Ex. 10.1
FORBEARANCE AGREEMENT
FORBEARANCE AGREEMENT, dated of as July 15, 2008 by and between GULF
COAST OIL & GAS, INC. (the "Company"), and YA GLOBAL INVESTMENTS, L.P.
(formerly, CORNELL CAPITAL PARTNERS, LP) ("YA Global"). All capitalized terms
used herein shall have the respective meanings assigned thereto in the
Transaction Documents (as defined below) unless otherwise defined herein.
W I T N E S S E T H:
WHEREAS, the Company and YA Global have entered into certain financing
arrangements set forth on Schedule A attached hereto and referred to herein as
the "Transaction Documents" pursuant to which, YA Global is the holder of the
following secured convertible debentures (collectively, the "Debentures") issued
by the Company:
------------------------------------------- ----------------------------------- --------------------------------------
DEBENTURE DESCRIPTION PRINCIPAL OUTSTANDING ACCRUED AND UNPAID INTEREST
------------------------------------------- ----------------------------------- --------------------------------------
10% Secured Convertible Debenture issued USD $403,454.13 $ 115,279.14
on February 1, 2006, due February 1, 2009
in the face amount of $500,000.
(Debenture No. CCP-1)
------------------------------------------- ----------------------------------- --------------------------------------
------------------------------------------- ----------------------------------- --------------------------------------
10% Secured Convertible Debenture issued USD $0 $ 55,027.61
on April 5, 2006, due April 5, 2009 in
the face amount of $500,000. (Debenture
No. CCP-2)
------------------------------------------- ----------------------------------- --------------------------------------
The amounts referenced in this chart above are as of June 1, 2008 and
do not include any additional costs, charges, expenses, or liquidated damages.
WHEREAS, the Company has breached the terms of the Transaction
Documents as set forth in the default letter dated March 17, 2008 (the "Existing
Defaults") a copy of which is attached hereto as Exhibit A; and
WHEREAS, YA Global is willing to agree to forbear from exercising
certain of its rights and remedies on the terms and conditions specified herein;
NOW, THEREFORE, in consideration of the foregoing, and the respective
agreements, warranties and covenants contained herein, the parties hereto agree,
covenant and warrant as follows:
1
1. ACKNOWLEDGMENTS.
a. Acknowledgement of Obligations. The Company hereby acknowledges,
confirms and agrees that as of the date hereof, the Company is
indebted to YA Global under the Debentures and the Transaction
Documents in the outstanding principal amount plus accrued and
unpaid interest thereon set forth in the first Whereas clause
above. In addition to the principal and interest set forth
herein, all interest accrued and accruing hereafter and all
liquidated damaged, fees, costs, expenses and other charges now
or hereafter payable by the Company to YA Global under the
Transaction Documents (collectively, the "Obligations"), are
unconditionally owing by the Company to YA Global, without
offset, defense or counterclaim of any kind, nature or
description whatsoever.
b. Acknowledgement of Security Interests. The Company hereby
acknowledges, confirms and agrees that YA Global has and shall
continue to have valid, enforceable and perfected first-priority
liens upon and security interests in the Pledged Property
heretofore granted to YA Global pursuant to the Security
Agreement between the Company and YA Global dated February 1,
2006 or otherwise granted to or held by YA Global. The Company
hereby acknowledges, confirms and agrees that YA Global has and
shall continue to have valid, enforceable and perfected
first-priority liens upon and security interests in the Pledged
Property heretofore granted to YA Global pursuant to the Security
Agreement between the Company and YA Global dated February 1,
2006 or otherwise granted to or held by the YA Global.
c. Binding Effect of Documents. The Company 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 YA
Global by the Company, and each is in full force and effect as of
the date hereof, (b) the agreements and obligations of the
Company contained in such documents and in this Agreement
constitute the legal, valid and binding obligations of the
Company, enforceable against each in accordance with their
respective terms, and the Company has no valid defense to the
enforcement of such obligations, and (c) YA Global is and shall
be entitled to the rights, remedies and benefits provided for in
the Transaction Documents and applicable law, without setoff,
defense or counterclaim of any kind, nature or descriptions
whatsoever.
2. FORBEARANCE IN RESPECT OF CERTAIN EVENTS OF DEFAULT.
a. Acknowledgement of Default. The Company hereby acknowledges and
agrees that the Existing Defaults have occurred and are
continuing, and each constitutes an Event of Default and entitles
YA Global to exercise its rights and remedies under the
Transaction Documents, applicable law or otherwise. The Company
further represents and warrants that as of the date hereof no
other Event of Default under the Transaction Documents exist. YA
Global has not waived, presently do not intend to waive and may
never waive such Existing Defaults and nothing contained herein
or the transactions contemplated hereby shall be deemed to
2
constitute any such waiver. The Company hereby acknowledges and
agrees that YA Global has the presently exercisable right to
declare the Obligations to be immediately due and payable under
the terms of the Transaction Documents.
b. Forbearance.
