January 31, 2007
January
31, 2007
Westchase
Center
0000
Xxxxxxxx Xxxx. - Xxxxx 000
Xxxxxxx,
Xxxxx 00000
Attn:
Xxxx X. Deutsch
Dear
Mr.
Deutsch:
This
forbearance agreement will confirm our understanding regarding Falcon Natural
Gas Corp.’s (“Falcon”)
obligations owed to Cornell Capital Partners, LP (“Cornell”).
Falcon hereby acknowledges, confirms and agrees that as of the close of business
on January ____, 2007, Falcon is indebted (collectively, the “Existing
Debentures”)
to
Cornell in the amounts set forth below:
|
Investor
Name:
|
Date
of
Debenture:
|
Outstanding
Principal:
|
Outstanding
Interest:
|
|
Cornell
|
4/19/05
|
$750,000
|
$78,424
|
|
Cornell
|
10/17/05
|
$7,000,000
|
$1,077,041
|
Falcon
acknowledges that it is in default of the Existing Debentures for, among other
things, failure to make timely payments of principal and interest and failing
to
timely register with the Securities and Exchange Commission (“SEC")
the
common stock underlying the Existing Debentures (collectively, the “Existing
Defaults”).
Our
agreement is as follows:
|
1.
|
In
consideration of the accommodations made by Cornell to Falcon set
forth
herein,
|
|
x.
|
Xxxxxxx
is agreeing to provide an additional $600,000 in financing to Falcon.
In
exchange for that financing, Falcon shall execute all documentation
required by Cornell, including a convertible debenture representing
the
obligation to repay the funds provided by Cornell to Falcon (the
“New
Convertible Debenture”).
|
|
x.
|
Xxxxxx
hereby agrees that Section 1(xiii) of Warrants Xx. XXX-0, XXX-0,
XXX-0,
XXX-0, XXX-0, XXX-0, and CCP-7 issued by Falcon to Cornell on March
29,
2006 (the “Warrants”) shall be modified to reflect a Warrant Exercise
Price of $0.10. In connection with this agreement, Cornell agrees
not to
avail itself of any right to increase the number of shares obtainable
by
it pursuant to the Warrants.
|
|
2.
|
The
Restated Convertible Debenture acquired herein by Cornell is being
acquired for consideration consisting solely of the Debentures surrendered
for conversion. Upon receipt by Cornell of the Restated Convertible
Debenture, the Convertible Debentures shall automatically terminate,
without any further action required by the parties, and no payments
of
principal shall be due and payable in connection with the Convertible
Debentures.
|
|
3.
|
Other
than as may be modified herein, all documents executed in connection
with
the Convertible Debentures, including, without limitation, those
creating
and evidencing registration obligations, and security interests in
favor
of Cornell (such documents, together with the Convertible Debentures,
the
“Transaction Documents”), shall remain in full force and effect. Those
documents include at least the
following:
|
|
a.
|
Securities
Purchase Agreement of April 19, 2005, and October 17,
2005
|
|
b.
|
Irrevocable
Transfer Agent Instructions of November 16, 2004, and October 17,
2005
|
|
c.
|
Investor
Registration Rights Agreement of April 19, 2005, and October 17,
2005
|
|
d.
|
Escrow
Agreement of April 19, 2005, and October 17,
2005
|
|
e.
|
Security
Agreement of April 19, 2005
|
|
4.
|
The
conversion of the Convertible Debentures into the Restated Convertible
Debenture is not conditioned upon any other transaction with respect
to
securities of Falcon.
|
|
5.
|
Falcon
hereby acknowledges, confirms, and agrees that Cornell has and shall
continue to have valid, enforceable and perfected first-priority
liens
upon and security interests in the Pledged Property (as defined in
the
Transaction Documents) heretofore granted pursuant to any and all
security
agreements or otherwise granted to or held by
Cornell.
|
| 6. |
The
Pledged Property shall also secure the New Convertible Debenture.
