ex101.htm


                                                                                                                                                                                                                                                                                          
EXHIBIT 10.1

     

                                                                                                                                                                                                      
Execution Copy

    


     

    


     

    PREFERRED
STOCK PURCHASE AGREEMENT

     

    Dated as
of June 27, 2008


     

    between


     

    BROADPOINT
SECURITIES GROUP, INC.

     

    and

     

    MAST
CREDIT OPPORTUNITIES I MASTER FUND LIMITED

     

     

     

     

     

     

     

     

     

     

     

     

     

    


     

    


     

    


     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    TABLE OF CONTENTS

     

    ARTICLE I
DEFINITIONS AND
INTERPRETATION                                                                                                   1                       

     

    
      	
              Section
      1.1    Definitions.

            	
              1

            


    

    
      	
              Section
      1.2    Interpretation.

            	
              1

            


    

     

    ARTICLE
II ISSUANCE AND SALE OF PURCHASED
SECURITIES                                                                        1

     

    
      	
              Section
      2.1    Issuance and Sale of
      Securities.

            	
              1

            


    

    
      	
              Section
      2.2    The
      Closing.

            	
              2

            


    

    
      	
              Section
      2.3    Mast Deliveries at the
      Closing.

            	
              2

            


    

    
      	
              Section
      2.4    Company Deliveries at
      the Closing.

            	
              2

            


    

     

    ARTICLE
III REPRESENTATIONS AND WARRANTIES OF THE
COMPANY                                                     3

     

    
      	
              Section
      3.1    Organization.

            	
              3

            


    

    
      	
              Section
      3.2    Capitalization.

            	
              3

            


    

    
      	
              Section
      3.3    Authorization;
      Execution and Enforceability.

            	
              5

            


    

    
      	Section
      3.4    Validity of Purchased
      Shares, Warrant and Warrant
      Shares.                                                             
      	
              5

            


    

    
      	
              Section
      3.5    No Conflicts; Consents and
      Approvals.

            	
              5

            


    

    
      	
              Section
      3.6    SEC Reports; Financial
      Statements.

            	
              6

            


    

    
      	
              Section
      3.7    Sarbanes-Oxley;
      Disclosure and Internal Controls.

            	
              7

            


    

    
      	
              Section
      3.8    Absence of Certain
      Changes.

            	
              7

            


    

    
      	
              Section
      3.9    Litigation.

            	
              8

            


    

    
      	
              Section
      3.10  Intellectual Property
      Rights.

            	
              8

            


    

    
      	
              Section
      3.11          Exchange
      Listing.

            	
              9

            


    

    
      	
              Section
      3.12          Tax
      Matters.

            	
              9

            


    

    
      	
              Section
      3.13          Title to
      Assets.

            	
              9

            


    

    
      	
              Section
      3.14          Insurance.

            	
              9

            


    

    
      	
              Section
      3.15          Permits.

            	
              10

            


    

    
      	
              Section
      3.16          Indebtedness and Other
      Contracts.

            	
              11

            


    

    
      	
              Section
      3.17          Labor
      Matters

            	
              11

            


    

    
      	
              Section
      3.18          Compliance.

            	
              12

            


    

    
      	
              Section
      3.19          Transactions with
      Affiliates.

            	
              12

            


    

    
      	
              Section
      3.20          Investment
      Company

            	
              12

            


    

    
      	
              Section
      3.21         Corrupt
      Practices.

            	
              12

            


    

    
      	
              Section
      3.22         Application of
      Takeover Protections.

            	
              12

            


    

    
      	
              Section
      3.23         Securities Law
      Compliance.

            	
              13

            


    

    
      	
              Section
      3.24         No
      Brokers.

            	
              13

            


    

    
      	
              Section
      3.25         OFAC
      Requirements.

            	
              13

            


    

    
      	
              Section
      3.26         Accuracy and
      Completeness of Disclosure.

            	
              13

            


    

     

     

    
      
        
        

      

      
        i

        
          

        

      

      
        
        

      

    

     

     

    ARTICLE
IV                                                                                                                                                 14

     

    REPRESENTATIONS
AND WARRANTIES OF
MAST                                                                                              14                                

    
      	
              Section
      4.1    Organization, Standing
      and Power.

            	
              14

            


    

    
      	
              Section
      4.2    Authorization;
      Execution and Enforceability.

            	
              14

            


    

    
      	
              Section
      4.3    No Conflict; Consents
      and Approvals.

            	
              14

            


    

    
      	
              Section
      4.4    Purchase Entirely for
      Own Account.

            	
              14

            


    

    
      	
              Section
      4.5    Investment
      Experience.

            	
              15

            


    

    
      	
              Section
      4.6    Disclosure of
      Information.

            	
              15

            


    

    
      	
              Section
      4.7    Restricted
      Securities.

            	
              15

            


    

    
      	
              Section
      4.8    Legends.

            	
              15

            


    

    
      	
              Section
      4.9    Accredited
      Investor.

            	
              16

            


    

    
      	
              Section
      4.10          No Puts or Short
      Sales.

            	
              16

            


    

    
      	
              Section
      4.11          Availability of
      Funds.

            	
              16

            


    

    
      	
              Section
      4.12          No
      Brokers.

            	
              16

            


    

    
      	
              Section
      4.13          Tax
      Matters.

            	
              16

            


    

     

    ARTICLE V
COVENANTS                                                                                                                                                 17

     

    
      	
              Section
      5.1    Listing.

            	
              17

            


    

    
      	
              Section
      5.2    Defense of Certain
      Actions.

            	
              17

            


    

    
      	
              Section
      5.3    Contractual Consents
      and Governmental
      Approvals.                                                                   17

            


    

    
      	
              Section
      5.4    Use of
      Proceeds

            	
              19

            


    

    
      	
              Section
      5.5    Restrictions on
      Transferability.

            	
              20

            


    

    
      	
              Section
      5.6    Current Public
      Information.

            	
              20

            


    

    
      	
              Section
      5.7    INTENTIONALLY
      OMITTED.

            	
              20

            


    

    
      	
              Section
      5.8    INTENTIONALLY
      OMITTED.

            	
              20

            


    

    
      	
              Section
      5.9    Taxes.

            	
              20

            


    

    
      	
              Section
      5.10          Corporate
      Existence.

            	
              20

            


    

    
      	
              Section
      5.11          Insurance.

            	
              21

            


    

    
      	
              Section
      5.12          Merger or Sale;
      Disposition of Property.

            	
              21

            


    

    
      	
              Section
      5.13          Incurrence of
      Indebtedness.

            	
              22

            


    

    
      	
              Section
      5.14          Restricted
      Payments.

            	
              22

            


    

    
      	
              Section
      5.15          Limitation on
      Liens.

            	
              22

            


    

    
      	
              Section
      5.16          Restrictions on
      Upstream Limitations.

            	
              22

            


    

    
      	
              Section
      5.17          Transactions with
      Affiliates.

            	
              22

            


    

    
      	
              Section
      5.18          Dividend and Other
      Payment Restrictions Affecting
      Subsidiaries.                                             22  
      

            


    

    
      	
              Section
      5.19          Noncircumvention;
      Antilayering.

            	
              23

            


    

    
      	
              Section
      5.20          Restrictions on
      Acquisitions; Creation of Subsidiaries; Transfers with
      Subsidiaries.            
      23

            


    

    
      	
              Section
      5.21          Sale and
      Leaseback.

            	
              23

            


    

    
      	
              Section
      5.22          Compliance with
      Laws.

            	
              24

            


    

    
      	
              Section
      5.23          Maintenance of
      Properties.

            	
              24

            


    

    
      	
              Section
      5.24          Maintenance of
      Records; Fiscal Year.

            	
              24

            


    

    
      	
              Section
      5.25          Compliance with
      Federal Reserve Regulations.

            	
              24

            


    

    
      	
              Section
      5.26          Minimum Net Tangible
      Book Value.

            	
              25

            


    

    
      	
              Section
      5.27          Independent Registered
      Public Accountants.

            	
              25

            


    

    
      	
              Section
      5.28          Further
      Assurances.

            	
              25

            


    

    
      	
              Section
      5.29          Registrar.

            	
              25

            


    

     

     

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

    

     

     

     

    ARTICLE
VI
CONDITIONS                                                                                                                                               25

                                                                                                                                          

     

    
      	
              Section
      6.1    Conditions to the
      Company’s Obligations.

            	
              25

            


    

    
      	
              Section
      6.2    Conditions to Mast’
      Obligations.

            	
              26

            


    

     

    ARTICLE
VII FURTHER
AGREEMENTS                                                                                                                        27     

     

    
      	
              Section
      7.1    Public
      Announcements.

            	
              27

            


    

    
      	
              Section
      7.2    Fees and
      Expenses.

            	
              27

            


    

     

    ARTICLE
VIII
GENERAL                                                                                                                                                   28

     

    
      	
              Section
      8.1    Termination.

            	
              28

            


    

    
      	
              Section
      8.2    Notice.

            	
              29

            


    

    
      	
              Section
      8.3    Complete Agreement; No
      Third-Party
      Beneficiaries.                                                                      30

            


    

    
      	
              Section
      8.4    Survival.

            	
              30

            


    

    
      	
              Section
      8.5    Governing
      Law.

            	
              30

            


    

    
      	
              Section
      8.6    No
      Assignment.

            	
              31

            


    

    
      	
              Section
      8.7    Counterparts.

            	
              31

            


    

    
      	
              Section
      8.8    Remedies;
      Waiver.

            	
              31

            


    

    
      	
              Section
      8.9    Severability.

            	
              31

            


    

    
      	
              Section
      8.10          Amendment;
      Waiver.

            	
              31

            


    

    
      	
              Section
      8.11          Confidentiality.

            	
              32

            


    

    


    Exhibit
A       Defined
Terms

    Exhibit
B       Company
Disclosure Letter

    Exhibit
C              
Form of Common Stock Purchase Warrant

    Exhibit
D              
Form of Warrant Registration Rights Agreement

    Exhibit
E              
Certificate of Designations

    Exhibit
F               
List of Closing Deliveries

    Exhibit
G              
Accredited Investor Questionnaire

    Exhibit
H              
Preemptive Rights Agreement

    Exhibit
I                
Form of Legal Opinion

    


     

     


    
      
         


      

      
        iii 


        
          

        

      

      
         


      

    

     

    
 

    BROADPOINT
SECURITIES GROUP, INC.

     

    PREFERRED
STOCK PURCHASE AGREEMENT

     

    PREFERRED
STOCK PURCHASE AGREEMENT (this “Agreement”), dated as
of June 27, 2008 between BROADPOINT SECURITIES GROUP, INC. a New York
corporation (the “Company”), and MAST
CREDIT OPPORTUNITIES I MASTER FUND LIMITED, a Cayman Islands corporation (“Mast”).

     

    WITNESSETH:

     

    WHEREAS
the Company wishes to issue and sell to Mast, and Mast wishes to purchase from
the Company, the Purchased Securities, as defined below, upon the terms and
subject to the conditions set forth herein;

     

    NOW,
THEREFORE, in consideration of these premises and the representations,
warranties, covenants and agreements herein set forth, the parties agree as
follows:

     

    ARTICLE
I

    DEFINITIONS
AND INTERPRETATION

     

    Section
1.1    Definitions. 
The
capitalized terms that are defined in Exhibit A are used
herein with the meanings set forth therein.

     

    Section
1.2    Interpretation.

     

    (a) Headings.  The
headings to the Articles, Sections and Subsections of this Agreement or any
Exhibit to this Agreement are inserted for convenience of reference only and
shall not affect the meaning or interpretation of this Agreement.

     

    (b) Usage.  In
this Agreement, unless the context requires otherwise:  (i) the
singular number includes the plural number and vice versa; (ii) reference to any
gender includes each other gender; (iii) the Exhibits to this Agreement are
hereby incorporated into, and shall be deemed to be a part of, this Agreement;
(iv) the terms “hereunder”, “hereof”, “hereto” and words of similar import shall
be deemed references to this Agreement as a whole and not to any particular
section or other provision hereof; (v) the words “include”, “includes” and
“including” shall be deemed to be followed by the words “without limitation”;
(vi) a reference to any Article, Section, Subsection or Exhibit shall be deemed
to refer to the corresponding Article, Section, Subsection, or Exhibit of this
Agreement and (vii) a reference to any Schedule shall be deemed to refer to the
corresponding Schedule to the Company Disclosure Letter, attached hereto as
Exhibit
B.

     

    ARTICLE
II

    ISSUANCE AND SALE OF PURCHASED SECURITIES

     

    Section
2.1    Issuance and Sale of
Securities.  Pursuant
to this Agreement, at the Closing, the Company shall issue and sell, and Mast
shall purchase, 1,000,000 shares of Series B Preferred Stock (the “Purchased Shares”),
and a warrant (in the form of Exhibit C to this
Agreement) to purchase 1,000,000 shares of Common Stock with a term of four
years and an exercise price per share of $3.00 (the “Warrant” and
collectively with the Purchased Shares, the “Purchased
Securities”), all on the terms set forth herein and free and clear of any
Liens.  At the Closing, Mast shall pay the Company, as consideration
for the Purchased Securities, the purchase price of $25,000,000 (the “Purchase
Price”).  At the option of Mast, funds paid at the Closing in
satisfaction of Mast’s Purchase Price may be adjusted for unpaid Reimbursable
Expenses and any unpaid portion of the Commitment Fee, in accordance with Section
7.2.

