Company or any of
its Subsidiaries, to the knowledge of the Company, is, or is now expected to be,
in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any of
its Subsidiaries to any liability with respect to any of the foregoing matters.

(ii)

The Company and its Subsidiaries are in compliance with all federal, state,
local and foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of employment and wages
and hours, except where failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

(w)

Title.  Except as set forth on Schedule 3(w), the Company and its Subsidiaries
have good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as do not materially affect the
value of such property and do not interfere with the use made and proposed to be
made of such property by the Company and any of its Subsidiaries.   Any real
property and facilities held under lease by the Company and any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.

10573421.7

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(x)

Intellectual Property Rights.  The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
other intellectual property rights ("Intellectual Property Rights") necessary to
conduct their respective businesses as now conducted.  Except as set forth in
Schedule 3(x), none of the Company's Intellectual Property Rights have expired
or terminated, or are expected to expire or terminate, within three years from
the date of this Agreement.  The Company does not have any knowledge of any
infringement by the Company or its Subsidiaries of Intellectual Property Rights
of others.  There is no claim, action or proceeding being made or brought, or to
the knowledge of the Company or its Subsidiaries, being threatened, against the
Company or its Subsidiaries regarding its Intellectual Property Rights.  To the
knowledge of the Company, there is no reasonable basis for any such claim,
action or proceeding.  The Company is unaware of any facts or circumstances
which might give rise to any of the foregoing infringements or claims, actions
or proceedings.  The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
intellectual properties.

(y)

Environmental Laws.  The Company and its Subsidiaries (i) are in compliance with
any and all Environmental Laws (as hereinafter defined), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or approval
where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so
comply could be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.  The term "Environmental Laws" means all federal,
state, local or foreign laws relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.

(z)

Subsidiary Rights.  Except as set forth in Schedule 3(z), the Company or one of
its Subsidiaries has the unrestricted right to vote, and (subject to limitations
imposed by applicable law) to receive dividends and distributions on, all
capital securities of its Subsidiaries as owned by the Company or such
Subsidiary.

(aa)

Investment Company Status.  The Company is not, and upon consummation of the
sale of the Securities will not be, an "investment company," a company
controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of  1940, as amended.

(bb)

Tax Status.  The Company and each of its Subsidiaries (i) has made or filed all
foreign, federal and state income and all other tax returns, reports and
declarations

10573421.7

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required by any jurisdiction to which it is subject, (ii) has paid all taxes and
other governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply.  There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.

(cc)

Internal Accounting and Disclosure Controls.  The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference.  The
Company maintains disclosure controls and procedures (as such term is defined in
Rule 13a-14 under the 1934 Act) that are effective in ensuring that information
required to be disclosed by the Company in the reports that it files or submits
under the 1934 Act is recorded, processed, summarized and reported, within the
time periods specified in the rules and forms of the SEC, including, without
limitation, controls and procedures designed in to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the 1934 Act is accumulated and communicated to the Company's management,
including its principal executive officer or officers and its principal
financial officer or officers, as appropriate, to allow timely decisions
regarding required disclosure.  Except as set forth on Schedule 3(cc), during
the twelve months prior to the date hereof neither the Company nor any of its
Subsidiaries have received any notice or correspondence from any accountant
relating to any material weakness in any part of the system of internal
accounting controls of the Company or any of its Subsidiaries.

(dd)

Off Balance Sheet Arrangements.  There is no transaction, arrangement, or other
relationship between the Company and an unconsolidated or other off balance
sheet entity that is required to be disclosed by the Company in its 1934 Act
filings and is not so disclosed or that otherwise would be reasonably likely to
have a Material Adverse Effect.  

(ee)

Ranking of Notes.  Except as set forth on Schedule 3(ee), no Indebtedness of the
Company is senior to or ranks pari passu with the Notes in right of payment,
whether with respect of payment of redemptions, interest, damages or upon
liquidation or dissolution or otherwise.

(ff)

Transfer Taxes.  On the Closing Date, all stock transfer or other taxes (other
than income or similar taxes) which are required to be paid in connection with
the sale and transfer of the Securities to be sold to each Buyer hereunder will
be, or will have been, fully paid or provided for by the Company, and all laws
imposing such taxes will be or will have been complied with.

10573421.7

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(gg)

Manipulation of Price.  The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) other than the Placement Agent, sold, bid for, purchased, or
paid any compensation for soliciting purchases of, any of the Securities, or
(iii) other than the Placement Agent, paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company.

(hh)

Acknowledgement Regarding Buyers' Trading Activity.  It is understood and
acknowledged by the Company that, except as set forth in Section 4(p), (i) none
of the Buyers have been asked to agree, nor has any Buyer agreed, to desist from
purchasing or selling, long and/or short, securities of the Company, or
"derivative" securities based on securities issued by the Company or to hold the
Securities for any specified term; (ii) any Buyer, and counter parties in
"derivative" transactions to which any such Buyer is a party, directly or
indirectly, presently may have a "short" position in the Common Stock, and (iii)
each Buyer shall not be deemed to have any affiliation with or control over any
arm's length counter-party in any "derivative" transaction.  The Company further
understands and acknowledges that one or more Buyers may engage in hedging
and/or trading activities at various times during the period that the Securities
are outstanding, including, without limitation, during the periods that the
value of the Conversion Shares, Interest Shares and/or the Warrant Shares are
being determined and (b) such hedging and/or trading activities, if any, can
reduce the value of the existing stockholders' equity interest in the Company
both at and after the time the hedging and/or trading activities are being
conducted.  The Company acknowledges that such aforementioned hedging and/or
trading activities do not constitute a breach of this Agreement, the Notes, the
Warrants or any of the documents executed in connection herewith.

(ii)

U.S. Real Property Holding Corporation.  The Company is not, nor has ever been,
a U.S. real property holding corporation within the meaning of Section 897 of
the Internal Revenue Code of 1986, as amended, and the Company shall so certify
upon Buyer's request.

