Exhibit
4.1
FIRST AMENDMENT AND WAIVER
AGREEMENT
This First Amendment and Waiver Agreement (this
“ Agreement ”), is made and entered into as of
February 15, 2007, by and among Fellows Energy Ltd., a Nevada
corporation (along with its subsidiaries signatory hereto, the
“ Company ”) and Palisades Master Fund (the
“ Holder ”).
WHEREAS, the Company and the Holder are parties
to that certain Securities Purchase Agreement, dated June 17, 2005,
by and among the Company and the signatories thereto (collectively,
the “ June Purchase Agreements ”), pursuant to
which the Company issued to the Holder a Convertible Debenture, due
September 7, 2007, with an aggregate principal amount of $4,01,200,
of which $1,046,438.23 currently remains outstanding (the “
June Debenture ”); and
WHEREAS, the Company and the Holder are parties
to that certain Securities Purchase Agreement, September 21, 2005,
by and among the Company and the signatories thereto (collectively,
the “ September Purchase Agreement ” and
together with the June Purchase Agreement, the “ Purchase
Agreements ”), pursuant to which the Company issued to
the Holder a Convertible Debenture, due September 7, 2007, with an
aggregate principal amount of $2,858,000, of which $1,536,238.51
currently remains outstanding (the “ September
Debenture ” and together with the June Debenture, the
“ Debentures ”); and
WHEREAS, on account of dilutive issuances of
equity by the Company, the conversion price of the Debentures and
the exercise prices of the common stock purchase warrants
(collectively, the “ Warrants ”) issued pursuant
to the Purchase Agreements have been reduced to equal $0.1357,
subject to adjustment therein, with proportional increases in the
number of shares of common stock issuable upon exercise of such
Warrants, as set forth therein; and
WHEREAS, certain events of default have occurred
pursuant to the Debentures and are continuing to occur related to
the Debentures and as a result of such defaults (“
Existing Defaults ”), Palisades is entitled, among
other things, to enforce its rights and remedies against the
Company, including without limitation, acceleration and immediately
demand payment in full of all obligations under the Debentures;
and
WHEREAS, the parties have reached an agreement
with respect to the modification and amendment of certain terms of
the Debentures relating to the conversion and terms of the
Debentures and the waiver of the Existing Defaults; and
WHEREAS, capitalized terms used herein, but not
otherwise defined, shall have the meanings ascribed to such terms
as set forth in the September Purchase Agreement; and
NOW THEREFORE, in consideration of the terms and
conditions contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties, intending to be legally bound hereby,
agree as follows:
1.
Incorporation of Preliminary
Statements and Acknowledgement . The preliminary statements set forth above by
this reference hereto are hereby incorporated into this Agreement.
Without limiting the foregoing, the Company hereby acknowledges
that the Existing Events have occurred and are continuing under the
terms of the Purchase Agreement and Debentures and, notwithstanding
anything to the contrary in this Agreement, the Purchase
Agreements, Debentures or any of the other Transaction Documents,
the Company acknowledges and agrees that upon a breach of this
Agreement by the Company, such breach shall be an Event of Default
under the Debentures.
2.
Consent to JGB/Crescent
Transaction .
Simultaneously with the execution of this Agreement, the following
transactions are also taking place: a) the Company and JGB Capital
L.P. (“ JGB ”) are entering into a settlement
agreement; b) JGB is entering into an assignment agreement with
Crescent International Ltd. (“ Crescent ”) for
the assignment of the Debenture (the “ JGB Assignment
Agreement ”); c) the Company is entering into an
amendment agreement (the “ Debenture Amendments
” and together with this Agreement and the JGB Assignment
Agreement, the “ Assignment Documents ”) with
Crescent for the amendment of the convertible debentures issued
pursuant to the Purchase Agreements; and d) the Company and Holder
are entering into a securities purchase agreement for the purchase
of $714,500 in secured convertible debentures. The Holder hereby
consents to the above-described transactions.
3.
Waiver of Existing
Defaults . The Holder
agrees to forever waive its rights and remedies against the
Company, including without limitation, acceleration of the
Debentures, solely in connection with, and as they relate to, the
prior occurrence of the Existing Defaults. Notwithstanding anything
herein to the contrary, this waiver is limited only to the Existing
Defaults and any future Events of Default, including a breach of
this Agreement, shall not be deemed waived hereunder.
4.
