exv4w1



 





Exhibit 4.1









NOTE PURCHASE AGREEMENT




dated as of December 29, 2006




by and between




BERLINER COMMUNICATIONS, INC.




and




THOSE INVESTORS SET FORTH IN SCHEDULE A




 






SENIOR SUBORDINATED SECURED CONVERTIBLE NOTES




AND




COMMON STOCK PURCHASE WARRANTS









 









 





BERLINER COMMUNICATIONS, INC.




NOTE PURCHASE AGREEMENT




SENIOR SUBORDINATED SECURED CONVERTIBLE NOTES




and




COMMON STOCK PURCHASE WARRANTS




TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page
	1. DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	2. PURCHASE AND SALE; PURCHASE PRICE
	 	 	8	 
	(a) Purchase
	 	 	8	 
	(b) Form of Payment
	 	 	8	 
	(c) Closing
	 	 	8	 
	 
	 	 	 	 
	3. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE BUYERS
	 	 	8	 
	(a) Purchase for Investment
	 	 	8	 
	(b) Accredited Investor
	 	 	9	 
	(c) Reoffers and Resales
	 	 	9	 
	(d) Company Reliance
	 	 	9	 
	(e) Information Provided
	 	 	9	 
	(f) Absence of Approvals
	 	 	10	 
	(g) Note Purchase Agreement
	 	 	10	 
	(h) Buyer Status
	 	 	10	 
	 
	 	 	 	 
	4. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE COMPANY
	 	 	10	 
	(a) Organization and Authority
	 	 	10	 
	(b) Qualifications
	 	 	11	 
	(c) Capitalization
	 	 	11	 
	(d) Concerning the Shares and the Common Stock
	 	 	12	 
	(e) Corporate Authorization
	 	 	12	 
	(f) Non-contravention
	 	 	12	 
	(g) Approvals, Filings, Etc.
	 	 	13	 
	(h) Information Provided
	 	 	13	 
	(i) Conduct of Business
	 	 	13	 
	(j) SEC Filings
	 	 	14	 
	(k) Absence of Certain Proceedings
	 	 	14	 
	(l) Financial Statements; Liabilities
	 	 	14	 
	(m) Material Losses
	 	 	15	 






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	 	 	Page
	(n) Absence of Certain Changes
	 	 	15	 
	(o) Intellectual Property
	 	 	15	 
	(p) Internal Accounting Controls
	 	 	16	 
	(q) Compliance with Law
	 	 	17	 
	(r) Properties
	 	 	17	 
	(s) Labor Relations
	 	 	17	 
	(t) Insurance
	 	 	17	 
	(u) Tax Matters
	 	 	17	 
	(v) Investment Company
	 	 	17	 
	(w) Absence of Brokers, Finders, Etc.
	 	 	18	 
	(x) No Solicitation
	 	 	18	 
	(y) ERISA Compliance
	 	 	18	 
	(z) Rights Agreement; Interested Stockholder
	 	 	18	 
	(aa) Sarbanes-Oxley Act
	 	 	18	 
	 
	 	 	 	 
	5. CERTAIN COVENANTS
	 	 	19	 
	(a) Transfer Restrictions
	 	 	19	 
	(b) Restrictive Legends
	 	 	19	 
	(c) Reporting Status
	 	 	20	 
	(d) Form D
	 	 	20	 
	(e) State Securities Laws
	 	 	21	 
	(f) Limitation on Certain Actions
	 	 	21	 
	(g) Use of Proceeds
	 	 	21	 
	(h) Best Efforts
	 	 	21	 
	(i) Debt Obligation
	 	 	21	 
	(j) Limitation on Certain Transactions
	 	 	21	 
	(k) Right of the Buyers to Participate in Future Transactions
	 	 	21	 
	 
	 	 	 	 
	6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL
	 	 	23	 
	 
	 	 	 	 
	7. CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE
	 	 	24	 
	 
	 	 	 	 
	8. REGISTRATION RIGHTS
	 	 	26	 
	(a) Mandatory Registration
	 	 	26	 
	(b) Obligations of the Company
	 	 	27	 
	(c) Obligations of the Buyers and Other Investors
	 	 	29	 
	(d) Rule 144
	 	 	30	 
	(e) Piggy-Back Registrations
	 	 	31	 
	 
	 	 	 	 
	9. INDEMNIFICATION AND CONTRIBUTION
	 	 	31	 
	(a) Indemnification
	 	 	31	 
	(b) Contribution
	 	 	33	 
	(c) Other Rights
	 	 	33	 
	 
	 	 	 	 
	10. MISCELLANEOUS
	 	 	33	 
	(a) Governing Law
	 	 	33	 






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	 	 	Page
	(b) Headings
	 	 	34	 
	(c) Severability
	 	 	34	 
	(d) Notices
	 	 	34	 
	(e) Counterparts
	 	 	34	 
	(f) Entire Agreement; Benefit
	 	 	34	 
	(g) Waiver
	 	 	35	 
	(h) Amendment
	 	 	35	 
	(i) Further Assurances
	 	 	35	 
	(j) Assignment of Certain Rights and Obligations
	 	 	35	 
	(k) Expenses
	 	 	36	 
	(l) Termination
	 	 	36	 
	(m) Survival
	 	 	37	 
	(n) Public Statements, Press Releases, Etc.
	 	 	37	 
	(o) Construction
	 	 	38	 






ANNEXES




	 	 	 
	ANNEX I

	 	Form of Senior Subordinated Secured Convertible Note
	ANNEX II

	 	Form of Common Stock Purchase Warrant
	ANNEX III

	 	Form of Security Agreement
	ANNEX IV

	 	Form of Additional Warrant
	ANNEX V

	 	Form of Opinion







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NOTE PURCHASE AGREEMENT




          THIS NOTE PURCHASE AGREEMENT, dated as of December 29, 2006 (this “Agreement”), by and between
BERLINER COMMUNICATIONS, INC., a Delaware corporation (the “Company”), with headquarters located at
20 Bushes Lane, Elmwood Park, New Jersey, 07407, and THOSE INVESTORS SET FORTH IN SCHEDULE A (each
a “Buyer” and together the “Buyers”).




W
I T N E S S E
T H:




          WHEREAS, each Buyer wishes to purchase from the Company and the Company wishes to sell to each
Buyer, upon the terms and subject to the conditions of this Agreement, a promissory note of the
Company having the aggregate principal amount set forth on Schedule A of this Agreement opposite
each Buyer’s name and in connection with which the Company shall issue to each Buyer warrants to
purchase shares of Common Stock (such capitalized term and all other capitalized terms used in this
Agreement having the meanings provided in Section 1);




          NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:




          1. DEFINITIONS




          (a) As used in this Agreement, the terms “Agreement”, “Buyer”, “Buyers” and “Company” shall
have the respective meanings assigned to such terms in the introductory paragraph of this
Agreement.




          (b) All the agreements or instruments herein defined shall mean such agreements or instruments
as the same may from time to time be supplemented or amended or the terms thereof waived or
modified to the extent permitted by, and in accordance with, the terms thereof and of this
Agreement.




          (c) The following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):




          “Additional Financing” shall have the meaning ascribed thereto in Section 7(i) of this
Agreement.




          “Advisory Fee” means $100,000 payable in cash and the Additional Warrant.




          “Additional Warrant” means the warrant in the form of Annex III hereto.




          “Affiliate” means, with respect to any Person, any other Person that directly, or indirectly
through one or more intermediaries, Controls, is Controlled by or is under common Control with the
subject Person.




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          “Blackout Period” means the period of up to 25 Trading Days (whether or not consecutive)
during any period of 365 consecutive days after the date the Company notifies the Investors that
they are required, pursuant to Section 8(c)(4), to suspend offers and sales of Registrable
Securities as a result of an event or circumstance described in Section 8(b)(5), provided;
however, that the Blackout Period shall be extended to include any period beginning upon
the Company’s receipt of notice from the SEC that any amendment to its Registration Statement is
being reviewed and ending on the date that the SEC has cleared such amended Registration Statement
for use by the Investors to conduct resales of the Registrable Securities if, during such period,
the Company shall promptly respond to all SEC comments and inquiries. The Company shall be deemed
to have promptly responded to all SEC comments and inquiries if they respond within the time
period, if any, specified by the SEC in any correspondence addressed to the Company in such
matters, without regard to any extension request by the Company with respect thereto.




          “Business Day” means any day other than a Saturday, Sunday or a day on which commercial banks
in The City of New York are authorized or required by law or executive order to remain closed.




          “Charter Amendment” shall have the meaning set forth in Section 4(d).




          “Claims” means any losses, claims, damages, liabilities or expenses, including, without
limitation, reasonable fees and expenses of legal counsel (joint or several), incurred by a Person.




          “Closing Date” means 10:00 a.m., New York City time, on December 29, 2006 or such other
mutually agreed to time.




          “Code” means the Internal Revenue Code of 1986, as amended, and the regulations thereunder and
published interpretations thereof.




          “Common Stock” means the Common Stock, par value $.00002 per share, of the Company.




          “Common Stock Equivalent” means any warrant, option, subscription or purchase right with
respect to shares of Common Stock, any security convertible into, exchangeable for, or otherwise
entitling the holder thereof to acquire, shares of Common Stock or any warrant, option,
subscription or purchase right with respect to any such convertible, exchangeable or other
security.




          “Control” (including, with correlative meaning, the terms “Controlled by” and “under common
Control with”), as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or otherwise.




          “Conversion Shares” means the shares of Common Stock issuable upon conversion of the Notes.




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          “Encumbrances” means all mortgages, deeds of trust, claims, security interests, liens,
pledges, leases, subleases, charges, escrows, options, proxies, rights of occupancy, rights of
first refusal, preemptive rights, covenants, conditional limitations, hypothecations, prior
assignments, easements, title retention agreements, indentures, security agreements or any other
encumbrances of any kind.




          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the
regulations thereunder and published interpretations thereof.




          “Event of Default” shall have the meaning provided in the Notes.




          “Guaranty” means the Guaranty of BCI Communications, Inc. in the form attached hereto as Annex
VI.




          “Indebtedness” shall have the meaning provided in the Notes.




          “Indemnified Party” means the Company, each of its directors, each of its officers who signs
the Registration Statement, each Person, if any, who Controls the Company, any underwriter and any
other stockholder selling securities pursuant to the Registration Statement or any of its directors
or officers or any Person who Controls such stockholder or underwriter.




          “Indemnified Person” means the Buyers and each other Investor who beneficially owns or holds
Registrable Securities and each other Investor who sells such Registrable Securities in the manner
permitted under this Agreement, the directors, if any, of such Investor, the officers or persons
performing similar functions, if any, of the Buyers and any such Investor, each Person, if any, who
Controls a Buyer or any such Investor, any underwriter (as defined in the 1933 Act) acting on
behalf of an Investor who participates in the offering of Registrable Securities of such Investor
in accordance with the plan of distribution contained in the Prospectus, the directors, if any, of
such underwriter and the officers, if any, of such underwriter, and each Person, if any, who
Controls any such underwriter.




          “Inspector” means any attorney, accountant or other agent retained by an Investor for the
purposes provided in Section 8(b)(9).




          “Intellectual Property” means all franchises, patents, trademarks, service marks, tradenames
(whether registered or unregistered), copyrights, corporate names, licenses, trade secrets,
proprietary software or hardware, proprietary technology, technical information, discoveries,
designs and other proprietary rights, whether or not patentable, and confidential information
(including, without limitation, know-how, processes and technology) created or wholly owned by the
Company and material to the operation and conduct of the business of the Company or any Subsidiary.




          “Investor” and “Investors” means the Buyer or Buyers, as the case may be, and any transferee
or assignee who agrees to become bound by the provisions of Sections 5(a), 5(b), 8, 9, and 10 of
this Agreement.




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          “Knowledge” Where any representation or warranty contained in this Agreement is expressly
qualified by reference to the knowledge of the Person, such reference shall be deemed to mean the
actual knowledge or information of any Person as to the matters that are the subject of such
representations and warranties, or such knowledge which any of them would have obtained after
reasonable inquiry into the matter concerned. It is agreed between the parties that
“reasonableness” (as used in the foregoing sentence) shall require that one or more of the Persons
with the responsibility to make an inquiry hereunder discuss the matter at issue with a
manager-level employee who has primary responsibility for such matter.