(jj)

Bank Holding Company Act.  Neither the Company nor any of its Subsidiaries is
subject to the Bank Holding Company Act of 1956, as amended (the "BHCA") and to
regulation by the Board of Governors of the Federal Reserve System (the "Federal
Reserve").  Neither the Company nor any of its Subsidiaries or affiliates owns
or controls, directly or indirectly, five percent (5%) or more of the
outstanding shares of any class of voting securities or twenty-five (25%) or
more of the total equity of a bank or any  equity that is subject to the BHCA
and to regulation by the Federal Reserve.  Neither the Company nor any of its
Subsidiaries or affiliates exercises a controlling influence over the management
or policies of a bank or any entity that is subject to the BHCA and to
regulation by the Federal Reserve.

(kk)

Disclosure.  Except as set forth on Schedule 3(kk), the Company confirms that
neither it nor any other Person acting on its behalf has provided any of the
Buyers or their agents or counsel with any information that constitutes or could
reasonably be expected to constitute material, nonpublic information.  The
Company understands and confirms that each of the Buyers will rely on the
foregoing representations in effecting transactions in securities of the
Company.  All disclosure provided to the Buyers regarding the Company, or any of
its

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Subsidiaries, their business and the transactions contemplated hereby, including
the Schedules to this Agreement, furnished by or on behalf of the Company is
true and correct in all material respects and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.  Each press release issued by the
Company or any of its Subsidiaries during the twelve (12) months preceding the
date of this Agreement did not at the time of release contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.  Except
as contemplated by this Agreement, no event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or its
or their business, properties, prospects, operations or financial conditions,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.  

4.

COVENANTS.

(a)

Best Efforts.  Each party shall use its best efforts timely to satisfy each of
the conditions to be satisfied by it as provided in Sections 6 and 7 of this
Agreement.

(b)

Form D and Blue Sky.  The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to each
Buyer promptly after such filing.  The Company shall, on or before the Closing
Date, take such action as the Company shall reasonably determine is necessary in
order to obtain an exemption for or to qualify the Securities for sale to the
Buyers at the Closing pursuant to this Agreement under applicable securities or
"Blue Sky" laws of the states of the United States (or to obtain an exemption
from such qualification), and shall provide evidence of any such action so taken
to the Buyers on or prior to the Closing Date.  The Company shall make all
filings and reports relating to the offer and sale of the Securities required
under applicable securities or "Blue Sky" laws of the states of the United
States following the Closing Date.  

(c)

Reporting Status.  Until the date on which the Investors (as defined in the
Registration Rights Agreement) shall have sold all the Conversion Shares, the
Interest Shares and Warrant Shares and none of the Notes or Warrants is
outstanding (the "Reporting Period"), or such earlier date as a Change of
Control (as defined in the Note) shall occur, the Company shall timely file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination.

(d)

Use of Proceeds.  The Company will use the proceeds from the sale of the
Securities for general corporate and for working capital purposes and not for
(i) the repayment of any outstanding Indebtedness of the Company or any of its
Subsidiaries, (ii) the redemption or repurchase of any of its or its
Subsidiaries' equity securities or (iii) the settlement of any claims, actions
or proceedings against the Company or any of its Subsidiaries.

(e)

Financial Information.  The Company agrees to send the following to each
Investor (as defined in the Registration Rights Agreement) during the Reporting
Period (i) unless the following are filed with the SEC through EDGAR and are
available to the public through the

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EDGAR system, or are otherwise made publicly available, (i) within one (1)
Business Day after the filing thereof with the SEC, a copy of its Annual Reports
and Quarterly Reports on Form 10-K, 10-KSB, 10-Q or 10-QSB, any interim reports
or any consolidated balance sheets, income statements, stockholders' equity
statements and/or cash flow statements for any period other than annual, any
Current Reports on Form 8-K and any registration statements (other than on Form
S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as the
release thereof, facsimile or e-mailed copies of all press releases issued by
the Company or any of its Subsidiaries and (iii) copies of any notices and other
information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.  As used herein, "Business Day" means any day other than Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.

(f)

Listing.  The Company shall promptly secure the listing of all of the
Registrable Securities (as defined in the Registration Rights Agreement) upon
each national securities exchange and automated quotation system, if any, upon
which the Common Stock is then listed (subject to official notice of issuance)
and shall maintain such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents.  The Company shall
maintain the Common Stocks' authorization for quotation on the Principal Market.
 Neither the Company nor any of its Subsidiaries shall take any action which
would be reasonably expected to result in the delisting or suspension of the
Common Stock on the Principal Market.  The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(f).

(g)

Fees.  The Company shall reimburse Castlerigg Master Investments Ltd. (a Buyer)
or its designee(s) (in addition to any other expense amounts paid to any Buyer
prior to the date of this Agreement) for all reasonable costs and expenses
incurred in connection with the transactions contemplated by the Transaction
Documents in an amount not to exceed $65,000 (including all reasonable legal
fees and disbursements in connection therewith, documentation and implementation
of the transactions contemplated by the Transaction Documents and due diligence
in connection therewith), which amount may be withheld by such Buyer from its
Purchase Price at the Closing.  The Company shall be responsible for the payment
of any placement agent's fees, financial advisory fees, or broker's commissions
(other than for Persons engaged by any Buyer) relating to or arising out of the
transactions contemplated hereby, including, without limitation, any fees or
commissions payable to the Placement Agent.  The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, reasonable attorney's fees and out-of-pocket expenses) arising in
connection with any claim relating to any such payment.  Except as otherwise set
forth in the Transaction Documents, each party to this Agreement shall bear its
own expenses in connection with the sale of the Securities to the Buyers.

(h)

Pledge of Securities.  The Company acknowledges and agrees that the Securities
may be pledged by an Investor (as defined in the Registration Rights Agreement)
in connection with a bona fide margin agreement or other loan or financing
arrangement that is secured by the Securities.  The pledge of Securities shall
not be deemed to be a transfer, sale or assignment of the Securities hereunder,
and no Investor effecting a pledge of Securities shall be required to provide
the Company with any notice thereof or otherwise make any delivery to the

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Company pursuant to this Agreement or any other Transaction Document, including,
without limitation, Section 2(f) hereof; provided that an Investor and its
pledgee shall be required to comply with the provisions of Section 2(f) hereof
in order to effect a sale, transfer or assignment of Securities to such pledgee.
 The Company hereby agrees to execute and deliver such documentation as a
pledgee of the Securities may reasonably request in connection with a pledge of
the Securities to such pledgee by an Investor.