     

    
 

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

     

    Section
2.2    The
Closing.  The
closing of the issuance and sale of the Purchased Securities (the “Closing”) and all
related actions contemplated by this Agreement to occur at the Closing shall
take place in the offices of the Company, One Penn Plaza, 42nd Floor,
New York, New York, 10119 at 10:00 a.m. local time, on a date to be specified by
the parties, which shall be no later than the second Business Day following the
day on which the last of the conditions set forth in Article VI (other
than those conditions required to be fulfilled at the Closing) shall have been
fulfilled or waived, or at such other time and place as the Company and Mast may
agree.  At the Closing, Mast and the Company shall make certain
deliveries, as specified in Sections 2.3 and
2.4,
respectively, and all such deliveries, regardless of chronological sequence,
shall be deemed to occur contemporaneously and simultaneously on the occurrence
of the last delivery and none of such deliveries shall be effective until the
last of the same has occurred.

     

    Section
2.3    Mast Deliveries at the
Closing.  At the
Closing:

     

    (a)    Mast
shall pay to the Company an amount in same-day funds equal to Mast’s Purchase
Price by wire transfer to a bank account designated in writing by the Company
prior to the Closing, as may be adjusted in accordance with Section
7.2;

     

    (b)    Mast
shall deliver to the Company a duly executed counterpart of the Warrant
Registration Rights Agreement attached hereto as Exhibit
D;

     

    (c)    Mast shall deliver to the Company each of the other certificates and
documents listed in Part I of Exhibit F;
and

     

    (d)    Mast
shall deliver to the Company a duly completed Accredited Investor Questionnaire
attached hereto as Exhibit
G.

     

    (e)    Mast
shall deliver to the Company a duly executed counterpart of the agreement set
forth in Exhibit
H, with regards to Mast’s right to participate in the Company’s future
qualified equity financings, subject to limits set forth therein (the “Preemptive Rights
Agreement”).

     

    Section
2.4    Company Deliveries at the
Closing.  At the
Closing:

     

    (a)    The
Company shall deliver to Mast a certificate or certificates (in denominations
specified by Mast) representing the Purchased Shares and the Warrant to be
issued to Mast, registered in Mast’s name;

     

    (b)    The
Company shall deliver to Mast a duly executed counterpart of the Warrant
Registration Rights Agreement attached hereto as Exhibit
D;

     

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     

    (c)    The
Company shall deliver to Mast a duly executed counterpart of the Preemptive
Rights Agreement;

     

    (d)    The
Company shall deliver to Mast a legal opinion, dated the Closing Date, of Cahill
Wink LLP, substantially to the effect set forth in Exhibit I;
and

     

    (e)    The
Company shall deliver to Mast each of the additional certificates and documents
listed in Part II of Exhibit
F.

     

     

    ARTICLE
III

    REPRESENTATIONS
AND WARRANTIES OF THE COMPANY

     

    The
Company hereby represents and warrants to Mast, except in each case as
specifically (i) set forth in a Schedule to the Company Disclosure Letter, a
copy of which is attached hereto as Exhibit B, furnished
to Mast specifically identifying the relevant Section hereof, and (ii) with the
exception of the representations and warranties in Sections 3.1, 3.2, 3.3 and
3.4, as qualified by disclosures in the Company’s SEC
Reports.  These representations and warranties, and the exceptions
referenced therein, are current as of the date of this Agreement except to the
extent that a representation or warranty specifies that it is made as of an
earlier date.  Where certain of the representations and warranties
below are specifically qualified by disclosures in the Company’s SEC Reports,
such qualification excludes any disclosure therein that constitutes a “risk
factor” or a “forward looking statement” under the heading “Forward Looking
Statements” in any such SEC Report (provided, however, that the
exclusion of any such “risk factor” or “forward looking statement” shall not
limit any of the exceptions set forth in clauses (a) through (l) in the
definition of “Company Material Adverse Effect”).

     

    Section
3.1    Organization. 
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of New York.  True and correct copies of
the certificate of incorporation and by-laws of the Company, as amended through
the date hereof, have been provided to Mast.  The Company has all
requisite corporate power and authority to carry on the businesses in which it
is engaged (and as described in the SEC Reports) and to own or lease its properties.  The Company and each of its
Subsidiaries are duly qualified to conduct business as a foreign corporation and
are in good standing under the laws of each jurisdiction in which the nature of
the businesses of the Company and its Subsidiaries or the ownership or leasing
of their properties requires such qualification, other than where the failure to
be so qualified would not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect.  The Company has
no Subsidiaries except as set forth on Schedule 3.1 of the
Company Disclosure Schedule.

    


    Section
3.2   Capitalization.  

     

    (a)    The
authorized capital stock of the Company consists of 100,000,000 shares of Common
Stock and 1,500,000 shares of Preferred Stock.  No shares of Preferred
Stock are currently outstanding and, other than the Company’s Series A Junior
Participating Preferred Stock referred to in the Rights Agreement, no series of
Preferred Stock has been designated or reserved for issuance other than pursuant
to the transactions contemplated by this Agreement.  Of the shares of
Common Stock currently authorized: (i) 75,836,549 shares are currently
outstanding, (ii) 166,401  shares are currently held in a rabbi trust
to hedge certain deferred compensation obligations, (iii) 483,601 shares are
reserved for issuance upon the exercise of the Common Stock purchase warrants
issued to purchasers of the Company’s senior notes dated June 13, 2003, (iv)
4,091,222  shares are reserved for issuance upon the exercise of
Employee Stock Options, (v) 7,065,714  shares are reserved for the
issuance of Common Stock upon the settlement of RSU Awards that are currently
outstanding, (vi) 1,500,000 additional RSU Awards are committed to Lee
Fensterstock and Peter McNierney pursuant to, and in accordance with the
schedule in and terms of, their current employment agreements, (vii) 10,788,467
additional shares are, as of June 25, 2008, reserved for issuance pursuant to
the Employee Stock Incentive Plans in respect of future awards under such plans,
and (viii) no other shares are reserved for issuance for any
purpose.  The Rights Agreement terminated on March 31, 2008 and has no
further force or effect and the Company has not taken any action to amend the
Rights Agreement to extend its term or to adopt a new rights
agreement.

     

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

     

    (b)   Except as
set forth in Schedule
3.2(b), there are no outstanding Convertible
Securities.  Except as disclosed on Schedule 3.2(b), the
issuance of the Purchased Shares, Warrant and Warrant Shares as contemplated
herein will not cause the number of shares of Common Stock issuable pursuant to
any outstanding Convertible Securities to increase as a result of any
antidilution provisions relating thereto.

     

    (c)   Except as
disclosed in Schedule
3.2(c), there are no (i) outstanding options, warrants or other rights
exercisable for the purchase of any shares of Capital Stock or Convertible
Securities (“Stock
Purchase Rights”), (ii) stock appreciation rights, performance stock
awards or other employee incentive awards the value of which is determined by
reference to the value of the Common Stock or (iii) other agreements or
commitments obligating the Company or any of its Subsidiaries to issue, sell,
repurchase, redeem or otherwise acquire any shares of Capital Stock, Convertible
Securities, Stock Purchase Rights or any securities of any
Subsidiary.  Except as set forth in Schedule 3.2(c), the
issuance of the Purchased Shares, Warrant and Warrant Shares as contemplated
herein will not cause the number of shares of Common Stock issuable pursuant to
any outstanding Stock Purchase Rights to increase as a result of any
antidilution provisions relating thereto.

     

    (d)   There are
no authorized or outstanding bonds, debentures, notes or other obligations of
the Company the holders of which have the right to vote with the holders of
Common Stock on any matter.  The Company does not have in effect any
dividend reinvestment plans or employee stock purchase plans.

     

    (e)   All outstanding shares of Capital Stock (including any
outstanding Restricted Stock) have been duly authorized and validly issued and
are fully-paid and nonassessable and have been offered and issued without
violation of any preemptive rights of any Person or any applicable securities
laws.  All outstanding Stock Purchase Rights have been issued without
violation of any applicable securities laws, and all shares of Common Stock
issued upon exercise thereof will have been, upon such issuance, duly authorized
and validly issued without violation of any preemptive rights of any Person and
will be fully-paid and nonassessable.

     

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     

    (f)   Except as
disclosed on Schedule
3.2(f), there are no voting trusts, proxies or other agreements to which
the Company or, to the Knowledge of the Company any of its officers or
directors, is a party or by which it is bound with respect to the voting of any
shares of Capital Stock affecting the voting of any shares of Capital
Stock.

     

    (g)   Except as
disclosed on Schedule
3.2(g), 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 Securities Act.

     

    (h)   Except as
disclosed on Schedule
3.2(h), 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.

     

    Section
3.3   Authorization; Execution and
Enforceability.

     

    (a)   The
Company has all requisite corporate power and authority to execute, deliver and
perform this Agreement and the each of the other Transaction Agreements and to
consummate the Transactions.  The execution, delivery and performance
of this Agreement and each of the other Transaction Agreements and the
consummation of the Transactions, including without limitation, the
authorization and issuance of the Purchased Shares, the Warrant and Warrant
Shares and each of the covenants agreed to in Article V below, has
been duly authorized by the Board and the Audit Committee and no further
corporate action on the part of the Company is required in connection
therewith.

     

    (b)   This
Agreement has been duly executed and delivered by the Company and constitutes,
and, upon execution and delivery thereof as contemplated herein, each of the
other Transaction Agreements will have been duly executed and delivered by the
Company and will constitute, a legal, valid and binding obligation of the
Company enforceable against it in accordance with its terms.

     

    Section
3.4   Validity of Purchased
Shares, Warrant and Warrant Shares.

     

      Upon
issuance to Mast as contemplated herein, the Purchased Shares and Warrant
issuable to Mast hereunder will have been duly authorized and validly issued
without violation of the preemptive rights of any Person and will be fully-paid
and nonassessable, free and clear of any Liens, taxes or
charges.  Upon issuance following the exercise of the Warrant, the
Warrant Shares will be duly authorized and validly issued without violation of
the preemptive rights of any Person and will be fully-paid and nonassessable,
free and clear of any Liens, taxes or charges.

     

    Section
3.5   No Conflicts; Consents and
Approvals.

     

    (a)    Neither
the execution, delivery or performance of this Agreement or any of the other
Transaction Agreements by the Company nor the consummation of any of the
Transactions will (a) conflict with or violate any provision of the certificate
of incorporation or by-laws of the Company or any Organizational Document of any
of the Subsidiaries; (b) result in a breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the acceleration of,
create in any party any right to accelerate, terminate, modify or cancel, or require any notice, consent or waiver under, any material
Contractual Obligation or any Requirement of Law material to the operation of
the Company or any of the Subsidiaries or any of their respective properties and
assets; (c) result in the imposition of any Lien upon any material properties or
assets of the Company or any of the Subsidiaries, which Lien would materially
detract from the value or materially interfere with the use of such properties
or assets, (d) result in the Company or any Subsidiary being required to redeem,
repurchase or otherwise acquire any outstanding equity or debt interests,
securities or obligations in the Company or any of the Subsidiaries or any
options or other rights exercisable for any of same, or (e) cause the
accelerated vesting of any Employee Stock Options, Restricted Stock Awards or
RSU Awards.

     

     

     

    
      
        
        

      

      
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    (b)    Except as
set forth in Schedule
3.5(b), neither the Company nor any of the Subsidiaries is required to
obtain any consent, authorization or approval of, or make any filing,
notification or registration with, any Governmental Authority or any self
regulatory organization in order for the Company to execute, deliver and perform
this Agreement and each of the other Transaction Agreements and to consummate
the Transactions (“Company
Approvals”).

     

    (c)    No
Contractual Consents are required to be obtained under any Contractual
Obligation applicable to the Company or any Subsidiary or, to the Knowledge of
the Company, any Associated Person thereof in connection with the execution,
delivery or performance of this Agreement or the other Transaction Agreements or
the consummation of any of the Transactions which if not obtained would
reasonably be expected, individually or in the aggregate to have a Company
Material Adverse Effect (“Company Contractual
Consents”).

     

    Section
3.6   SEC Reports; Financial
Statements.

     

    (a)   Except as
set forth in Schedule
3.6(a), the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it since December 31,
2006 with the SEC pursuant to the reporting requirements of the Exchange Act
(all the foregoing filed prior to the date hereof and all exhibits included or
incorporated by reference therein and financial statements and schedules thereto
and documents included or incorporated by reference therein being sometimes
hereinafter collectively referred to as the “SEC
Reports”).  As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Exchange Act
applicable to the SEC Reports, and none of the SEC Reports, 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 light of the circumstances under which
they were made, not misleading.

     

    (b)   As of
their respective dates, except as set forth therein or in the notes thereto, the
financial statements contained in the SEC Reports and the related notes (the
“Financial
Statements”) complied as to form in all material respects with all
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto.  The Financial Statements: (i) were
prepared in accordance with accounting principles generally accepted in the
United States (“GAAP”), consistently
applied during the periods involved (except (i) as may be otherwise indicated in
the notes thereto or (ii) in the case of unaudited interim statements, to the
extent that they may not include footnotes, may be condensed or summary
statements or may conform to the SEC’s rules and instructions for Reports on
Form 10-Q), (ii) fairly present in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal and recurring year-end audit adjustments) and (iii) are in
all material respects in accordance with the books of account and records of the
Company and its consolidated Subsidiaries (except as may be otherwise noted
therein).

     

     

     

     

     

    
      
        
        

      

      
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    Section
3.7   Sarbanes-Oxley; Disclosure
and Internal Controls.   Except as
disclosed on Schedule
3.7:

     

    (a)    The
Company is in compliance in all material respects with all of the provisions of
the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) that
are applicable to it or any of the Subsidiaries.

     

    (b)    The
Company has established and maintains disclosure controls and procedures as
defined in Rule 13a-15 under the Exchange Act.  Such disclosure
controls and procedures are designed to ensure that material information
relating to the Company and the Subsidiaries is made known to the Company’s
principal executive officer and its principal financial officer by others within
those entities, particularly during the periods in which the periodic reports
required to be filed under the Exchange Act are being prepared.  Such
disclosure controls and procedures are effective in all material respects to
timely alert the Company’s principal executive officer and principal financial
officer to material information required to be included in the Company’s reports
required to be filed under Exchange Act.

