IRREVOCABLE TRANSFER AGENT INSTRUCTIONS January 31, 2007
IRREVOCABLE
TRANSFER AGENT INSTRUCTIONS
January
31, 2007
|
Worldwide
Stock Transfer, LLC
|
|
▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
|
|
Teaneck,
New Jersey 07066
|
Ladies
and Gentlemen:
Reference
is made to that certain Securities Purchase Agreement (the “Securities
Purchase Agreement”)
of
even date herewith by and between Falcon
Natural Gas Corp., a Nevada
corporation (the “Company”),
and
the Buyers set forth on Schedule I attached thereto (collectively the
“Buyers”).
Pursuant to the Securities Purchase Agreement, the Company shall sell to the
Buyers, and the Buyers shall purchase from the Company, convertible debentures
(collectively, the “Debentures”)
in the
aggregate principal amount of Six
Hundred Thousand Dollars ($600,000),
plus
accrued interest, which are convertible into shares of the Company’s common
stock, par
value $0.00001
per
share (the “Common
Stock”),
at
the Buyers discretion. These instructions relate to the following stock or
proposed stock issuances or transfers:
|
1.
|
The
Company has agreed to issue to the Buyers up to Fifteen Million
(15,000,000) shares
of
the Company’s Common Stock upon conversion of the Debentures
(“Conversion
Shares”)
plus the shares of Common Stock to be issued to the Buyers upon conversion
of accrued interest and liquidated damages into Common Stock (the
“Interest
Shares”)
|
This
letter shall serve as our irrevocable authorization and direction to Worldwide
Stock Transfer, LLC (the “Transfer
Agent”)
to do
the following:
|
1.
|
Conversion
Shares.
|
|
a.
|
Instructions
Applicable to Transfer Agent.
With respect to the Conversion Shares and the Interest Shares, the
Transfer Agent shall issue the Conversion Shares and the Interest
Shares
to the Buyers from time to time upon delivery to the Transfer Agent
of a
properly completed and duly executed Conversion Notice (the “Conversion
Notice”),
in the form attached hereto as Exhibit I,
delivered on behalf of the Company to the Transfer Agent. Upon receipt
of
a Conversion Notice, the Transfer Agent shall within three (3) Trading
Days thereafter (i) issue and surrender to a common carrier for overnight
delivery to the address as specified in the Conversion Notice, a
certificate, registered in the name of the Buyers or their designees,
for
the number of shares of Common Stock to which the Buyers shall be
entitled
as set forth in the Conversion Notice or (ii) provided Transfer Agent
are
participating in The Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, upon the request of the
Buyers, credit such aggregate number of shares of Common Stock to
which
the Buyers shall be entitled to the Buyers’ or their designees’ balance
account with DTC through its Deposit Withdrawal At
Custodian (“DWAC”)
system provided the Buyers causes its bank or broker to initiate
the DWAC
transaction. For purposes hereof “Trading
Day”
shall mean any day on which the Nasdaq Market is open for customary
trading.
|
|
b.
|
The
Company hereby confirms to the Transfer Agent and the Buyers that
certificates representing the Conversion Shares shall not bear any
legend
restricting transfer and should not be subject to any stop-transfer
restrictions and shall otherwise be freely transferable on the books
and
records of the Company; provided
that
counsel to the Company delivers (i) the Notice of Effectiveness set
forth
in Exhibit
II
attached hereto and (ii) an opinion of counsel in the form set forth
in
Exhibit
III
attached hereto, and that if the Conversion Shares and the Interest
Shares
are not registered for sale under the Securities Act of 1933, as
amended,
then the certificates for the Conversion Shares and Interest Shares
shall
bear the following legend:
|
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID
ACT.”
|
c.
|
In
the event that counsel to the Company fails or refuses to render
an
opinion as required to issue the Conversion Shares in accordance
with the
preceding paragraph (either with or without restrictive legends,
as
applicable), then the Company irrevocably and expressly authorizes
counsel
to the Buyers to render such opinion. The Transfer Agent shall accept
and
be entitled to rely on such opinion for the purposes of issuing the
Conversion Shares.