(i)

Disclosure of Transactions and Other Material Information.  On or before 8:30
a.m., New York City time, on the second Business Day following the date of this
Agreement, the Company shall issue a press release and file a Current Report on
Form 8-K describing the terms of the transactions contemplated by the
Transaction Documents in the form required by the 1934 Act and attaching the
material Transaction Documents (including, without limitation, this Agreement,
the form of the Notes, the form of Warrant, the form the Registration Rights
Agreement and the form of Security Documents as exhibits to such filing
(including all attachments, the "8-K Filing").  From and after the filing of the
8-K Filing with the SEC, no Buyer shall be in possession of any material,
nonpublic information received from the Company, any of its Subsidiaries or any
of their respective officers, directors, employees or agents, that is not
disclosed in the 8-K Filing.  Unless requested in writing by a Buyer, the
Company shall not, and shall cause each of its Subsidiaries and its and each of
their respective officers, directors, employees and agents, not to, provide any
Buyer with any material, nonpublic information regarding the Company or any of
its Subsidiaries from and after the filing of the 8-K Filing with the SEC
without the express written consent of such Buyer.  If a Buyer has, or believes
it has, received any such material, nonpublic information regarding the Company
or any of its Subsidiaries, it shall provide the Company with written notice
thereof.  The Company shall, within two (2) Trading Days (as defined in the
Notes) of receipt of such notice, make public disclosure of such material,
nonpublic information.  Subject to the foregoing, neither the Company, its
Subsidiaries nor any Buyer shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Buyer, to make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release).  Without the prior written consent of
any applicable Buyer, neither the Company nor any of its Subsidiaries or
affiliates shall disclose the name of such Buyer in any filing, announcement,
release or otherwise, except as required by applicable law and regulation.

(j)

Restriction on Redemption and Cash Dividends.  So long as any Notes are
outstanding, the Company shall not, directly or indirectly, redeem, or declare
or pay any cash dividend or distribution on, the Common Stock without the prior
express written consent of the holders of Notes representing not less than a
majority of the aggregate principal amount of the then outstanding Notes.

(k)

Additional Notes; Variable Securities; Dilutive Issuances.  So long as any Notes
are outstanding, the Company will not issue any Notes other than to the Buyers
as contemplated hereby and the Company shall not issue any other securities that
would cause a breach or default under the Notes.  For so long as any Notes or
Warrants remain outstanding, the

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Company shall not, in any manner, issue or sell any rights, warrants or options
to subscribe for or purchase Common Stock or directly or indirectly convertible
into or exchangeable or exercisable for Common Stock at a price which varies or
may vary with the market price of the Common Stock, including by way of one or
more reset(s) to any fixed price unless the conversion, exchange or exercise
price of any such security cannot be less than the then applicable Conversion
Price (as defined in the Notes) with respect to the Common Stock into which any
Note is convertible or the then applicable Exercise Price (as defined in the
Warrants) with respect to the Common Stock into which any Warrant is
exercisable.  Notwithstanding the foregoing, nothing in this Section 3(k) shall
prohibit the Company from issuing any securities with a fixed conversion or
exercise price with full ratchet or weighted average anti-dilution protection.
 For so long as any Notes or Warrants remain outstanding, the Company shall not,
in any manner, enter into or affect any Dilutive Issuance (as defined in the
Notes) if the effect of such Dilutive Issuance is to cause the Company to be
required to issue upon conversion of any Note or exercise of any Warrant any
shares of Common Stock in excess of that number of shares of Common Stock which
the Company may issue upon conversion of the Notes and exercise of the Warrants
without breaching the Company's obligations under the rules or regulations of
the Principal Market or any applicable Eligible Market (as defined in the
Registration Rights Agreement).

(l)

Reservation of Shares.  So long as any Buyer owns any Securities, the Company
shall take all action necessary to at all times have authorized, and reserved
for the purpose of issuance, no less than 130% of the sum of the maximum number
of shares of Common Stock issuable (i) upon conversion of the Notes, (ii) as
Interest Shares pursuant to the terms of the Notes (assuming the Notes are held
until the Maturity Date (as defined in the Notes) without conversion), and (iii)
upon exercise of the Warrants then outstanding (without taking into account any
limitations on the conversion of the Notes or exercise of the Warrants set forth
in the Notes and Warrants, respectively).

(m)

Conduct of Business.  The business of the Company and its Subsidiaries shall not
be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.

(n)

Additional Issuances of Securities.

(i)

For purposes of this Section 4(n), the following definitions shall apply.

(1)

"Convertible Securities" means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for shares of Common Stock.

(2)

"Options" means any rights, warrants or options to subscribe for or purchase
shares of Common Stock or Convertible Securities.

(3)

"Common Stock Equivalents" means, collectively, Options and Convertible
Securities.

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(ii)

Except as set forth on Schedule 4(n), from the date hereof until the date when
all Registrable Securities (as defined in the Registration Rights Agreement) are
freely tradeable without the requirement to be in compliance with Rule 144(c)(1)
and otherwise without restriction or limitation pursuant to Rule 144 (the
"Trigger Date"), the Company will not, directly or indirectly, file any
registration statement with the SEC other than the Registration Statement (as
defined in the Registration Rights Agreement).  From the date hereof until the
Trigger Date, the Company will not, (i) directly or indirectly, offer, sell,
grant any option to purchase, or otherwise dispose of (or announce any offer,
sale, grant or any option to purchase or other disposition of) any of its or its
Subsidiaries' equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is, at
any time during its life and under any circumstances, convertible into or
exchangeable or exercisable for shares of Common Stock or Common Stock
Equivalents (any such offer, sale, grant, disposition or announcement being
referred to as a "Subsequent Placement") or (ii) be party to any solicitations,
negotiations or discussions with regard to the foregoing.