     

    (c)    The
Company and its consolidated subsidiaries have established and maintained a
system of internal control over financial reporting (within the meaning of Rule
13a-15 under the Exchange Act) (“internal
controls”).  Such internal controls are sufficient to provide
reasonable assurance regarding the reliability of the Company’s financial
reporting and the preparation of the Company’s financial statements for external
purposes in accordance with GAAP.  The Company’s certifying officers
have evaluated the effectiveness of the Company’s internal controls as of the
end of the period covered by the most recently filed quarterly or annual
periodic report under the Exchange Act (the “Evaluation
Date”).  The Company presented in its most recently filed
quarterly or annual periodic report under the Exchange Act the conclusions of
the certifying officers about the effectiveness of the internal controls and
procedures based on their evaluations as of the Evaluation
Date.  Since the Evaluation Date, there have been no significant
changes in the Company’s internal controls over financial reporting (as defined
in Item 307(b) of Regulation S-K under the Exchange Act) or, to the Knowledge of
the Company, in other factors that could significantly affect such internal
controls.

     

    Section
3.8    Absence of Certain
Changes.     Since
December 31, 2007, (a) there has not been any Company Material Adverse Effect or
any changes, events or developments that would reasonably be expected,
individually or in the aggregate, to have a Company Material Adverse Effect, and
(b) the Company and the Subsidiaries have conducted their respective businesses
only in the ordinary course and in conformity with past
practice.  Except as disclosed in Schedule 3.8, since
December 31, 2007, neither the Company nor any of its Subsidiaries has (i)
declared or paid any dividends, (ii) sold or otherwise disposed of any material
asset outside of the ordinary course of business or (iii) made or committed to
make capital expenditures, individually or in the aggregate, in excess of
$1,000,000.  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 and its Subsidiaries,
individually and on a consolidated basis, are not as of the date hereof, and
after giving effect to the transactions contemplated hereby to occur at the
Closing will not, be Insolvent.

     

     

    
 

    
      
        
        

      

      
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    Section
3.9    Litigation.     Schedule
3.9 lists all pending litigation to which the Company or any of the Subsidiaries
is a party (either as a plaintiff or defendant).  Except as disclosed
on Schedule 3.9, there is no Action or Proceeding to which the Company or any of
the Subsidiaries is a party (either as a plaintiff or defendant) pending or, to
the Knowledge of the Company, threatened before any Governmental Authority,
FINRA or self-regulatory organization (i) that challenges the validity or
propriety of any of the Transactions or (ii) if determined adversely to the
Company or any Subsidiary would reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect.  Neither the
Company nor any of the Subsidiaries, nor, to the Knowledge of the Company, any
of their respective officers, directors, employees or Associated Persons, is the
subject of any Action or Proceeding involving a claim of material violation or
material liability under federal, state or foreign securities or insurance laws
or the rules, by-laws, or constitution of FINRA or any self-regulatory
organization, or a claim of material breach of fiduciary duty relating to the
Company or any of the Subsidiaries or is permanently or temporarily enjoined by
any order, judgment or decree of any Governmental Authority, FINRA or
self-regulatory organization from engaging in or continuing to conduct any of
the businesses of the Company or any Subsidiary.  To the Knowledge of
the Company, there is not pending or contemplated, any investigation by any
Governmental Authority, FINRA or self-regulatory organization involving the
Company or any of the Subsidiaries or any officer, director, employee or
Associated Person thereof.  Since December 31, 2007 the Company has
not received a stop order or other order suspending the effectiveness of any
registration statement filed by the Company under the Exchange Act or the
Securities Act and, to the Knowledge of the Company, the SEC has not issued any
such order since such date.  No order, judgment or decree of any
Governmental Authority, FINRA or self-regulatory organization has been issued in
any Action or Proceeding to which the Company or any of the Subsidiaries is or
was a party or, to the Knowledge of the Company, in any Action or Proceeding
except as would not reasonably be expected, individually or in the aggregate, to
have a material adverse effect on the Company.

    


    Section
3.10    Intellectual Property
Rights.     Except as
would not reasonably be expected, individually or in the aggregate, to have a
Company Material Adverse Effect, the Company and the Subsidiaries own or
possess, or will be able to obtain on reasonable terms, licenses or sufficient
rights to use all patents, patent applications, patent rights, inventions,
know-how, trade secrets, trademarks, trademark applications, service marks,
service names, trade names and copyrights necessary to enable them to conduct
their businesses as currently conducted (“Intellectual
Property”).  Neither the Company nor any of the Subsidiaries
has infringed the intellectual property rights of third parties, and no third
party, to the Knowledge of the Company, is infringing the Intellectual Property,
in each case, where such infringement would reasonably be expected, individually
or in the aggregate, to result in a Company Material Adverse
Effect.  There is no material claim or proceeding pending or, to the
Knowledge of the Company, threatened that challenges the right of the Company or
any of the Subsidiaries with respect to any of the Intellectual
Property.

     

     

     

    
 

    
      
        
        

      

      
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    Section
3.11    Exchange
Listing.     The
Common Stock is listed on the NASDAQ Global Market and, to the Knowledge of the
Company, there are no proceedings to revoke or suspend such
listing.  The Company is in compliance with the requirements of the
NASDAQ Global Market for continued listing of the Common Stock thereon and any
other NASDAQ Global Market listing and maintenance
requirements.  Trading in the Common Stock has not been suspended by
the SEC or the NASDAQ Global Market.  The transactions contemplated by
this Agreement and the Transaction Documents will not require shareholder
approval under NASDAQ Marketplace Rule 4350.

    


    Section
3.12    Tax
Matters.     The
Company and the Subsidiaries have made or filed all federal, state and foreign
income and all other Tax Returns required by any jurisdiction to which they are
subject (unless and only to the extent that the Company or any of the
Subsidiaries has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported Taxes) and have paid all Taxes that are
material in amount, shown or determined to be due on such Tax Returns, except
those being contested in good faith and have set aside on their books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply.  To the
Knowledge of the Company there are no unpaid Taxes in any material amount
claimed to be due by any Taxing Authority, and to the Knowledge of the Company
there is no basis for any such claim.  Neither the Company nor any
Subsidiary has executed a waiver with respect to the statute of limitations
relating to the assessment or collection of any Tax.  Except as
disclosed in Schedule 3.12, none of the Company's, or any of the Subsidiaries’,
Tax Returns is presently being audited by any Taxing Authority.

     

    Section 3.13    Title to
Assets.     The
Company and the Subsidiaries have good and marketable title in and to all
property owned by them and that is material to their businesses, free and clear
of all Liens, except for Liens as do not materially affect the value of such
property and do not materially interfere with the use
made and proposed to be made of such property by them. Any property and
facilities held under lease by the Company and the Subsidiaries are held under
valid, subsisting and enforceable leases concerning which the Company and the
Subsidiaries are in material compliance.

    


    Section
3.14    Insurance.     The Company and the Subsidiaries maintain in full force and
effect insurance coverage that is customary for comparably situated companies
for the business being conducted and properties owned or leased by the Company
and the Subsidiaries, and the Company reasonably believes such insurance
coverage provides reasonable, prudent and customary coverage against all
liabilities, claims and risks against which it is customary for comparably
situated companies to insure.  To the Knowledge of the Company,
neither the Company nor any Subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a Company Material
Adverse Effect.

     

     

     

    
 

    
      
        
        

      

      
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    Section
3.15    Permits.

     

    (a)    The Company and its Subsidiaries hold all Company Permits that
are required for the conduct of the businesses of the Company and the
Subsidiaries as currently being conducted, each as amended through the date
hereof, other than such Miscellaneous Permits the absence of which would not
reasonably be expected, individually or in the aggregate to have a Company
Material Adverse Effect.  To the Knowledge of the Company, the
respective officers, directors, employees and Associated Persons of each of the
Company and its Subsidiaries hold all material Company Permits that are required
for the conduct of the businesses of the Company and the Subsidiaries as
currently being conducted, each as amended through the date hereof, other than
such Miscellaneous Permits the absence of which would not reasonably be
expected, individually or in the aggregate to have a Company Material Adverse
Effect.

     

    (b)    The
Regulatory Permits and all Miscellaneous Permits material to the business of the
Company are in full force and effect and have not been pledged or otherwise
encumbered, assigned, suspended, modified, conditioned, or restricted in any
material respect, canceled or revoked, and the Company and each of the
Subsidiaries, and, to the Knowledge of the Company, each of their respective
officers, directors, employees and Associated Persons thereof, have operated,
and are operating, in compliance with all terms thereof or any renewals thereof
applicable to them, and are in good standing in respect of all such Company
Permits, other than Miscellaneous Permits where the failure to so comply or
operate or to be in good standing would not reasonably be expected, individually
or in the aggregate, to have a Company Material Adverse Effect.  To
the Knowledge of the Company, no event has occurred, nor has any notice been
received, with respect to any of the Company Permits which allows or results in,
or after notice or lapse of time or both would result in, revocation,
suspension, or termination, modification, or the imposition of any condition or
restriction, thereof or would result in any other material impairment of the
rights of the holder of any such Company Permit other than with respect to
Miscellaneous Permits such as would not be reasonably expected, individually or
in the aggregate, to have a Company Material Adverse Effect.

     

    (c)    Except as
disclosed on Schedule
3.15(c), to the Knowledge of the Company, no Governmental Authority,
FINRA or self-regulatory organization has initiated any material proceeding,
investigation, or examination into the business or operations of the Company or
any Subsidiary, or any officer, director, employee or Associated Persons
thereof, or has instituted any proceeding seeking to revoke, cancel or limit any
Company Permit, and neither the Company or any Subsidiary, nor any officer,
director, employee or Associated Person thereof has received any notice of any
unresolved material violation or exception by any Governmental Authority, FINRA
or self-regulatory organization with respect to any report or statement relating
to any examination of the Company or any Subsidiary.  Without limiting
the generality of the foregoing, neither the Company nor any Subsidiary nor, to
the Knowledge of the Company, any of their respective officers, directors,
employees, or Associated Persons or persons performing similar duties has been
enjoined, indicted, convicted or made the subject of a disciplinary proceeding,
censure, consent decree, cease and desist or administrative order on account of
any violation of the Exchange Act, the Commodity Exchange Act, the Investment
Company Act of 1940, the Investment Advisers Act of 1940, state securities law
or applicable foreign law or regulation.

     

     

     

     

    
      
        
        

      

      
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    (d)    Except as disclosed on Schedule 3.15(d),
neither the Company or any Subsidiary, nor, to the Knowledge of the Company, any
officer, director, employee or Associated Person thereof is a party or subject
to any agreement, consent, decree or order or other understanding or arrangement
with, or any directive of any Government Authority, FINRA or self-regulatory
organization which imposes any material restrictions on or otherwise adversely
affects in any material way the conduct of any of the business of the Company
and its Subsidiaries.

     

    Section
3.16    Indebtedness and Other
Contracts.     Except as
set forth on Schedule 3.16, neither the Company nor any of its Subsidiaries (i)
has any outstanding Indebtedness (other than Indebtedness incurred in the
ordinary course of business since December 31, 2007 which does not exceed
$500,000 individually or $2,500,000 in the aggregate), or (ii) is in any
material respect in violation of any term of or in default under any contract,
agreement or instrument relating to any Indebtedness, except such violations or
defaults as would not reasonably be expected to have a Material Adverse
Effect.

     

    Section
3.17    Labor
Matters.     There
are no collective bargaining agreements to which the Company or any of the
Subsidiaries is a party.  Except as would not be reasonably expected,
individually or in the aggregate, to have a Company Material Adverse Effect, the
Company and each Subsidiary are in compliance with all Requirements of Law
respecting employment and employment practices, terms and conditions of
employment and wages and hours.  To the Knowledge of the Company, no
Key Employee has notified the Company or any Subsidiary that such employee
intends to leave the Company or any such Subsidiary or otherwise terminate such
Key Employee’s employment with the Company or any such Subsidiary and to the
Knowledge of the Company no Key Employee intends to leave the Company or any
such Subsidiary or otherwise terminate such Key Employee’s employment with the
Company or any such Subsidiary.

     

     

     

     

     

     

    
      
        
        

      

      
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    Section
3.18    Compliance.     The
Company and the Subsidiaries are not: (i) in violation of any of their
respective Organizational Documents, (ii) in default under or in violation of
(and, to the Knowledge of the Company, no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or the Subsidiaries under), nor has the Company or the Subsidiaries
received notice of a claim that it is in default under or that it is in
violation of, any Company Contract to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has been
waived), (iii) in violation of any order of any court, arbitrator or
Governmental Authority, or (iv) in violation of any applicable Requirement of
Law, and with respect to clauses (ii), (iii) or (iv) above, other than where
such violation or default would not reasonably be expected, individually or in
the aggregate, to have a Company Material Adverse Effect.  The Company
and each of its Subsidiaries and the conduct and operation of their respective
businesses is and has been in compliance with each Requirement of Law that (a)
affects or relates to this Agreement or any of the other Transaction Agreements
or any of the Transactions or (b) is applicable to the Company or its
Subsidiaries or their respective businesses, other than where the failure to be
or to have been in compliance would not reasonably be expected, individually or
in the aggregate, to have a Company Material Adverse Effect.

    


    Section
3.19    Transactions with
Affiliates.     Except as
disclosed on Schedule
3.18, and other than the Transactions, no transactions, or series of
related transactions, are currently proposed to which the Company or any of the
Subsidiaries would be a party that would be required to be disclosed under Item
404 of Regulation S-K promulgated under the Securities Act.