|
2
|
2.
|
All
Shares.
|
|
a.
|
The
Transfer Agent shall reserve for issuance to the Buyers the Conversion
Shares. All such shares shall remain in reserve with the Transfer
Agent
until the Buyers provides the Transfer Agent instructions that the
shares
or any part of them shall be taken out of reserve and shall no longer
be
subject to the terms of these instructions.
|
|
b.
|
The
Transfer Agent shall rely exclusively on the Conversion Notice and
shall
have no liability for relying on such instructions. Any Conversion
Notice
delivered hereunder shall constitute an irrevocable instruction to
the
Transfer Agent to process such notice or notices in accordance with
the
terms thereof. Such notice or notices may be transmitted to the Transfer
Agent by facsimile or any commercially reasonable
method.
|
|
c.
|
The
Company hereby confirms to the Transfer Agent and the Buyers that
no
instructions other than as contemplated herein will be given to Transfer
Agent by the Company with respect to the matters referenced herein.
The
Company hereby authorizes the Transfer Agent, and the Transfer Agent
shall
be obligated, to disregard any contrary instructions received by
or on
behalf of the Company.
|
The
Company hereby agrees that it shall not replace the Transfer Agent as the
Company’s transfer agent without the prior written consent of the
Buyers.
Any
attempt by Transfer Agent to resign as the Company’s transfer agent hereunder
shall not be effective until such time as the Company provides to the Transfer
Agent written notice that a suitable replacement has agreed to serve as transfer
agent and to be bound by the terms and conditions of these Irrevocable Transfer
Agent Instructions.
The
Company herby confirms and the Transfer Agent acknowledges that while any
portion of the Debenture
remains unpaid and unconverted, the Company and the
Transfer Agent
shall
not, without the prior consent of the Buyers, (i) issue any Common Stock or
Preferred Stock without consideration or for a consideration per share less
than
its closing bid price determined immediately prior to its issuance,
(ii) issue any Preferred Stock, warrant, option, right, contract, call, or
other security or instrument granting the holder thereof the right to acquire
Common Stock without consideration or for a consideration per share less than
the closing bid price of such Common Stock determined immediately prior to
its
issuance, (iii)
issue any S-8
shares of the Company’s Common Stock.
The
Company and the Transfer Agent hereby acknowledge and confirm that complying
with the terms of this Agreement does not and shall not prohibit the Transfer
Agent from satisfying any and all fiduciary responsibilities and duties it
may
owe to the Company.
The
Company and the Transfer Agent acknowledge that the Buyers is relying on the
representations and covenants made by the Company and the Transfer Agent
hereunder and are a material inducement to the Buyers purchasing convertible
debentures under the Securities Purchase Agreement. The Company and the Transfer
Agent further acknowledge that without such representations and covenants of
the
Company and the Transfer Agent made hereunder, the Buyers would not purchase
the
Debentures.
3
Each
party hereto specifically acknowledges and agrees that in the event of a breach
or threatened breach by a party hereto of any provision hereof, the Buyers
will
be irreparably damaged and that damages at law would be an inadequate remedy
if
these Irrevocable Transfer Agent Instructions were not specifically enforced.
Therefore, in the event of a breach or threatened breach by a party hereto,
including, without limitation, the attempted termination of the agency
relationship created by this instrument, the Buyers shall be entitled, in
addition to all other rights or remedies, to an injunction restraining such
breach, without being required to show any actual damage or to post any bond
or
other security, and/or to a decree for specific performance of the provisions
of
these Irrevocable Transfer Agent Instructions.
