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FALCON NATURAL GAS CORP.
PLACEMENT AGENT AGREEMENT
Dated as of: April 19, 2005
Sloan Securities Corporation
2 Executive Drive
Fort Lee, New Jersey 07024
Ladies and Gentlemen:
The undersigned, Falcon Natural Gas Corp., a Nevada corporation
(the
"Company"), hereby agrees with Sloan Securities Corporation (the
"Placement
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Agent") and Cornell Capital Partners, LP, a Delaware Limited
Partnership (the
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"Investor"), as follows:
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1. Offering. The Company hereby engages the Placement Agent to
act as
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its exclusive placement agent in connection with the Standby
Equity Distribution
Agreement dated the date hereof (the "Standby Equity
Distribution Agreement"),
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pursuant to which the Company shall issue and sell to the
Investor, from time to
time, and the Investor shall purchase from the Company (the
"Offering") up to
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Twenty Million U.S. Dollars ($20,000,000) of the Company's
common stock (the
"Commitment Amount"), par value US$0.00001 per share (the
"Common Stock"), at
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price per share equal to the Purchase Price, as that term is
defined in the
Standby Equity Distribution Agreement. The Placement Agent
services shall
consist of reviewing the terms of the Standby Equity
Distribution Agreement and
advising the Company with respect to those terms.
All capitalized terms used herein and not otherwise defined
herein shall
have the same meaning ascribed to them as in the Standby Equity
Distribution
Agreement. The Investor will be granted certain registration
rights with
respect to the Common Stock as more fully set forth in the
Registration Rights
Agreement between the Company and the Investor dated the date
hereof (the
"Registration Rights Agreement"). The documents to be executed
and delivered in
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connection with the Offering, including, but not limited, to the
Company's
latest Quarterly Report on Form 10-QSB as filed with the United
States
Securities and Exchange Commission, this Agreement, the Standby
Equity
Distribution Agreement, the Registration Rights Agreement, and
the Escrow
Agreement dated the date hereof (the "Escrow Agreement"), are
referred to
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sometimes hereinafter collectively as the "Offering Materials."
The Company's
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Common Stock purchased by the Investor hereunder or to be issued
in connection
with the conversion of any debentures are sometimes referred to
hereinafter as
the "Securities." The Placement Agent shall not be obligated to
sell any
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Securities.
2. Compensation.
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A. No additional compensation is due to Placement Agent. The
Company
has previously issued to the Placement Agent or its designee
shares of the
Company's Common Stock in an amount equal to Ten Thousand U.S.
Dollars
(US$10,000) (the "Placement Agent's Shares"). The Placement
Agent shall be
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entitled to "piggy-back" registration rights, which shall be
triggered upon
registration of any shares of Common Stock by the Investor with
respect to the
Placement Agent's Shares pursuant to the Registration Rights
Agreement dated the
date hereof.
<PAGE>
3. Representations, Warranties and Covenants of the Placement
Agent.
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A. The Placement Agent represents, warrants and covenants as
follows:
(i) The Placement Agent has the necessary power to enter into
this
Agreement and to consummate the transactions contemplated
hereby.
(ii) The execution and delivery by the Placement Agent of
this
Agreement and the consummation of the transactions contemplated
herein will
not result in any violation of, or be in conflict with, or
constitute a
default under, any agreement or instrument to which the
Placement Agent is
a party or by which the Placement Agent or its properties are
bound, or any
judgment, decree, order or, to the Placement Agent's knowledge,
any
statute, rule or regulation applicable to the Placement Agent.
This
Agreement when executed and delivered by the Placement Agent,
will
constitute the legal, valid and binding obligations of the
Placement Agent,
enforceable in accordance with their respective terms, except to
the extent
that (a) the enforceability hereof or thereof may be limited by
bankruptcy,
insolvency, reorganization, moratorium or similar laws from time
to time in
effect and affecting the rights of creditors generally, (b)
the
enforceability hereof or thereof is subject to general
principles of
equity, or (c) the indemnification provisions hereof or thereof
may be held
to be in violation of public policy.