          “Margin Stock” shall have the meaning provided in Regulation U of the Board of Governors of
the Federal Reserve System (12 C.F.R. Part 221).




          “Market Price” shall have the meaning to be provided or provided in the Note.




          “Nasdaq” means the Nasdaq Global Market, Global Select Market or the Nasdaq Capital Market.




          “NASD” means the National Association of Securities Dealers, Inc.




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




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




          “Notes” means the Senior Subordinated Secured Convertible Notes of the Company issued to the
Buyers in the form attached as
Annex I.




          “Person” means any natural person, corporation, partnership, limited liability company, trust,
incorporated organization, unincorporated association or similar entity or any government,
governmental agency or political subdivision.




          “Prospectus” means the prospectus forming part of the Registration Statement at the time the
Registration Statement is declared effective and any amendment or supplement thereto (including any
information or documents incorporated therein by reference).




          “Purchase Price” means the purchase price for the Notes set forth on Schedule A of this
Agreement.




          “QIB” means a qualified institutional buyer as defined in Rule 144A.




          “Record” means all pertinent financial and other records, pertinent corporate documents and
properties of the Company subject to inspection for the purposes provided in Section 8(b)(9).




          “register,” “registered,” and “registration” refer to a registration effected by preparing and
filing a Registration Statement or Statements in compliance with the 1933 Act and



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pursuant to Rule 415, and the declaration or ordering of effectiveness of such Registration
Statement by the SEC.



          “Registrable Securities” means (1) the Shares, (2) if the Common Stock is changed, converted
or exchanged by the Company or its successor, as the case may be, into any other stock or other
securities on or after the date hereof, such other stock or other securities which are issued or
issuable in respect of or in lieu of the Shares and (3) if any other securities are issued to
holders of the Common Stock (or such other shares or other securities into which or for which the
Common Stock is so changed, converted or exchanged as described in the immediately preceding clause
(2)) upon any reclassification, share combination, share subdivision, share dividend, merger,
consolidation or similar transaction or event, such other securities which are issued or issuable
in respect of or in lieu of the Common Stock.




          “Registration Default Period” means the period during which any Registration Event occurs and
is continuing.




          “Registration Event” means the occurrence of any of the following events:





     (i) the Company fails to file with the SEC the Registration Statement on or before the
date by which the Company is required to file the Registration Statement pursuant to Section
8(a)(1),




     (ii) the Registration Statement covering Registrable Securities is not declared
effective by the SEC on or before the Required Effective Date,




     (iii) after the SEC Effective Date, sales cannot be made pursuant to the Registration
Statement (including without limitation by reason of a stop order of any untrue statement of
a material fact or omission of a material fact in the Registration Statement, or the
Company’s failure to update the Registration Statement) but except as excused pursuant to
Section 8(b)(5), other than closure of the trading markets for the Common Stock,




     (iv) after the date on which securities of the Company are listed or included for
quotation on a Trading Market, the Common Stock generally or the Registrable Securities
specifically are not listed or included for quotation on a Trading Market, or trading of the
Common Stock is suspended or halted for a period exceeding 5 days on the Trading Market
which at the time constitutes the principal market for the Common Stock, or




     (v) the Company fails, refuses or is otherwise unable timely to issue Conversion Shares
upon conversion of the Notes in accordance with the terms of the Notes or Warrant Shares
upon exercise of the Warrants in accordance with the terms of the Warrants, or certificates
therefor as required under the Transaction Documents or the Company fails, refuses or is
otherwise unable timely to transfer any Shares as and when required by the Transaction
Documents.



-5-









 





          “Registration Period” means the period from the SEC Effective Date to the earlier of (A) the
date that is three (3) years after the Closing Date, (B) such date after which each Investor may
sell all of its Registrable Securities without registration under the 1933 Act pursuant to Rule 144
(k), or (D) the date on which the Investors beneficially own, in the aggregate, less than ten
percent (10%) of the Registrable Securities.




          “Registration Statement” means a registration statement on Form S-1, Form SB-2, Form S-3 or
such other form as may be available to the Company to be filed with the SEC under the 1933 Act
relating to the Registrable Securities and which names the Investors as selling stockholders.




          “Regulation D” means Regulation D under the 1933 Act.




          “Repurchase Event” shall have the meaning to be provided or provided in the Note.




          “Required Effective Date” means June 15, 2007.




          “Required Information” means, with respect to each Investor, all information regarding such
Investor, the Registrable Securities held by such Investor or which such Investor has the right to
acquire and the intended method of disposition of the Registrable Securities held by such Investor
or which such Investor has the right to acquire as shall be required by the 1933 Act to effect the
registration of the resale by such Investor of such Registrable Securities.




          “Rule 144” means Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time provide a “safe harbor” exemption from registration
under the 1933 Act so as to permit a holder to sell securities of the Company to the public without
being deemed an “underwriter” for purposes of the 1933 Act.




          “Rule 144A” means Rule 144A under the 1933 Act or any successor rule thereto.




          “SEC” means the Securities and Exchange Commission.




          “SEC Effective Date” means the date the Registration Statement is declared effective by the
SEC.




          “SEC Filing Date” has the meaning set forth in Section 8(a).




          “SEC Reports” means the Company’s (1) Annual Report on Form 10-K for the year ended June 30,
2006, (2) Schedule 14A filed with the SEC on October 25, 2006, (3) Quarterly Report on Form 10-Q
for the quarter ended September 30, 2006, (4) Current Reports on Form 8-K filed with the SEC on
October 16, 2006, September 22, 2006, September 13, 2006, August 4, 2006 and July 26, 2006, and (5)
all other periodic and other reports filed by the Company with the SEC pursuant to the 1934 Act
subsequent to September 30, 2006, and prior to the date hereof, in each case as filed with the SEC
and including the information and documents (other than exhibits) incorporated therein by
reference.




-6-









 








          “Securities” means, collectively, the Notes, the Shares and the Warrants.




          “Security Agreement” means the Security Agreement attached hereto as Annex III.




          “Senior Lender” shall mean Presidential Financial Corporation of Delaware Valley.




          “Shares” means the Conversion Shares and the Warrant Shares.




          “Sigma” means Sigma Opportunity Fund, LLC.




          “Sigma Advisors” means Sigma Capital Advisors, LLC, the managing member of Sigma.




          “Subsidiary” means any corporation or other entity of which a majority of the capital stock or
other ownership interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly or indirectly
owned by the Company.




          “Trading Day” means at any time a day on which any of a national securities exchange, Nasdaq,
or such other securities market as at such time constitutes the principal securities market for the
Common Stock is open for general trading of securities.




          “Trading Market” means the Over-The-Counter Bulletin Board, the American Stock Exchange, Inc.,
the Nasdaq, or the New York Stock Exchange, Inc.




          “Transaction Documents” means, collectively, this Agreement, the Securities, the Security
Agreement, the Guaranty and the other agreements, instruments and documents contemplated hereby and
thereby.




          “Violation” means:




          (i) any untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or any post-effective amendment thereof or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to make the statements
therein not misleading,




          (ii) any untrue statement or alleged untrue statement of a material fact contained in any
Prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading,




-7-









 








          (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any
state securities law or any rule or regulation under the 1933 Act, the 1934 Act or any state
securities law, or




          (iv) any breach or alleged breach by any Person other than the Buyers of any representation,
warranty, covenant, agreement or other term of any of the Transaction Documents.




          “Warrants” means the Common Stock Purchase Warrants in the form attached hereto as Annex II.




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




          2. PURCHASE AND SALE; PURCHASE PRICE.




          (a) Purchase. Upon the terms and subject to the conditions of this Agreement, each Buyer
hereby agrees to purchase from the Company, and the Company hereby agrees to sell to each Buyer, on
the Closing Date, a Note in the principal amount set forth on Schedule A of this Agreement opposite
each Buyer’s name and having the terms and conditions as set forth in the form of the Note attached
hereto as Annex I for the Purchase Price. In connection with the purchase of the Notes by the
Buyers, the Company shall issue to each Buyer at the closing on the Closing Date Warrants initially
entitling the holder to purchase one-half of a share of Common Stock for each $1.00 principal
amount of the Note purchased by Buyer.




          (b) Form of Payment. Payment by the Buyers of the Purchase Price to the Company on the
Closing Date shall be made by wire transfer of immediately available funds to:



Interchange Bank

444 Boulevard

Elmwood Park, NJ 07407

ABA No.: 021205871



For Credit to:

Berliner Communications, Inc.

20 Bushes Lane

Elmwood Park, New Jersey 07407

Account number:                     




          (c) Closing. The issuance and sale of the Notes and the issuance of the Warrants and the
Additional Warrants shall occur on the Closing Date at Moomjian, Waite, Wactlar & Coleman, LLP, 100
Jericho Quadrangle, Jericho, New York 11753. At the closing, upon the
terms and subject to the conditions of this Agreement, (1) the Company shall issue and deliver to the Buyers the Notes and
the Warrants and to Sigma Advisors the Additional Warrants against payment by the Buyers to the
Company of an amount equal to the Purchase Price and (2)




-8-









 







the Buyers shall pay to the Company an
amount equal to the Purchase Price against delivery by the Company to the Buyers of the Notes and
the Warrants and to Sigma Advisors of the Additional Warrants.




          3. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE BUYERS.




          Each Buyer, severally and not jointly, represents and warrants as to itself to, and covenants
and agrees with, the Company as follows:




          (a) Purchase for Investment. The Buyer is purchasing the Note and acquiring the Warrants for
its own account for investment and not with a view towards the public sale or distribution thereof
within the meaning of the 1933 Act; and in the event that the Buyer shall acquire any Shares prior
to the SEC Effective Date of a Registration Statement covering the resale of such Shares, such
acquisition by the Buyer shall be for its own account for investment and not with a view towards
the public sale or distribution thereof within the meaning of the 1933 Act prior to the SEC
Effective Date; and the Buyer has no intention of making any distribution, within the meaning of
the 1933 Act, of the Shares except in compliance with the registration requirements of the 1933 Act
or pursuant to an exemption therefrom;




          (b) Accredited Investor. The Buyer is an “accredited investor” as that term is defined in
Rule 501 of Regulation D under the 1933 Act;




          (c) Reoffers and Resales. The Buyer will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or
take a pledge of) any of the Securities unless registered under the 1933 Act, pursuant to an
exemption from registration under the 1933 Act or in a transaction not requiring registration under
the 1933 Act;




          (d) Company Reliance. The Buyer understands that (1) the Note is being offered and sold and
the Warrants are being issued to the Buyer, (2) upon conversion of the Notes, the Conversion Shares
will be issued to the Buyer and (3) upon exercise of the Warrants, the Warrant Shares will be sold
to the Buyer, in each such case in reliance on one or more exemptions from the registration
requirements of the 1933 Act, including, without limitation, Regulation D, and exemptions from
state securities laws and that the Company is relying upon the truth and accuracy of, and the
Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein, in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire or receive an offer to acquire the
Securities;




          (e) Information Provided. The Buyer and its advisors, if any, have requested, received and considered all information
relating to the business, properties, operations, condition (financial or other), results of
operations or prospects of the Company and information relating to the offer and sale of the Note
and the Warrants and the offer of the Conversion Shares and the Warrant Shares deemed relevant by
them ( assuming the accuracy and completeness of the SEC Reports and the Company’s responses to the
Buyer’s requests); the



-9-









 







Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company concerning the terms of the offering of the Securities and the business,
properties, operations, condition (financial or other), results of operations and prospects of the
Company and its Subsidiaries and have received satisfactory answers to any such inquiries; without
limiting the generality of the foregoing, the Buyer has had the opportunity to obtain and to review
the SEC Reports; in connection with its decision to purchase the Note and to acquire the Warrants,
the Buyer has relied exclusively upon (i) the SEC Reports, (ii) the representations, warranties,
covenants and agreements of the Company set forth in this Agreement and to be contained in the
other Transaction Documents, as well as any (iii) investigation of the Company completed by the
Buyer or its advisors; the Buyer understands that its investment in the Securities involves a high
degree of risk; and the Buyer understands that the offering of the Note, the Warrants and the
Additional Warrants is being made to the Buyer as part of an offering without any minimum or
maximum amount of the offering (subject, however, to the right of the Company at any time prior to
execution and delivery of this Agreement by the Company, in its sole discretion, to accept or
reject an offer by the Buyer to purchase the Note and to acquire the Warrants or the Additional
Warrants);



          (f) Absence of Approvals. The Buyer understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any recommendation or
endorsement of the Securities;




          (g) Note Purchase Agreement. The Buyer has all requisite power and authority, corporate or
otherwise, to execute, deliver and perform its obligations under this Agreement and the other
agreements executed by the Buyer in connection herewith and to consummate the transactions
contemplated hereby and thereby; and this Agreement has been duly and validly authorized, duly
executed and delivered by the Buyer and, assuming due execution and delivery by the Company, is a
valid and binding agreement of the Buyer enforceable in accordance with its terms, except as the
enforceability hereof may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect relating to or affecting
creditors’ rights generally and general principles of equity, regardless of whether enforcement is
considered in a proceeding in equity or at law; and




          (h) Buyer Status. The Buyer is not a “broker” or “dealer” as those terms are defined in the
1934 Act nor is it required to be registered with the SEC pursuant to Section 15 of the 1934 Act.