    


    Section
3.20    Investment
Company.     The Company is not, and after giving effect to the Transactions
will not be, an “investment company” as such term is defined in the Investment
Company Act of 1940, as amended.

     

    Section
3.21    Corrupt
Practices.     Neither
the Company nor any Subsidiary, nor to the Knowledge of the Company any
director, officer, employee, agent or other Person acting on behalf of the
Company or any Subsidiary has, in the course of his or its actions for, or on
behalf of the Company or any of the Subsidiaries (i) used any corporate funds
for any unlawful contribution gift, entertainment or other unlawful expense
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employees from
corporate funds; (iii) violated or is in violation of in any material respect
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.

     

    Section
3.22    Application of Takeover
Protections.     The Board
has taken all action necessary pursuant to Section 912 of the NYBCL prior to the
date hereof to approve for purposes of Section 912 the purchase of the Purchased
Shares, Warrant and Warrant Shares by Mast.  Other than Section 912 of
the NYBCL, no state or foreign takeover or similar statute or regulation in any
jurisdiction in which the Company does business applies or purports to apply to
this Agreement or any of the Transactions.

     

     

     

     

     

     

    
      
        
        

      

      
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    Section
3.23    Securities Law
Compliance.     Assuming
the accuracy of Mast’s representations and warranties contained in Article IV, the
offer, sale and issuance of the Purchased Shares, Warrant and Warrant Shares
hereunder is in compliance with Section 4(2) of the Securities Act and is exempt
from the registration and prospectus delivery requirements of the Securities Act
and all applicable state securities laws.  Neither the Company nor any
agent of the Company has offered the Purchased Shares, Warrant and Warrant
Shares by any form of general solicitation or general advertising, including any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.  Except as stated in this
Agreement and to the Knowledge of the Company, the Company has not taken, nor
will it take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Purchased
Shares, Warrant and Warrant Shares.  The Company agrees not to sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) that would be integrated with the
sale of the Purchased Shares, Warrant and Warrant Shares in a manner that would
require the registration under the Securities Act of the offer or sale to Mast
of the Purchased Shares, Warrant and Warrant Shares.

    


    Section
3.24    No
Brokers.     Except
for the Commitment Fee, no broker, investment banker or other Person is entitled
to any broker’s, finder’s or other similar fee or commission in connection with
the execution and delivery of this Agreement or any of the other Transaction
Agreements or the consummation of any of the Transactions based upon
arrangements made by or on behalf of the Company, and the Company shall
indemnify and hold Mast harmless against any claim for any such fee or
commission based on any such arrangements.

    


    Section
3.25    OFAC
Requirements.     Neither
the Company nor, to the Company’s knowledge, any of its Affiliates, or any
Person acting on their behalf in connection with this Agreement, has engaged
directly or indirectly in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or violates the requirements or prohibitions set
forth in any Anti-Terrorism Law.  Neither the Company nor, to the
Company’s knowledge, any of its Affiliates (i) is a Sanctioned Person, (ii) has
assets in Sanctioned Countries, or (iii) derives any of its operating income
from investments in, or transactions with Sanctioned Persons or Sanctioned
Countries.  No part of the proceeds from the Transactions will be used
or have been used to fund any operations in, finance any investments or
activities in or make any payments to, a Sanctioned Person or a Sanctioned
Country.

    


    Section
3.26    Accuracy and Completeness of
Disclosure.     Neither
this Agreement nor any other document, certificate or instrument delivered to
Mast by or on behalf of the Company or any of its Subsidiaries in connection
with this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained in
this Agreement and in such other documents, certificates or instruments not
misleading in light of the circumstances under which such statements were
made.

     

     

     

     

     

     

     

    
      
        
        

      

      
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    ARTICLE
IV

                                    

    REPRESENTATIONS
AND WARRANTIES OF MAST

     

    Mast
hereby represents and warrants to the Company as follows:

     

    Section 4.1    Organization, Standing and
Power.     Mast is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its formation.  Mast has the necessary power and
authority to execute, deliver and perform this Agreement and each of the other
Transaction Agreements to which it is a party.

    


    Section
4.2    Authorization; Execution and
Enforceability.     The
execution, delivery and performance by Mast of this Agreement and each of the
other Transaction Agreements to which it is a party have been duly and validly
authorized by all necessary Business Entity action on its part.  This
Agreement has been duly executed and delivered by Mast and each other
Transaction Agreement to which it is a party, when executed
and delivered as contemplated herein, will have been duly executed and delivered
by it, and this Agreement constitutes, and each such other Transaction Agreement
upon execution and delivery thereof by Mast will constitute, the legal, valid
and binding obligations of Mast, enforceable against it in accordance with their
respective terms.

    


    Section
4.3    No Conflict; Consents and
Approvals.

     

    (a)    Neither
the execution, delivery or performance by Mast of this Agreement or any other
Transaction Agreement to which Mast is a party nor the consummation of any of
the Transactions will (i) conflict with or violate any provision of any
Organizational Document of Mast or (ii) result in a breach of, constitute (with
or without due notice or lapse of time or both) a default under, result in the
acceleration of, create in any party any right to accelerate, terminate, modify
or cancel, or require any notice, consent or waiver under, any Contractual
Obligation or any Requirement of Law applicable to Mast or any of its properties
or assets other than a breach, default, acceleration, right, notice, consent or
waiver that is not material.

     

    (b)    Mast is
not required to obtain any consent, authorization or approval of, or make any
filing or registration with, any Governmental Authority or any self regulatory
organization in order for Mast to execute, deliver and perform this Agreement
and the other Transaction Agreements to which it is a party and to consummate
the Transactions (“Investor
Approvals”).

     

    (c)    No
material Contractual Consents are required to be obtained under any Contractual
Obligation applicable to Mast in connection with the execution, delivery or
performance of this Agreement or any of the other Transaction Agreements to
which it is a party or the consummation of any of the Transactions.

     

    Section
4.4    Purchase Entirely for Own
Account.     The
Purchased Securities to be acquired by Mast hereunder will be acquired for its
own account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of the Securities Act, and Mast
has no present intention of selling, granting any participation in, or otherwise
distributing the same in violation of the Securities Act.  Mast does
not have any agreement or understanding, whether or not legally binding, direct
or indirect, with any other Person to sell or otherwise distribute the Purchased
Securities to be issued to it hereunder.

     

     

     

    
      
        
        

      

      
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    Section
4.5    Investment
Experience.     Mast
acknowledges that it can bear the economic risk and complete loss of its
investment in the Purchased Securities to be purchased by it and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment contemplated
hereby.  Mast understands that the purchase of the Purchased
Securities involves substantial risk.

    


                                    Section 4.6   Disclosure of
Information.     Mast has, in connection with its decision to purchase the Purchased
Securities to be issued to it, has had access to the SEC Reports and the
representations and warranties of the Company contained herein.  Mast
is not purchasing the Purchased Securities as a result of any advertisement,
article, notice or other communication regarding the Purchased Securities
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.  In making its decision to
invest in the Purchased Securities, Mast has relied upon the independent
investigations made by Mast and by Mast’s own professional
advisors.  Mast and its advisors, if any, have been given the
opportunity to obtain information and to examine this Agreement and certain
other information regarding the Company and to ask questions of, and to receive
answers from the Company or Persons acting on the Company's behalf concerning
the Purchased Securities, the Company, and terms and conditions of this
investment, and to obtain any additional information to verify the accuracy of
any information previously furnished.  All such questions have been
answered to Mast’s full satisfaction.  Mast or any person acting on
its behalf has not received from the Company any information that may constitute
material, non-public information, the confidentiality and use of which is not
covered by the Mast Confidentiality Agreement.  The right of Mast to
rely fully upon the representations and warranties of the Company contained in
this Agreement shall not limited by this Section 4.6 or any
right of Mast to investigate the affairs of the Company or any knowledge of
facts determined or determinable by Mast pursuant to such investigation or right
of investigation.

    


    Section
4.7    Restricted
Securities.     Mast
understands that the Purchased Securities will be characterized as “restricted
securities” under the United States federal securities laws inasmuch as they are
being acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act only in certain limited
circumstances.  Mast 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 Purchased Securities or the
fairness or suitability of the investment in the Purchased
Securities.

     

                                    Section 4.8    Legends.     Mast
understands that, except as provided below and until such time as the resale of
the Purchased Securities has been registered under the Securities Act,
certificates evidencing the Purchased Securities shall bear the following
legends:

     

    (a)    “THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OFFERED FOR SALE, OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION FROM COUNSEL IN A FORM
ACCEPTABLE TO THE COMPANY AND ITS LEGAL COUNSEL STATING THAT SUCH REGISTRATION
IS NOT REQUIRED.”

     

     

     

    
      
        
        

      

      
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    (b)    If required by the authorities of any state in connection with
the issuance or sale of the Purchased Securities, the legend required by such
state authority.

     

                                    Section 4.9    Accredited
Investor.     Mast is
an “accredited investor” as defined in Rule 501(a) of Regulation D, as amended,
under the Securities Act.  Mast’s principal place of business is
located in the jurisdiction set forth on Exhibit
B.

     

                                    Section 4.10    No Puts or Short
Sales.     During
the period of time beginning ninety (90) days prior to the date of this
Agreement and ending upon the Closing Date, Mast and its Affiliates have not
entered, and will not enter, into any "put equivalent position" as such term is
defined in Rule 16a-1 under the Exchange Act or short sale positions with
respect to the Common Stock of the Company.

     

                           
Section 4.11    Availability of
Funds.     Mast has
sufficient funds on hand or currently drawable under applicable credit
facilities or financing commitments to pay the Purchase Price for the Purchased
Securities.

    


    Section
4.12    No
Brokers.     Except
for the Commitment Fee and as heretofore been disclosed to the Company by Mast
no broker, investment banker or other Person is entitled to any broker’s,
finder’s or other similar fee or commission in connection with the execution an
delivery of this Agreement or any of the other Transaction Agreements or the
consummation of any of the Transactions based upon arrangements made by or on
behalf of Mast, and Mast shall indemnify and hold the Company harmless against
any claim for any such fee or commission based on any such
arrangements.

    


                                    Section 4.13    Tax Matters.    
With
respect to tax considerations involved in this investment, other than the
representations and warranties of the Company set forth in Section 3.12, Mast is
not relying on the Company (or any agent or representative of the
Company).  Mast has carefully considered and has, to the extent Mast
believes such discussion necessary, discussed with its tax advisers the
suitability of an investment in the Purchased Securities for its particular tax
situation.

     

     

     

     

     

     

     

     

    
 

    
      
         


      

      
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    ARTICLE
V

    COVENANTS


     

    For so
long as any Purchased Shares remain outstanding (unless a shorter time period is
specified below), the Company and its Subsidiaries and Mast, as the case may be,
agree to the following covenants, unless waived by the Company or Mast, as
applicable, in writing in accordance with Section
8.10:

     

    Section
5.1    Listing.     The Company shall use its reasonable best efforts to maintain the
Common Stock’s authorization for quotation on the NASDAQ Global Market and to
cause the Warrant Shares to be approved for listing thereon as soon as
practicable following their issuance to the extent permitted under the rules of
the NASDAQ Global Market.  Neither the Company nor any of the
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock on the NASDAQ Global Market
and shall take all action reasonably necessary to maintain the listing of the
Common Stock on the NASDAQ Global Market, including without limitation,
exhausting all available remedies, appeal reviews and other similar mechanisms
and procedures provided for under the rules and regulations of the NASDAQ Global
Market to permit the continued listing of the Common Stock on the NASDAQ Global
Market.  The Company shall pay all fees and expenses in connection
with satisfying its obligations under this Section
5.1.

    


    Section
5.2    Defense of Certain
Actions.

     

    (a) The
Company and Mast shall each refrain from taking any action which would render
any representation or warranty contained in Article III or IV
inaccurate in any material respect as of the Closing Date.  Each party
shall promptly notify the other of (i) any event or matter that would reasonably
be expected to cause any of its representations or warranties to be untrue in
any material respect as of the Closing Date or (ii) any action, suit or
proceeding that shall be instituted or threatened against such party to
restrain, prohibit or otherwise challenge the legality of any of the
Transactions.

     

    (b) The
Company and Mast shall each use their respective reasonable best efforts to
cause each of the conditions precedent set forth in Article VI to be
satisfied as soon as practicable after the date hereof.

     

    (c) The
Company and Mast shall cooperate fully with each other and assist each other in
defending any lawsuits or other legal proceedings, whether judicial or
administrative, brought against either party challenging this Agreement or any
of the other Transaction Agreements or the consummation of the Transactions,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Authority vacated or reversed.

     

    Section
5.3    Contractual Consents and
Governmental Approvals.

     

    (a) The
Company shall act diligently and reasonably in attempting to obtain before the
Closing Date, and Mast shall reasonably cooperate with the Company in such
efforts, any Company Contractual Consents in form and substance reasonably
satisfactory to Mast, provided that neither
the Company nor Mast shall have any obligation to offer or pay any consideration
in order to obtain any such Company Contractual Consents; and provided, further, that the
Company shall not make any agreement or understanding affecting the Company or
any of the Subsidiaries, or any of their respective businesses, as a condition
for obtaining any such Company Contractual Consents except with the prior
written consent of Mast.

