FORBEARANCE AGREEMENT

 

                      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 Docume