FORBEARANCE AGREEMENT
This Forbearance Agreement (this "Agreement") is entered into as of
November 30, 2005, by and among BROADCAST INTERNATIONAL, INC., a Utah
corporation (the "Company"), and the PURCHASERS named on the signature pages
to this Agreement (each, a "Purchaser" and collectively, the "Purchasers"),
with reference to the following facts:
A. The Company and the Purchasers are parties to, among others, the
following documents:
1. Securities Purchase Agreement dated May 16, 2005 (the
"Purchase Agreement");
2. 6% Senior Secured Convertible Notes Due 2008, each dated May
16, 2005, executed by the Company in favor of the Purchasers
(the "Notes"); and
3. Registration Rights Agreement dated May 16, 2005 (the
"Registration Rights Agreement").
The above-referenced documents, all other documents executed in connection
therewith and all other agreements between or among the Company and one or
more of the Purchasers are hereinafter collectively referred to as the
"Operative Documents".
B. As of November 30, 2005, there could be owing under each Note 125%
of (1) the Principal Amount of such Note, plus (2) accrued but unpaid interest
thereon should the Purchasers exercise their rights and remedies under the
Operative Documents and accelerate the payments due thereunder. Interest
continues to accrue on the Principal Amount of each Note at the rate set forth
in the Notes. In addition, as of November 30, 2005, there is due and owing to
the Purchasers under the Registration Rights Agreement, as partial Liquidated
Damages thereunder, the aggregate amount of $156,000. The foregoing amounts,
plus accruing interest and costs and accrued and accruing attorneys' fees and
costs and various other collection costs, are hereinafter referred to herein
as the "Existing Debt".
C. An Event of Default (the "Existing Default") has occurred and is
continuing under Section 4(a)(viii) of each Note by virtue of the failure of
the Registration Statement required by the Registration Rights Agreement to be
declared effective by the SEC. The Existing Default entitles each Purchaser
to immediately enforce all of the rights and remedies set forth in the
Operative Documents.
D. The Company has requested that the Purchasers forbear from
exercising their rights and remedies under the Operative Documents, and the
Purchasers have agreed to do so, provided that the Company enters into this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the parties agree
as follows:
1. Defined Terms. Capitalized terms not otherwise defined herein shall
have the same meanings as set forth in the Operative Documents.
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2. Acknowledgment of Liability. As of the date of this Agreement, the
Company owes the Purchasers an amount equal to the Existing Debt. The Company
reaffirms all of its obligations under the Operative Documents and hereby
forever waives and relinquishes any and all claims, off sets or defenses that
the Company may now have with respect to the payment of sums due to the
Purchasers under the Operative Documents and the performance of other
obligations thereunder.
3. Forbearance. The Company acknowledges the Existing Default is an
existing and uncured Event of Default under the Operative Documents which is
continuing to the date of this Agreement. The Company further acknowledges
and agrees that no Purchaser is in any way agreeing to waive such Existing
Default as a result of this Agreement or the performance by the parties of
their respective obligations hereunder or under the Operative Documents.
Subject to the conditions contained herein and performance by the Company of
all of the terms of this Agreement and the Operative Documents after the date
hereof, the Purchasers shall, until the earlier of (i) January 31, 2006, or
(ii) such date that there shall occur any further Event of Default under this
Agreement or the Operative Documents (the "Forbearance Period"), forbear from
exercising any remedies that they may have against the Company as a result of
the occurrence of the Existing Default. Such forbearance does not apply to
any other Event of Default or other failure by the Company to perform in
accordance with the Operative Documents or this Agreement. This forbearance
shall not be deemed a continuing waiver or forbearance with respect to any
Event of Default of a similar nature that may occur after the date of this
Agreement.