(iii) Upon receipt and execution of this Agreement, the
Placement
Agent will promptly forward copies of this Agreement to the
Company or its
counsel and the Investor or its counsel.
(iv) The Placement Agent will not intentionally take any action
that
it reasonably believes would cause the Offering to violate the
provisions
of the Securities Act of 1933, as amended (the "1933 Act"), the
Securities
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Exchange Act of 1934 (the "1934 Act"), the respective rules and
regulations
--------
promulgated thereunder (the "Rules and Regulations") or
applicable "Blue
----------------------
Sky" laws of any state or jurisdiction.
(v) The Placement Agent is a member of the National Association
of
Securities Dealers, Inc., and is a broker-dealer registered as
such under
the 1934 Act and under the securities laws of the states in
which the
Securities will be offered or sold by the Placement Agent unless
an
exemption for such state registration is available to the
Placement Agent.
The Placement Agent is in material compliance with the rules
and
regulations applicable to the Placement Agent generally and
applicable to
the Placement Agent's participation in the Offering.
<PAGE>
4. Representations and Warranties of the Company.
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A. The Company represents and warrants as follows:
(i) The execution, delivery and performance of each of this
Agreement,
the Standby Equity Distribution Agreement, the Escrow Agreement,
and the
Registration Rights Agreement has been or will be duly and
validly
authorized by the Company and is, or with respect to this
Agreement, the
Standby Equity Distribution Agreement, the Escrow Agreement, and
the
Registration Rights Agreement, will be a valid and binding
agreement of the
Company, enforceable in accordance with its respective terms,
except to the
extent that (a) the enforceability hereof or thereof may be
limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws from
time to time in effect and affecting the rights of creditors
generally, (b)
the enforceability hereof or thereof is subject to general
principles of
equity or (c) the indemnification provisions hereof or thereof
may be held
to be in violation of public policy. The Securities to be issued
pursuant
to the transactions contemplated by this Agreement and the
Standby Equity
Distribution Agreement have been duly authorized and, when
issued and paid
for in accordance with this Agreement, the Standby Equity
Distribution
Agreement and the certificates/instruments representing such
Securities,
will be valid and binding obligations of the Company,
enforceable in
accordance with their respective terms, except to the extent
that (1) the
enforceability thereof may be limited by bankruptcy,
insolvency,
reorganization, moratorium or similar laws from time to time in
effect and
affecting the rights of creditors generally, and (2) the
enforceability
thereof is subject to general principles of equity. All
corporate action
required to be taken for the authorization, issuance and sale of
the
Securities has been duly and validly taken by the Company.
(ii) The Company has a duly authorized, issued and
outstanding
capitalization as set forth herein and in the Standby Equity
Distribution
Agreement. The Company is not a party to or bound by any
instrument,
agreement or other arrangement providing for it to issue any
capital stock,
rights, warrants, options or other securities, except for this
Agreement,
the agreements described herein and as described in the Standby
Equity
Distribution Agreement, dated the date hereof and the agreements
described
therein. All issued and outstanding securities of the Company,
have been
duly authorized and validly issued and are fully paid and
non-assessable;
the holders thereof have no rights of rescission or preemptive
rights with
respect thereto and are not subject to personal liability solely
by reason
of being security holders; and none of such securities were
issued in
violation of the preemptive rights of any holders of any
security of the
Company.
(iii) The Common Stock to be issued in accordance with this
Agreement
and the Standby Equity Distribution Agreement has been duly
authorized and,
when issued and paid for in accordance with this Agreement, the
Standby
Equity Distribution Agreement and the Compensation Debenture,
the
certificates/instruments representing such Common Stock will be
validly
issued, fully-paid and non-assessable; the holders thereof will
not be
subject to personal liability solely by reason of being such
holders; such
Securities are not and will not be subject to the preemptive
rights of any
holder of any security of the Company.
(iv) The Company has good and marketable title to, or valid
and
enforceable leasehold estates in, all items of real and personal
property
necessary to conduct its business (including, without
limitation, any real
or personal property stated in the Offering Materials to be
owned or leased
by the Company), free and clear of all liens, encumbrances,
claims,
security interests and defects of any material nature
whatsoever, other
than those set forth in the Offering Materials and liens for
taxes not yet
due and payable.