          4. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE COMPANY.



          The Company represents and warrants to, and covenants and agrees with, the Buyers as follows:



          (a) Organization and Authority. The Company and each of the Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and (i) each of the Company and the Subsidiaries has all



-10-









 







requisite corporate power
and authority to own, lease and operate its properties and to carry on its business as described in
the SEC Reports and as currently conducted, and (ii) the Company has all requisite corporate power
and authority to execute, deliver and perform its obligations under this Agreement and the other
Transaction Documents to be executed and delivered by the Company in connection herewith, and to
consummate the transactions contemplated hereby and thereby. The Company does not have any equity
investment in any other Person other than the Subsidiaries listed in Schedule 4(a) hereto.



          (b) Qualifications. The Company and each of the Subsidiaries are duly qualified to do
business as foreign corporations and are in good standing in all jurisdictions where failure so to
qualify could have a material adverse effect on the business, properties, operations, condition
(financial or other), results of operations or prospects of the Company and the Subsidiaries, taken
as a whole.



          (c) Capitalization. As of the date hereof, (1) The authorized capital stock of the Company
consists of (A) 20,000,000 shares of Common Stock, of which 17,035,357 shares are issued and
outstanding, and (B) 2,000,000 shares of Preferred Stock, $.00002 par value, none of which are
issued and outstanding. Schedule 4(c) hereto discloses all outstanding options or warrants for the
purchase of, or rights to purchase or subscribe for, or securities convertible into, exchangeable
for, or otherwise entitling the holder to acquire, Common Stock or other capital stock of the
Company, or any contracts or commitments to issue or sell Common Stock or other capital stock of
the Company or any such options, warrants, rights or other securities.



          (2) The Company has duly reserved from its authorized and unissued shares of Common Stock the
full number of shares required for (A) all options, warrants, convertible securities, exchangeable
securities, and other rights to acquire shares of Common Stock which are outstanding and (B) all
shares of Common Stock and options and other rights to acquire shares of Common Stock which may be
issued or granted under the stock option and similar plans which have been adopted by the Company
or any Subsidiary; and, immediately following the Closing Date, after giving effect to any
antidilution or similar adjustment arising by reason of issuance of the Notes, the Warrants and the
Additional Warrants, the total number of shares of Common Stock reserved and required to be
reserved from the authorized and unissued shares of Common Stock for purposes of all such options,
warrants, convertible securities, other rights, and stock option and similar plans (excluding the
Notes, the Warrants and the Additional Warrants) will be 2,872,956. Each outstanding class or
series of securities of the Company for which any such antidilution adjustment will occur is
identified on Schedule 4(c) attached hereto,
together with the amount of such antidilution adjustment for each such class or series. The
outstanding shares of Common Stock of the Company and outstanding options, warrants, rights, and
other securities entitling the holders to purchase or otherwise acquire Common Stock have been duly
and validly authorized and issued. None of the outstanding shares of Common Stock or options,
warrants, rights, or other such securities has been issued in violation of the preemptive rights of
any securityholder of the Company. The offers and sales of the outstanding shares of Common Stock
of the Company and options, warrants, rights, and other securities were at all relevant times
either registered under the 1933 Act and applicable state securities laws or exempt from such
requirements. Except for as set forth on Schedule 4(c) attached hereto, no holder of any of the
Company’s securities has any rights, “demand,” “piggy-back” or otherwise,



-11-









 







to have such securities
registered by reason of the intention to file, filing or effectiveness of the Registration
Statement.



          (d) Concerning the Shares and the Common Stock. Upon the approval of the Company’s
stockholders of an amendment to the Company’s certificate of incorporation to increase the number
of shares of authorized common stock from twenty million (20,000,000) shares to 100,000,000 shares
(the “Charter Amendment”), the Shares will be duly authorized and the Conversion Shares, when
issued upon conversion of the Notes, and the Warrant Shares, when issued upon exercise of the
Warrants and the Additional Warrants, will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability solely by reason of
being such holder. There are no preemptive or similar rights of any stockholder of the Company or
any other Person to acquire any of the Shares or the Warrants. Upon approval of the Charter
Amendment, the Company will duly reserve 4,377,273 shares of Common Stock (subject to antidilution
adjustment and adjustment for stock splits, combinations, and the like) for issuance upon
conversion of the Notes and exercise of the Warrants, and such shares shall remain so reserved, and
the Company shall from time to time reserve such additional shares of Common Stock as shall be
required to be reserved pursuant to the Notes and Warrants and the Additional Warrants, so long as
the Notes and Warrants and the Additional Warrants are outstanding. The Company will effect the
Charter Amendment on or before the SEC Filing Date. The Common Stock is currently traded on the
National Association of Securities Dealers Over-The-Counter Bulletin Board, and the Company knows
of no reason that the Shares would be ineligible for continued quotation on such Trading Market in
the reasonably foreseeable future.



          (e) Corporate Authorization. This Agreement and the other Transaction Documents to which the
Company is or will be a party have been duly and validly authorized by the Company; this Agreement
has been duly executed and delivered by the Company and, assuming due execution and delivery by
each Buyer, this Agreement is, and the Notes, the Warrants and the Additional Warrants, and the
other Transaction Documents, will be when executed and delivered by the Company, valid and binding
obligations of the Company enforceable in accordance with their respective terms, except as the
enforceability hereof or thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or affecting creditors’
rights generally and general principles of equity, regardless of whether enforcement is considered
in a proceeding in equity or at law.



          (f) Non-contravention. The execution and delivery of the Transaction Documents by the Company
and any Subsidiary and the consummation by the Company of the issuance of the Securities as
contemplated by this Agreement and consummation by the Company any Subsidiary of the other
transactions contemplated by the Transaction Documents do not and will not, with or without the
giving of notice or the lapse of time, or both, (i) result in any violation of any term or
provision of the certificate of incorporation (including all certificates of designation) or bylaws
of the Company or any Subsidiary, (ii) conflict with or result in a breach by the Company or any
Subsidiary of any of the terms or provisions of, or constitute a default under, or result in the
modification of, or result in the creation or imposition of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any Subsidiary pursuant to, or
affect the validity or enforceability of or the ability of the



-12-









 







Company or any Subsidiary to perform
its obligations under the Transaction Documents pursuant to, any indenture, mortgage, deed of trust
or other agreement or instrument to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or any of their respective properties or assets are bound or affected,
(iii) violate or contravene any applicable law, rule or regulation or any applicable decree,
judgment or order of any court, United States federal or state regulatory body, administrative
agency or other governmental body having jurisdiction over the Company or any Subsidiary or any of
their respective properties or assets, in any such case which would be reasonably likely to have a
material adverse effect on the business, properties, operations, condition (financial or other),
results of operations or prospects of the Company and the Subsidiaries, taken as a whole, or the
validity or enforceability of, or the ability of the Company to perform its obligations under, the
Transaction Documents, or (iv) have any material adverse effect on any permit, certification,
registration, approval, consent, license or franchise necessary for the Company or any Subsidiary
to own or lease and operate any of its properties and to conduct any of its business or the ability
of the Company or any Subsidiary to make use thereof.



          (g) Approvals, Filings, Etc. No authorization, approval or consent of, or filing with, any
United States or foreign court, governmental body, regulatory agency, self-regulatory organization,
or stock exchange or market, or the stockholders of the Company, or any other Person, is required
to be obtained or made by the Company or any Subsidiary for (x) the execution, delivery and
performance by the Company of the Transaction Documents, (y) the issuance and sale of the
Securities as contemplated by this Agreement and the terms of the Notes, the Warrants and the
Additional Warrants and (z) the performance by the Company of its obligations under the Transaction
Documents, other than (1) registration of the resale of the Shares under the 1933 Act as
contemplated by Section 8, (2) as may be required under applicable state securities or “blue sky”
laws, (3) filing of one or more Forms D with respect to the Securities as required under Regulation
D, (4) as may be required in connection with the Charter Amendment, and (5) the approval of the
Senior Lender (which has been received prior to Closing).



          (h) Information Provided. The SEC Reports, the Transaction Documents and the instruments
delivered by the Company to the Buyers in connection with the closing on the Closing Date do not
and will not on the date of execution and delivery of this Agreement nor on the Closing Date
contain any untrue statement of a material fact or omit to state any material fact necessary in
order to make the statements
therein, in the light of the circumstances under which they are made, not misleading, it being
understood that for purposes of this Section 4(h), any statement contained in such information
shall be deemed to be modified or superseded for purposes of this Section 4(h) to the extent that a
statement in any document included in such information which was prepared and furnished to the
Buyers on a later date or filed with the SEC on a later date modifies or replaces such statement,
whether or not such later prepared or filed statement so states.



          (i) Conduct of Business. Except as set forth on Schedule 4(i), since June 30, 2006, neither
the Company nor any Subsidiary has (i) incurred any material obligation or liability (absolute or
contingent) other than in the ordinary course of business; (ii) canceled, without payment in full,
any material notes, loans or other obligations receivable or other debts



-13-









 







or claims held by it other
than in the ordinary course of business; (iii) sold, assigned, transferred, abandoned, mortgaged,
pledged or subjected to lien any of its material properties, tangible or intangible, or rights
under any material contract, permit, license, franchise or other agreement; (iv) conducted its
business in a manner materially different from its business as conducted on such date; (v)
declared, made or paid or set aside for payment any cash or non-cash distribution on any shares of
its capital stock; or (vi) consummated, or entered into any agreement with respect to, any
transaction or event which would constitute a Repurchase Event. The Company and each Subsidiary
owns, possesses or has obtained all governmental, administrative and third party licenses, permits,
certificates, registrations, approvals, consents and other authorizations necessary to own or lease
(as the case may be) and operate its properties, whether tangible or intangible, and to conduct its
business or operations as currently conducted, except such licenses, permits, certificates,
registrations, approvals, consents and authorizations the failure of which to obtain would not have
a material adverse effect on the business, properties, operations, condition (financial or other),
results of operations or prospects of the Company and the Subsidiaries, taken as a whole.



          (j) SEC Filings. For the preceding twelve months, the Company has timely filed all reports
required to be filed under the 1934 Act and any other material reports or documents required to be
filed with the SEC.



          (k) Absence of Certain Proceedings. Other than as set forth in Schedule 4(k), there is no
action, suit, proceeding, inquiry or investigation before or by any court, public board or body or
governmental agency pending or, to the knowledge of the Company or any Subsidiary, threatened
against or affecting the Company or any Subsidiary, in any such case wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the business, properties,
operations, condition (financial or other), results of operations or prospects of the Company and
the Subsidiaries, taken as a whole, or the transactions contemplated by the Transaction Documents
or which could adversely affect the validity or enforceability of, or the authority or ability of
the Company to perform its obligations under, the Transaction Documents; the Company does not have
pending before the SEC any request for confidential treatment of information and, to the best of
the Company’s knowledge, no such request will be made by the Company prior to the SEC Effective
Date; and to the best of the Company’s knowledge there is not pending or contemplated any, and
there has
been no, investigation by the SEC involving the Company or any current or former director or
officer of the Company.