4. Purchaser Expenses. The Company shall reimburse the Purchasers for
all expenses incurred by the Purchasers, at any time on, before or after the
date hereof in connection with (i) preparing and negotiating this Agreement;
and (ii) any matters contemplated by or arising out of this Agreement or the
Operative Documents including, by way of illustration only, any action taken
(a) to commence, prosecute, defend or intervene in any litigation (adversary
proceeding or otherwise) or to file a petition, complaint, answer, motion or
other pleading, (b) to take any other action in or with respect to any suit,
case, motion, appeal or proceeding (bankruptcy or otherwise), (c) to draft
documents in connection with any of the foregoing or in connection with any
proposed modification or amendment of this Agreement or the Operative
Documents, or any proposed waiver, extension or refinance of the Existing
Debt, including, but not limited to, all outside counsel fees incurred by the
Purchasers in connection with the preparation and negotiation of this
Agreement and the Operative Documents, (d) to attempt to enforce any rights of
the Purchasers to collect any part of the Existing Debt, or (e) any matter
relating to the ongoing administration of this Agreement or the Operative
Documents (collectively "Purchaser Expenses"). Purchaser Expenses shall also
include all expenditures by the Purchasers, including payment made by the
Purchasers for taxes, insurance, assessments, costs or expenses which the
Company is required to pay under this Agreement or the Operative Documents,
but fails to pay; inside and outside counsel fees and any expenses, costs and
charges relating to such expenditures (including, without limitation, all fees
of legal assistants and other staff employed by such attorneys) as well as all
other costs of collection; all documentation fees; and all other expenses of
any kind whatsoever incurred by the Purchasers in connection with the
documentation, negotiation, administration and enforcement of this Agreement
and the Operative Documents, whether such expenditures, fees and expenses are
incurred before, after or in connection with the commencement of a Bankruptcy
Event, including any actions taken in connection with cash collateral orders,
motions for relief from any stays, preparation for any objections to plans of
reorganization and any other negotiations, actions or appeals entered into,
taken or made in connection with the reorganization, bankruptcy or liquidation
of the Company. With respect to Purchaser Expenses owing by the Company to
the Purchasers, such amounts shall be paid within ten (10) days of the
Company's receipt of notice from any Purchaser of the existence and amount of
such Purchaser Expenses.
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5. Forbearance Fee. In consideration of the Purchasers' execution of
this Agreement, in addition to any unpaid Purchaser Expenses, the Company
shall, on or before January 31, 2006, pay to each Purchaser an amount (the
"Forbearance Fee") equal to, at each Purchaser's sole election, either (1) (a)
the outstanding Principal Amount of such Purchaser's Note (plus all accrued
and unpaid interest thereon), multiplied by (b) (i) 113% plus (ii) 2% for each
thirty (30) day period, pro rated for any period less than thirty (30) days,
following the date of this Agreement until the Forbearance Fee is paid in
full, plus (c) the amount of all Liquidated Damages due to such Purchaser
under the Registration Rights Agreement as of the date of payment of the
Forbearance Fee; or (2) the amount of all Liquidated Damages due to such
Purchaser under the Registration Rights Agreement as of the date of payment of
the Forbearance Fee. Each Purchaser shall notify the Company on or before
January 20, 2006, of which Forbearance Fee election (i.e., (1) or (2) above)
made by such Purchaser. If a Purchaser selects the Forbearance Fee election
described in (1) above, and such Forbearance Fee is paid in full in accordance
with the preceding sentence, then such Purchaser shall surrender both its Note
and its AIR to the Company for cancellation. Each Purchaser agrees to not
exercise its AIR during the Forbearance Period.
6. Representations and Warranties. The Company hereby represents and
warrants that:
(a) No Event of Default or failure of condition has occurred or
exists, or would exist with notice or lapse of time or both under any of the
Operative Documents, other than the Existing Default.
(b) The Forbearance Period granted pursuant to the terms of this
Agreement is reasonable and is based upon the projections of the Company and
the Company's reasonable expectations regarding its ability to cause the
Registration Statement under the Registration Rights Agreement to be declared
effective by the SEC.
(c) All representations and warranties of the Company in this
Agreement and the Operative Documents are true and correct as of the date
hereof, and shall survive the execution of this Agreement.
7. Default. In addition to all other Events of Default under the Notes
and the other Operative Documents, the following shall constitute an Event of
Default hereunder:
(a) The Company's failure to pay any amount when due under this
Agreement or the Operative Documents, including, without limitation, (i)
payment of the Forbearance Fee in accordance with Section 5, and (ii) payment
of any Liquidated Damages accruing from and after November 30, 2005;
(b) The Company's failure to perform any covenant or other
agreement contained in this Agreement or any other document entered into in
connection herewith; and
(c) Any representation or warranty of the Company made in
connection with this Agreement or the Operative Documents shall be false,
misleading or incorrect when made or at any time.
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8. Rights and Remedies.
(a) Upon the occurrence and during the continuance of an Event of
Default, each Purchaser may, at its election, without notice of its election
and without demand, do any one or more of the following, all of which are
authorized by the Company:
(i) Take action against the Company for payment under the
Operative Documents and this Agreement; and/or
(ii) Exercise any right or remedy authorized by the Operative
Documents and/or this Agreement and/or applicable law.