Release of all Claims
. THE COMPANY (FOR ITSELF AND ITS
AFFILIATES) HEREBY UNCONDITIONALLY RELEASES AND FOREVER DISCHARGES
THE HOLDER AND ITS RESPECTIVE SUCCESSORS, ASSIGNS, AGENTS,
DIRECTORS, OFFICERS, EMPLOYEES, AFFILIATES, ACCOUNTANTS,
CONSULTANTS, CONTRACTORS, ADVISORS AND ATTORNEYS (COLLECTIVELY, THE
" BENEFITED PARTIES ") FROM ALL CLAIMS (AS DEFINED BELOW)
AND AGREES TO INDEMNIFY THE BENEFITED PARTIES, AND HOLD THEM
HARMLESS FROM ANY AND ALL CLAIMS, LOSSES, CAUSES OF ACTION, COSTS
AND EXPENSES OF EVERY KIND OR CHARACTER IN CONNECTION WITH THE
CLAIMS. AS USED IN THIS AMENDMENT, THE TERM "CLAIMS" MEANS ANY AND
ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTIONS, COSTS,
EXPENSES AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART, WHICH THE COMPANY, OR ANY
OF ITS AGENTS, EMPLOYEES OR AFFILIATES MAY NOW OR HEREAFTER HAVE OR
CLAIM AGAINST ANY OF THE BENEFITED PARTIES AND IRRESPECTIVE OF
WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF
LAW OR OTHERWISE IN CONNECTION WITH ANY OF THE TRANSACTION
DOCUMENTS, INCLUDING ANY CONTRACTING FOR, CHARGING, TAKING,
RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE
MAXIMUM RATE ON INTEREST CHARGEABLE UNDER APPLICABLE LAW AND ANY
LOSS, COST OR DAMAGE, OF ANY KIND OR CHARACTER, ARISING OUT OF OR
IN ANY WAY CONNECTED WITH OR IN ANY WAY RESULTING FROM THE ACTIONS
OR OMISSIONS OF THE BENEFITED PARTIES, INCLUDING ANY BREACH OF
FIDUCIARY DUTY, BREACH OF ANY DUTY OF GOOD FAITH OR FAIR DEALING,
UNDUE INFLUENCE, DURESS, ECONOMIC COERCION, CONFLICT OF INTEREST,
NEGLIGENCE, BAD FAITH, MALPRACTICE, VIOLATIONS OF THE RACKETEER
INFLUENCED AND CORRUPT ORGANIZATIONS ACT, INTENTIONAL OR NEGLIGENT
INFLICTION OF MENTAL DISTRESS, TORTIOUS INTERFERENCE WITH
CONTRACTUAL RELATIONS, TORTIOUS INTERFERENCE WITH CORPORATE
GOVERNANCE OR PROSPECTIVE BUSINESS ADVANTAGE, BREACH OF CONTRACT,
DECEPTIVE TRADE PRACTICES, LIBEL, SLANDER, CONSPIRACY OR ANY CLAIM
FOR WRONGFULLY ACCELERATING ANY OBLIGATIONS OR WRONGFULLY
ATTEMPTING TO FORECLOSE ON ANY COLLATERAL. THE COMPANY (FOR ITSELF
AND ITS AFFILIATES) AGREES THAT NONE OF THE BENEFITED PARTIES HAS
FIDUCIARY OR SIMILAR OBLIGATIONS TO THE COMPANY OR ANY AGENTS,
EMPLOYEES OR AFFILIATES OF THE COMPANY AND THAT THEIR RELATIONSHIPS
ARE STRICTLY THAT OF CREDITOR AND DEBTOR. THIS RELEASE IS ACCEPTED
BY HOLDER PURSUANT TO THIS AMENDMENT AND SHALL NOT BE CONSTRUED AS
AN ADMISSION OF LIABILITY BY HOLDER OR ANY OTHER BENEFITED
PARTY.
5.
Cashless Exchange of
Warrant . In
consideration for the Holder immediately exercising the Warrants
pursuant to the cashless exercise provisions thereof, the Company
agrees to reduce the exercise price of the warrants (“
Exercise Price Adjustment ”) to $0.0866 in connection
with such exercise such that the Holder shall receive 2,970,758
shares of Common Stock (the “ Exercised Shares
”). Within 3 Trading Days of the date hereof, the Company
shall have delivered the Exercised Shares to the Depository Trust
Account of the Holder pursuant to the instructions set forth on the
Holder’s signature page hereto. The Exercised Shares shall be
registered for resale pursuant to the Registration Statements, File
No. 333-127413 and 333-129627 (the “ Registration
Statements ”) free of any legends or restrictions on
resale by the Holder. The Holder waives any anti-dilution
adjustments that would otherwise occur to securities held by Holder
solely as a result of the Exercise Price Adjustment;
provided , however , that such waiver does not extend
to any adjustment to a third party holder of the Company’s
securities that received an adjustment to their securities to less
than $0.0866, subject to adjustment for reverse and forward stock
splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this
Agreement, as a result of the Exercise Price Adjustment.
6.
Conversion of
Debentures . The Company
shall issue shares of common stock (the “ Converted
Shares ”) to the Holder pursuant to overdue monthly
redemptions owed as of December 1, 2006, January 1, 2007 and
February 1, 2007, to the extent such Converted Shares are
registered for resale pursuant to the Registration Statements. The
Company shall issue 7,025,789 Converted Shares upon the monthly
liquidation of, in the aggregate, $608,433.15 in principal amount
of the Debentures, as set forth on Exhibit A hereto. Within
3 Trading Days of the date hereof, the Company shall have delivered
the Converted Shares to the Depository Trust Account of the Holder
pursuant to the instructions set forth on the Holder’s
signature page hereto. The Converted Shares shall be registered for
resale pursuant to the Registration Statements and free of any
legends or restrictions on resale by the Holder. The Holder waives
any anti-dilution adjustments that would otherwise occur
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