CONFIDENTIAL
Broadcast International
7050 Union Park Center
6th Floor
Salt Lake City, UT 84047
USA
Att.:Dan Mabey
Oslo, 11 October, 2005
ENGAGEMENT LETTER BETWEEN BROADCAST
INTERNATIONAL AND FIRST SECURITIES ASA
With reference to meetings and discussions,
First Securities ASA ("First") is
pleased to submit this proposal to render
investment-banking services to
Broadcast International (hereinafter
referred to as either "BI" or "the
Company"). We would like to propose the
following structure and conditions
for First's engagement.
1. Background and assumptions
BI is currently traded on the OTC market in
the US. The Company has a number
of international investors, among them many
Scandinavian shareholders. At the
same time BI is experiencing a growing
number of business opportunities and
projects requiring additional funding to
the Company. To this end, the board
of directors of BI desires to engage First
to carry out an initial public
offering of the Company's common shares at
the Oslo Stock Exchange. An initial
evaluation is that the Company will issue
new shares worth MUSD 10 -25 in
connection with the IPO.
2. Transactions covered under the
engagement
The engagement will be split into the
following phases (hereinafter termed the
"Transactions"):
IPO and stock exchange listing
The Company's ambition is to make a share
issue and a possible secondary sale
of shares (the "Secondary Sale") with a
subsequent listing of the Company's
shares on the Oslo Stock Exchange (combined
referred to as the "IPO"). The
timing of the IPO will be Q4/2005 or early
in Q1 2006, but will
ultimately
depend on the development of the Company's
revenues and profitability, market
conditions in general and the interest for
the Company's shares in the capital
markets.
Financial advisory services related to a
merger/de-merger, acquisition or sale
of the Company or its operations
In order to ensure a satisfactory growth in
turnover and profitability, BI
will consider and possibly carry out one or
several acquisitions and/or
mergers. BI may also become an acquisition
target in line with the development
in the Company. Together with the issuance
of financial instruments and the
IPO, these types of transactions are
referred to herein as the "Transactions".
3. Services
The management and board of BI wish to
engage First as an exclusive financial
manager and advisor (Sole Lead Manager) for
the Transactions that BI wishes to
make.
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Further, the management and Board of
Directors of BI wish to engage First an
exclusive financial manager and advisor for
all other financial transactions
that BI wish to contemplate and possibly
carry out, given that the scope and
size of the particular transaction is
commensurate with the services First
normally renders. However, any agreements
of funding and financial advisory
services and the results thereof, which
have been signed prior to this
Engagement Letter shall be excluded from
liability for BI paying commission to
First.
At your request, First will perform all the
services normally rendered by an
investment bank in connection with the
Transactions.
First shall be project manager for the IPO
and for other Transactions from
time to time, including the coordination of
external advisors (auditors and
legal advisors) and possible contact with
shareholders, the share account
manager, the Norwegian Central Securities
Depository ("VPS"), and also
organise distribution of documentation,
printing, etc. as needed. First shall
assist the Company with a qualitative
assessment of the relevant investors and
the allocation of shares in the equity
issues.
4. Rights and obligations
BI shall have the right to approve, in its
sole discretion, all major
decisions based on First's suggestions,
including but not limited to the
following:
- The timing of the
Transactions.
- If not regulated by laws or
regulations in the financial market in
Norway, recipient(s) of marketing documentation and, if applicable,
the
prospectus and subscription material.
- The subscription price,
alternatively the conversion rate, and size of
the
Transactions.
- Allocation of shares.
- The timing and the announcement of
the Transactions.
The Company shall ensure that all necessary
decisions are resolved in
accordance with legislation and
regulations, including any agreements with
shareholders in connection with the
Transactions.
5. Conditions for the completion of the
Transactions, due diligence,
indemnity, responsibility, etc.
The following conditions will apply:
- that First may engage external
advisers, including legal assistance in
connection with the Transactions. The cost of such advisors shall
be
paid
by BI as long as BI has prior notice of such engagement and has
approved the budget therefore.
- that customary legal and financial
due diligence of the Company is
carried out in connection with the IPO. The due diligence findings
shall be satisfactory from First's point of view.
- that satisfactory legal and
auditor statements are submitted to First
in
connection with the implementation of the Transactions.
- that the Company's board of
directors shall submit a statement of
completeness to First. Such statement shall have the same date as
the
general assembly and/or meeting of the board of directors for
the
approval of the Transactions and must be dated before the
subscription
of
shares take place.
- that all employee board members
and companies represented by employee
board members, the
founders of the Company, and all employees with a
greater than 5% ownership in the Company, enter into customary lock-up
agreements for a period of six months, which regulate any sale
of
shares from said persons.
<PAGE>
- that all relevant external
information, press releases regarding
proposals to the board/general assembly or other information which
may
be
of importance for the Company's financial situation in relation
to
the
Transactions, are put before First before publication. The
Company will use its best efforts to provide First with 12 hours
notice
before publication.
Such statements must be sent to:
First
Securities ASA, e-mail: christian.dovland@first.no
- that BI without delay informs
First about issues that are deemed to be
of
importance for the value of the Company's shares or the Company's
situation in general.
- that the timing of IPO, the final
valuation and the allocation of
shares shall be acceptable for First.
- that BI ensures that the necessary
resources and all relevant
documentation are made available for First.
- that BI agrees that First may
establish a client account in its name
for
the purpose of receiving proceeds from the Transactions.
BI's board of directors is liable for
ensuring that the information that is
given to any third parties through
presentations, the prospectus or other
sales material is correct, complete and in
accordance with all known facts,
and that such documentation do not contain
any misleading or incomplete
information about matters which are likely
to affect any third party's
evaluation of the Transaction.
The Company shall hold First harmless and
indemnified from and against any and
all losses, claims, damages or liabilities
that First incurs as a result of
missing or incorrect information from the
Company in connection with the
Transactions and/or other aspects of the
engagement. Nevertheless the Company
is not liable for any loss, claim, damage,
expense or liability incurred by
First or its directors and employees where
due to gross negligence on the part
of First.
6. Fees and expenses
First's fee is to be structured as
follows:
a.
Retainer
First shall be paid a retainer fee of USD 200,000. The Retainer
fee
is deductible from the fee under b) below.
The retainer fee shall be split in two parts:
- USD 35,000 which has been paid
prior to execution hereof.
- USD 165,000 is
payable upon execution hereof.
b.
IPO
There will be a management and subscription fee of 7% of the
gross
proceeds from the issuance of financial instruments or from the
IPO,
and a fee of 7% of the gross sales proceeds for shares that are
sold
in connection with the Seconda