i. In reliance upon the representations, warranties and
covenants of the Company contained in this Agreement, and
subject to the terms and conditions of this Agreement and
any documents or instruments executed in connection
herewith, YA Global agrees to forbear from exercising its
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
ending on September 30, 2008, so long as the following
conditions are met: (i) the Company 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.
ii. Upon the termination or expiration of the Forbearance
Period, the agreement of YA Global 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 YA Global 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 YA Global to notify the
Company of the occurrence of the Existing Defaults and
satisfies any obligation by YA Global to give the Company an
opportunity to cure the Existing Defaults.
c. No Other Waivers; Reservation of Rights.
i. YA Global has not waived, is not by this Agreement waiving,
and has no intentions of waiving, any Events of Default
which may be continuing on the date hereof or any Events of
Default which may occur after the date hereof (whether the
same or similar to the Existing Defaults or otherwise), and
YA Global has not agreed to forbear with respect to any of
its rights or remedies concerning any Events of Default
(other than, during the Forbearance Period, the Existing
Defaults to the extent expressly set forth herein), which
may have occurred or are continuing as of the date hereof or
which may occur after the date hereof.
ii. Subject to Section 2(b) above (solely with respect to the
Existing Defaults), YA Global reserves the right, in its
discretion, to exercise any or all of its rights and
remedies under the Transaction Documents as a result of any
Events of Default which may be continuing on the date hereof
3
or any Event of Default which may occur after the date
hereof, and YA Global has not waived any of such rights or
remedies, and nothing in this Agreement, and no delay on its
part in exercising any such rights or remedies, should be
construed as a waiver of any such rights or remedies.
3. AMENDMENT OF WARRANTS. Pursuant to the terms and conditions of this
Agreement, contemporaneously with the execution and delivery of this
Agreement, the Company will amend each of the existing warrants
(specifically Warrant No. CCP-001 dated February 1, 2006 ("Warrant No.
CCP-001"), Warrant No. CCP-002 dated February 1, 2006 ("Warrant No.
CCP-002"), Warrant No. CCP-003 dated February 1, 2006 ("Warrant No.
CCP-003"), Debenture No. CCP-004 dated February 1, 2006 ("Warrant No.
CCP-004") and Debenture No. CCP-005 dated February 1, 2006 ("Warrant
No. CCP-005"), and collectively, the "Warrants") by executing an
amendment (the "Warrant Amendments") in substantially the form attached
hereto as Exhibit B for each of the Warrants. Pursuant to the Warrant
Amendments, the following amendment will be made to the Warrants:
a. the Exercise Price (as defined in the Warrants) shall be $0.001.
b. the Expiration Date (as defined in the Warrants) shall be amended
to provide for a date seven (7) years from the Issuance Date (as
defined in the Warrants).
4. WARRANTS. In consideration of the agreements set forth herein, the
Company shall issue to YA Global five (5) warrants in substantially the
form attached hereto as Exhibit C to purchase shares of Common Stock of
the Company as follows, for a period of seven (7) years from the
issuance date:
a. Warrant to purchase 2,500,000 shares, at an exercise price of
$0.01 per share;
b. Warrant to purchase 2,333,333 shares at an exercise price of
$0.015 per share.
c. Warrant to purchase 2,250,000 shares at an exercise price of
$0.02 per share.
d. Warrant to purchase 2,400,000 shares at an exercise price of
$0.025 per share.
e. Warrant to purchase 2,833,333 shares at an exercise price of
$0.03 per share.
5. AMENDMENT OF DEBENTURES. Pursuant to the terms and conditions of this
Agreement, contemporaneously with the execution and delivery of this
Agreement, the Company will amend each of the Debentures by executing
an amendment (the "Debenture Amendments") in substantially the form
attached hereto as Exhibit D for each Debenture. Pursuant to the
Debenture Amendments, the following amendments will be made to the
Debentures:
a. Interest will accrue on the outstanding principal balance of the
Debentures at an annual rate equal to eighteen percent (18%) per
annum effective as of June 1, 2008;
4
b. the Conversion Price as set forth in the Debentures shall be
equal to the lesser of (a) the Fixed Conversion Price, or (b) an
amount equal to seventy-five percent (75%) of the lowest volume
weighted average price (the "VWAP") of the Common Stock as quoted
by Bloomberg, LP during the ten (10) trading days immediately
preceding the Conversion Date.
c. All conversion calculations shall be rounded to the nearest
twelfth (12th) decimal, at the sole option of the holder.