(b) Each Purchaser's rights and remedies under this Agreement,
the Operative Documents and all other agreements shall be cumulative. The
Purchasers shall have all other rights and remedies not inconsistent herewith
as provided by law or in equity. No exercise by any Purchaser of one right or
remedy shall be deemed an election, and no waiver by any Purchaser of any
Event of Default on the part of the Company shall be deemed a continuing
waiver. No delay by any Purchaser shall constitute a waiver, election, or
acquiescence by it.
9. As a condition to the effectiveness of this Agreement, each
Purchaser shall have received the following:
(a) this Agreement, duly executed by the Company;
(b) payment of all Purchaser Expenses incurred through the date
of this Agreement; and
(c) such other documents, and completion of such other matters,
as such Purchaser may reasonably deem necessary or appropriate.
10. Waiver of Notice and Cure. The Company acknowledges that an Event
of Default has occurred under each Note that, but for this Agreement, would
have entitled each Purchaser to exercise all the remedies available to such
Purchaser under its Note and applicable law. The Company waives all notices
of default and rights to cure that are otherwise provided in the Notes or
applicable law.
11. Release.
(a) The Company acknowledges that the Purchasers would not enter
into this Agreement without the Company's assurance that the Company has no
claims against any Purchaser or any of the Purchasers' partners, affiliates,
employees or agents. Except for the obligations arising hereafter under this
Agreement and the Operative Documents, the Company releases each Purchaser,
any person or entity that has obtained any interest from any Purchaser under
the Operative Documents and each Purchaser's and such entity's partners,
affiliates, officers, directors, employees and agents from any known or
unknown claims which the Company now has against any Purchaser of any nature,
including any claims that the Company, its successors, counsel, and advisors
may in the future discover they would have now had if they had known facts not
now known to them, whether founded in contract, in tort or pursuant to any
other theory of liability, including but not limited to any claims arising out
of or related to the Operative Documents or the transactions contemplated
thereby.
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(b) The provisions, waivers and releases set forth in this
section are binding upon the Company and the Company's shareholders, agents,
employees, assigns and successors in interest. The provisions, waivers and
releases of this section shall inure to the benefit of the Purchasers and
their respective partners, affiliates, agents, employees, officers, directors,
assigns and successors in interest.
(c) The Company warrants and represents that the Company is the
sole and lawful owner of all right, title and interest in and to all of the
claims released hereby and the Company has not heretofore voluntarily, by
operation of law or otherwise, assigned or transferred or purported to assign
or transfer to any person any such claim or any portion thereof. The Company
shall indemnify and hold harmless each Purchaser from and against any claim,
demand, damage, debt, liability (including payment of attorneys' fees and
costs actually incurred whether or not litigation is commenced) based on or
arising out of any assignment or transfer.
(d) The provisions of this Section 11 shall survive payment in
full of the amounts owed by the Company to the Purchasers, full performance of
all the terms of this Agreement and the Operative Documents, and/or any
Purchaser's actions to exercise any remedy available hereunder, under the
Operative Documents or otherwise.
12. Further Assurances. The Company will take such other actions as
the Purchasers may reasonably request from time to time to accomplish the
objectives of this Agreement.
13. Consultation of Counsel. The Company acknowledges that the Company
has had the opportunity to be represented by legal counsel of its own choice
throughout all of the negotiations that preceded the execution of this
Agreement. The Company has executed this Agreement after reviewing and
understanding each provision of this Agreement and without reliance upon any
promise or representation of any person or persons acting for or on behalf of
any Purchaser. The Company further acknowledges that the Company and its
counsel have had adequate opportunity to make whatever investigation or
inquiry they may deem necessary or desirable in connection with the subject
matter of this Agreement prior to the execution hereof and the delivery and
acceptance of the consideration described herein.
14. Notices. Unless otherwise provided in this Agreement, all notices
or demands by any party relating to this Agreement or any other agreement
entered into in connection herewith shall be in writing and shall be
personally delivered or sent by a recognized overnight delivery service,
certified mail, postage prepaid, return receipt requested, or by facsimile to
the Company or to any Purchaser, as the case may be, at its address set forth
in the Purchase Agreement.
15. Miscellaneous.
(a) Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the Company and the Purchasers and their
respective successors and assigns; provided, however, that the foregoing shall
not authorize any assignment by the Company of its rights or duties hereunder.
(b) Integration. This Agreement and any documents executed in
connection herewith or pursuant hereto contain the entire agreement between
the parties with respect to the subject matter hereof and supersede all prior
agreements, understandings, offers and negotiations, oral or written, with
respect thereto and no extrinsic evidence whatsoever may be introduced in any
judicial or arbitration proceeding, if any, involving this Agreement.