Transfer
Agent Binding Disclaimer:
In
consideration for Worldwide Stock Transfer, LLC agreeing and attesting to all
terms in the above referenced Irrevocable Transfer Agent Instructions, in
particular any kind of lawsuit and or action that may arise from the buyer
instructing Worldwide Stock Transfer, LLC to issue shares based on the legality
of the agreement whereas the issuer is denying the request in full or partially
for whatever reason, the issuer, buyers and any other third party involved
agree
for ourselves, our successors, legal representatives and assigns, at all times
to defend, indemnify and save Worldwide Stock Transfer, LLC, their successors
and assigns, free and harmless from and against any and all claims, from
actions, suits, whether groundless or otherwise, and from and against any and
all liabilities, taxes, losses, damages, costs, charges, counsel fees, and
other
expenses of every nature and character that arises from this
action.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
4
IN
WITNESS WHEREOF,
the
parties have caused this letter agreement regarding Irrevocable Transfer Agent
Instructions to be duly executed and delivered as of the date first written
above.
|
COMPANY:
|
|
|
By:
/s/ ▇▇▇▇ ▇.
▇▇▇▇▇▇▇
|
|
|
Name:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
|
|
|
Title:
Chief Financial Officer
|
|
WORLDWIDE
STOCK TRANSFER, LLC
By:
/s/ ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇
Name:
▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇
Title: SVP
5
SCHEDULE
I
SCHEDULE
OF BUYERS
|
Name
|
Signature
|
Address/Facsimile
Number
of Buyers
|
||
|
Cornell
Capital Partners, LP
|
By:
Yorkville Advisors, LLC
|
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
|
||
|
Its:
General Partner
|
Jersey
City, NJ 07303
|
|||
|
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
|
||||
|
By:__________________________________
|
||||
|
Name:
▇▇▇▇ ▇▇▇▇▇▇
|
||||
|
Its:
Portfolio Manager
|
SCHEDULE
I-1
EXHIBIT
I
TO
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM
OF CONVERSION NOTICE
Reference
is made to the Securities Purchase Agreement (the “Securities
Purchase Agreement”)
between
Falcon Natural Gas Corp.
(the
“Company”),
and
the Buyers set forth on Schedule I attached thereto dated January
____, 2007.
In
accordance with and pursuant to the Securities Purchase Agreement, the
undersigned hereby elects to convert convertible debentures into shares of
common stock, par value
$0.00001
per
share (the “Common
Stock”),
of
the Company for the amount indicated below as of the date specified
below.
|
Conversion
Date:
|
__________________________________ |
|
Amount
to be converted:
|
$_________________________________
|
|
Conversion
Price:
|
$_________________________________
|
|
Shares
of Common Stock Issuable:
|
__________________________________ |
|
Amount
of Debenture unconverted:
|
$_________________________________
|
|
Amount
of Interest Converted:
|
$_________________________________
|
|
Conversion
Price of Interest:
|
$_________________________________
|
|
Shares
of Common Stock Issuable:
|
__________________________________ |
|
Amount
of Liquidated Damages:
|
$_________________________________
|
|
Conversion
Price of Liquidated Damages:
|
$_________________________________
|
|
Shares
of Common Stock Issuable:
|
__________________________________ |
|
Total
Number of shares of Common Stock to be issued:
|
__________________________________ |
EXHIBIT I-1
Please
issue the shares of Common Stock in the following name and to the following
address:
|
Issue
to:
|
__________________________________ |
|
Authorized
Signature:
|
__________________________________ |
|
Name:
|
__________________________________ |
|
Title:
|
__________________________________ |
|
Phone
#:
|
__________________________________ |
|
Broker
DTC Participant Code:
|
__________________________________ |
|
Account
Number*:
|
__________________________________ |
*
Note that receiving broker must initiate transaction on DWAC
System.
2
EXHIBIT
II
TO
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
_________,
2007
________
Attention:
Ladies
and Gentlemen:
We
are
counsel to
Falcon Natural Gas Corp.,
(the
“Company”),
and
have represented the Company in connection with that certain Securities Purchase
Agreement, dated as of January
__, 2007
(the
“Securities
Purchase Agreement”),
entered into by and among the Company and the Buyers set forth on Schedule
I
attached thereto (collectively the “Buyers”)
pursuant to which the Company has agreed to sell to the Buyers up to
Six Hundred Thousand Dollars ($600,000)
of
secured convertible debentures, which shall be convertible into shares (the
“Conversion
Shares”)
of the
Company’s common stock, par
value $0.00001
per
share (the “Common
Stock”),
in
accordance with the terms of the Securities Purchase Agreement. Pursuant to
the
Securities Purchase Agreement, the Company also has entered into a Registration
Rights Agreement, dated as of January
___, 2007,
with the
Buyers (the “Investor
Registration Rights Agreement”)
pursuant to which the Company agreed, among other things, to register the
Conversion Shares under the Securities Act of 1933, as amended (the
“1933
Act”).