     

     

     

    
      
        
        

      

      
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    (b) Between
the date hereof and the Closing Date, the Company and Mast shall act diligently
and reasonably, and shall cooperate with each other, in making any required
filing, registration or notification with, and in attempting to obtain any
consent, authorization or approval required from, any Governmental Authority,
FINRA, any self regulatory organization, and stock exchange of which the Company
or any Subsidiary is a member in connection with the Transactions or to
otherwise satisfy the conditions set forth in Article VI; provided that the
Company shall not make any agreement or understanding affecting the Company or
any of the Subsidiaries, or any of their respective businesses, as a condition
for obtaining any such consents or waivers except with the prior written consent
of Mast; provided, further that neither
the Company nor Mast shall be obligated to (A) execute settlements,
undertakings, consent decrees, stipulations or other agreements, (B) sell,
divest, hold separate or otherwise convey any particular assets or categories of
assets or businesses of the Company or Mast or (C) otherwise take or commit to
take actions that after the Closing Date would limit the freedom of action of
Mast or the Company or its Subsidiaries with respect to, or its or their ability
to retain, one or more of its or their businesses, product lines or assets, in
each case as may be required in order to avoid the entry of, or to effect the
dissolution of, any injunction, temporary restraining order or other order in
any suit or proceeding which would otherwise have the effect of preventing or
materially delaying the Closing.

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
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    Section
5.4    Use of
Proceeds.  The
net proceeds received by the Company from the issuance of the Purchased Shares
shall be used to increase the regulatory capital of the Company’s broker-dealer
Subsidiaries and for other corporate purposes.

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
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    Section
5.5    Restrictions on
Transferability.     Mast
agrees that it shall not make any sale, assignment, transfer or other
disposition of the Purchased Securities except in accordance with this
Agreement.  Mast acknowledges and agrees that neither the Purchased
Shares nor the Warrant may be sold, assigned, transferred or otherwise disposed
of, and are not transferable on the books of the Company, unless (a) each such
sale, assignment, transfer or disposition is for a minimum of either 300,000
Purchased Shares or 300,000 issuable Warrant Shares (or, if the aggregate number
of Purchased Shares or issuable Warrant Shares (as applicable) held by Mast are
less than 300,000 Purchased Shares or 300,000 issuable Warrant Shares (as
applicable), then no less than 100% of the remaining Purchased Shares or
issuable Warrant Shares (as applicable) held by Mast shall be included in such
sale, assignment, transfer or disposition), in each case, as applicable, (b)
such Purchased Shares are sold pursuant to (i) a Registration Statement, (ii)
Rule 144 under the Securities Act (“Rule 144”) or (iii)
an exemption from registration other than Rule 144 and (c) a certificate is
submitted to the Company’s transfer agent evidencing the Purchased Shares and
accompanied by a separate officer’s certificate: (i) executed by an officer of,
or other authorized person designated by Mast; and (ii) to the effect that the
Purchased Shares have been sold pursuant to (A) a Registration Statement, in
which case Mast certifies that the requirement of delivering a current
prospectus has been complied with or will be complied with in
connection with the sale, (B) Rule 144, in which case Mast certifies that it has
complied with or will comply with the requirements of Rule 144 or (C) pursuant
to an exemption from registration other than Rule 144, and in the case of (B)
and (C) Mast must also provide the Company with an opinion of counsel,
reasonably acceptable to the Company, to the effect that the transaction is so
exempt.  Mast hereby covenants with the Company not to make any sale
of the Purchased Shares pursuant to a Registration Statement without effectively
causing the prospectus delivery requirements under the Securities Act (to the
extent applicable) to be satisfied.

     

    Section
5.6    Current Public
Information.     


     

    So long
as Mast owns any of the Purchased Shares, Warrants or Warrant Shares, the
Company shall satisfy the current public information requirement of Rule 144(c)
of the Securities Act, and shall not terminate its status as an issuer required
to file reports under the Exchange Act. The Company shall take all commercially
reasonable actions necessary to maintain its eligibility to register the Warrant
Shares on a Form S-3 registration statement for resale by Mast.

     

    Section
5.7    INTENTIONALLY
OMITTED.

     

    Section
5.8    INTENTIONALLY
OMITTED.

     

    Section
5.9    Taxes.    
The
Company shall pay, and shall cause each of its Subsidiaries to pay, prior to
delinquency, all Taxes that are material in amount except such as are contested
in good faith by appropriate proceedings and for which adequate reserves have
been maintained.  The Company will file all tax related returns,
reports and declarations that it is required to file.

     

    Section
5.10    Corporate
Existence.     The
Company shall do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, in accordance with its
organizational documents (as the same may be amended from time to
time).

     

     

     

    
      
        
        

      

      
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    Section
5.11    Insurance.    
The
Company and the Subsidiaries shall maintain in full force and effect, to the
extent practicable and necessary, insurance coverage reasonably similar to that
currently maintained by the Company and the Subsidiaries as of the date
hereof.

     

    Section
5.12    Merger or Sale; Disposition
of Property.

     

    (a)    Except as
disclosed in Schedule
5.12, the Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, consolidate or merge with or into another Person
(whether or not the Company or such Subsidiary is the surviving corporation), or
sell, assign, transfer, convey or otherwise dispose of all or substantially all
of the properties or assets of the Company and its Subsidiaries taken as a whole
in one or more related transactions, to any other Person (other than the Company
or any of its wholly-owned Subsidiaries).  In addition, the Company
shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, lease all or substantially all of the properties or assets, of the
Company and its Subsidiaries taken as a whole, in one or more related
transactions, to any other Person (other than the Company or any of its
wholly-owned Subsidiaries).  Notwithstanding anything in this Section
5.12(a) to the contrary, this Section 5.12(a) shall not apply to any merger,
consolidation or other transaction involving the Company or any Subsidiary in
which the shares of capital stock of the Company outstanding immediately prior
to such merger or consolidation continue to represent, or are converted into or
exchanged for shares of capital stock that represent, immediately following such
merger, consolidation or other transaction, at least a majority, by voting
power, of the capital stock of (1) the surviving or resulting corporation or (2)
if the surviving or resulting corporation is a wholly owned subsidiary of
another corporation immediately following such merger or consolidation, the
parent corporation of such surviving or resulting corporation.

     

    (b)    Except as
disclosed in Schedule
5.12, the Company will not, and will not permit any of its Subsidiaries
to, sell, transfer, convey or lease all or any substantial part of its assets,
except for (i) the sale of inventory in the ordinary course of business, (ii)
dispositions of used, worn-out or surplus equipment in the ordinary course of
business, (iii) a sale, lease, transfer, exclusive license or other disposition
to a wholly-owned Subsidiary, and (iv) asset dispositions not covered by (i),
(ii) or (iii) in this Section 5.12 to the
extent that the aggregate fair market value of all such assets sold by the
Company and its Subsidiaries does not exceed $50,000 in any fiscal
year.  

     

    (c)    Notwithstanding
anything in this Agreement or any Transaction Agreement to the contrary, each of
the Company and Mast hereby acknowledges and agrees that the Company and its
Subsidiaries are permitted, and shall not be restricted in any way by this
Agreement or any of the Transaction Agreements, from pursuing and/or
consummating the B/D Merger, the FATV Transaction and/or the establishment or
operation of the Descap Fund; provided, however, that the
Company shall not be permitted to transfer more than $5,000,000 in the aggregate
to the Descap Fund without the prior written consent of the holders of at least
a majority of the then outstanding shares of the Series B Preferred
Stock.  None of this Section 5.12 or any other term or provision of
this Agreement or any Transaction Agreement shall be applicable to (or be deemed
to be breached as a result of) the B/D Merger, the establishment and operation
of the Descap Fund (provided that Descap Fund is established and operated in
compliance with the limit set forth in the preceding sentence) or the FATV
Transaction, nor shall the B/D Merger, the establishment and operation of the
Descap Fund (provided that Descap Fund is established and operated in compliance
with the limit set forth in the preceding sentence) or the FATV Transaction
result in any consequences pursuant to the terms and conditions of this
Agreement or any of the Transaction Agreements.

     

     

     

     

    
      
        
        

      

      
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    Section
5.13    Incurrence of
Indebtedness.     Neither
the Company nor any Subsidiary shall, directly or indirectly, contingently or
otherwise, create, incur, assume, become or be liable in any manner
in respect of, or suffer to exist, any Indebtedness, except Permitted
Indebtedness.

     

    Section
5.14    Restricted
Payments.     The
Company shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly: make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness of the Company or any
of its Subsidiaries excluding (i) any intercompany Indebtedness between or among
the Company and any of its Subsidiaries or (ii) any Permitted Indebtedness,
except for regularly scheduled or otherwise required payments (all such payments
and other actions set forth above being collectively referred to as “Restricted
Payments”).

     

    Section
5.15     Limitation on
Liens.     The
Company shall not, and shall not permit any of its Subsidiaries (whether now or
hereafter existing) to, create or permit to exist any Lien on any of its real or
personal properties, assets or rights of whatsoever nature (whether now owned or
hereafter acquired) except (i) for Permitted Liens and (ii) in connection with
real property leases, letters of credit and other agreements and documentation
entered into in connection therewith. 

     

    Section
5.16    Restrictions on Upstream
Limitations.     The
Company will not, nor will it permit any of its Subsidiaries to enter into any
agreement, contract or arrangement (excluding this Agreement or any
Transaction  Agreement) restricting the ability of any Subsidiary of
the Company to pay or make dividends or distributions in cash or kind to the
Company, to make loans, advances or other payments of whatsoever nature to the
Company, or to make transfers or distributions of all or any part of its assets
to the Company, in each case other than (i) restrictions on specific assets
which assets are the subject of purchase money security interests or deposit
arrangements, (ii) customary anti-assignment provisions contained in leases and
licensing agreements entered into by the Company or such Subsidiary in the
ordinary course of its business, and (iii) in connection with any Requirement of
Law.

     

    Section
5.17    Transactions with
Affiliates.     Except
for transactions contemplated by the Transaction Documents or transactions
approved in accordance with the Company’s Related Party Transactions Policy,
neither the Company nor any Subsidiary shall enter into any transaction with any
director, officer, employee or holder of more than five percent of the
outstanding capital stock of any class or series of capital stock of the Company
or any subsidiary, member of the family of any such person, or any corporation,
partnership, trust or other entity in which any such person, or member of the
family of any such person, is a director, officer, trustee, partner or holder of
more than five percent of the outstanding capital stock thereof.

     

    Section
5.18    Dividend and Other Payment
Restrictions Affecting Subsidiaries.     Other
than in connection with any Requirement of Law or in accordance with its
obligations to the holders of the Series B Preferred Stock (or pursuant to this
Agreement or any Transaction Agreement), the Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, create or otherwise
permit, cause or suffer to exist or become effective any consensual encumbrance
or restriction on the ability of the Company or any Subsidiary to (a)(i) pay
dividends or make any other distributions on its Capital Stock to the Company or
any of its Subsidiaries or with respect to any other interest or participation
in, or measured by, its profits or (ii) pay any indebtedness owed to the Company
or any of its Subsidiaries, (b) make loans or advances to the Company or any of
its Subsidiaries or (c) sell, lease or transfer any of its properties or assets
to the Company or any of its Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (i) the terms of the Transaction
Agreements; (ii) the Purchased Shares; (iii) applicable law rule, regulation or
order; (iv) customary non-assignment provisions in contracts and licenses
entered into in the ordinary course of business; (v) any agreement for the sale
or other disposition of a Subsidiary that restricts distributions by that
Subsidiary pending the sale or other disposition; and (vi) Permitted
Liens.

     

     

     

    
      
        
        

      

      
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    Section
5.19    Noncircumvention;
Antilayering.     The
Company shall not, and shall not permit its Subsidiaries, by amendment of its
Certificate of Incorporation, Bylaws or through any reorganization, transfer of
assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale
of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Agreement, the Transaction
Agreements, the Purchased Shares or the Warrant and will at all times in good
faith carry out all of the provisions of this Agreement and the Transaction
Agreements, and take all reasonable actions as may be required to protect the
rights of Mast as a holder of the Purchased Shares and Warrant under this
Section 5.19.

     

    Section
5.20    Restrictions on
Acquisitions; Creation of Subsidiaries; Transfers with
Subsidiaries.      Except
with respect to acquisitions of, or investments in, Persons in the industry in
which the Company or any of the Subsidiaries operates as of the date hereof, and
so long as the Company is not in breach of Section 5.26 of this Agreement, the
Company shall not, and shall not permit any of its Subsidiaries to, (i) make any
investment, or acquire the capital shares, assets or business of, any Person,
whether in a single transaction or a series of related transactions, for a
purchase price in excess of $2,000,000 in the aggregate, or (ii) make or permit
to exist any investments in any other Person other than contributions by the
Company to the capital of any wholly-owned Subsidiary, or by any wholly-owned
Subsidiary to the capital of any other wholly-owned Subsidiary.  The
Company shall not transfer any portion of its assets to any of its foreign
Subsidiaries (whether now or hereafter existing) unless the fair market value of
the assets (determined in accordance with Section 2 of the Certificate of
Designations) is less than $5,000,000 in the aggregate and each of the foreign
Subsidiaries receiving funds has pledged at least 65% of its capital stock to
Mast,
provided,
however, that the Company may transfer up to $1,000,000 of the $5,000,000
to foreign Subsidiaries whose capital stock is not pledged to
Mast.  The Company shall not transfer any portion of its assets to any
of its domestic Subsidiaries (whether now or hereafter existing) unless and
until such Subsidiary is a direct or indirect wholly-owned domestic
Subsidiary.

     

    Section
5.21    Sale and
Leaseback.     Except
with respect to inventory financing or otherwise in the ordinary course of the
Company’s or any Subsidiary’s business, the Company will not, and will not
permit any of its Subsidiaries to, enter into any arrangement, directly or
indirectly, whereby the Company or any Subsidiary shall sell or transfer any
property owned by it in order then or thereafter to lease such property or lease
other property that the Company or any Subsidiary of the Company intends to use
for substantially the same purpose as the property being sold or
transferred.

