CONFIDENTIAL

 

 

 

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.

 

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    -  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