In
connection with the Company’s obligations under the Securities Purchase
Agreement and the Registration Rights Agreement, on _______, 2007, the Company
filed a Registration Statement (File No. ___-_________) (the “Registration
Statement”)
with
the Securities and Exchange Commission (the “SEC”)
relating to the sale of the Conversion Shares.
In
connection with the foregoing, we advise the Transfer Agent that a member of
the
SEC’s staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at ____ P.M.
on __________, 2007 and we have no knowledge, after telephonic inquiry of a
member of the SEC’s staff, that any stop order suspending its effectiveness has
been issued or that any proceedings for that purpose are pending before, or
threatened by, the SEC and the Conversion Shares are available for sale under
the 1933 Act pursuant to the Registration Statement.
EXHIBIT II-1
The
Buyers has confirmed it shall comply with all securities laws and regulations
applicable to it including applicable prospectus delivery requirements upon
sale
of the Conversion Shares.
|
Very
truly yours,
|
|
|
By:_________________________________
|
EXHIBIT II-2
EXHIBIT
III
TO
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM
OF OPINION
VIA
FACSIMILE AND REGULAR MAIL
________
Attention:
Ladies
and Gentlemen:
We
have
acted as special counsel to Falcon
Natural Gas Corp.
(the
“Company”),
in
connection with the registration of ___________shares (the “Shares”)
of its
common stock with the Securities and Exchange Commission (the “SEC”).
We
have
not acted as your counsel. This opinion is given at the request and with the
consent of the Company.
In
rendering this opinion we have relied on the accuracy of the Company’s
Registration Statement on Form SB-2, as amended (the “Registration
Statement”),
filed
by the Company with the SEC on _________ ___, 2005. The Company filed the
Registration Statement on behalf of certain selling stockholders (the
“Selling
Stockholders”).
This
opinion relates solely
to the
Selling Shareholders listed on Exhibit
“A”
hereto
and number of Shares set forth opposite such Selling Stockholders’ names. The
SEC declared the Registration Statement effective on __________ ___,
2005.
We
understand that the Selling Stockholders acquired the Shares in a private
offering exempt from registration under the Securities Act of 1933, as amended.
Information regarding the Shares to be sold by the Selling Shareholders is
contained under the heading “Selling Stockholders” in the Registration
Statement, which information is incorporated herein by reference. This opinion
does not relate to the issuance of the Shares to the Selling Stockholders.
The
opinions set forth herein relate solely to the sale or transfer by the Selling
Stockholders pursuant to the Registration Statement under the Federal laws
of
the United States of America. We do not express any opinion concerning any
law
of any state or other jurisdiction.
In
rendering this opinion we have relied upon the accuracy of the foregoing
statements.
EXHIBIT
III-1
Based
on
the foregoing, it is our opinion that the Shares have been registered with
the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
and that ________ may remove the restrictive legends contained on the Shares.
This opinion relates solely
to the
number of Shares set forth opposite the Selling Stockholders listed on
Exhibit
“A”
hereto.
This
opinion is furnished to Transfer Agent specifically in connection with the
sale
or transfer of the Shares, and solely for your information and benefit. This
letter may not be relied upon by Transfer Agent in any other connection, and
it
may not be relied upon by any other person or entity for any purpose without
our
prior written consent. This opinion may not be assigned, quoted or used without
our prior written consent. The opinions set forth herein are rendered as of
the
date hereof and we will not supplement this opinion with respect to changes
in
the law or factual matters subsequent to the date hereof.
Very
truly yours,
EXHIBIT
III-2
EXHIBIT
“A”
(LIST
OF SELLING STOCKHOLDERS)
|
Name:
|
No.
of Shares:
|
|
EXHIBIT
A-1