          (l) Financial Statements; Liabilities. The financial statements included in the SEC Reports
present fairly the financial position, results of operations and cash flows of the Company and the
Subsidiaries, at the dates and for the periods covered thereby, have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis throughout the periods
covered thereby, and include all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial position, results of operations and cash flows of the
Company and the Subsidiaries at the dates and for the periods covered thereby. Except as and to
the extent disclosed, reflected or reserved against in the financial statements of the Company and
the notes thereto included in the SEC Reports, neither the Company nor any Subsidiary has any
liability, debt or obligation, whether accrued, absolute, contingent or otherwise, and whether due
or to become due which, individually or in the



-14-









 







aggregate, are material to the Company and the
Subsidiaries, taken as a whole. Since June 30, 2006, neither the Company nor any Subsidiary has
incurred any liability, debt or obligation of any nature whatsoever which, individually or in the
aggregate are material to the Company and the Subsidiaries, taken as a whole, other than those
incurred in the ordinary course of their respective businesses. A detailed description and the
amount of the Indebtedness of the Company and Subsidiaries that will be outstanding on the Closing
Date appear on Schedule 4(l) attached hereto.



          (m) Material Losses. Since June 30, 2006, neither the Company nor any Subsidiary has
sustained any loss or interference with its business or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from any labor dispute or court
or governmental action, order or decree, which loss or interference could be material to the
business, properties, operations, condition (financial or other), results of operations or
prospects of the Company and the Subsidiaries, taken as a whole.



          (n) Absence of Certain Changes. Since June 30, 2006, there has been no material adverse
change and no material adverse development in the business, properties, operations, condition
(financial or other), results of operations or prospects of the Company and the Subsidiaries, taken
as a whole. The Company has not received any notice that any customer intends, and to its
knowledge no customer intends, to cease doing business with the Company or decrease in any material
respect the amount of business that it does with the Company. Since June 30, 2006, the Company has
not (i) declared or paid any dividends, (ii) sold any assets outside of the ordinary course of
business consistent with past practice, (iii) had capital expenditures outside of the ordinary
course of business consistent with past practice, (iv) engaged in any transaction with any
Affiliate in which the amount involved exceed $60,000 except as set forth in the SEC Reports or (v)
engaged in any other transaction outside of the ordinary course of business consistent with past
practice. Except as set forth in Schedule 4(n), neither the Company nor any Subsidiary has taken
any steps to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge
or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or
any actual knowledge of any fact which would reasonably lead a creditor to do so. The Company is
not as of the date hereof, and after giving effect to the Additional Financing and the transactions
contemplated hereby to occur on the Closing Date, Insolvent (as defined below). For purposes of
this Section 4(n), “Insolvent” means (i) the present fair saleable value of the Company’s assets as
a going concern is less than the amount required to pay the Company’s total indebtedness,
contingent or otherwise, (ii) the Company is unable to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and matured, (iii) the
Company intends to incur or believes that it will incur debts that would be beyond its ability to
pay as such debts mature or (iv) the Company has unreasonably small capital with which to conduct
the business in which it is engaged as such business is now conducted and is proposed to be
conducted.



          (o) Intellectual Property. Except as set forth on Schedule 4(o): (1) the Company holds all
Intellectual Property, free and clear of all Encumbrances and restrictions on use or transfer,
whether or not recorded, and has sole title to and ownership of or has the full, exclusive right to
use, for the life of the proprietary right all Intellectual Property; (2) the use of the
Intellectual Property by the Company or any Subsidiary does not, to the knowledge of the



-15-









 







Company
after due inquiry, violate or infringe on the rights of any other Person; (3) neither the Company
nor any Subsidiary has received any notice of any conflict between the asserted rights of others
and the Company or any Subsidiary with respect to any Intellectual Property; (4) the Company and
the Subsidiaries are in compliance with all terms and conditions of their agreements relating to
the Intellectual Property; (5) neither the Company nor any Subsidiary is or has been a defendant in
any action, suit, investigation or proceeding relating to infringement or misappropriation by the
Company or any Subsidiary of any Intellectual Property; (6) neither the Company nor any Subsidiary
has been notified of any alleged claim of infringement or misappropriation by the Company or any
Subsidiary of any Intellectual Property; (7) the Company has no knowledge of any claim of
infringement or misappropriation by the Company or any Subsidiary of any Intellectual Property; (8)
to the knowledge (after due inquiry) of the Company, none of the products the Company and the
Subsidiaries are researching, developing, propose to research and develop, make, have made, use, or
sell, infringes or misappropriates any Intellectual Property right of any third party; (9) none of
the trademarks and service marks used by the Company or any Subsidiary, to the knowledge of the
Company after due inquiry, infringes the trademark or service mark rights of any third party; (10)
neither the Company nor any Subsidiary has entered into any agreement to indemnify any other person
against any charge of infringement of any Intellectual Property; (11) none of the research and
development results and other know-how relating to the Company’s or the Subsidiaries’ respective
businesses, the value of which to the Company or the Subsidiaries is contingent upon maintenance of
the confidentiality thereof, has been disclosed to any Person other than Persons bound by written
confidentiality agreements; and (12) the Company owns directly, or possesses adequate rights to
use, all intellectual property used in or relating to the business of the Company as currently
conducted except where the failure to own or possess such rights could not have a material adverse
effect on the business, properties or operations of the Company and its Subsidiaries.



          (p) Internal Accounting Controls. To the best of its knowledge and belief, the Company and
each of its Subsidiaries maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial statements in conformity
with generally accepted accounting principles and to maintain asset and liability accountability,
(iii) access to assets or incurrence of liabilities is permitted only in accordance with
management’s general or specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable intervals and
appropriate action is taken with respect to any difference. The Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15 under the 1934 Act) that are
effective in ensuring that information required to be disclosed by the Company in the reports that
it files or submits under the 1934 Act is recorded, processed, summarized and reported, within the
time periods specified in the rules and forms of the SEC, including, without limitation, controls
and procedures designed to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the 1934 Act is accumulated and communicated to the
Company’s management, including its principal executive officer or officers and its principal
financial officer or officers, as appropriate, to allow timely decisions regarding required
disclosure.



-16-









 





          (q) Compliance with Law. Neither the Company nor any Subsidiary is in violation of or has any
liability under any statute, law, rule, regulation, ordinance, decision or order of any
governmental agency or body or any court, domestic or foreign, except where such violation or
liability would not individually or in the aggregate have a material adverse effect on the
business, properties, operations, condition (financial or other), results of operations or
prospects of the Company and the Subsidiaries, taken as a whole; and neither the Company nor any
Subsidiary is aware of any pending investigation which would reasonably be expected to lead to such
a claim.



          (r) Properties. Each of the Company and the Subsidiaries has good title to all property, real
and personal (tangible and intangible), and other assets owned by it, free and clear of all
security interests, pledges, charges, mortgages, liens or other encumbrances, except as set forth
on Schedule 4(r). The leases, licenses or other contracts or instruments under which the Company
and each Subsidiary leases, holds or is entitled to use any property, real or personal, which
individually or in the aggregate are material to the Company and the Subsidiaries, taken as a
whole, are valid, subsisting and enforceable. Neither the Company nor any Subsidiary has received
notice of any material violation of any applicable law, ordinance, regulation, order or requirement
relating to its owned or leased properties. Neither the Company nor any Subsidiary has any
mortgage, lien, pledge, security interest or other charge or encumbrance on any of its assets or
properties except as listed in Schedule 4(r) attached hereto.



          (s) Labor Relations. No material labor problem exists or, to the knowledge of the Company, is
imminent with respect to any of the employees of the Company or any Subsidiary. The Company has
provided Sigma with the names of each of the employees of the Company and each Subsidiary, his or
her title or position, his or her current salary and any additional compensation arrangements with
such person (e.g. as to raises, bonuses, etc.). The Company has 13 employees who earned in excess
of $100,000 in total compensation in calendar year 2006.



          (t) Insurance. The Company and the Subsidiaries maintain insurance against loss or damage by
fire or other casualty and such other insurance, including but not limited to, general liability
insurance, in such amounts and covering such risks as the Company believes are commercially
reasonable.



          (u) Tax Matters. Except as set forth on Schedule 4(u), each of the Company and the
Subsidiaries has filed all federal, state and local income and franchise tax returns required to be
filed and has paid all taxes shown by such returns to be due, and no tax deficiency has been
determined adversely to the Company or any Subsidiary which has had (nor does the Company or any
Subsidiary have any knowledge of any tax deficiency which, if determined adversely to the Company
or any Subsidiary, might have) a material adverse effect on the business, properties, operations,
condition (financial or other), results of operations, or prospects of the Company and the
Subsidiaries, taken as a whole.



          (v) Investment Company. Neither the Company nor any Subsidiary is an “investment company”
within the meaning of such term under the Investment Company Act of 1940, as amended, and the rules
and regulations of the SEC thereunder.



-17-









 





          (w) Absence of Brokers, Finders, Etc. Except for Punk Ziegel and Company, no broker, finder
or similar Person is entitled to any commission, fee or other compensation by reason of action
taken by or on behalf of the Company in connection with the transactions contemplated by this
Agreement, and the Company shall pay, and indemnify and hold harmless each Buyer from, any claim
made against any Buyer by any Person for any such commission, fee or other compensation.



          (x) No Solicitation. No form of general solicitation or general advertising was used by the
Company or, to the best of its knowledge, any other Person acting on behalf of the Company, in
respect of the Securities or in connection with the offer and sale of the Securities. Other than
securities issued to Punk Ziegel and Company, neither the Company nor, to its knowledge, any Person
acting on behalf of the Company has, either directly or indirectly, sold or offered for sale to any
Person any of the Securities or, within the six months prior to the date hereof, any other similar
security of the Company except as contemplated by this Agreement; and neither the Company nor any
Person authorized to act on its behalf will sell or offer for sale any promissory notes, warrants,
shares of Common Stock or other securities to, or solicit any offers to buy any such security from,
any Person so as thereby to cause the issuance or sale of any of the Securities to be in violation
of any of the provisions of Section 5 of the 1933 Act.



          (y) ERISA Compliance. Each of the Company and the Subsidiaries is in compliance in all
material respects with all presently applicable provisions of ERISA; no “reportable event” (as
defined in ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for which
the Company or any Subsidiary would have any liability; neither the Company nor any Subsidiary has
incurred or
expects to incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any “pension plan” or (ii) Sections 412 or 4971 of the Code; and each “pension
plan” for which the Company or any Subsidiary would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the loss of such qualification.



          (z) Rights Agreement; Interested Stockholder. The Company has not adopted a shareholder
rights plan or similar arrangement relating to accumulations of beneficial ownership of Common
Stock or a change in control of the Company. All necessary and proper action has been taken by the
Company and its Board of Directors such that the execution, delivery and performance of the
Transaction Documents and the purchase, sale and issuance of the Securities will not cause any
Buyer to become an “interested stockholder” under Section 203 of the Delaware General Corporation
Law.