<PAGE>
(v) There is no litigation or governmental proceeding pending
or, to
the best of the Company's knowledge, threatened against, or
involving the
properties or business of the Company, except as set forth in
the Offering
Materials.
(vi) The Company has been duly organized and is validly existing
as a
corporation in good standing under the laws of the State of
Nevada. Except
as set forth in the Offering Materials, the Company does not own
or
control, directly or indirectly, an interest in any other
corporation,
partnership, trust, joint venture or other business entity. The
Company is
duly qualified or licensed and in good standing as a foreign
corporation in
each jurisdiction in which the character of its operations
requires such
qualification or licensing and where failure to so qualify would
have a
material adverse effect on the Company. The Company has all
requisite
corporate power and authority, and all material and
necessary
authorizations, approvals, orders, licenses, certificates and
permits of
and from all governmental regulatory officials and bodies
(domestic and
foreign) to conduct its businesses (and proposed business) as
described in
the Offering Materials. Any disclosures in the Offering
Materials
concerning the effects of foreign, federal, state and local
regulation on
the Company's businesses as currently conducted and as
contemplated are
correct in all material respects and do not omit to state a
material fact.
The Company has all corporate power and authority to enter into
this
Agreement, the Standby Equity Distribution Agreement, the
Registration
Rights Agreement, and the Escrow Agreement, to carry out the
provisions and
conditions hereof and thereof, and all consents, authorizations,
approvals
and orders required in connection herewith and therewith have
been
obtained. No consent, authorization or order of, and no filing
with, any
court, government agency or other body is required by the
Company for the
issuance of the Securities or execution and delivery of the
Offering
Materials except for applicable federal and state securities
laws. The
Company, since its inception, has not incurred any liability
arising under
or as a result of the application of any of the provisions of
the 1933 Act,
the 1934 Act or the Rules and Regulations.
(vii) There has been no material adverse change in the condition
or
prospects of the Company, financial or otherwise, from the
latest dates as
of which such condition or prospects, respectively, are set
forth in the
Offering Materials, and the outstanding debt, the property and
the business
of the Company conform in all material respects to the
descriptions thereof
contained in the Offering Materials.
(viii) Except as set forth in the Offering Materials, the
Company is
not in breach of, or in default under, any term or provision of
any
material indenture, mortgage, deed of trust, lease, note, loan
or Standby
Equity Distribution Agreement or any other material agreement or
instrument
evidencing an obligation for borrowed money, or any other
material
agreement or instrument to which it is a party or by which it or
any of its
properties may be bound or affected. The Company is not in
violation of any
provision of its charter or by-laws or in violation of any
franchise,
license, permit, judgment, decree or order, or in violation of
any material
statute, rule or regulation. Neither the execution and delivery
of the
Offering Materials nor the issuance and sale or delivery of the
Securities,
nor the consummation of any of the transactions contemplated in
the
Offering Materials nor the compliance by the Company with the
terms and
provisions hereof or thereof, has conflicted with or will
conflict with, or
has resulted in or will result in a breach of, any of the terms
and
provisions of, or has constituted or will constitute a default
under, or
has resulted in or will result in the creation or imposition of
any lien,
charge or encumbrance upon any property or assets of the Company
or
pursuant to the terms of any indenture, mortgage, deed of trust,
note, loan
or any other agreement or instrument evidencing an obligation
for borrowed
money, or any other agreement or instrument to which the Company
may be
bound or to which any of the property or assets of the Company
is subject
except (a) where such default, lien, charge or encumbrance would
not have a
material adverse effect on the Company and (b) as described in
the Offering
Materials; nor will such action result in any violation of the
provisions
of the charter or the by-laws of the Company or, assuming the
due
performance by the Placement Agent of its obligations hereunder,
any
material statute or any material order, rule or regulation
applicable to
the Company of any court or of any foreign, federal, state or
other
regulatory authority or other government body having
jurisdiction over the
Company.