(iii)

From the Trigger Date until the second anniversary of the Trigger Date, the
Company will not, directly or indirectly, effect any Subsequent Placement unless
the Company shall have first complied with this Section 4(n)(iii).

(1)

The Company shall deliver to each Buyer an irrevocable written notice
(the "Offer Notice") of any proposed or intended issuance or sale or exchange
(the "Offer") of the securities being offered (the "Offered Securities") in a
Subsequent Placement, which Offer Notice shall (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which they are
to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (y) identify the persons or entities
(if known) to which or with which the Offered Securities are to be offered,
issued, sold or exchanged and (z) offer to issue and sell to or exchange with
such Buyers no less than 50% of the Offered Securities, allocated among such
Buyers (a) based on such Buyer's pro rata portion of the aggregate principal
amount of Notes purchased hereunder (the "Basic Amount"), and (b) with respect
to each Buyer that elects to purchase its Basic Amount, any additional portion
of the Offered Securities attributable to the Basic Amounts of other Buyers as
such Buyer shall indicate it will purchase or acquire should the other Buyers
subscribe for less than their Basic Amounts (the "Undersubscription Amount"),
which process shall be repeated until the Buyers shall have an opportunity to
subscribe for any remaining Undersubscription Amount.

(2)

To accept an Offer, in whole or in part, such Buyer must deliver a written
notice to the Company prior to the end of the tenth (10th) Business Day after
such Buyer's receipt of the Offer Notice (the "Offer Period"), setting forth the
portion of such Buyer's Basic Amount that such Buyer elects to purchase and, if
such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the "Notice of Acceptance").  If the Basic Amounts subscribed for by all
Buyers are less than the total of all of the Basic Amounts, then each Buyer who
has set forth an Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however, that if the

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Undersubscription Amounts subscribed for exceed the difference between the total
of all the Basic Amounts and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Basic Amount of such Buyer bears to
the total Basic Amounts of all Buyers that have subscribed for Undersubscription
Amounts, subject to rounding by the Company to the extent its deems reasonably
necessary.   Notwithstanding anything to the contrary contained herein, if the
Company desires to modify or amend the terms and conditions of the Offer prior
to the expiration of the Offer Period, the Company may deliver to the Buyers a
new Offer Notice and the Offer Period shall expire on the tenth (10th) Business
Day after such Buyer’s receipt of such new Offer Notice.

(3)

The Company shall have five (5) Business Days from the expiration of the Offer
Period above to offer, issue, sell or exchange all or any part of such Offered
Securities as to which a Notice of Acceptance has not been given by the Buyers
(the "Refused Securities"), but only to the offerees described in the Offer
Notice (if so described therein) and only upon terms and conditions (including,
without limitation, unit prices and interest rates) that are not more favorable
to the acquiring person or persons or less favorable to the Company than those
set forth in the Offer Notice and (ii) to publicly announce (a) the execution of
such Subsequent Placement Agreement, and (b) either (x) the consummation of the
transactions contemplated by such Subsequent Placement Agreement or (y) the
termination of such Subsequent Placement Agreement, which shall be filed with
the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement
and any documents contemplated therein filed as exhibits thereto.

(4)

In the event the Company shall propose to sell less than all the Refused
Securities (any such sale to be in the manner and on the terms specified in
Section 4(n)(iii)(3) above), then each Buyer may, at its sole option and in its
sole discretion, reduce the number or amount of the Offered Securities specified
in its Notice of Acceptance to an amount that shall be not less than the number
or amount of the Offered Securities that such Buyer elected to purchase pursuant
to Section 4(n)(iii)(2) above multiplied by a fraction, (i) the numerator of
which shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to Section 4(n)(iii)(3) above prior to such
reduction) and (ii) the denominator of which shall be the original amount of the
Offered Securities.  In the event that any Buyer so elects to reduce the number
or amount of Offered Securities specified in its Notice of Acceptance, the
Company may not issue, sell or exchange more than the reduced number or amount
of the Offered Securities unless and until such securities have again been
offered to the Buyers in accordance with Section 4(n)(iii)(1) above.

(5)

Upon the closing of the issuance, sale or exchange of all or less than all of
the Refused Securities, the Buyers shall acquire from the Company, and the
Company shall issue to the Buyers, the number or amount of Offered Securities
specified in the Notices of Acceptance, as reduced pursuant to Section
4(n)(iii)(3) above if the Buyers have so elected, upon the terms and conditions
specified in the Offer.  The

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purchase by the Buyers of any Offered Securities is subject in all cases to the
preparation, execution and delivery by the Company and the Buyers of a purchase
agreement relating to such Offered Securities reasonably satisfactory in form
and substance to the Buyers and their respective counsel.

(6)

Any Offered Securities not acquired by the Buyers or other persons in accordance
with Section 4(n)(iii)(3) above may not be issued, sold or exchanged until they
are again offered to the Buyers under the procedures specified in this
Agreement.

(7)

The Company and the Buyers agree that if any Buyer elects to participate in the
Offer, (x) neither the agreement regarding the Subsequent Placement (the
"Subsequent Placement Agreement") with respect to such Offer nor any other
transaction documents related thereto (collectively, the "Subsequent Placement
Documents") shall include any term or provisions whereby any Buyer shall be
required to agree to any restrictions in trading as to any securities of the
Company owned by such Buyer prior to such Subsequent Placement, and (y) any
registration rights set forth in such Subsequent Placement Documents shall be
similar in all material respects to the registration rights contained in the
Registration Rights Agreement.

(8)

Notwithstanding anything to the contrary in this Section 4(n) and unless
otherwise agreed to by the Buyers, the Company shall either confirm in writing
to the Buyers that the transaction with respect to the Subsequent Placement has
been abandoned or shall publicly disclose its intention to issue the Offered
Securities, in either case in such a manner such that the Buyers will not be in
possession of material non-public information, by the fifteenth (15th) Business
Day following delivery of the Offer Notice.  If by the fifteenth (15th)
following delivery of the Offer Notice no public disclosure regarding a
transaction with respect to the Offered Securities has been made, and no notice
regarding the abandonment of such transaction has been received by the Buyers,
such transaction shall be deemed to have been abandoned and the Buyers shall not
be deemed to be in possession of any material, non-public information with
respect to the Company.  Should the Company decide to pursue such transaction
with respect to the Offered Securities, the Company shall provide each Buyer
with another Offer Notice and each Buyer will again have the right of
participation set forth in this Section 4(n)(iii).  The Company shall not be
permitted to deliver more than one such Offer Notice to the Buyers in any 60 day
period.