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



-18-









 





          5. CERTAIN COVENANTS.



          (a) Transfer Restrictions. The Buyers acknowledge and agree that (1) the Notes, the Warrants
and the Additional Warrants have not been and are not being registered under the provisions of the
1933 Act or any state securities laws and, except as provided in Section 8, the Shares have not
been and are not being registered under the 1933 Act or any state securities laws, and that the
Notes, the Warrants and the Additional Warrants may not be transferred unless the Buyer desiring to
make such transfer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the Notes, the
Warrants or the Additional Warrants to be transferred may be transferred without such registration
or unless transferred in accordance with Rule 144A to a QIB; (2) no sale, assignment or other
transfer of the Notes, the Warrants and the Additional Warrants or any interest therein may be made
except in accordance with the terms hereof and thereof; (3) the Shares may not be resold by any
Buyer unless the resale has been registered under the 1933 Act or is made pursuant to an applicable
exemption from such registration and the Company shall have received the opinion of counsel
provided for in the second to last sentence of this Section 5(a); (4) any sale of Shares under a
Registration Statement shall be made only in compliance with the terms of this Section 5(a) and
Section 8 (including, without limitation, Section 8(c)(5)); (5) any sale of the Securities made in
reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if the
exemption provided by Rule 144 is not available, any resale of the Securities under circumstances
in which the seller, or the Person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and (6) the Company is under
no obligation to register the Securities (other than registration of the resale of the Shares in
accordance with Section 8) under the 1933 Act or, except as provided in Section 5(d) and Section 8,
to comply with the terms and conditions of any exemption thereunder. Prior to the time particular
Shares are eligible for resale under Rule 144(k), no Buyer may transfer the
Shares in a transaction which does not constitute a transfer thereof pursuant to the applicable
Registration Statement in accordance with the plan of distribution set forth therein or in any
supplement to the related Prospectus unless the Buyer shall have delivered to the Company an
opinion of counsel, reasonably satisfactory in form, scope and substance to the Company, that such
Shares may be so transferred without registration under the 1933 Act. Nothing in any of the
Transaction Documents shall limit the right of a holder of the Securities to make a bona fide
pledge thereof to an institutional lender and the Company agrees to cooperate with any Investor who
seeks to effect any such pledge by providing such information and making such confirmations as
reasonably requested.



          (b) Restrictive Legends. (1) The Buyers acknowledge and agree that the Notes shall bear a
restrictive legend in substantially the following form (and a stop-transfer order may be placed
against transfer of the Notes):




This Note has not been registered under the Securities Act of 1933, as amended (the “Act”),
or any state securities laws. This Note has been acquired for investment only and may not
be sold, transferred or assigned unless (1) resale is registered under the Act, (2) the
Company has received an opinion of counsel reasonably satisfactory in form, scope



-19-









 







and
substance to the Company that such registration is not required or (3) sold, transferred or
assigned to a QIB pursuant to Rule 144A.



          (2) The Buyers further acknowledge and agree that the Warrants and the Additional Warrants
shall bear a restrictive legend in substantially the following form (and a stop-transfer order may
be placed against transfer of the Warrants and the Additional Warrants):





This Warrant has not been registered under the Securities Act of 1933, as amended (the
“Act”), and may not be sold, transferred or assigned unless (1) the resale hereof is
registered under the Act, (2) the Company has received an opinion of counsel reasonably
satisfactory in form, scope and substance to the Company that such registration is not
required or (3) sold, transferred or assigned to a QIB pursuant to Rule 144A.



          (3) The Buyers further acknowledge and agree that until such time as the Shares have been
registered for resale under the 1933 Act as contemplated by Section 8 or are eligible for resale
under Rule 144(k) under the 1933 Act, the certificates for the Shares, may bear a restrictive
legend in substantially the following form (and a stop-transfer order may be placed against
transfer of the certificates for the Shares):





The securities represented by this certificate have not been registered under the Securities
Act of 1933, as amended (the “Act”). The securities have been acquired for investment and
may not be resold, transferred or assigned in the absence of an effective registration
statement for the securities under the Act or an opinion of counsel that registration is not
required under the Act.



          (4) Once the Registration Statement required to be filed by the Company pursuant to Section 8
has been declared effective or particular Shares are eligible for resale
pursuant to Rule 144(k) under the 1933 Act, thereafter (1) upon request of a Buyer the Company will
substitute certificates without restrictive legend for certificates for any such Shares issued
prior to the SEC Effective Date or prior to the time of such eligibility, as the case may be, which
bear such restrictive legend and remove any stop-transfer restriction relating thereto promptly,
but in no event later than three days after surrender of such certificates by the Buyer, and (2)
the Company shall not place any restrictive legend on certificates for Conversion Shares issued
upon conversion of the Notes or on any Warrant Shares issued upon exercise of the Warrants and the
Additional Warrants or impose any stop-transfer restriction thereon.




          (c) Reporting Status. During the Registration Period, the Company shall timely file all
reports required to be filed with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such termination.




          (d) Form D. The Company agrees to file one or more Forms D with respect to the Securities as
required under Regulation D to claim the exemption provided by Rule 506 of Regulation D and to
provide a copy thereof to the Buyers promptly after such filing.




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          (e) State Securities Laws. On or before the Closing Date, the Company shall take such action
as shall be necessary to qualify, or to obtain an exemption for, the offer and sale of the
Securities to the Buyers as contemplated by the Transaction Documents under such of the securities
laws of jurisdictions in the United States as shall be applicable thereto. Notwithstanding the
foregoing obligations of the Company in this Section 5(e), the Company shall not be required (1) to
qualify to do business in any jurisdiction where it would not otherwise be required to qualify but
for this Section 5(e), (2) to subject itself to general taxation in any such jurisdiction, (3) to
file a general consent to service of process in any such jurisdiction, (4) to provide any
undertakings that cause more than nominal expense or burden to the Company or (5) to make any
change in its charter or by-laws which the Company determines to be contrary to the best interests
of the Company and its stockholders. The Company shall furnish the Buyers with copies of all
filings, applications, orders and grants or confirmations of exemptions relating to such securities
laws on or before the Closing Date.



          (f) Limitation on Certain Actions. From the date of execution and delivery of this Agreement
by the parties hereto to the date of issuance of the Notes, the Company (1) shall comply with
Article II of the Notes as if the Notes were outstanding, (2) shall not take any action which, if
the Notes were outstanding, (A) would constitute an Event of Default or, with the giving of notice
or the passage of time or both, would constitute an Event of Default or (B) would constitute a
Repurchase Event or, with the giving of notice or the passage of time or both, would constitute a
Repurchase Event.



          (g) Use of Proceeds. The Company represents and agrees that: (1) it does not own or have any
present intention of acquiring any Margin Stock; (2) the proceeds of sale of the Notes will be used
as set forth on Schedule 5(g); (3) none of the proceeds from the sale of the Notes or Warrant
Shares will be
used, directly or indirectly (A) to pay any existing debt obligations other than as may be
consented to in writing by Sigma, (B) to make any loan to or investment in any other Person other
than as may be consented to in writing by Sigma or (C) for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any Margin Stock or for the purpose of
maintaining, reducing or retiring any indebtedness which was originally incurred to purchase or
carry any stock that is currently a Margin Stock or for any other purpose which might constitute
the transactions contemplated by this Agreement a “purpose credit” within the meaning of such
Regulation U of the Board of Governors of the Federal Reserve System; and (4) neither the Company
nor any agent acting on its behalf has taken or will take any action which might cause this
Agreement or the transactions contemplated hereby to violate Regulation T, Regulation U or any
other regulation of the Board of Governors of the Federal Reserve System or to violate the 1934
Act, in each case as in effect now or as the same may hereafter be in effect.



          (h) Best Efforts. Each of the parties shall use its best efforts timely to satisfy each of
the conditions to the other party’s obligations to sell and purchase the Notes set forth in Section
6 or 7, as the case may be, of this Agreement on or before the Closing Date.



          (i) Debt Obligation. So long as any portion of the Notes are outstanding, the Company shall
cause its books and records to reflect the Notes as a debt of the Company in its unpaid principal
amount, shall cause its financial statements to reflect the Notes as a debt of the



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Company in such
amount as shall be the greatest amount permitted in accordance with generally accepted accounting
principles and, whenever appropriate, as a valid debt obligation of the Company for money borrowed.



          (j) Limitation on Certain Transactions. Beginning as of the date of this Agreement and until
the effective date of the Registration Statement, without the prior written consent of Sigma (which
consent may be withheld in Sigma’s sole discretion), the Company shall not issue or sell or agree
to issue or sell any securities in a capital raising transaction, unless such securities will not
be, and are not, registered for sale or resale under the 1933 Act until on or after the effective
date of the Registration Statement, provided that the limitation of this Section 5(j) shall not
apply to securities issued pursuant to (a) the Company’s duly adopted employee or director bona
fide share and options plans, or (b) the exercise or conversion of Common Stock Equivalents that
are outstanding on the date of this Agreement.



          (k) Right of the Buyers to Participate in Future Transactions. For a period of two years
after the Closing Date, the Buyers will have the right to participate in any sales of any of the
Company’s securities in a capital raising transaction on the terms and conditions set forth in this
Section 5(k). During such period, the Company shall give ten Business Days advance written notice
to the Buyers prior to any non-public offer or sale of any of the Company’s capital stock or any
Common Stock Equivalents in a capital raising transaction by providing to the Buyer a term sheet
containing all significant business terms of such a proposed transaction. The Buyers shall have
the right to participate in such proposed transaction and to purchase an aggregate of 50 percent of
such securities (each such Buyer having the right to purchase their pro rata share of such
securities based upon their beneficial ownership of Common Stock underlying the Notes and Warrants
and the Additional Warrants) which are the
subject of such proposed transaction for the same consideration and on the same terms and
conditions as contemplated for such third-party sale (or such lesser portion thereof as specified
by the Buyers). If a Buyer elects to exercise its rights hereunder it must deliver written notice
to the Company within five Business Days following receipt of the notice and term sheet from the
Company, which notice from such Buyer shall be contingent upon receipt of satisfactory definitive
documents for such transaction from the Company. If, subsequent to the Company giving notice to
the Buyers hereunder but prior to the Buyers exercising their rights to participate (or the
expiration of the five-day period without response from the Buyers or the rejection of such offer
for such financing by the Buyers), the terms and conditions of the proposed third-party sale are
changed in any material manner from that disclosed in the comprehensive term sheet provided to the
Buyers, the Company shall be required to provide a new notice and comprehensive term sheet
reflecting such revised terms to the Buyers hereunder and the Buyers shall have the right, which
must be exercised within five Business Days of such new notice and such revised term sheet, to
exercise their rights to purchase the securities on such changed terms and conditions as provided
hereunder. To the extent that the Buyers do not exercise their rights hereunder with respect to a
proposed transaction with the Company, then the Company may proceed with such proposed transaction
on the same terms and conditions as notice to the Buyers with the Buyers that have elected to
participate in such proposed transaction, provided that if such proposed transaction is not
consummated within 90 days following the Company’s notice hereunder, then the right of
participation hereunder shall again apply to the Buyers for such proposed transaction. The rights
and obligations of this Section 5(k) shall in no way diminish



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the other rights of the Buyers
pursuant to this Section 5.



          (l) Reservation of Common Stock. On or before the SEC Filing Date, the Company
shall have reserved a sufficient number of authorized shares to provide for the issuance of
Shares upon the full conversion of the Notes and exercise of the Warrants and the Additional
Warrants.



          (m) Appointment of Director. So long as any of the Notes purchased by Sigma remain
outstanding in the name of Sigma or Sigma beneficially owns at least 5% of the Common Stock of the
Company, calculated in accordance with Section 13(d) of the 1934 Act and Regulation 13D-G
thereunder, Sigma shall have the right to nominate a director to the Company’s Board of Directors,
with Sigma’s initial director designee to be Thom Waye. The Company shall use its best efforts to
cause such nominee, as well as all reasonably suited future designees, to be elected to the Board
of Directors of the Company.



          (n) Financial Information. From and after the Closing Date, the Company shall deliver to
Buyers such financial and other information regarding the Company and its business as Buyers may
reasonably request.