<PAGE>
(ix) Subsequent to the dates as of which information is given in
the
Offering Materials, and except as may otherwise be indicated
or
contemplated herein or therein and the securities offered
pursuant to the
Securities Purchase Agreement dated the date hereof, the Company
has not
(a) issued any securities or incurred any liability or
obligation, direct
or contingent, for borrowed money, or (b) entered into any
transaction
other than in the ordinary course of business, or (c) declared
or paid any
dividend or made any other distribution on or in respect of its
capital
stock. Except as described in the Offering Materials, the
Company has no
outstanding obligations to any officer or director of the
Company.
(x) There are no claims for services in the nature of a finder's
or
origination fee with respect to the sale of the Common Stock or
any other
arrangements, agreements or understandings that may affect the
Placement
Agent's compensation, as determined by the National Association
of
Securities Dealers, Inc.
(xi) The Company owns or possesses, free and clear of all liens
or
encumbrances and rights thereto or therein by third parties, the
requisite
licenses or other rights to use all trademarks, service marks,
copyrights,
service names, trade names, patents, patent applications and
licenses
necessary to conduct its business (including, without
limitation, any such
licenses or rights described in the Offering Materials as being
owned or
possessed by the Company) and, except as set forth in the
Offering
Materials, there is no claim or action by any person pertaining
to, or
proceeding, pending or threatened, which challenges the
exclusive rights of
the Company with respect to any trademarks, service marks,
copyrights,
service names, trade names, patents, patent applications and
licenses used
in the conduct of the Company's businesses (including, without
limitation,
any such licenses or rights described in the Offering Materials
as being
owned or possessed by the Company) except any claim or action
that would
not have a material adverse effect on the Company; the Company's
current
products, services or processes do not infringe or will not
infringe on the
patents currently held by any third party.
(xii) Except as described in the Offering Materials, the Company
is
not under any obligation to pay royalties or fees of any kind
whatsoever to
any third party with respect to any trademarks, service marks,
copyrights,
service names, trade names, patents, patent applications,
licenses or
technology it has developed, uses, employs or intends to use or
employ,
other than to their respective licensors.
<PAGE>
(xiii) Subject to the performance by the Placement Agent of
its
obligations hereunder the offer and sale of the Securities
complies, and
will continue to comply, in all material respects with the
requirements of
Rule 506 of Regulation D promulgated by the SEC pursuant to the
1933 Act
and any other applicable federal and state laws, rules,
regulations and
executive orders. Neither the Offering Materials nor any
amendment or
supplement thereto nor any documents prepared by the Company in
connection
with the Offering will contain any untrue statement of a
material fact or
omit to state any material fact required to be stated therein or
necessary
to make the statements therein, in light of the circumstances
under which
they were made, not misleading. All statements of material facts
in the
Offering Materials are true and correct as of the date of the
Offering
Materials.
(xiv) All material taxes which are due and payable from the
Company
have been paid in full or adequate provision has been made for
such taxes
on the books of the Company, except for those taxes disputed in
good faith
by the Company
(xv) None of the Company nor any of its officers, directors,
employees
or agents, nor any other person acting on behalf of the Company,
has,
directly or indirectly, given or agreed to give any money, gift
or similar
benefit (other than legal price concessions to customers in the
ordinary
course of business) to any customer, supplier, employee or agent
of a
customer or supplier, or official or employee of any
governmental agency or
instrumentality of any government (domestic or foreign) or any
political
party or candidate for office (domestic or foreign) or other
person who is
or may be in a position to help or hinder the business of the
Company (or
assist it in connection with any actual or proposed transaction)
which (A)
might subject the Company to any damage or penalty in any civil,
criminal
or governmental litigation or proceeding, or (B) if not given in
the past,
might have had a materially adverse effect on the assets,
business or
operations of the Company as reflected in any of the financial
statements
contained in the Offering Materials, or (C) if not continued in
the future,
might adversely affect the assets, business, operations or
prospects of the
Company in the future.
5. Representations, Warranties and Covenants of the
Investor.
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A. The Investor represents, warrants and covenants as
follows:
(i) The Investor has the necessary power to enter i
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