(iv)

The restrictions contained in subsections (ii) and (iii) of this Section 4(n)
shall not apply in connection with the issuance of any Excluded Securities (as
defined in the Notes).

(o)

Collateral Agent.

(i)

Each Buyer hereby (a) appoints Castlerigg Master Investments Ltd., as the
collateral agent hereunder and under the other Security Documents (in such
capacity, the "Collateral Agent"), and (b) authorizes the Collateral Agent (and
its officers, directors, employees and agents) to take such action on such
Buyer's behalf in accordance with the terms

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hereof and thereof.  The Collateral Agent shall not have, by reason hereof or
any of the other Security Documents, a fiduciary relationship in respect of any
Buyer.  Neither the Collateral Agent nor any of its officers, directors,
employees and agents shall have any liability to any Buyer for any action taken
or omitted to be taken in connection hereof or any other Security Document
except to the extent caused by its own gross negligence or willful misconduct,
and each Buyer agrees to defend, protect, indemnify and hold harmless the
Collateral Agent and all of its officers, directors, employees and agents
(collectively, the "Indemnitees") from and against any losses, damages,
liabilities, obligations, penalties, actions, judgments, suits, fees, costs and
expenses (including, without limitation, reasonable attorneys' fees, costs and
expenses) incurred by such Indemnitee, whether direct, indirect or
consequential, arising from or in connection with the performance by such
Indemnitee of the duties and obligations of Collateral Agent pursuant hereto or
any of the Security Documents.  The Collateral Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the holders of at least a majority in
principal amount of the Notes then outstanding, and such instructions shall be
binding upon all holders of Notes; provided, however, that the Collateral Agent
shall not be required to take any action which, in the reasonable opinion of the
Agent, exposes the Agent to liability or which is contrary to this Agreement or
any other Transaction Document or applicable law.

(ii)

The Collateral Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents or any telephone message
believed by it in good faith to be genuine and correct and to have been signed,
sent or made by the proper Person, and with respect to all matters pertaining to
this Agreement or any of the other Transaction Documents and its duties
hereunder or thereunder, upon advice of counsel selected by it.

(iii)

The Collateral Agent may resign from the performance of all its functions and
duties hereunder and under the Notes and the Security Documents at any time by
giving at least ten (10) Business Days prior written notice to the Company and
each holder of the Notes.  Such resignation shall take effect upon the
acceptance by a successor Collateral Agent of appointment as provided below.
 Upon any such notice of resignation, the holders of a majority of the
outstanding principal under the Notes shall appoint a successor Collateral
Agent.  Upon the acceptance of the appointment as Collateral Agent, such
successor Collateral Agent shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Collateral Agent, and the
retiring Collateral Agent shall be discharged from its duties and obligations
under this Agreement, the Notes and the other Security Documents.  After any
Collateral Agent's resignation hereunder, the provisions of this Section 4(n)
shall inure to its benefit.  If a successor Collateral Agent shall not have been
so appointed within said ten (10) Business Day period, the retiring Collateral
Agent shall then appoint a successor Collateral Agent who shall serve until such
time, if any, as the holders of a majority of the outstanding principal under
the Notes appoint a successor Collateral Agent as provided above.

(p)

Investor Lock-Up.  For the period commencing on the date hereof and ending on
the six month anniversary of the Closing Date, each Buyer, severally and not
jointly with the other Buyers, covenants that neither it nor any affiliate
acting on its behalf or pursuant

10573421.7

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to any understanding with it will execute any sales of Common Stock, including
"short sales" as defined in Rule 200 of Regulation SHO under the 1934 Act.

(q)

Public Information.  At any time during the period commencing from the six (6)
month anniversary of the Closing Date and ending at such time that all of the
Securities can be sold either pursuant to a Registration Statement may be sold
without the requirement to be in compliance with Rule 144(c)(1) and otherwise
without restriction or limitation pursuant to Rule 144, if the Company shall
fail for any reason to satisfy the current public information requirement under
Rule 144 (a "Public Information Failure") then, as partial relief for the
damages to any holder of Securities by reason of any such delay in or reduction
of its ability to sell the Securities (which remedy shall not be exclusive of
any other remedies available at law or in equity), the Company shall pay to each
such holder an amount in cash equal to two percent (2.0%) of the aggregate
Purchase Price of such holder's Securities on the day of a Public Information
Failure and on every thirtieth day (pro rated for periods totaling less than
thirty days) thereafter until the earlier of (i) the date such Public
Information Failure is cured and (ii) such time that such public information is
no longer required pursuant to Rule 144.  The payments to which a holder shall
be entitled pursuant to this Section 4(q) are referred to herein as "Public
Information Failure Payments."  Public Information Failure Payments shall be
paid on the earlier of (I) the last day of the calendar month during which such
Public Information Failure Payments are incurred and (II) the third Business Day
after the event or failure giving rise to the Public Information Failure
Payments is cured.  In the event the Company fails to make Public Information
Failure Payments in a timely manner, such Public Information Failure Payments
shall bear interest at the rate of 1.5% per month (prorated for partial months)
until paid in full.

(r)

Additional Relief.  If the Company shall fail for any reason or for no reason to
issue to the Buyer unlegended certificates or issue such Common Shares to such
Buyer by electronic delivery at the applicable balance account at DTC within
three (3) Trading Days after the receipt of documents necessary for the removal
of the legend set forth in Section 2(g) above (the “Removal Date”), then in
addition to all other remedies available to the Buyer, if on or after the
Trading Day immediately following such three Trading Day period, the Buyer
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Buyer of such Common Shares that the
Buyer anticipated receiving without legend from the Company (a "Buy-In"), then
the Company shall, within three (3) Business Days after the Buyer’s request and
in the Buyer’s discretion, either (i) pay cash to the Buyer in an amount equal
to the Buyer’s total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased (the "Buy-In Price"), at which point
the Company's obligation to deliver such unlegended Common Shares shall
terminate, or (ii) promptly honor its obligation to deliver to the Buyer such
unlegended Common Shares as provided above and pay cash to the Buyer in an
amount equal to the excess (if any) of the Buy-In Price over the product of (A)
such number of shares of Common Stock, times (B) the Closing Bid Price (as
defined in the Warrants) on the Removal Date.  