     

     

     

     

     

     

    
      
        
        

      

      
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    Section
5.22    Compliance with
Laws.     The
Company shall, and shall cause each of its Subsidiaries to, comply in all
material respects with all applicable Requirements of Law and obtain or maintain
all material permits, franchises and other governmental authorizations and
approvals necessary for the ownership, acquisition and disposition of their
respective properties and the conduct of their respective
businesses.  Without limiting the generality of the foregoing, the
Company shall not nor permit any of its Subsidiaries to (a) violate any
Anti-Terrorism Law or engage in or conspire to engage in any transaction that
evades or avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in any Anti-Terrorism Law or (b)
conduct any business or engage in making or receiving any contribution of funds,
goods or services to or for the benefit of any Sanctioned Person or Sanctioned
Country, maintain any of its assets in a Sanctioned Country or derive any of its
operating income from investments in or transactions with a Sanctioned
Person.

     

    Section
5.23    Maintenance of
Properties.     The
Company shall, and shall cause each of its Subsidiaries to:  (a)
maintain its material properties in reasonably good repair, working order and
condition, ordinary wear and tear excepted; and (b) make all reasonably
appropriate and proper repairs, ordinary wear and tear excepted; and (c) keep
all material systems and equipment that may now or in the future be subject to
compliance with any material standards or rules imposed by any applicable
governmental authority or self regulatory organization, including FINRA, in
compliance in all material respects with such standards or rules.  The
Company shall, and shall cause each of its Subsidiaries to, take all steps
necessary to prosecute, maintain, preserve, defend and protect, and, when
necessary, renew:  (i) all material franchises, licenses, and permits,
necessary to the conduct of its business, and (ii) all material patent
applications, patents, trademarks, service marks, trade dress, domain names,
trade names, trade secrets, copyrights and other intellectual property rights
owned or licensed by any of them, including but not limited to the payment of
all necessary maintenance fees and the filing of all material statutory
declarations, except in the case of clauses (i) or (ii) to the extent that the
Company has determined in its reasonable judgment that such property or asset is
no longer useful in or material to its business or that it is in its best
business interest to terminate the same.

     

    Section
5.24    Maintenance of Records;
Fiscal Year.     The
Company shall, and shall cause each of its Subsidiaries to, maintain its books
of record and account in the ordinary course of its business.  The
Company shall, and shall cause each of its Subsidiaries to, keep its books of
account and financial statements in accordance with GAAP and to report on the
basis of a fiscal year ending December 31.

     

    Section
5.25    Compliance with Federal
Reserve Regulations.     Neither
the Company nor any of its Subsidiaries shall, directly or indirectly, use all
or any portion of the proceeds of any credit extended hereunder to purchase or
carry margin stock (within the meaning of Regulation U of the Board of Governors
of the United States Federal Reserve System) in contravention of Regulation U of
the Board of Governors of the United States Federal Reserve System.

     

     

     

     

     

    
      
        
        

      

      
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    Section
5.26    Minimum Net Tangible Book
Value.     For any
fiscal quarter ending during the period from the Closing Date to the date upon
which the all Purchased Shares have been redeemed, the Company will not permit
the Company's Net Tangible Book Value as reported on the face of the Company’s
consolidated statement of financial condition filed quarterly with the SEC to be
less than 50% of the Net Tangible Book Value Threshold.  The “Net
Tangible Book Value Threshold” at any given point in time shall equal the
highest fiscal year end Net Tangible Book Value that has been reported by the
Company during the period from December 31, 2007 through the determination
date.  For purposes hereof, “Net Tangible Book Value” shall mean an
amount equal to the Company's (a) total assets (net of reserves), minus (b) the
sum of (i) intangible assets, including goodwill and any other item treated as
an intangible asset under GAAP, (ii) all liabilities and (iii) the par value of
preferred stock.

     

    Section
5.27    Independent Registered
Public Accountants.     


     

      The
Company shall, and shall cause each of its Subsidiaries to, have its financial
statements audited and certified by independent registered public accountants of
nationally recognized standing selected by the Company.

     

    Section
5.28    Further
Assurances.     The
Company and its Subsidiaries shall execute and deliver any and all such further
documents and take any and all such other actions as may be reasonably necessary
or appropriate to carry out the intent and purposes of this Agreement and the
Transaction Agreements and to consummate the Transactions.

     

    Section
5.29    Registrar.    
The
Company shall maintain an office or agency where the Purchased Securities may be
presented for redemption or exercise.  Initially, the Company will act
as Registrar.

     

     

    ARTICLE
VI

    CONDITIONS

     

    Section
6.1    Conditions to the Company’s
Obligations.

     

    The obligation of the Company to
consummate the Transactions shall be subject to the fulfillment (or waiver by
the Company) at or prior to the Closing of each of the following
conditions:

    


    (a)    No
Order.  No court or other Governmental Authority having
jurisdiction over the Company or any of the Subsidiaries or Mast shall have
instituted, enacted, issued, promulgated, enforced or entered any Requirement of
Law (whether temporary, preliminary or permanent) that is then in effect and
that (i) has the effect of making illegal or otherwise prohibiting or
invalidating consummation of any of the Transactions or any provision of this
Agreement or any of the other Transaction Agreements or (ii) seeks to restrain,
prohibit or invalidate the consummation of any of the Transactions or to
invalidate any provision of this Agreement or any of the other Transaction
Agreements.

     

    (b)    Governmental
Approvals.  Each Company Approval and Investor Approval, if
any, shall have been obtained or made and shall be in full force and effect to
the extent that the failure to obtain or make such Company Approval or Investor
Approval (i) has the effect of making illegal or otherwise prohibiting or
invalidating consummation of any of the Transactions or any provision of this
Agreement or any of the other Transaction Agreements or (ii) could reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect.

     

     

     

     

     

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

     

     

    (c)    Performance of
Obligations.  Mast shall have performed in all material
respects each of their respective covenants and agreements contained in this
Agreement required to be performed at or prior to the Closing.

     

    (d)    Representations and
Warranties.  Each of the representations and warranties of Mast
contained in this Agreement that is qualified as to materiality shall be true
and correct on and as of the Closing Date as if made on and as of such date
(other than representations and warranties which address matters only as of a
certain date, which shall be true and correct as of such certain date) and each
of the representations and warranties of Mast that is not so qualified shall be
true and correct in all material respects on and as of the Closing Date as if
made on and as of such date (other than representations and warranties which
address matters only as of a certain date, which shall be true and correct in
all material respects as of such certain date).

     

    Section
6.2    Conditions to Mast’
Obligations.

     

    The obligation of Mast to consummate
the Transactions shall be subject to the fulfillment (or waiver) at or prior to
the Closing of each of the following conditions:

    


    (a)    No
Order.  No court or other Governmental Authority having
jurisdiction over the Company or any of the Subsidiaries or Mast shall have
instituted, enacted, issued, promulgated, enforced or entered any Requirement of
Law (whether temporary, preliminary or permanent) that is then in effect and
that (i) has the effect of making illegal or otherwise prohibiting or
invalidating consummation of any of the Transactions or any provision of this
Agreement or any of the other Transaction Agreements or result or would result
in a Company Material Adverse Effect or (ii) seeks to restrain, prohibit or
invalidate the consummation of any of the Transactions or to invalidate any
provision of this Agreement or any of the other Transaction
Agreements.

     

    (b)    Governmental
Approvals.  Each Company Approval and Investor Approval, if
any, shall have been obtained or made and shall be in full force and effect to
the extent that the failure to obtain or make such Company Approval or Investor
Approval (i) has the effect of making illegal or otherwise prohibiting or
invalidating consummation of any of the Transactions or any provision of this
Agreement or any of the other Transaction Agreements or (ii) would reasonably be
expected, individually or together with other Company Approvals or Investor
Approvals that have not been obtained or made, to have a Company Material
Adverse Effect.

     

    (c)    Contractual
Consents.  Each Company Contractual Consent, if any, shall have
been obtained and shall be in full force and effect to the extent that the
failure to obtain such Company Contractual Consent would reasonably be expected,
individually or together with other Company Contractual Consents that have not
been obtained, to have a Company Material Adverse Effect.

     

     

     

     

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

     

     

    (d)    Performance of
Obligations.  The Company shall have performed in all material
respects each of its respective covenants and agreements contained in this
Agreement and required to be performed at or prior to the Closing.

     

    (e)    Representations and
Warranties.  Each of the representations and warranties of the
Company contained in this Agreement that is qualified as to materiality shall be
true and correct on and as of the Closing Date as if made on
and as of such date (other than representations and warranties which address
matters only as of a certain date, which shall be true and correct as of such
certain date) and each of the representations and warranties of the Company that
is not so qualified shall be true and correct in all material respects on and as
of the Closing Date as if made on and as of such date (other than
representations and warranties which address matters only as of a certain date,
which shall be true and correct in all material respects as of such certain
date).

     

    (f)    Filing of the Certificate of
Designations.  The Company shall have delivered evidence
satisfactory to Mast of the filing of the Certificate of Designations with the
Secretary of State of the State of New York.

     

     

     

    ARTICLE
VII

    FURTHER
AGREEMENTS

     

    Section
7.1    Public
Announcements.

     

    Mast and the Company shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to the execution and delivery of this Agreement or the
other Transaction Agreements or any of the Transactions, and shall not issue any
such press release or make any such public statement prior to reaching mutual
agreement on the language of such press release or such public statement, except
as may otherwise be required by applicable Requirement of Law or stock exchange
rule.

    


    Section
7.2    Fees and
Expenses.

     

    (a)    Except as
otherwise specified in this Section 7.2 or agreed
in writing by the parties, all costs and expenses incurred in connection with
this Agreement, the Transaction Agreements and the Transactions shall be paid by
the party incurring such cost or expense.

     

    (b)    On or
prior to the date of this Agreement, the Company shall pay the remaining balance
of the Commitment Fee agreed to in the Commitment Letter, dated May 13, 2008,
between the Company and Mast (the “Commitment
Fee”).

     

    (c)    The
Company shall promptly reimburse Mast upon presentation of appropriate invoices
and documentation therefor for all Reimbursable Expenses incurred by or on
behalf of Mast or any of its Affiliates.  Any such Reimbursable
Expenses incurred on or prior to the Closing Date may also be deducted by Mast
from the Purchase Price as contemplated in Article
II.  For purposes of this Agreement, “Reimbursable
Expenses” shall mean all reasonable out-of-pocket fees and expenses
incurred by or on behalf of Mast (or its respective Affiliates) at any time
prior to any termination of this Agreement (whether before or after the date
hereof or before or after the Closing Date) in connection with their due
diligence investigation of the Company, the preparation of this Agreement and
the other Transaction Agreements and consummation of the Transactions and
related preparations therefor, including all reasonable fees and expenses of
counsel, accountants, experts and consultants to Mast and its respective
Affiliates.

     

     

     

     

     

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

     

    (d)    Prior to
the date of this Agreement, the Company deposited $50,000 with Foley Hoag LLP,
counsel to Mast, as an advance to be applied against a portion of reasonable
fees, time charges and expenses of Mast to be paid by the Company in accordance
with Section
7.2(c) above.  Amounts payable by the Company to Mast in
accordance with Section 7.2(c) which
exceed such $50,000 will be paid by the Company at the Closing or shall be
deducted by Mast from the Purchase Price in accordance with the terms of Section
7.2(c).

     

    (e)    The Company acknowledges that the agreements contained in this
Section 7.2 are
an integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Mast would not enter into this
Agreement.  Accordingly, if the Company fails to pay promptly any
Reimbursable Expenses due to Mast pursuant to this Section 7.2, (i)
interest shall accrue and immediately become payable on the overdue amount from
the due date thereof until the date of payment at the base rate of Citibank,
N.A. in effect from time to time and (ii) in the event that Mast commences a
suit that results in a judgment against the Company for any such overdue amount
or interest, the Company shall also reimburse Mast for its costs and expenses
(including reasonable attorney’s fees) incurred in connection with such
suit.

     

     

     

    ARTICLE
VIII 

    GENERAL

     

     

    Section
8.1    Termination.    
This
Agreement may be terminated at any time prior to the Closing:

     

    (a)    by mutual
written consent of Mast and the Company;

     

    (b)    by Mast
if there has been (i) a material breach of any of the representations or
warranties of the Company set forth in this Agreement that would give rise to
the failure of the condition set forth in Section 6.2 or (ii) a
material breach of any of the covenants or agreements of the Company set forth
in this Agreement, which breach has not been cured within ten (10) Business Days
following receipt by the Company of notice of such breach from Mast; provided that Mast is
not then in material breach of any representation or warranty under this
Agreement.

     

    (c)    by the
Company if there has been (i) a material breach of any of the representations or
warranties by Mast set forth in this Agreement that would give rise to the
failure of the condition set forth in Section 6.1 or (ii) a
material breach of any of the covenants or agreements of Mast
set forth in this Agreement, which breach has not been cured within ten (10)
Business Days following receipt by Mast of notice of such breach from the
Company; provided that the
Company is not then in material breach of any representation or warranty under
this Agreement.

     

     

     

     

     

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

     

     

    (d)    by any of
Mast or the Company if any permanent order, decree, ruling or other action of a
court or other competent authority restraining, enjoining or otherwise
preventing the consummation of any of the Transactions shall have become final
and non-appealable; or

     

    (e)    by either
of Mast or the Company if the Closing shall not have occurred on or before July
31, 2008, unless the failure for the Closing to occur is the result of a
material breach of this Agreement by the party seeking to terminate this
Agreement.

     

    In the
event of termination of this Agreement by Mast or the Company, as provided in
this Section
8.1, this Agreement shall forthwith become void and there shall be no
liability hereunder on the part of Mast or the Company, or their respective
officers, directors, managers, members or partners, except for Sections 7.2 and 8.1
and except that no such termination shall relieve any party of liability for any
breach of any other provision of this Agreement occurring prior to such
termination.

     

    Section
8.2    Notice.