          (o) Additional Financing. Sigma and its affiliates, partners and/or designees shall have the
right, on or prior to February 15, 2007, to invest an additional $1 million on the same terms as
provided in this Agreement. In addition, on or prior to January 15, 2007, the Company shall obtain
the written commitment (subject to conventional qualifications and conditions precedent typically
set forth in financing commitment letters issued by working capital lenders) of a financing source
reasonably satisfactory to Sigma to provide senior
financing to the Company on terms reasonably satisfactory to Sigma in an amount not less than $2
million nor more than $10 million (it being understood and acknowledged by Buyers that such
financing would (A) be senior in right of payment to the Note, subject to the right of Sigma to
receive regularly scheduled payments on the Note and other amounts due under the Transaction
Documents in accordance with their terms until such time as an event of default has occurred under
such senior financing, and (B) be secured by a first priority security interest in all of the
Company’s and its Subsidiaries’ assets, including all accounts receivable, inventory and all
proceeds thereof, and Buyers would have a security interest in such assets that is subordinated to
the security interest granted to such financing source). In the event that the Company does not
obtain such commitment on or prior to such date, Sigma, its affiliates, partners and/or designees
shall have the right to invest a further $2 million on or prior to February 15, 2007 on the same
terms as provided in this Agreement and the Company shall not, without the prior written consent of
Sigma, engage in discussions with any third party with respect to any alternative financing until
on or after February 15, 2007.



          6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.



          The Buyers understand that the Company’s obligation to sell the Notes and issue the Warrants
and the Additional Warrants to the Buyers pursuant to this Agreement is conditioned upon
satisfaction of the following conditions precedent on or before the Closing Date (any or all of
which may be waived by the Company in its sole discretion):



-23-









 





          (a) On the Closing Date, no legal action, suit or proceeding shall be pending or threatened
which seeks to restrain or prohibit the transactions contemplated by this Agreement; and



          (b) The representations and warranties of the Buyers contained in this Agreement shall have
been true and correct on the date of this Agreement and on the Closing Date as if made on the
Closing Date and on or before the Closing Date the Buyers shall have performed all covenants and
agreements of the Buyers required to be performed by the Buyers on or before the Closing Date.



          7. CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE.



          The Company understands that each Buyer’s obligation to purchase a Note and acquire the
Warrants and the Additional Warrants is conditioned upon satisfaction of the following conditions
precedent on or before the Closing Date (any or all of which may be waived by each Buyer in their
sole discretion):



          (a) On the Closing Date, no legal action, suit or proceeding shall be pending or threatened
which seeks to restrain or prohibit the transactions contemplated by this Agreement;



          (b) The representations and warranties of the Company contained in this Agreement shall have
been true and correct on the date of this Agreement and shall be true and correct on the Closing
Date as if given on and as of the Closing Date (except for representations
given as of a specific date, which representations shall be true and correct as of such date and,
except for the approvals and filings referred to in clause (2) of Section 4(g), which shall have
been obtained or made, on or before the Closing Date), and on or before the Closing Date the
Company shall have performed all covenants and agreements of the Company contained herein or in any
of the other Transaction Documents required to be performed by the Company on or before the Closing
Date;



          (c) No event which, if the Note were outstanding, (1) would constitute an Event of Default or
which, with the giving of notice or the passage of time, or both, would constitute an Event of
Default shall have occurred and be continuing or (2) would constitute a Repurchase Event or which,
with the giving of notice or the passage of time, or both, would constitute a Repurchase Event
shall have occurred and be continuing;



          (d) The Company shall have delivered to the Buyers a certificate, dated the Closing Date, duly
executed by its Chief Executive Officer or Chief Financial Officer, to the effect set forth in
subparagraphs (a), (b), and (c) of this Section 7;



          (e) The Company shall have delivered to Buyers the Security Agreement substantially in the
form attached as Annex III.



-24-









 





          (f) The Company shall have delivered to the Buyers a certificate, dated the Closing Date, of
the Secretary of the Company certifying (1) the Certificate of Incorporation and By-Laws of the
Company as in effect on the Closing Date, (2) all resolutions of the Board of Directors (and
committees thereof) of the Company relating to this Agreement and the other Transaction Documents
and the transactions contemplated hereby and thereby and (3) such other matters as reasonably
requested by the Buyer;



          (g) On the Closing Date, the Buyers shall have received an opinion of Andrews Kurth, LLP,
counsel for the Company, dated the Closing Date, addressed to the Buyers, in form, scope and
substance reasonably satisfactory to the Buyers, substantially in the
form attached as Annex
V;



          (h) The Company shall have delivered to the Buyers the waiver and consent to the transactions
contemplated hereby of the Senior Lender;



          (i) On the Closing Date, (i) trading in securities on the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. or Nasdaq shall not have been suspended or materially limited and
(ii) a general moratorium on commercial banking activities in the State of New York shall not have
been declared by either federal or state authorities.



          (j) On the Closing Date, Sigma Capital Advisors, LLC (“Sigma Advisors”) and the Company shall
have entered into an advisory services agreement in form and substance satisfactory to Sigma
Advisors providing for payment of the Advisory Fee and the issuance of the Additional Warrants.



          (k) The Company shall have caused to be delivered to the Buyers, in form and substance
satisfactory to Buyers, a majority written stockholder’s consent whereby Old Berliner
Communications, Inc., the majority shareholder of the Company, approves the Charter Amendment and
approval of the Board of Directors of the Company of the Charter Amendment.



          (l) The Company shall have caused BCI Communications, Inc. to have delivered to Buyers the
Guaranty substantially in the form attached as Annex VI.



-25-









 





          8. REGISTRATION RIGHTS.



          (a) Mandatory Registration. (1) The Company shall prepare and, as expeditiously as possible,
but in no event later than March 15, 2007 (the “SEC Filing Date”), file with the SEC a Registration
Statement which covers the resale by the Buyers of (A) a number of shares of Common Stock equal to
the maximum number of Conversion Shares issuable upon conversion of the Notes, and (B) a number of
shares of Common Stock equal to the number of Warrant Shares issuable upon exercise of the Warrants
and the Additional Warrants, in each such case as Registrable Securities, and which Registration
Statement shall state that, in accordance with Rule 416 under the 1933 Act, the Registration
Statement also covers such indeterminate number of additional shares of Common Stock as may become
issuable upon conversion of the Notes or exercise of the Warrants and the Additional Warrants to
prevent dilution resulting from stock splits, stock dividends or similar transactions.



          (2) Prior to the SEC Effective Date, and during any time subsequent to the SEC Effective Date
when the Registration Statement for any reason is not available for use by any Investor for the
resale of any Registrable Securities, the Company shall not file any other registration statement
or any amendment thereto with the SEC under the 1933 Act or request the acceleration of the
effectiveness of any other registration statement previously filed with the SEC, other than (A) any
registration statement on Form S-8 and (B) any registration statement or amendment which the
Company is required to file, or as to which the Company is required to request acceleration,
pursuant to any obligation in effect on the date of execution and delivery of this Agreement.



          (3) If a Registration Event occurs, then the Company will make payments to each Buyer as
partial liquidated damages for the minimum amount of damages to each Buyer by reason thereof, and
not as a penalty, at the rate of 2% per month of the Purchase Price paid by each Buyer pursuant to
this Agreement (excluding the Purchase Price with respect to Shares already sold or which may be
sold pursuant to Rule 144(k)), for each calendar month of the Registration Default Period (pro
rated for any period less than 30 days); provided that in no event shall the Company be required to
pay any such amount for periods after the date that is six months after the Required Effective
Date. Each such payment shall be due and payable within five (5) days after the end of each
calendar month of the Registration Default Period until the termination of the Registration Default
Period and within five (5) days after such termination. Such payments shall be in partial
compensation to the Buyers, and shall not constitute the Buyers’ exclusive remedy for a breach of
the Company’s obligations under this Section 8. The Registration Default Period shall terminate
upon (u) the filing of the Registration Statement in
the case of clause (i) of the definition of “Registration Event”; (v) the SEC Effective Date in the
case of clause (ii) of the definition of “Registration Event”; (w) the ability of each Buyer to
effect sales pursuant to the Registration Statement in the case of clause (iii) of the definition
of “Registration Event”; (x) the listing or inclusion and/or trading of the Common Stock on a
Trading Market, as the case may be, in the case of clause (iv) of the definition of “Registration
Event”; (y) the delivery of such shares or certificates in the case of clause (v) of the definition
of “Registration Event”; and (z) in the case of the events described in clauses (ii) and (iii) of
the definition of “Registration Event”, the earlier termination of the Registration Period and in
each such case any Registration Default Period that commenced by reason of the occurrence of such



-26-









 







event shall terminate if at the time no other Registration Event is continuing. Amounts payable
as partial liquidated damages hereunder shall cease when the Buyer no longer holds any of the
Notes, the Warrant or Registrable Securities.



          (b) Obligations of the Company. In connection with any registration of the Registrable
Securities, the Company shall:



          (1) use its best efforts to cause the Registration Statement to become effective as promptly
as possible, and no later than the Required Effective Date, and to keep the Registration Statement
effective at all times during the Registration Period (other than during any Blackout Period). The
Company shall submit to the SEC, within three Business Days after the Company learns that no review
of the Registration Statement will be made by the staff of the SEC or that the staff of the SEC has
no further comments on the Registration Statement, as the case may be, a request for acceleration
of effectiveness of the Registration Statement to a time and date not later than 48 hours after the
submission of such request. The Company represents and warrants to the Investors that (a) the
Registration Statement (including any amendments or supplements thereto and prospectuses contained
therein), at the time it is first filed with the SEC, at the time it is ordered effective by the
SEC and at all times during which it is required to be effective hereunder (and each such amendment
and supplement at the time it is filed with the SEC and at all times during which it is available
for use in connection with the offer and sale of the Registrable Securities) shall not contain any
untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading and (b) the Prospectus, at the time the
Registration Statement is declared effective by the SEC and at all times that the Prospectus is
required by this Agreement to be available for use by any Investor and, in accordance with Section
8(c)(4), any Investor is entitled to sell Registrable Securities pursuant to the Prospectus, shall
not contain any untrue statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading;



          (2) use its best efforts to prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the Prospectus as may
be necessary to keep the Registration Statement effective, and the Prospectus current, at all times
during the Registration Period, and, during the Registration Period (other than during any Blackout
Period during which the provision of Section 8(b)(5) is applicable), comply with the provisions of
the 1933 Act applicable to the Company in order to permit the disposition by the Investors of all
Registrable Securities covered by the Registration Statement;



          (3) furnish to Investors whose Registrable Securities are included in the Registration
Statement and such Investors’ respective legal counsel, promptly after the same is prepared and
publicly distributed, filed with the SEC or received by the Company, (1) electronic copies of the
Registration Statement and any amendment thereto and the Prospectus and each amendment or
supplement thereto, (2) electronic copies of each letter written by or on behalf of the Company to
the SEC or the staff of the SEC and each item of correspondence from the SEC or the staff of the
SEC relating to the Registration Statement (other than any portion of any thereof which contains
information for which the Company has sought confidential treatment), each of which the Company
hereby determines to be confidential information and which each



-27-









 







investor hereby agrees to keep
confidential as a confidential Record in accordance with Section 8(b)(9) and (3) such number of
hard copies of the Prospectus and all amendments and supplements thereto and such other documents,
as such Investor may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor;



          (4) use its best efforts to qualify and maintain the qualification of the Registrable
Securities for sale by the Investors under the securities or blue sky laws of such jurisdictions as
any Investor holding Registrable Securities reasonably requests; provided, however, that the
Company shall not be required in connection therewith or as a condition thereto (I) to qualify to
do business in any jurisdiction where it would not otherwise be required to qualify but for this
Section 8(b)(4), (II) to subject itself to general taxation in any such jurisdiction, (III) to file
a general consent to service of process in any such jurisdiction, (IV) to provide any undertakings
that cause more than nominal expense or burden to the Company or (V) to make any change in its
charter or by-laws which the Board of Directors of the Company determines to be contrary to the
best interests of the Company and its stockholders;



          (5) as promptly as practicable after becoming aware of such event or circumstance, notify each
Investor of the occurrence of any event or circumstance of which the Company has knowledge (x) as a
result of which the Prospectus, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading or (y) which
requires the Company to amend or supplement the Registration Statement due to the receipt from an
Investor or any other selling stockholder named in the Prospectus of new or additional information
about such Investor or selling stockholder or its intended plan of distribution of its Registrable
Securities or other securities covered by such Registration Statement, and use its best efforts
promptly to prepare a supplement or amendment to the Registration Statement and Prospectus to
correct such untrue statement or omission or to add any new or additional information, and deliver
a number of copies of such supplement or amendment to each Investor as such Investor may reasonably
request;