(s)

Closing Documents.  On or prior to fourteen (14) calendar days after the Closing
Date, the Company agrees to deliver, or cause to be delivered, to each Buyer and
Schulte Roth & Zabel LLP executed copies of the Transaction Documents,
Securities and other documents within the Company's possession or control that
are required to be delivered to any party pursuant to Section 7 hereof.   

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(t)

Landlord Waivers.  The Company shall use reasonable best efforts to deliver to
the Collateral Agent within 30 days following the Closing Date, landlord waivers
duly executed by the lessee and landlord in a form satisfactory to the
Collateral Agent in its sole discretion, for each of the following locations:
(i) 7050 Union Park Ave., Salt Lake City, Utah 84047 and (ii) 6952 S. High Tech
Drive, Suite C, Salt Lake City, Utah  84047.

(u)

Deposit Account Control Agreements: Within 30 days following the Closing Date,
the Company shall deliver to the Collateral Agent, deposit account control
agreements in a form satisfactory to the Collateral Agent in its reasonable
discretion duly executed by the Company and the depositary institution, for each
of the following accounts of the Company: (1) account No. 1167832 maintained at
Jeffries & Company, (ii) account No. 900913336 maintained at JP Morgan Chase
Bank and (iii) account No. 900913344 maintained at JP Morgan Chase Bank.

(v)

Release of Liens.  As soon as practicable, but in no event later than 30 days
following the Closing Date, the Company shall cause the UCC-1 financing
statement referred to in Schedule 3(s) to be terminated and released.

5.

REGISTER; TRANSFER AGENT INSTRUCTIONS.

(a)

Register.  The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to each
holder of Securities, which for purposes of the Common Stock, shall be the
Company's existing independent registrar and transfer agent) a register for the
Notes, the Common Shares and the Warrants in which the Company shall record the
name and address of the Person in whose name the Notes, the Common Shares and
the Warrants have been issued (including the name and address of each
transferee), the principal amount of Notes held by such Person, the number of
Conversion Shares issuable upon conversion of the Notes, the number of Common
Shares held by such Person and Warrant Shares issuable upon exercise of the
Warrants held by such Person.  The Company shall keep the register open and
available at all times during reasonable business hours for inspection of any
Buyer or its legal representatives.

(b)

Transfer Agent Instructions.  The Company shall issue irrevocable instructions
to its transfer agent, and any subsequent transfer agent, to issue certificates
or credit shares to the applicable balance accounts at The Depository Trust
Company ("DTC"), registered in the name of each Buyer or its respective
nominee(s), for the Common Shares issued at the Closing, as Interest Shares
issuable pursuant to the terms of the Notes and for the Conversion Shares and
the Warrant Shares issuable upon conversion of the Notes or exercise of the
Warrants in such amounts as specified from time to time by each Buyer to the
Company, including upon conversion of the Notes or exercise of the Warrants in
the form of Exhibit G (the "Irrevocable Transfer Agent Instructions").  The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(b), and stop transfer instructions to
give effect to Section 2(g) hereof, will be given by the Company to its transfer
agent, and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this Agreement
and the other Transaction Documents.  If a Buyer effects a sale, assignment or
transfer of the Securities in accordance with Section 2(f), the Company shall
permit the transfer and shall promptly instruct its transfer agent to issue one
or more certificates or credit shares to the applicable balance accounts at DTC
in such name and in such denominations as specified by such Buyer to effect such
sale, transfer or assignment.  In the event that such sale, assignment or
transfer involves Common Shares, Conversion Shares, Interest Shares or Warrant
Shares sold, assigned or transferred pursuant to an

10573421.7

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

effective registration statement or pursuant to Rule 144, the transfer agent
shall issue such Securities to the Buyer, assignee or transferee, as the case
may be, without any restrictive legend.  The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to a Buyer.
 Accordingly, the Company acknowledges that the remedy at law for a breach of
its obligations under this Section 5(b) will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of this
Section 5(b), that a Buyer shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.

6.

CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

The obligation of the Company hereunder to issue and sell the Notes and the
related Common Shares and Warrants to each Buyer at the Closing is subject to
the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:

(i)

Such Buyer shall have executed each of the Transaction Documents to which it is
a party and delivered the same to the Company.

(ii)

Such Buyer and each other Buyer shall have delivered to the Company the Net
Purchase Price (less, in the case of Castlerigg Master Investments Ltd., any
amounts withheld pursuant to Section 4(g)) for the Notes and the related Common
Shares and Warrants being purchased by such Buyer at the Closing by wire
transfer of immediately available funds pursuant to the wire instructions
provided by the Company.

(iii)

The representations and warranties of such Buyer shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date which shall be true and correct as of such specified
date), and such Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Buyer at or prior
to the Closing Date.

7.

CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.

The obligation of each Buyer hereunder to purchase the Notes and the related
Common Shares and Warrants at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for each Buyer's sole benefit and may be waived by such
Buyer at any time in its sole discretion by providing the Company with prior
written notice thereof:

(i)

The Company shall have duly executed and delivered to such Buyer (A) each of the
Transaction Documents and, (B) the Notes (in such principal amounts as such
Buyer shall request), being purchased by such Buyer at the Closing pursuant to
this Agreement, (C) the related Common Shares (in such amounts as such Buyer
shall request) and

10573421.7

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

(D) the related Warrants (in such amounts as such Buyer shall request) being
purchased by such Buyer at the Closing pursuant to this Agreement.

(ii)

Such Buyer shall have received the opinion of Reed L. Benson, Esq., the
Company's General Counsel, dated as of the Closing Date, in substantially the
form of Exhibit H attached hereto.