     

    Whenever any notice is required to be
given hereunder, such notice shall be deemed given only when such notice is in
writing and is delivered by messenger or courier or, if sent by fax, when
received.  All notices, requests and other communications hereunder
shall be delivered by courier or messenger or shall be sent by facsimile to the
following addresses:

    


    
      	
              (i)  

            	
              If
      to Mast before
      September 15, 2008, at the following
address:

            


    

     

    MAST
Credit Opportunities I Master Fund Limited

    c/o MAST
Capital Management, LLC

    535
Boylston Street, Suite 401

    Boston,
Massachusetts 02116

    Attention:
John S. Ehlinger

    Fax:
(617) 247-7985

    


    If to Mast after September 15,
2008, at the following address:

     

    MAST
Credit Opportunities I Master Fund Limited

    c/o MAST
Capital Management, LLC

    200
Clarendon Street, 51st
Floor

    Boston,
Massachusetts 02116

    Attention:
John S. Ehlinger

    


    with a copy by fax or messenger or
courier to:

     

     

     

     

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

     

     

    Foley
Hoag LLP

    Bay
Colony Corporate Center

    1000
Winter Street, Suite 4000

    Waltham,
Massachusetts 02451

    Attention:
David A. Broadwin, Esq.

    Fax:
(617) 832-7000

    


    (ii)           If to the Company, at the following address:

     

    Broadpoint
Securities Group, Inc.

    One Penn
Plaza, 42nd
Floor

    New York,
New York 10119

    Facsimile:
(212) 273-7100

    Attention:  General
Counsel

     

    with a copy by fax or messenger or
courier to:

     

    Cahill
Wink LLP

    5 Penn
Plaza, 23rd floor

    New York,
New York 10001

    Facsimile:
(646) 378-2025

    Attention:  Stephen
Wink, Esq.

     

    or, in
the case of any of the foregoing, to such other respective addresses as may be
designated by notice given in accordance with this Section
8.2.

     

    Section
8.3    Complete Agreement; No
Third-Party Beneficiaries.     This
Agreement and the other Transaction Agreements constitute the entire agreement
among the parties pertaining to the subject matter hereof and supersede all
prior agreements and understandings of the parties in connection therewith,
including the Commitment Letter dated May 12, 20008 between Mast Capital
Management, LLC and the Company, which, except for those sections which are
explicitly binding on the parties thereto, shall be deemed terminated and of no
further force or effect.  This Agreement is not intended to confer
upon any person other than the Company and Mast any rights or remedies
hereunder.

    


    Section
8.4    Survival.    
The
respective representations, warranties, covenants and agreements of the Company
and Mast set forth in this Agreement or any other Transaction Agreement or in
any exhibit, schedule, certificate or instrument attached or delivered pursuant
hereto or thereto (except covenants and agreements which are expressly required
to be performed and are performed in full on or prior to the Closing Date) shall
survive the Closing and the consummation of the Transactions.

    


     

    Section
8.5    Governing
Law.


     

      THIS
AGREEMENT SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICTS OF LAWS THAT
WOULD APPLY THE LAW OF ANY OTHER JURISDICTION.  MAST AND THE COMPANY
HEREBY CONSENT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND
THE FEDERAL COURTS LOCATED IN THE BOROUGH OF MANHATTAN WITH RESPECT TO ANY
ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE ANY PROVISION OF THIS AGREEMENT OR
TO DETERMINE THE RIGHTS OF ANY PARTY HERETO.

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

     

     

     

     

    Section
8.6    No
Assignment.

     

    Neither
this Agreement nor any rights or obligations under it are assignable by any
party without the prior written consent of the other parties.

     

    Section
8.7    Counterparts.


     

      This
Agreement may be executed in one or more counterparts and by different parties
in separate counterparts.  All such counterparts shall constitute one
and the same agreement and shall become effective when one or more counterparts
have been signed by each party and delivered to the other parties.

     

    Section
8.8    Remedies;
Waiver.


     

      All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.  No failure
on the part of any party to exercise or delay in exercising any right hereunder
shall be deemed a waiver thereof, nor shall any single or partial exercise
preclude any further or other exercise of such or any other
right.  Notwithstanding any other provision of this Agreement, it is
understood and agreed that remedies at law would be inadequate in the case of
any breach of the covenants contained in this Agreement.  The Company
and Mast shall be entitled to equitable relief, including the remedy of specific performance, with respect to any breach or
attempted breach of such covenants by the other party.

    


    Section
8.9    Severability.


     

      Any
invalidity, illegality or unenforceability of any provision of this Agreement in
any jurisdiction shall not invalidate or render illegal or unenforceable the
remaining provisions hereof in such jurisdiction and shall not invalidate or
render illegal or unenforceable such provisions in any other
jurisdiction.  The Company and Mast shall endeavor in good faith
negotiations to replace any invalid, illegal or unenforceable provision with a
valid, legal and enforceable provision, the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable
provision.

    


    Section
8.10         Amendment;
Waiver.


     

      This
Agreement may be amended only by agreement in writing of each of the
parties.  No waiver of any provision nor consent to any exception to
the terms of this Agreement shall be effective unless in writing and signed by
the party to be bound and then only to the specific purpose, extent and instance
so provided.

     

     

     

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    


     

     

     

    Section
8.11    Confidentiality.

     

      Mast
agrees to comply with the terms of the Mast Confidentiality
Agreement.

     

     

     

    


     

    [the next
page is the signature page]

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
         


      

      
        32 


        
          

        

      

      
         


      

    


    IN WITNESS WHEREOF, the Company and Mast have caused this Agreement to
be executed by their respective offers thereunto duly authorized all as of the
date first written above.

     

    


    BROADPOINT SECURITIES GROUP,
INC.

    


    


    By: /s/ Robert I.
Turner 

    Name:  Robert I.
Turner

    Title:    Chief
Financial Officer

    


    


    


    MAST CREDIT OPPORTUNITIES I
MASTER

    FUND LIMITED

    


    


    By: /s/ Christopher B.
Madison

    Name:  Christopher B.
Madison

    Title:   
Partner

    


    



    
      
         


      

      
        33 


        
          

        

      

      
         


      

    

     

     

    
 

    Exhibit
A

    to

    Preferred
Stock Purchase Agreement

    


    Defined
Terms.

    


    


    “Action or Proceeding”
means any suit, action, proceeding (including any compliance, enforcement or
disciplinary proceeding), arbitration, formal or informal inquiry, inspection,
investigation or formal order of investigation of complaint.

    


    “Affiliate” has the
meaning set forth in Rule 12b-2 under the Exchange Act as in effect as on the
date hereof.

    


    “Agreement” has the
meaning set forth in the preamble.

    


    “Anti-Terrorism Laws”
means any Law of the United States or any state thereof or political subdivision
of the foregoing relating to terrorism or money laundering, including the
Executive Order and the Patriot Act.

     

    “Associated Person”
means an “associated persons” as defined in Article I, section (dd) of the
FINRA’s By-laws, as incorporated into the FINRA Rulebook, By-laws and Schedules
to By-laws.

    


    “B/D Merger” means any
merger, consolidation or other business combination between Broadpoint Capital,
Inc. and Broadpoint Securities, Inc.

    


    “Board” means the
board of directors of the Company.

    


    “Business Day” means
any day other than a Saturday, Sunday or a day on which banking institutions in
the State of New York are authorized by law or executive order to
close.

    


    “Business Entity”
means any corporation, partnership, limited liability company, joint venture,
association, partnership, business trust or other business entity.

    


    “Capital Stock” means
the Common Stock and the Preferred Stock.

    


    “Certificate of
Designations” means the Certificate of Designations, Relative Rights,
Preferences and Limitations of Series B Preferred Stock.

    


    “Closing” has the
meaning set forth in Section
2.2.

    


    “Closing Date” means
the date on which the Closing takes place.

    


    “Code” means the U.S.
Internal Revenue Code of 1986, as amended.

    


    “Commitment Fee” has
the meaning set forth in Section
7.2(b).

     

     

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

    


    “Common Stock” means
the common stock, par value $.01 per share, of the Company.

    


    “Company” has the
meaning set forth in the preamble.

    


    “Company Approvals”
has the meaning set forth in Section
3.5(b).

    


    “Company Contract”
means any indenture, mortgage, deed of trust, lease, contract, agreement,
instrument or other undertaking or legally binding arrangement (whether written or oral) to which the Company or any Subsidiary
is a party or by the Company or any Subsidiary or any of their respective
properties or assets is bound.

    


    “Company Contractual
Consents” has the meaning set forth in Section
3.5(c).

    


    “Company Disclosure
Letter” means the letter attached to this Agreement as Exhibit B, dated the
date hereof, delivered by the Company to Mast, which letter relates to this
Agreement and is designated therein as the Company Disclosure
Letter.

    


    “Company Material Adverse
Effect” means a material adverse effect on (i) the ability of the Company
to consummate any of the Transactions or to perform any of its obligations under
this Agreement or any of the other Transaction Agreements or (ii) the
businesses, assets (including licenses, franchises and other intangible assets),
liabilities, financial condition or operating income of the Company and its
Subsidiaries, taken as a whole, provided, however that in no
event shall any of the following, alone or in combination, be deemed to
constitute, nor shall any of the following be taken into account in determining
whether there has been, a Company Material Adverse Effect:  (a) a
change in the market price or trading volume of Common Stock (but not any
effect, event, development or change underlying such decrease to the extent that
such effect, event, development or change would otherwise constitute a Company
Material Adverse Effect); (b) changes in conditions in the U.S. or global
economy or capital or financial markets generally, including changes in interest
or exchange rates; (c) changes in general legal, tax, regulatory, political or
business conditions; (d) changes that are the result of factors generally
affecting the industry in which the Company and the Subsidiaries operate; (e)
changes in applicable law or GAAP; (f) the negotiation, execution, announcement,
pendency or performance of this Agreement or the Transactions or the
consummation of the Transactions, including the impact thereof on relationships,
contractual or otherwise, with customers, suppliers, vendors, lenders, brokers,
investors, venture partners or employees; (g) acts of war, armed hostilities,
sabotage or terrorism, or any escalation or worsening of any such acts of war,
armed hostilities, sabotage or terrorism threatened or underway as of the date
of this Agreement; (h) earthquakes, hurricanes, floods, or other natural
disasters; (i) any action taken by the Company at the request or with the prior
written consent of Mast; (j) the failure of the Company to take any action as a
result of any restrictions or prohibitions set forth in Article V; or (k) any
adverse development in any litigation or regulatory proceeding described in
Schedule 3.9 or
the commencement of any action or proceeding based on a pre-litigation claim
described in Schedule
3.9; or (l) any litigation or regulatory proceeding alleging claims
arising under Section 10(b) of the Securities Exchange Act of 1934 and Rule
10b-5 promulgated thereunder or other laws to similar effect based solely on the
existence, announcement or performance of this Agreement or the
Transactions.

     

     

     

    
 

    
      
        
        

      

      
        A-2

        
          

        

      

      
        
        

      

    

     

     

                                   
“Company
Permits” means all Regulatory Permits and all Miscellaneous
Permits.

    


    “Consolidated Cash
Flow” means, with respect to any specified Person for any period, the
Consolidated Net Income of such Person for such period plus or minus the
following (as the case may be, as set forth below), without duplication: plus
(1) provision for taxes based on income or profits of such Person and its
Subsidiaries for such period, to the extent that such provision for taxes was
deducted in computing such Consolidated Net Income; plus (2) Consolidated
Interest Expense of such Person and its Subsidiaries for such period, whether
paid or accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, noncash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with capital lease
obligations, imputed interest with respect to attributable debt, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers’ acceptance financings), to the extent that any such expense was
deducted in computing such Consolidated Net Income; plus (3) depreciation,
amortization (excluding amortization of prepaid cash expenses that were paid in
a prior period) and other noncash expenses (excluding any such noncash expense
to the extent that it represents an accrual of or reserve for cash expenses in
any future period or amortization of a prepaid cash expense that was paid in a
prior period) of such Person and its Subsidiaries for such period to the extent
that such depreciation, amortization and other noncash expenses were deducted in
computing such Consolidated Net Income; plus (4) noncash items (excluding any
noncash item to the extent that it represents an accrual of, or a reserve for,
cash expenditures in any future period) reducing such Consolidated Net Income
for such period; minus (5) noncash items increasing such Consolidated Net Income
for such period, other than the accrual of revenue in the ordinary course of
business; and minus (6) non-operating gains (including extraordinary or
non-recurring gains), in each case, on a consolidated basis and determined in
accordance with GAAP.

    


    “Consolidated Interest
Expense” means, with respect to any Person for any period, the sum,
without duplication of: (1) the consolidated interest expense of such Person and
its Subsidiaries for such period, whether paid or accrued; (2) the consolidated
interest expense of such Person and its Subsidiaries that was capitalized during
such period; (3) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or any of its Subsidiaries or secured by a Lien on
assets of such Person or any of its Subsidiaries (whether or not such guarantee
or Lien is called upon); and (4) the product of: (a) all cash dividend payments
(and noncash dividend payments in the case of a Person that is a Subsidiary) on
any series of preferred stock of such Person or any of the Subsidiaries, times
(b) a fraction, the numerator of which is one and the denominator of which is
one minus the then current combined federal, state and local statutory tax rate
of such Person, expressed as a decimal, in each case, on a consolidated basis
and determined in accordance with GAAP.

    


    “Consolidated Net
Income” means, with respect to any specified Person for any period, the
aggregate of the net income of such Person and its Subsidiaries for such period,
on a consolidated basis, determined in accordance with GAAP; provided that: (1)
the net income (but not loss) of any Person that is accounted for by the equity
method of accounting will be included only to the extent of the amount of
dividends or distributions paid in cash to the specified Person or Subsidiary of
the Person; (2) the net income of any Subsidiary will be excluded to the extent
that the declaration or payment of dividends or similar distributions by that
Subsidiary of that net income is not at the date of determination permitted
without any prior governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders; (3) the net income
of any Person acquired during the specified period for any period prior to the
date of such acquisition will be excluded; and (4) the cumulative effect of a
change in accounting principles will be excluded.