          (6) as promptly as practicable after becoming aware of such event, notify each Investor who
holds Registrable Securities being offered or sold pursuant to the Registration Statement of the
issuance by the SEC of any stop order or other suspension of effectiveness of the Registration
Statement at the earliest possible time;



          (7) permit the Investors who hold Registrable Securities being included in the Registration
Statement (or their designee) and their counsel at such Investors’ sole expense to review and have
a reasonable opportunity to comment on the Registration Statement and all amendments and
supplements thereto at least two Business Days (or such shorter period as may reasonably be
specified by the Company) prior to their filing with the SEC;



          (8) make generally available to its security holders as soon as practical, but not later than
90 days after the close of the period covered thereby, an earning statement (in form complying with
the provisions of Rule 158 under the 1933 Act) covering a 12-month period



-28-









 







beginning not later than
the first day of the Company’s fiscal quarter next following the SEC Effective Date of the
Registration Statement;



          (9) use its best efforts to cause all the Registrable Securities covered by the Registration
Statement as of the SEC Effective Date to be listed or quoted on the principal securities market on
which securities of the same class or series issued by the Company are then listed or traded;



          (10) provide a transfer agent and registrar, which may be a single entity, for the Registrable
Securities at all times;



          (11) cooperate with the Investors who hold Registrable Securities being offered pursuant to
the Registration Statement to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates to be in such denominations or amounts as the
Investors may reasonably request and registered in such names as the Investors may request; and,
not later than the SEC Effective Date, the Company shall cause legal counsel selected by the
Company to deliver to the Investors whose Registrable Securities are included in the Registration
Statement opinions of counsel in form and substance as is customarily given to underwriters in an
underwritten public offering;



          (12) during the Registration Period, the Company shall not bid for or purchase any Common
Stock or any right to purchase Common Stock or attempt to induce any Person to purchase any such
security or right if such bid, purchase or attempt would in any way limit the right of the
Investors to sell Registrable Securities by reason of the limitations set forth in Regulation M
under the 1934 Act; and



          (13) take all other reasonable actions necessary to expedite and facilitate disposition by the
Investors of the Registrable Securities pursuant to the Registration Statement relating thereto.



          (c) Obligations of the Buyers and Other Investors. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:



          (1) It shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable Securities of
a particular Investor that such Investor shall furnish to the Company the Required Information and
shall execute such documents in connection with such registration as the Company may reasonably
request.



          (2) Each Investor by such Investor’s acceptance of the Registrable Securities agrees to
cooperate with the Company as reasonably requested by the Company in connection with the
preparation and filing of the Registration Statement hereunder, unless such Investor has notified
the Company of such Investor’s election to exclude all of such Investor’s Registrable Securities
from the Registration Statement;



-29-









 





          (3) Each Investor agrees that it will not effect any disposition of the Registrable Securities
except as contemplated in the Registration Statement or as otherwise is in compliance with
applicable securities laws and that it will promptly notify the Company of any material changes in
the information set forth in the Registration Statement regarding such Investor or its plan of
distribution; each Investor agrees (a) to notify the Company in writing in the event that such
Investor enters into any material agreement with a broker or a dealer for the sale of the
Registrable Securities through a block trade, special offering, exchange distribution or a purchase
by a broker or dealer and (b) in connection with such agreement, to provide to the Company in
writing the information necessary to prepare any supplemental prospectus pursuant to Rule 424(c)
under the 1933 Act which is required with respect to such transaction;



          (4) Each Investor acknowledges that there may occasionally be times as specified in Section
8(b)(5) or 8(b)(6) when the Company must suspend the use of the Prospectus until such time as an
amendment to the Registration Statement has been filed by the Company and declared effective by the
SEC, the Company has prepared a supplement to the Prospectus or the Company has filed an
appropriate report with the SEC pursuant to the 1934 Act. Each Investor hereby covenants that it
will not sell any Registrable Securities pursuant to the Prospectus during the period commencing at
the time at which the Company gives such Investor notice of the suspension of the use of the
Prospectus in accordance with Section 8(b)(5) or 8(b)(6) and ending at the time the Company gives
such Investor notice that such Investor may thereafter effect sales pursuant to the Prospectus, or
until the Company delivers to such Investor or files with the SEC an amended or supplemented
Prospectus; and



          (5) In connection with any sale of Registrable Securities which is made by an Investor
pursuant to the Registration Statement (A) if such sale is made through a broker, such Investor
shall instruct such broker to deliver the Prospectus to the purchaser or purchasers (or the broker
or brokers therefor) in connection with such sale, shall supply copies of the Prospectus to such
broker or brokers and shall instruct such broker or brokers to deliver such Prospectus to the
purchaser in such sale or such purchaser’s broker; (B) if such sale is made in a transaction
directly with a purchaser and not through the facilities of any securities exchange or market, such
Investor shall deliver, or cause to be delivered, the Prospectus to such purchaser; and (C) if such
sale is made by any means other than those described in the immediately preceding clauses (A) and
(B), such Investor shall otherwise use its reasonable best efforts to comply with the prospectus
delivery requirements of the 1933 Act applicable to such sale.



          (d) Rule 144.
With a view to making available to each Investor the benefits of Rule 144, the Company agrees:



          (1) so long as any Investor owns Registrable Securities, promptly upon request of such
Investor, to furnish to such Investor such information as may be necessary to permit such Investor
to sell Registrable Securities pursuant to Rule 144 without registration and otherwise reasonably
to cooperate with such Investor and



          (2) if at any time the Company is not required to file reports with the SEC pursuant to
Section 13 or 15(d) of the 1934 Act, to use its best efforts, upon the request of an Investor, to
make publicly available other information so long as is necessary to permit



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publication by brokers
and dealers of quotations for the Common Stock and sales of the Registrable Securities in
accordance with Rule 15c2-11 under the 1934 Act.



          (e) Piggy-Back Registrations. If at any time the Company shall determine to prepare and file
with the SEC a Registration Statement relating to an offering for its own account or the account of
others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8
or their then equivalents relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in connection with stock option
or other employee benefit plans, the Company shall send to each Investor who is entitled to
registration rights under this Section 8(e) written notice of such determination and, if within ten
(10) days after receipt of such notice, such Investor shall so request in writing, the Company
shall include in such Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any underwritten public
offering for the account of the Company the managing underwriter(s) thereof shall impose a
limitation on the number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)’ judgment, such limitation is necessary to effect an
orderly public distribution, then the Company shall be obligated to include in such Registration
Statement only such limited portion of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder. Any exclusion of Registrable Securities shall be made
pro rata among the Investors seeking to include Registrable Securities, in proportion to the number
of Registrable Securities sought to be included by such Investors; provided, however, that the
Company shall not exclude any Registrable Securities unless the Company has first excluded all
outstanding securities the holders of which are not entitled by right to inclusion of securities in
such Registration Statement; and provided further, however, that, after giving effect to the
immediately preceding proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in the Registration
Statement, based on the number of securities for which registration is requested except to the
extent such pro rata exclusion of such other securities is prohibited under any written agreement
entered into by the Company with the holder of such other securities prior to the date of this
Agreement, in which case such other securities shall be excluded, if at all, in accordance with the
terms of such agreement. No right to registration of Registrable Securities under this Section
8(e) shall be construed to limit any registration required under Section 8(a) hereof.
Notwithstanding any other provision of this Agreement, if any Registration Statement required to be
filed pursuant to Section 8(a) of this Agreement shall have been ordered effective by the SEC and
the Company shall have maintained the effectiveness of such Registration Statement as required by
this Agreement and if the Company shall otherwise have complied in all material respects with its
obligations under this Agreement, then the Company shall not be obligated to register any
Registrable Securities on such Registration Statement referred to in this Section 8(e).



          9. INDEMNIFICATION AND CONTRIBUTION.



          (a) Indemnification. (1) To the extent not prohibited by applicable law, the Company will
indemnify and hold harmless each Indemnified Person against any Claims to which any of them may
become subject under the 1933 Act, the 1934 Act or otherwise, insofar



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as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon
any Violation or any of the transactions contemplated by this Agreement. Subject to the
restrictions set forth in Section 9(a)(3) with respect to the number of legal counsel, the Company
shall reimburse the Investors and each such Controlling Person, promptly as such expenses are
incurred and are due and payable, for any documented reasonable legal fees or other documented and
reasonable expenses incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification agreement contained
in this Section 9(a)(1) shall not apply to: (I) a Claim arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information relating to an Indemnified Person
furnished in writing to the Company by such Indemnified Person or an underwriter for such
Indemnified Person expressly for use in connection with the preparation of any Registration
Statement or any such amendment thereof or supplement thereto; (II) any Claim arising out of or
based on any statement or omission in any Prospectus, which statement or omission was corrected in
any subsequent Prospectus that was delivered to the Indemnified Person prior to the pertinent sale
or sales of Registrable Securities by such Indemnified Person; and (III) amounts paid in settlement
of any Claim if such settlement is effected without the prior written consent of the Company. Such
indemnity shall remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by
the Investors.



          (2) In connection with the Registration Statement, each Investor agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section 9(a)(1), each Indemnified
Party against any Claim to which any of them may become subject, under the 1933 Act, the 1934 Act
or otherwise, insofar as such Claim arises out of or is based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity
with written information furnished to the Company by such Investor expressly for use in connection
with such Registration Statement or any amendment thereof or supplement thereto; and such Investor
will reimburse any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 9(a)(2) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of such Investor; provided, further,
however, that the Investor shall be liable under this Section 9(a)(2) for only that amount of all
Claims in the aggregate as does not exceed the amount by which the proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration Statement exceeds the
amount paid by such Investor for such Registrable
Securities. Such indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 9(a)(2) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in such preliminary prospectus was corrected on a timely basis
in the related Prospectus, as then amended or supplemented.



          (3) Promptly after receipt by an Indemnified Person or Indemnified Party under this Section
9(a) of notice of the commencement of any action (including any governmental action), such
Indemnified Person or Indemnified Party shall, if a Claim in respect



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thereof is to be made against
any indemnifying party under this Section 9(a), deliver to the indemnifying party a notice of the
commencement thereof and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying party similarly
noticed, to assume control of the defense thereof with counsel reasonably satisfactory to the
Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the
fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding, in which case the indemnifying party shall not be
responsible for more than one such separate counsel, and one local counsel in each jurisdiction in
which an Action is pending, for all Indemnified Persons or Indemnified Parties, as the case may be.
The failure to deliver notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 9(a), except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The indemnification
required by this Section 9(a) shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss, damage or liability is incurred and
is due and payable.



          (b) Contribution. To the extent any indemnification by an indemnifying party as set forth in
Section 9(a) above is applicable by its terms but is prohibited or limited by law, the indemnifying
party agrees to make the maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 9(a) to the fullest extent permitted by law. In determining the
amount of contribution to which the respective parties are entitled, there shall be considered the
relative fault of each party, the parties’ relative knowledge of and access to information
concerning the matter with respect to which the claim was asserted, the opportunity to correct and
prevent any statement or omission and any other equitable considerations appropriate under the
circumstances; provided, however, that (a) no contribution shall be made under circumstances where
the maker would not have been liable for indemnification under the fault standards set forth in
Section 9(a), (b) no Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any other Person who was not guilty
of such fraudulent misrepresentation and (c) the aggregate contribution by any seller of
Registrable Securities shall be limited to the amount by which the proceeds received by such seller
from the sale of such Registrable Securities exceeds the amount paid by such Investor for such
Registrable Securities.



          (c) Other Rights. The indemnification and contribution provided in this Section shall be in
addition to any other rights and remedies available at law or in equity.



          10. MISCELLANEOUS.



          (a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.



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



          (c) Severability. If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement or the validity or enforceability of this Agreement in any other
jurisdiction.