(iii)

The Company shall have delivered to such Buyer a copy of the Irrevocable
Transfer Agent Instructions, in the form of Exhibit G attached hereto, which
instructions shall have been delivered to and acknowledged in writing by the
Company's transfer agent.

(iv)

The Company shall have delivered to such Buyer a certificate evidencing the
formation and good standing of the Company and each of its Subsidiaries, except
as set forth in Schedule 3(a), in such entity's jurisdiction of formation issued
by the Secretary of State (or comparable office) of such jurisdiction, as of a
date within 10 days of the Closing Date.

(v)

The Company shall have delivered to such Buyer a certified copy of the Articles
of Incorporation as certified by the Secretary of State of the State (or
comparable office of Utah within ten (10) days of the Closing Date.

(vi)

The Company shall have delivered to such Buyer a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Company's Board of
Directors in a form reasonably acceptable to such Buyer, (ii) the Articles of
Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the
form attached hereto as Exhibit I.

(vii)

The representations and warranties of the Company shall be true and correct as
of the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date
which shall be true and correct as of such specified date) and the Company shall
have performed, satisfied and complied in all respects with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Closing Date.  Such
Buyer shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Buyer in the form
attached hereto as Exhibit J.

(viii)

The Company shall have delivered to such Buyer a letter from the Company's
transfer agent certifying the number of shares of Common Stock outstanding as of
a date within five days of the Closing Date.

(ix)

The Common Stock (I) shall be designated for quotation or listed on the
Principal Market and (II) shall not have been suspended, as of the Closing Date,
by the SEC or the Principal Market from trading on the Principal Market nor
shall suspension by the SEC or the Principal Market have been threatened, as of
the Closing Date, either (A) in writing by the SEC or the Principal Market or
(B) by falling below the minimum listing maintenance requirements of the
Principal Market.

10573421.7

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

(x)

The Company shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Securities, except
for such consents and approvals as are contemplated to be obtained following the
Closing Date.

(xi)

In accordance with the terms of the Security Documents, the Company shall have
delivered to the Collateral Agent (i) certificates representing the
Subsidiaries' shares of capital stock, along with duly executed blank stock
powers and (ii) appropriate financing statements on Form UCC-1 to be duly filed
in such office or offices as may be necessary or, in the opinion of the
Collateral Agent, desirable to perfect the security interests purported to be
created by each Security Document.

(xii)

Within six (6) Business Days prior to the Closing, the Company shall have
delivered or caused to be delivered to each Buyer (A) certified copies of UCC
search results, listing all effective financing statements which name as debtor
the Company or any of its Subsidiaries filed in the prior five years to perfect
an interest in any assets thereof, together with copies of such financing
statements, none of which, except as otherwise agreed in writing by the Buyers,
shall cover any of the Collateral (as defined in the Security Documents) and the
results of searches for any tax lien and judgment lien filed against such Person
or its property, which results, except as otherwise agreed to in writing by the
Buyers shall not show any such Liens (as defined in the Security Documents); and
(B) a perfection certificate, duly completed and executed by the Company and
each of its Subsidiaries, in form and substance satisfactory to the Buyers.

(xiii)

The Company shall have delivered to such Buyer such other documents relating to
the transactions contemplated by this Agreement as such Buyer or its counsel may
reasonably request.

8.

TERMINATION.  In the event that the Closing shall not have occurred with respect
to a Buyer on or before five (5) Business Days from the date hereof due to the
Company's or such Buyer's failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the nonbreaching party's failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party;
provided, however, that if this Agreement is terminated pursuant to this Section
8, the Company shall remain obligated to reimburse the non-breaching Buyers for
the expenses described in Section 4(g) above.

9.

MISCELLANEOUS.

(a)

Governing Law; Jurisdiction; Jury Trial.  All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York.  Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed

10573421.7

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

herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper.  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 to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
 EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

(b)

Counterparts.  This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.

(c)

Headings.  The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.

(d)

Severability.  If any provision of this Agreement is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
 The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

(e)

Entire Agreement; Amendments.  This Agreement and the other Transaction
Documents supersede all other prior oral or written agreements between the
Buyers, the Company, their affiliates and Persons acting on their behalf with
respect to the matters discussed herein, and this Agreement, the other
Transaction Documents and the instruments referenced herein and therein contain
the entire understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or therein,
neither the Company nor any Buyer makes any representation, warranty, covenant
or undertaking with respect to such matters.  No provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and the
holders of at least a majority of the

10573421.7

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

aggregate number of Registrable Securities issued and issuable hereunder and
under the Notes, and any amendment to this Agreement made in conformity with the
provisions of this Section 9(e) shall be binding on all Buyers and holders of
Securities, as applicable.  No provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought.
 No such amendment shall be effective to the extent that it applies to less than
all of the holders of the applicable Securities then outstanding.  No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents, holders of Notes or holders of the Warrants, as the case
may be.  The Company has not, directly or indirectly, made any agreements with
any Buyers relating to the terms or conditions of the transactions contemplated
by the Transaction Documents except as set forth in the Transaction Documents.
 Without limiting the foregoing, the Company confirms that, except as set forth
in this Agreement, no Buyer has made any commitment or promise or has any other
obligation to provide any financing to the Company or otherwise.

(f)

Notices.  Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered:  (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the
same.  The addresses and facsimile numbers for such communications shall be:

If to the Company:

Broadcast International, Inc.
7050 Union Park, Ave. #600
Salt Lake City, Utah 84047
Telephone:  

801) 562-2252
Facsimile:  

(801) 562-1773
Attention:  

Reed L. Benson

With a copy to:

Holland & Hart LLP
60 E. South Temple, Suite 2000
Salt Lake City, Utah 84111
Telephone:  

(801) 799-5800
Facsimile:  

(801) 799-5700
Attention:  

David G. Angerbauer, Esq.

