FORBEARANCE
AGREEMENT
FORBEARANCE AGREEMENT,
dated of as July 17, 2008, by and
between IGNIS PETROLEUM GROUP, INC. (the “
Company ”), and YA GLOBAL INVESTMENTS, L.P. (f/k/a
Cornell Capital Partners L.P.), a Cayman Island limited
partnership (“ 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:
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Debenture, Number, Issue Date, Original
Principal Amount
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Principal Outstanding
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Accrued and Unpaid Interest
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Secured Convertible Debenture due January 5,
2009 (CCP-001) issued on January 5, 2006, in the original principal
amount of US$2,500,000.
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US$2,229,400
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US$433,205
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Secured Convertible Debenture due February 9,
2009 (CCP-002) issued on February 9, 2006, in the original
principal amount of US$1,500,000.
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US$1,425,000
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US$251,612
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Secured Convertible Debenture due April 28, 2009
(CCP-003) issued on April 28, 2006, in the original principal
amount of US$1,000,000.
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US$965,000
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US$152,472
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The amounts referenced in this chart
above are as of July 17, 2008 and do not include additional costs,
charges, or expenses that may be accrued and owing or that may
hereafter be accrued.
WHEREAS, the Company has breached the terms of the
Transaction Documents as set forth in the events of default set
forth in Exhibit A hereto (the “ Existing
Defaults ”);
WHEREAS, the Company has requested that YA Global forbear
from exercising its rights as a result of the Existing Defaults,
which are continuing; 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:
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a.
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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
recital above. In addition to the principal and interest set forth
herein, all interest accrued and accruing hereafter and all
liquidated damages, 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.
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b.
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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 Amended
and Restated Security Agreement dated February 9, 2006 (the
“Security Agreement”), or otherwise granted to or held
by or for YA Global. The Company further agrees to grant YA Global
an enforceable first-priority lien in all of the Company’s
assets of every nature including all real property and all tangible
and intangible assets not otherwise encompassed within the
definition of “Pledged Property” set forth in the
Security Agreement including, but not limited to, its working and
other interests in oil and gas properties. The Company agrees, at
its sole expense, to promptly (but in no event later than 30 days
from the date hereof) make, execute, acknowledge, deliver to YA
Global, and otherwise obtain any documents including, without
limitation, mortgages, security agreements, pledges, title
opinions, title insurance, financing statements, certificates,
affidavits, and forms reasonably requested by YA Global to perfect,
or continue and preserve, the security interest set forth herein
and in the Security Agreement.
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c.
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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
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applicable law, without setoff, defense or
counterclaim of any kind, nature or descriptions whatsoever
.
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2.
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FORBEARANCE IN RESPECT OF CERTAIN EVENTS OF
DEFAULT.
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a.
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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 exists. YA Global has not waived, presently does not
intend to waive and may never waive such Existing Defaults and
nothing contained herein or the transactions contemplated hereby
shall be deemed to 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.
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i.
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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 January 5, 2009, 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.
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ii.
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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.
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c.
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No Other Waivers; Reservation of
Rights .
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i.
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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
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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.
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ii.
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Subject to Section 2(b) above (solely with
respect to the Existing Defa
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