EXHIBIT 10.1
March 28, 2006
Falcon Natural Gas Corp.
Westchase Center
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▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Massimiliano Pozzoni
Re: Forbearance Agreement
Dear ▇▇. ▇▇▇▇▇▇▇:
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 March 28, 2006, Falcon is indebted (collectively, the
"Existing Debentures") to Cornell in the amounts set forth below:
Date of Outstanding Outstanding
Investor Name: Debenture: Principal: Interest:
------------- ---------- --------- --------
Cornell 4/19/05 $1,000,000 $88,767
Cornell 10/17/05 $7,000,000 $151,509
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,
▇. ▇▇▇▇▇▇▇ shall convert the outstanding balance of $250,000 on the
Convertible Debenture dated as of April 19, 2005 at a conversion
price of $0.10 per share (i.e., the default conversion price of such
debenture). The outstanding principal balance of such Convertible
Debenture shall be reduced by $250,000, the amount so converted.
Falcon shall cause 2,500,000 shares of its common stock to be issued
to Cornell within 5 days of the date hereof, and shall deliver to
Falcon's transfer agent at such time a legal opinion rendered
pursuant to Rule 144 and shall render any additional legal opinions
to Cornell as may be required by Cornell from time to time to resell
the common stock underlying such debenture; and
b. Further, Falcon shall issue to Cornell the following warrants
(collectively, the "Warrant") to purchase shares of Falcon's common
stock, each warrant in the form of the warrant attached as Exhibit A
hereto:
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March 28, 2006
Page 2
Warrant Exercise
Investor Name: Warrant No.: Warrant Shares: Price:
------------- ----------- -------------- ----------------
Cornell Capital Partners, LP. CCP-1 3,000,000 $0.30
Cornell Capital Partners, LP. CCP-2 3,000,000 $0.35
Cornell Capital Partners, LP. CCP-3 3,000,000 $0.40
Cornell Capital Partners, LP. CCP-4 3,000,000 $0.50
Cornell Capital Partners, LP. CCP-5 3,000,000 $0.60
Cornell Capital Partners, LP. CCP-6 3,000,000 $0.70
Cornell Capital Partners, LP. CCP-7 5,000,000 $0.80
Total 23,000,000
2. The maturity dates of the Existing Debentures shall be extended until
December 31, 2007. Payments of principal and interest on the Existing
Debentures shall commence on April 1, 2007 and shall continue on the first
business day of each calendar month thereafter until the paid in full.
Each monthly payment shall be equal to the outstanding principal balance
on the date such payment is due divided by 10, plus accrued and unpaid
interest. For example, if the outstanding principal balance on the
Convertible Debenture dated October 17, 2005 issued by Falcon to Cornell
was $4,000,000 on April 1, 2007, then the payment due on April 1, 2007
would be $400,000 (i.e., $4,000,000 divided 10), plus all accrued and
unpaid interest through such date.
3. Falcon shall re-file the Registration Statement with the SEC for the
resale of the shares of common stock underlying the Existing Debentures
and the Warrants on, or before, May 15, 2006. Falcon shall have such
Registration Statement declared effective by the SEC on, or before July
31, 2006.
4. 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 agreements, contracts, instruments or
other items delivered in connection therewith (collectively, along with
this letter agreement shall be referenced herein as the "Transaction
Documents") are unconditionally owing by Falcon to Cornell, without
offset, setoff, defense or counterclaim of any kind, nature or description
whatsoever. All terms of the Transaction Documents not modified by this
letter agreement shall remain in full force and effect. An event of
default on any Transaction Document shall constitute an Event of Default
on all other Transaction Documents.
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March 28, 2006
Page 3
5. Falcon hereby acknowledges, confirms and agrees that each of 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. 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 Default under
the Transaction Documents or any other agreement that Falcon has entered
into with Cornell.
7. 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.
8. 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.
9. 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.
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March 28, 2006
Page 4
10. 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/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Portfolio Manager
ACCEPTED AND AGREED:
FALCON NATURAL GAS CORP.
By: /s/ Massimiliano Pozzoni
-------------------------------
Name: Massimiliano Pozzoni
Title: Chief Executive Officer
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EXHIBIT A
FORM OF WARRANT
See Exhibit 4.1