     

     

     

    
 

    
      
        
        

      

      
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    “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, other than obligations resulting from
the endorsement of negotiable instruments for collection in the ordinary course
of business.

    


    “Contractual Consent”
applicable to a specified Person in respect of a specified matter means any
consent required to be obtained by such Person from any other Person party to
any Contractual Obligation to which such first Person is a party or by which it
is bound in order for such matter to occur or exist without resulting in the
occurrence of a default or event of default or termination, the creation of any
lien, the triggering of any decrease in the rights of such
first Person, any increase in the obligations of such first Person or any other
consequence adverse to the interests of such first Person, under any provision
of such Contractual Obligation.

    


    “Contractual
Obligation” means, as to any Person, any obligation arising out of any
indenture, mortgage, deed of trust, contract, agreement, insurance policy,
instrument or other undertaking to which such Person is a party or by which it
or any of its property is bound (including, without limitation, any debt
security issued by such Person).

    


    “Convertible
Securities” means securities or obligations that are convertible into or
exchangeable for shares of Capital Stock.

    


    “Descap Fund” means
Sheepshead Capital Partners, LLC, Sheepshead Management, LLC and Dynathos
Partners, L.P., collectively and individually.

    


    “Employee Stock Incentive
Plans” means the Company’s: (i) 1989 Stock Incentive Plan, (ii) 1999
Long-Term Incentive Plan (Amended and Restated Through April 27, 2004, as
amended), (iii) 2001 Long-Term Incentive Plan, as amended, (iv) 1989 Stock
Incentive Plan, as amended, (v) Restricted Stock Inducement Plan for Descap
Employees, as amended, (vi) 2003 Directors’ Stock Plan, as amended, (vii) 2007
Incentive Compensation Plan and (viii) any amendments, replacements or new
plans, in each case, approved by the Board or any duly authorized committee
thereof, including, without limitation, any employee stock purchase plans; provided that, all shares of
Common Stock (or options, warrants or other rights to purchase such shares of
Common Stock) issued pursuant to such amendments, replacements or new plans are
either exempt from, or issued in compliance with the requirements of Section
409A of the Code and the guidance thereunder.

     

     

     

     

     

    
 

    
      
        
        

      

      
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“Employee Stock
Options” means any stock options granted pursuant to any Employee Stock
Incentive Plan.

     

                                   
“Evaluation
Date” has the meaning set forth in Section
3.7(c).

    


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

    


    “FATV Transaction”
means the transactions described in the Form 8-K filed with the SEC by the
Company on May 6, 2008.

    


    “Financial Statements”
has the meaning set forth in Section
3.6(b).

    


    “FINRA” means the
Financial Industry Regulatory Authority.

    


    “GAAP” has the meaning
set forth in Section
3.6(b).

    


    “Governmental
Authority” means any government or political subdivision or department
thereof, any governmental or regulatory body, commission, board, bureau, agency
or instrumentality, or any court or arbitrator or alternative dispute resolution
body, in each case whether federal, state, local, foreign or
supranational.

    


    “Indebtedness” of any
Person means, without duplication (i) all indebtedness for borrowed money, (ii)
all obligations issued, undertaken or assumed as the deferred purchase price of
property or services (including, without limitation, “capital leases” in
accordance with GAAP) (other than trade payables and accrued liabilities
incurred in the ordinary course of business), (iii) all reimbursement or payment
obligations with respect to letters of credit, surety bonds and other similar
instruments, (iv) 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, (v) 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), (vi) 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, (vii) all indebtedness
referred to in clauses (i) through (vii) 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 (viii) all Contingent Obligations in respect of indebtedness or obligations
of others of the kinds referred to in clauses (i) through (viii)
above.

     

     

     

     

    
 

    
      
        
        

      

      
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                                    “Insolvent” means,
with respect to any Person (i) the present fair saleable value of such Person’s
assets is less than the amount required to pay such Person’s total Indebtedness,
(ii) such Person is unable to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured or (iii) such Person intends to incur or believes that it will incur
debts that would be beyond its ability to pay as such debts mature.

    


    “Intellectual
Property” has the meaning set forth in Section
3.10.

    


    “Investor Approvals”
has the meaning set forth in Section
4.3(b).

    


    “Key
Employees”  means Lee Fensterstock, Robert Turner, Tim
O’Connor, Robert Fine, Joseph Mannello and Robert Tirschwell.

    


    “Knowledge of the
Company” means the actual knowledge of the officers of the Company who
have been designated in the Company Disclosure Letter as having “Knowledge of
the Company”.

    


    “Liens” means any
security interests, liens, claims, pledges, mortgages, options, rights of first
refusal, agreements, limitations on voting rights, charges, easements,
servitudes, encumbrances and other restrictions of any nature
whatsoever.

    


    “Mast” has the meaning
set forth in the preamble.

    


    “Mast Confidentiality
Agreement” means the confidentiality letter agreement dated as of
February 28, 2008 between Mast Capital Management, LLC and the
Company.

    


    “Miscellaneous
Permits” means all licenses, permits, certificates, franchises,
ordinances, registrations, qualifications, and other rights, privileges,
applications or authorizations filed with, granted or issued by any Governmental
Authority other than Regulatory Permits.

    


    “Net Tangible Book
Value” has the meaning set forth in Section
5.26.

    


    “NYBCL” means the New
York Business Corporation Law.

    


    “Organizational
Document” means, with respect to the Company or any Subsidiary, any
certificate or articles of incorporation, memorandum of association, by-laws,
partnership agreement, limited liability agreement, operating agreement, trust
agreement or other agreement, instrument or document governing the affairs of
the Company or such Subsidiary.

    


    “Permitted
Indebtedness” means (i) Indebtedness in existence on the date hereof, and
listed on Schedule
3.16 or permitted to be excluded from Schedule 3.16
pursuant to Section
3.16, (ii) additional Indebtedness incurred by the Company or any
Subsidiary for borrowed money, not to exceed, in the aggregate, $1,000,000,
provided that,
the Company has Consolidated Cash Flow of at least $5,000,000 for the Trailing
Twelve Month Reference Period, (iii) Contingent Obligations in existence on the
date hereof, (iv) purchase money Indebtedness incurred in connection with the
acquisition, repair, improvement or construction of any property, equipment or
other asset of the Company or any of its Subsidiaries, (v) securities inventory
financing, (vi) any compensation related loans, guarantees or other arrangements
with employees of the Company or any of its Subsidiaries, (vii) any Indebtedness
incurred in the ordinary course of business by the Company or any of its
Subsidiaries as broker-dealer participants, investment banks, brokerage firms,
merchant banks and financial advisory firms and (viii) any replacement or
refinancing or any of the Indebtedness described in clauses (i) through (vii)
above.

     

     

    
 

    
      
        
        

      

      
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    “Permitted Liens”
means (i) Any Liens existing on the date hereof and specifically disclosed in
Schedule 3.16;
(ii) Liens securing the Permitted Indebtedness; (iii) Liens for taxes, fees,
assessments or other governmental charges or levies, either not delinquent or
being contested in good faith by appropriate proceedings and for which the
Company maintains adequate reserves; (iv) Liens to secure payment of workers’
compensation, employment insurance, old age pensions, social security or other
like obligations incurred in the ordinary course of business; (v) Liens incurred
in connection with the extension, renewal or refinancing of indebtedness secured
by Liens of the type described in clauses (i) through (iv) above, provided that any
extension, renewal or replacement Lien shall be limited to the property
(together with any accessions thereto and proceeds thereof) encumbered by any
such Lien and the amount of such Permitted Lien does not exceed the amount of
the lien extended, renewed or refinanced; (vi) carriers’, warehousemen’s,
mechanic’s, materialmen’s, repairmen’s or other like liens arising in the
ordinary course of business and securing obligations that are not due and
payable or which are being contested in good faith for which adequate reserves
have been established; (vii) pledges and deposits made in the ordinary course of
business in compliance with workmen’s compensation, unemployment insurance and
other social security laws or regulations; and (viii) easements, rights-of-way,
restrictions and other similar encumbrances on the use of real property imposed
by law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business of the
Company and the Subsidiaries.

    


    “Person” means any
individual, Business Entity, unincorporated association or Governmental
Authority.

    


    “Preemptive Rights
Agreement” has the meaning set forth in Section
2.4(d).

    


    “Preferred Stock”
means the preferred stock, par value $0.01 per share, of the
Company.

    


    “Purchased Securities”
has the meaning set forth in Section
2.1.

    


    “Purchased Shares” has
the meaning set forth in Section
2.1.

    


    “Purchase Price” has
the meaning set forth in Section
2.1.

     

     

     

     

     

    
      
        
        

      

      
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    “Registration
Statement” means a registration statement to be filed by the Company
pursuant to the Warrant Registration Rights Agreement.

    


    “Regulatory Permits”
means all licenses, permits, certificates, franchises, ordinances,
registrations, qualifications, and other rights, privileges, applications or
authorizations filed with, granted or issued by the Securities Exchange
Commission, any state securities or blue sky regulatory authority in which the
Company maintains offices, FINRA or any self-regulatory
organization.

    


    “Reimbursable
Expenses” has the meaning set forth in Section
7.2(c).

    


    “Requirement of Law”
means any judgment, order (whether temporary, preliminary or permanent), writ,
injunction, decree, statute, rule, regulation, notice, law or ordinance and
shall also include any rules, regulations and interpretations of any applicable
self regulatory organizations including, without limitation, FINRA.

    


    “Restricted Stock”
means any shares of Common Stock issued (i) in the form of a Restricted Stock
Award or (ii) upon the exercise of RSUs.

    


    “Restricted Stock
Award” means any award granted under an Employee Stock Incentive Plan
consisting of a direct issuance of restricted stock.

    


    “Rights” has the
meaning set forth in the Rights Agreement.

    


    “Rights Agreement”
means the Rights Agreement dated as of March 30, 1998 between the Company and
American Stock Transfer & Trust Company, as Rights Agent, as
amended.

     

    “RSU” means a unit
representing a right to purchase Restricted Stock that is subject to an RSU
Award.

    


    “RSU Award” means an
award granted under an Employee Stock Incentive Plan in the form of
RSUs.

    


    “Sanctioned Country”
means a country subject to a sanctions program identified on the list maintained
by OFAC and available at http://www.treas.gov/offices/

    enforcement/ofac/programs/
or as otherwise published from time to time.

    


    “Sanctioned Person”
means (i) a person named on the list of Specially Designated Nationals or
Blocked Persons maintained by OFAC available at
http://www.treas.gov/offices/

    eotffc/ofac/sdn/index.html,
or as otherwise published from time to time, or (ii) (A) an agency of the
government of a Sanctioned Country, (B) an organization controlled by a
Sanctioned Country, or (C) a person resident in a Sanctioned Country, to the
extent subject to a sanctions program administered by OFAC.

    


    “Sarbanes-Oxley” has
the meaning set forth in Section
3.7(a).

     

     

    
      
        
        

      

      
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    “Schedules” means the
Schedules to the Company Disclosure Letter.

    


    “SEC” means the
Securities and Exchange Commission.

    


    “SEC Reports” has the
meaning set forth in Section
3.6(a).

    


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

    


    “Series B Preferred
Stock” means the Series B Mandatory Redeemable Preferred Stock, $1.00 par
value per share, of the Company.

    


    “Stock Purchase
Rights” has the meaning set forth in Section
3.2(c).

    


    “Subsidiary” means any
Business Entity of which the Company (either alone or through or together with
one or more other Subsidiaries) (x) owns, directly or indirectly, more than 50%
of the stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such Business Entity, (y) is a general partner, managing member, trustee
or other Person performing similar functions or (z) has control (as defined in
Rule 405 under the Securities Act).

    


    “Tax Return” means any
return, report or similar statement (including the attached schedules) required
to be filed with respect to any Tax, including, without limitation, any
information return, claim for refund, amended return or declaration of estimated
Tax.

    


    “Tax” means any tax,
governmental fee or other like assessment or charge of any kind whatsoever
(including, but not limited to, any tax imposed under Subtitle A of the Code and
any net income, alternative or add-on minimum tax, gross income, gross receipts,
sale, bulk sales, use, real property, personal property, ad valorem, value
added, transfer, franchise, profits, license, withholding tax on amounts paid,
withholding, payroll, employment, excise severance, stamp, capital stock,
occupation, property, environmental or windfall profits tax, premium, custom,
duty or other tax or assessment), together with any interest, penalty, addition
to tax or additional amount thereto, imposed by any Governmental
Authority.

    


    “Taxing Authority”
means any Governmental Authority (domestic or foreign) responsible for the
imposition of any Tax.

    


    “Trailing Twelve Month
Reference Period” means for any date, the twelve calendar month period
ending on the calendar month immediately preceding such date.

    


    “Transactions” means
the sale and issuance of the Purchased Securities to Mast, the execution and
delivery of the Transaction Agreements and the consummation by the Company of
the transactions contemplated therein.

     

     

    
 

    
      
        
        

      

      
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“Transaction
Agreements” means this Agreement, the Company Disclosure Letter, the
Certificate of Designations, the Warrant, the Warrant Registration Rights
Agreement, the Preemptive Rights Agreement and the certificates delivered
pursuant to Exhibit
F.

    


    “Warrant” has the
meaning set forth in Section
2.1.

    


    “Warrant
Shares”  means the shares of the Company’s Common Stock issued
upon exercise of the Warrant.

    


    “Warrant Registration Rights
Agreement” means the Registration Rights Agreement in substantially the
form of Exhibit
D hereto.

     

     

     

     

     

     

     

     

     

     

     

     

    
 

    



    
      
         


      

      
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