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(c) Effect of This Agreement. This Agreement does not impair,
alter, waive, annul, vary or affect any provision, acknowledgement,
representation, condition, covenant, right, security interest, lien or remedy
contained in the Operative Documents or in any other instrument or agreement
at any time executed by the Company in favor of any Purchaser, except as
expressly provided in this Agreement. The Company and the Purchasers intend
that the terms and provisions contained in the other Operative Documents shall
continue in full force and effect subject to the terms of this Agreement. In
the event that the terms of this Agreement conflict with those of the
Operative Documents, the terms of this Agreement shall govern.
(d) Course of Dealing; Waivers. No course of dealing on the part
of the any Purchaser or its partners, nor any failure or delay in the exercise
of any right by any Purchaser, shall operate as a waiver thereof, and any
single or partial exercise of any such right shall not preclude any later
exercise of any such right. Any Purchaser's failure at any time to require
strict performance by the Company of any provision shall not affect any right
of such Purchaser thereafter to demand strict compliance and performance. Any
suspension or waiver of a right must be in writing signed by a general partner
of each Purchaser.
(e) Time is of the Essence. Time is of the essence as to each
and every term and provision of this Agreement and the other Operative
Documents.
(f) Counterparts. This Agreement may be signed in counterparts
and all of such counterparts when properly executed by the appropriate parties
thereto together shall serve as a fully executed document, binding upon the
parties.
(g) Legal Effect. The Operative Documents remain in full force
and effect. If any provision of this Agreement conflicts with applicable law,
such provision shall be deemed severed from this Agreement, and the balance of
this Agreement shall remain in full force and effect.
(h) Governing Law; Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of Texas
without regard to principles of conflicts of laws. The parties hereby agree
that all actions or proceedings arising directly or indirectly from or in
connection with this Agreement shall be litigated exclusively in the United
States District Court for the Northern District of Texas located in Dallas
County, Dallas, Texas. The parties consent and submit to the jurisdiction and
venue of the foregoing court and consent that any process or notice of motion
or other application to said court or a judge thereof may be served inside or
outside the State of Texas or the Northern District of Texas (but with respect
to any party hereto, such consent shall not be deemed a general consent to
jurisdiction and service for any third parties) by registered mail, return
receipt requested, directed to the party being served at its address provided
in or pursuant to this Agreement (and service so made shall be deemed complete
three (3) days after the same has been posted as aforesaid) or by personal
service or in such other manner as may be permissible under the rules of said
court. The Company hereby waives any right to a jury trial in connection with
any litigation pursuant to this Agreement.
(i) Assignment and Indemnity. The Company consents to each
Purchaser's assignment of all or any part of such Purchaser's rights under
this Agreement and the Operative Documents. The Company shall indemnify and
defend and hold each Purchaser and any assignee of such Purchaser's interests
harmless from any actions, costs, losses or expenses (including attorneys'
fees) arising out of such assignment, this Agreement and the Operative
Documents.
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IN WITNESS WHEREOF the undersigned have executed this Agreement as of
the first date above written.
BROADCAST INTERNATIONAL, INC.
By: /s/ Rodney M. Tiede
________________________________________
Name: Rodney M. Tiede
Title: President & CEO
[Remainder of page intentionally left blank;
Purchaser signature page to follow.]
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PURCHASERS:
GRYPHON MASTER FUND, L.P.
By: Gryphon Partners, L.P., its General Partner
By: Gryphon Management Partners, L.P., its
General Partner
By: Gryphon Advisors, L.L.C., its General Partner
By: /s/ E.B. Lyon, IV
______________________________________
E.B. Lyon, IV, Authorized Agent
GSSF MASTER FUND, LP
By: Gryphon Special Situations Fund, LP, its General
Partner
By: GSSF Management Partners, LP, its General Partner
By: GSSF, LLC, its General Partner
By: /s/ E.B. Lyon, IV
_______________________________________
E.B. Lyon, IV, Authorized Agent
BUSHIDO CAPITAL MASTER FUND, LP
By: Bushido Capital Partners, Ltd., its General
Partner
By: /s/ Christopher Rossman
________________________________________
Christopher Rossman, Managing Director
GAMMA OPPORTUNITY CAPITAL PARTNERS, LP
By: Gamma Capital Advisors, Ltd. its General Partner
By: /s/ Jonathan P. Knight, PhD
__________________________________________
Jonathan P. Knight, PhD, President/Director
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