6. COVENANTS
a. COMMON STOCK OF THE COMPANY. The Company shall, within thirty
(30) days of the date hereof, have filed the appropriate
paperwork with the Nevada Secretary of State and the United
States Securities and Exchange Commission and increased the
authorized shares of Common Stock the Company to fifteen billion
(15,000,000,000) and to provide for a par value of no par value
per share. Failure by the Company to do so shall be considered an
Event of Default.
b. FURTHER ASSURANCES. The Company shall, from and after the
execution of this Agreement, execute and deliver to YA Global
whatever additional documents, instruments, and agreements that
YA Global may require in order to correct any document
deficiencies, or to vest or perfect the Transaction Documents and
the collateral granted therein more securely in YA Global and/or
to otherwise give effect to the terms and conditions of this
Agreement, and hereby authorize YA Global to file any financing
statements (including financing statements with a generic
description of the collateral such as "all assets"), and take any
other normal and customary steps, YA Global deems necessary to
perfect or evidence YA Global's security interests and liens in
any such collateral.
c. NON-INTERFERENCE. From and after the termination of the
Forbearance Period, the Company agrees not to interfere with the
exercise by YA Global of any of its rights and remedies. The
Company further agrees that it shall not seek to restrain or
otherwise hinder, delay, or impair YA Global's efforts to realize
upon any collateral granted to YA Global, or otherwise to enforce
its rights and remedies pursuant to the Transaction Documents.
The provisions of this Paragraph shall be specifically
enforceable by YA Global.
d. CROSS DEFAULT. The Company hereby acknowledges and agrees that
any default or Event of Default under this Agreement or under any
Transaction Document shall constitute an Event of Default under
each other Transaction Document.
7. RELEASE. In exchange for the accommodations made by YA Global herein,
the Company does hereby, on behalf of itself and its agents,
representatives, attorneys, assigns, heirs, subsidiaries, executors and
administrators (collectively, "Company Parties") RELEASE AND FOREVER
DISCHARGE YA Global and its subsidiaries and its respective affiliates,
parents, joint ventures, officers, directors, shareholders, interest
holders, members, managers, employees, consultants, representatives,
successors and assigns, heirs, executors and administrators
5
(collectively, "Buyer Parties") from all causes of action, suits,
debts, claims and demands whatsoever known or unknown, at law, in
equity or otherwise, which the Company Parties ever had, now has, or
hereafter may have on or prior to the date hereof, and any claims for
reasonable attorneys' fees and costs, and including, without
limitation, any claims relating to fees, penalties, liquidated damages,
and indemnification for losses, liabilities and expenses. The release
contained in this Section is effective without regard to the legal
nature of the claims raised and without regard to whether any such
claims are based upon tort, equity, or implied or express contract. It
is expressly understood and agreed that this release shall operate as a
clear and unequivocal waiver by the Company Parties of any such claim
whatsoever.
8. PROVISIONS OF GENERAL APPLICATION
a. Effect of this Agreement. Except as modified pursuant hereto, no
other changes or modifications to the Transaction Documents are
intended or implied and in all other respects the Transaction
Documents are hereby specifically ratified, restated and
confirmed by all parties hereto as of the effective date hereof.
To the extent of conflict between the terms of this Agreement and
the other Transaction Documents, the terms of this Agreement
shall control. The Transaction Documents and this Agreement shall
be read and construed as one agreement.
b. Governing Law. This Agreement shall be interpreted according to
the laws of the State of New Jersey and shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors and assigns. Any notices, demands,
consents, other writings or communications permitted or required
by this Agreement shall be given in the manner and to the address
as set forth in the Transaction Documents.
c. Mutual Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY
AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND
THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE
JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT
TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT OR
OTHERWISE BETWEEN FACTOR AND CLIENT ARISING OUT OF, CONNECTED
WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE
OTHER FACTORING DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
[SIGNATURE PAGE IMMEDIATELY TO FOLLOW]
6
IN WITNESS WHEREOF, this Agreement is executed and delivered as of the
day and year first above written.
GULF COAST OIL & GAS, INC.
By:
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President & CEO
YA GLOBAL INVESTMENTS, L.P.
BY: YORKVILLE ADVISORS, LLC
ITS: INVESTMENT MANAGER
By:
Name:
Title:
7
SCHEDULE A
TRANSACTION DOCUMENTS
1. Securities Purchase Agreement dated February 1, 2006, entered into by
and between Gulf Coast Oil &Gas, Inc. (the "Company") and YA Global
Investments, L.P. (formerly, Cornell Capital Partners, LP) (herein "YA
Global") and Certain Wealth, Ltd. ("Certain Wealth") and TAIB Bank,
B.S.C. ("TAIB"). YA Global, Certain Wealth, and TAIB are collectively
referred to as the "Buyers".
2. Investor Registration Rights Agreement dated February 1, 2006, entered
into by and between the Company and the Buyers, as amended.
3. Security Agreement dated February 1, 2006, entered into by and between
the Company and the Buyers.
4. Irrevocable Transfer Agent Instructions dated February 1, 2006 entered
into by and between the Company, the Buyers, and Worldwide Stock
Transfer, LLC.
8
EXHIBIT A
DEFAULT NOTICE
9
EXHIBIT B
FORM OF AMENDMENT TO WARRANTS
10
EXHIBIT C
FORM OF WARRANT
11
EXHIBIT D
FORM OF AMENDMENT TO DEBENTURES
12