          (d) Notices. Any notices required or permitted to be given under the terms of this Agreement
shall be in writing and shall be sent by mail, personal delivery, telephone line facsimile
transmission, electronic mail, or courier and shall be effective five days after being placed in
the mail, if mailed, or upon receipt, if delivered personally, by telephone line facsimile
transmission, electronic mail, or by courier, in each case addressed to a party at such party’s
address (or telephone line facsimile transmission number or email address) shown in the
introductory paragraph or on the signature page of this Agreement or such other address (or
telephone line facsimile transmission number or email address) as a party shall have provided by
notice to the other party in accordance with this provision. In the case of any notice to the
Company, such notice shall be addressed to the Company at its address shown in the introductory
paragraph of this Agreement, Attention: Chief Executive Officer (telephone line facsimile number
201-794-8974), and a copy shall also be given to: Victor B. Zanetti (telephone line facsimile
transmission number 214-659-4890); in the case of notice to the Buyers, such notice shall be
addressed to the Buyers at their addresses shown on Schedule A hereto, and in the case of any
notice to the Buyers, a copy shall be given to: Moomjian, Waite, Wactlar & Coleman, LLP, 100
Jericho Quadrangle, Jericho, New York 11753 (telephone line facsimile transmission number (516)
937-5050).



          (e) Counterparts. This Agreement may be executed in counterparts and by the parties hereto on
separate counterparts, each of which shall be deemed to be an original and all of which together
shall constitute one and the same instrument. A telephone line facsimile transmission of this
Agreement bearing a signature on behalf of a party hereto shall be legal and binding on such party.
Although this Agreement is dated as of the date first set forth above, the actual date of
execution and delivery of this Agreement by each party is the date set forth below such party’s
signature on the signature page hereof. Any reference in this Agreement or in any of the documents
executed and delivered by the parties hereto in connection herewith to (1) the date of execution
and delivery of this Agreement by a Buyer shall be deemed a reference to the date set forth below
the Buyer’s signature on the signature page hereof, (2) the date of execution and delivery of this
Agreement by the Company shall be deemed a reference to the date set forth below the Company’s
signature on the signature page hereof and (3) the date of execution and delivery of this
Agreement, or the date of execution and delivery of this Agreement by the Buyers and the Company,
shall be deemed a reference to the later of the dates set forth below the signatures of the parties
on the signature page hereof.



          (f) Entire Agreement; Benefit. This Agreement, including the Annexes and Schedules hereto,
and the transactions contemplated hereby, including the letter dated December



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29, 2006 from Sigma
to the Company, constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof. There are no restrictions, promises, warranties, or undertakings, other
than those set forth or referred to herein. This Agreement, including the Annexes, supersedes all
prior agreements and understandings, whether written or oral, between the parties hereto with
respect to the subject matter hereof. This Agreement and the terms and provisions hereof are for
the sole benefit of only the Company, the Buyers and their respective successors and permitted
assigns.



          (g) Waiver. Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, or any course of dealing between
the parties, shall not operate as a waiver thereof or an amendment hereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or exercise of any
other right or power.



          (h) Amendment. (1) No amendment, modification, waiver, discharge or termination of any
provision of this Agreement on or prior to the Closing Date nor consent to any departure by the
Buyer or the Company therefrom on or prior to the Closing Date shall in any event be effective
unless the same shall be in writing and signed by the party to be charged with enforcement, and in
any such case shall be effective only in the specific instance and for the purpose for which given.



          (2) No amendment, modification, waiver, discharge or termination of any provision of this
Agreement after the Closing Date nor consent to any departure by the Company therefrom after the
Closing Date shall in any event be effective unless the same shall be in writing and signed (x) by
the Company if the Company is to be charged with enforcement or (y) by a majority in interest of
the Buyers, if the Buyers are to be charged with enforcement, based upon the aggregate principal
amount of the Notes then outstanding, and in any such case shall be effective only in the specific
instance and for the purpose for which given.



          (3) No course of dealing between the parties hereto shall operate as an amendment of this
Agreement.



          (i) Further Assurances. Each party to this Agreement will perform any and all acts and
execute any and all documents as may be necessary and proper under the circumstances in order to
accomplish the intents and purposes of this Agreement and to carry out its provisions.



          (j) Assignment of Certain Rights and Obligations. The rights of an Investor under Sections
5(a), 5(b), 8, 9, and 10 of this Agreement shall be automatically assigned by such Investor to any
transferee of all or any portion of such Investor’s Registrable Securities (or all or any portion
of the Notes or the Warrants and the Additional Warrants) only if: (1) such Investor agrees in
writing with such transferee to assign such rights, and a copy of such agreement is furnished to
the Company within a reasonable time after such assignment, (2) the Company is, within a reasonable
time after such transfer, furnished with notice of (A) the name and address of such transferee and
(B) the securities with respect to which such rights and



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obligations are being transferred, (3)
immediately following such transfer or assignment the further disposition of Registrable Securities
by the transferee or assignee is restricted under the 1933 Act and applicable state securities
laws, and (4) at or before the time the Company received the notice contemplated by clause (2) of
this sentence the transferee agrees in writing with the Company to be bound by all of the
provisions contained in Sections 5(a), 5(b), 8, 9, and 10 hereof. Upon any such transfer, the
Company shall be obligated to such transferee to perform all of its covenants under Sections 5(a),
5(b), 8, 9, and 10 of this Agreement as if such transferee were the Buyer. In connection with any
such transfer the Company shall, at its sole cost and expense, promptly after such transfer take
such actions as shall be reasonably acceptable to the transferring Investor and such transferee to
assure that the Registration Statement and related Prospectus for which the transferring Investor
is a selling stockholder are available for use by such transferee for sales of the Registrable
Securities in respect of which such rights and obligations have been so transferred. Transfer of
the Note shall be limited as provided therein and transfer of the Warrants and the Additional
Warrants shall be limited as provided therein.



          (k) Expenses. The Company shall be responsible for its expenses (including, without
limitation, the legal fees and expenses of its counsel), incurred by it in connection with the
negotiation and execution of, and closing under, and performance of, this Agreement. Whether or
not the closing occurs, the Company shall be obligated to pay the legal fees and expenses and
out-of-pocket due diligence expenses of Sigma, not in excess of $60,000.00, in connection with the
negotiation and execution of, and closing under, this Agreement. At closing, Sigma shall withhold
$60,000.00 from the Purchase Price payable to the Company for application to its fees and expenses
as set forth in the next sentence and $100,000 for payment to Sigma Advisors as part of the
Advisory Fee. Within 30 days after closing, Sigma shall provide a detailed accounting of the fees
and expenses of Sigma for which the Company is responsible hereunder, and shall pay to the Company
any difference between the amount withheld and the actual fees and expenses incurred. All
reasonable expenses incurred in connection with registrations, filings or qualifications pursuant
to Sections 5(d), 5(e), 5(g) and 8 of this Agreement shall be paid by the Company, including,
without limitation, all registration, listing and qualifications fees, printers and accounting fees
and the fees and disbursements of counsel for the Company and the Investors but excluding (a) fees
and expenses of investment bankers retained by any Investor and (b) brokerage commissions incurred
by any Investor. The Company shall pay on demand all expenses incurred by the Buyers after the
Closing Date, including reasonable attorneys’ fees and expenses, as a consequence of, or in
connection with (1) the negotiation, preparation or execution of any amendment, modification or
waiver of any of the Transaction Documents, (2) any default or breach of any of the Company’s
obligations set forth in any of the Transaction Documents, and (3) the enforcement or restructuring
of any right of, including the collection of any payments due, the Buyers under any of the
Transaction Documents, including any action or proceeding relating to such enforcement or any
order, injunction or other process seeking to restrain the Company from paying any amount due the
Buyers. Except as otherwise provided in this Section 10(k), each of the Company and the Buyers
shall bear their own expenses in connection with this Agreement and the transactions contemplated
hereby.



          (l) Termination. (1) Each Buyer shall have the right to terminate this Agreement by giving
notice to the Company at any time at or prior to the Closing Date if:



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     (A) the Company shall have failed, refused, or been unable at or prior to the date of
such termination of this Agreement to perform any of its obligations hereunder required to
be performed prior to the time of such termination;




     (B) any condition to such Buyer’s obligations hereunder is not fulfilled at or prior to
the time such condition is required to be satisfied; or




     (C) the closing shall not have occurred on a Closing Date on or before December 31,
2006, other than solely by reason of a breach of this Agreement by such Buyer.


Any such termination shall be effective upon the giving of notice thereof by such Buyer. Upon such
termination, such Buyer shall have no further obligation to the Company hereunder and the Company
shall remain liable for any breach of this Agreement or the other documents contemplated hereby
which occurred on or prior to the date of such termination.




          (2) The Company shall have the right to terminate this Agreement by giving notice to the
Buyers at any times at or prior to the Closing Date if the closing shall not have occurred on a
Closing Date on or before December 31, 2006, other than solely by reason of a breach of this
Agreement by the Company, so long as the Company is not in breach of this Agreement at the time it
gives such notice. Any such termination shall be effective upon the giving of notice thereof by
the Company. Upon such termination, neither the Company nor the Buyers shall have any further
obligation to one another hereunder, except for the Company’s liability for the Buyers’ expenses as
provided in Section 10(k).




          (m) Survival.
The respective representations, warranties, covenants and agreements of the Company and the
Buyers contained in this Agreement and the documents delivered in connection with this Agreement
shall survive the execution and delivery of this Agreement and the other Transaction Documents and
the closing hereunder and delivery of and payment for the Notes and issuance of the Warrants and
the Additional Warrants, and shall remain in full force and effect regardless of any investigation
made by or on behalf of the Buyers or any Person Controlling or acting on behalf of the Buyers or
by the Company or any Person Controlling or acting on behalf of the Company for a period ending on
the later of (x) the date which is six years after the Closing Date and (y) the date which is two
years after the Company shall have paid in full all amounts due from the Company under the
Transaction Documents and performed in full all of its obligations under the Transaction Documents.




          (n) Public Statements, Press Releases, Etc. The Company and the Buyers shall have the right
to approve before issuance any press releases or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall be entitled, without
the prior approval of the Buyers, to make any press release or other public disclosure with respect
to such transactions as is required by applicable law or applicable requirements of any stock
market on which securities of the Company are listed for trading (although the Buyers shall be
consulted by the Company in connection with any such press release or other public disclosure prior
to its release and shall be provided with a copy thereof).



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




[Remainder of This Page Intentionally Left Blank]




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          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective officers or other representatives thereunto duly authorized on the respective dates set
forth below their signatures hereto.




	 	 	 	 	 
	 	BERLINER COMMUNICATIONS, INC.

 	 
	 	By:  	/s/ Richard B. Berliner
 	 
	 	Name: 	Richard B. Berliner 	 
	 	Title:	Chief Executive Officer 	 
	 



	 	 	 	 	 
	 	SIGMA OPPORTUNITY FUND, LLC 

 	 
	 	By:  	SIGMA CAPITAL ADVISORS, LLC
 	 
	 	 	 
	 	By:  	                                                  /s/ Thom Waye
 	 
	 	 	Name:  	Thom Waye 	 
	 	 	Title:  	Manager 	 
	 
	 	Date: December 29, 2006



Address:



          c/o Sigma Capital Advisors, LLC

          800 Third Avenue

          Suite 1701

          New York, New York 10022



Facsimile No.: (212) 937-3558

 	 



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Schedule A




	 	 	 	 	 	 	 	 	 
	 	 	Purchase Price/	 	Warrant Shares Initially Issuable
	Name
and Address
	 	Principal Amount of Note	 	Upon Exercise of Warrants
	Sigma Opportunity Fund, LLC
	 	$	3,000,000	 	 	 	1,500,000	 
	c/o Sigma Capital Advisors,
LLC
	 	 	 	 	 	 	 	 
	800 Third Avenue
	 	 	 	 	 	 	 	 
	Suite 1701
	 	 	 	 	 	 	 	 
	New York, New York 10022
	 	 	 	 	 	 	 	 
	Telephone: 212-201-6636
	 	 	 	 	 	 	 	 
	Facsimile: 212-937-3558
	 	 	 	 	 	 	 	 
	E-mail Address:
	 	 	 	 	 	 	 	 
	thomw@sigmacp.com
	 	 	 	 	 	 	 	 







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