Falcon
agrees to execute all necessary documentation to effectuate the security
of the New Convertible Debenture by the Pledged
Property.
|
|
7.
|
As
enhanced security for the Restated Convertible Debenture and the
New
Convertible Debenture, Falcon shall execute all necessary documentation
to
grant, and shall grant, Cornell a security interest and/or mortgage
in
various oil and gas leases and other properties including without
limitation the “Wyandotte Property” in Louisiana. To the degree
permissible by law, the security interest and/or mortgage shall be
deemed
to have been entered into, and shall date from, the date of the New
Convertible Debenture and Restated Convertible
Debenture.
|
|
8.
|
This
Agreement shall be governed by and construed under the laws of the
State
of New Jersey.
|
|
9.
|
All
amounts owed, together with interest accrued and accruing thereon,
and
fees, costs, expenses and other charges (collectively, the “Obligations”)
now or hereafter payable by Falcon to Cornell (including, without
limitation, the amounts referenced in the table above) under the
Convertible Debentures and all other Transaction Documents are
unconditionally owing by Falcon to Cornell, without offset, setoff,
defense or counterclaim of any kind, nature or description whatsoever.
An
event of default on any Transaction Document shall constitute an
Event of
Default on all other Transaction
Documents.
|
|
10.
|
In
reliance upon the representations, warranties and covenants of Falcon
contained in this Agreement, and subject to the terms and conditions
set
forth herein, Cornell hereby waives on a one-time basis only the
Existing
Defaults and further agree to forbear from exercising their rights
and
remedies under the Transaction Documents or applicable law in respect
of
or arising out of the Existing Defaults, subject to the conditions,
amendments and modifications contained herein for the period (the
“Forbearance
Period”)
commencing on the date hereof and continuing for so long as the following
conditions are met: (i) Falcon strictly complies with the terms of
this
Agreement, and (ii) there is no occurrence or existence of any event
of
default, other than the Existing Defaults under the Transaction Documents
or any other agreement that Falcon has entered into with
Cornell.
|
|
11.
|
Upon
the termination or expiration of the Forbearance Period, the agreement
of
Cornell to forbear shall automatically and without further action
terminate and be of no force and effect, it being expressly agreed
that
the effect of such termination will be to permit Cornell to exercise
such
rights and remedies immediately, including, but not limited to, the
acceleration of all of the Obligations without any further notice,
passage
of time or forbearance of any kind. This Agreement shall be deemed
to
satisfy any and all requirements by Cornell to notify Falcon of the
occurrence of the Existing Default and satisfies any obligation by
Cornell
to give Falcon an opportunity to cure each Existing
Default.
|
|
12.
|
Falcon
hereto acknowledges, confirms and agrees that: (a) each of the
Transaction Documents to which it is a party has been duly executed
and
delivered to Cornell by Falcon, and each is in full force and effect
as of
the date hereof, (b) the agreements and obligations of Falcon
contained in such documents and in this Agreement constitute the
legal,
valid and binding obligations of Falcon, enforceable against it in
accordance with their respective terms, and Falcon has no valid defense
to
the enforcement of such obligations, and (c) Cornell is and shall be
entitled to the rights, remedies and benefits provided for in the
Transaction Documents and applicable law, without offset, setoff,
defense
or counterclaim of any kind, nature or descriptions
whatsoever.
|
|
13.
|
Falcon
shall disclose the contents of this letter agreement on a Form 8-K
or such
other form as may be applicable within 1 day of the date
hereof.
|
|
14.
|
This
letter may be executed in any number of counterparts, each of which
shall
be deemed an original, and all of which shall constitute one and
the same
instrument. This letter shall be accepted, effective and binding,
for all
purposes, when the parties shall have signed and transmitted to each
other, by telecopier or otherwise, copies of this letter. The terms
of
this letter supersede the terms of any other verbal or written agreement
existing prior to the date hereof. In the event of any litigation
arising
hereunder, the prevailing party or parties shall be entitled to recover
its or their reasonable attorneys’ fees and court costs from the other
party or parties, including the costs of bringing such litigation
and
collecting upon any judgments. This letter shall be binding upon
and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, legal representatives, trustees, successors and assigns.
Except
for the amounts expressly set forth herein, none of the parties hereto
shall be liable to any other party for any amounts
whatsoever.
|
If
the
foregoing correctly sets forth the terms of our agreement, please sign this
letter on the line provided below, whereupon it will constitute a binding
agreement among us.
|
Sincerely,
|
||
|
CORNELL
CAPITAL PARTNERS, LP
|
||
|
By:
Yorkville Advisors, LLC
|
||
|
Its:
General Partner
|
||
|
By:
|
/s/
Xxxx Xxxxxx
|
|
|
Name:
|
Xxxx
Xxxxxx
|
|
|
Title:
|
Portfolio
Manager
|
|
ACCEPTED
AND AGREED:
By:
/s/ Xxxx X.
Deutsch
Name:
Xxxx X. Deutsch
Title:
Chief Financial Officer