If to the Transfer Agent:

Interwest Transfer Company
1981 E. Murray-Holladay Road
Salt Lake City, Utah 84117

10573421.7

- 32 -

 

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

Telephone:  

(801) 272-9294
Facsimile:  

(801) 277-3147
Attention: Melinda Orth

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers,

with a copy (for informational purposes only) to:

Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York  10022
Telephone:

(212) 756-2000
Facsimile:

(212) 593-5955
Attention:

Eleazer N. Klein, Esq.

or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
 Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.

(g)

Successors and Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including
any purchasers of the Notes or the Warrants.  The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the holders of at least a majority of the aggregate number of
Registrable Securities issued and issuable hereunder, including by way of a
Fundamental Transaction (unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Notes and the
Warrants).  A Buyer may assign some or all of its rights hereunder without the
consent of the Company, in which event such assignee shall be deemed to be a
Buyer hereunder with respect to such assigned rights.

(h)

No Third Party Beneficiaries.  This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by, any other
Person.

(i)

Survival.  Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in
Sections 2 and 3, and the agreements and covenants set forth in Sections 4, 5
and 9 shall survive the Closing.  Each Buyer shall be responsible only for its
own representations, warranties, agreements and covenants hereunder.

(j)

Further Assurances.  Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as any other
party may reasonably request

10573421.7

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

in order to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.

(k)

Indemnification.  In consideration of each Buyer's execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to
all of the Company's other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless each Buyer and each
other holder of the Securities and all of their stockholders, partners, members,
officers, directors, employees and direct or indirect investors and any of the
foregoing Persons' agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought
or made against such Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company) and arising out of or
resulting from (i) the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Securities, (iii) any disclosure made by such Buyer pursuant to Section
4(i), or (iv) the status of such Buyer or holder of the Securities as an
investor in the Company pursuant to the transactions contemplated by the
Transaction Documents.  To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities that is permissible under applicable law.  Except as otherwise set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 9(k) shall be the same as those set forth in
Section 6 of the Registration Rights Agreement.

(l)

No Strict Construction.  The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

(m)

Remedies.  Each Buyer and each holder of the Securities shall have all rights
and remedies set forth in the Transaction Documents and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law.  Any
Person having any rights under any provision of this Agreement shall be entitled
to enforce such rights specifically (without posting a bond or other security),
to recover damages by reason of any breach of any provision of this Agreement
and to exercise all other rights granted by law.  Furthermore, the Company
recognizes that in the event that it fails to perform, observe, or discharge any
or all of its obligations under the Transaction Documents, any remedy at law may
prove to be inadequate

10573421.7

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

relief to the Buyers.  The Company therefore agrees that the Buyers shall be
entitled to seek temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages and without posting a bond or
other security.

(n)

Rescission and Withdrawal Right.  Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Buyer exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Buyer may rescind or
withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.

(o)

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

(p)

Independent Nature of Buyers' Obligations and Rights.  The obligations of each
Buyer under any Transaction Document are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any way for
the performance of the obligations of any other Buyer under any Transaction
Document.  Nothing contained herein or in any other Transaction Document, and no
action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as, and the Company acknowledges that the Buyers do not so
constitute, a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Buyers are in any way acting in concert
or as a group, and the Company will not assert any such claim with respect to
such obligations or the transactions contemplated by the Transaction Documents
and the Company acknowledges that the Buyers are not acting in concert or as a
group with respect to such obligations or the transactions contemplated by the
Transaction Documents.  The Company acknowledges and each Buyer confirms that it
has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors.  Each Buyer
shall be entitled to independently protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any other Buyer to be
joined as an additional party in any proceeding for such purpose.

[Signature Page Follows]

10573421.7

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IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

COMPANY:

BROADCAST INTERNATIONAL, INC.

By:

/s/ Reed Benson

         Name: Reed Benson

Title:  Chief Financial Officer  and General Counsel

 

10573421.7

 

 

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

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

BUYERS:

CASTLERIGG MASTER INVESTMENTS LTD.

By:

/s/ Patrick T. Burke

         Name: Patrick T. Burke

Title:   Senior Managing Partner

 

 

10573421.7

 

 

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

SCHEDULE OF BUYERS

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)`

(9)

Buyer

Address and
Facsimile Number

Aggregate
Principal
Amount of
Notes

Number of
Common Shares

Number of Warrant Shares

Prepaid
Interest

Net
Purchase
Price

Purchase Price

Legal Representative's Address and Facsimile Number

 

 

 

 

 

 

 

 

 

Castlerigg Master Investments Ltd.

c/o Sandell Asset Management

40 West 57th St

26th Floor

New York, NY 10019

Attention: Cem Hacioglu/Matthew Pliskin

Fax:  212-603-5710

Telephone: 212-603-5700

Residence: British Virgin Islands

$15,000,000

1,000,000

1,875,000

$937,500

$14,062,500

$15,000,000

Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York  10022
Attention:  Eleazer Klein, Esq.
Facsimile: (212) 593-5955
Telephone:  (212) 756-2376

10573421.7

 

 

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EXHIBITS

Exhibit A

Form of Notes

Exhibit B

Form of Warrants

Exhibit C

Form of Registration Rights Agreement

Exhibit D

[Reserved]

Exhibit E

Form of Security Agreement

Exhibit F

Form of Guaranty

Exhibit G

Form of Irrevocable Transfer Agent Instructions

Exhibit H

Form of Opinion of Company's Counsel

Exhibit I

Form of Secretary's Certificate

Exhibit J

Form of Officer's Certificate

SCHEDULES

Schedule 3(a)

Subsidiaries

Schedule 3(d)

Conflicts

Schedule 3(k)

SEC Documents

Schedule 3(l)

Absence of Certain Changes

Schedule 3(q)

Transactions with Affiliates

Schedule 3(r)

Equity Capitalization

Schedule 3(s)

Indebtedness and Other Contracts

Schedule 3(t)

Absence of Litigation

Schedule 3(w)

Title

Schedule 3(x)

Intellectual Property Rights

Schedule 3(z)

Subsidiary Rights

Schedule 3(cc)

Internal Accounting

Schedule 3(ee)

Ranking of Notes

Schedule 3(kk)

Disclosure

Schedule 4(n)

Additional Issuances of Securities

10573421.7