Offer Memorandum Falcon Oil & Gas Australia Pty Ltd

Transcription

1 Offer Memorandum Falcon Oil & Gas Australia Pty Ltd ACN For the placement of 10 million 50 million Shares at US$1.00 per Share with an attaching option in respect of each issued Share, exercisable at US$1.25 each to raise between US$10 million and US$50 million (the Offer). Beetaloo Basin Project, Northern Territory of Australia THE SHARES AND ATTACHING OPTIONS OFFERED UNDER THIS OFFER MEMORANDUM ARE OF A SPECULATIVE NATURE. THE INTERESTS DESCRIBED ARE OF AN EXPLORATION AND EVALUATION STAGE. ONLY INVESTORS EXPERIENCED IN INVESTING IN EXPLORATION COMPANIES SHOULD CONSIDER SUBSCRIBING TO THIS OFFER. THE OFFER IS MADE TO INVESTORS QUALIFIED UNDER SECTIONS 708(8) AND 708(11) OF THE CORPORATIONS ACT 2001 (CTH). 27 JANUARY 2010

2 2 Disclaimer and confidentiality notice THIS IS NOT A PROSPECTUS OR DISCLOSURE DOCUMENT While prospective investors should read the full text of this Offer Memorandum, the information contained in this Offer Memorandum is not intended to and does not contain all material information relating to Falcon Oil & Gas Australia Pty Ltd (Falcon Australia or the Company) that may be necessary or desirable to enable an investor to properly evaluate or consider an investment in the Shares and attaching options offered under this Offer Memorandum. In particular, this Offer Memorandum does not contain all of the information that would be contained in a prospectus or other disclosure document prepared under the Corporations Act 2001 (Cth) (Corporations Act). The Offer Memorandum assumes a high level of background knowledge about investment in Australia and unconventional oil and gas exploration. The information contained in this Offer Memorandum or provided to selected parties (Recipient) in connection with the Offer whether orally, electronically or in writing by or on behalf of Falcon Australia or its respective employees, agents, or consultants (Information) is provided on the terms and conditions of this Offer Memorandum. The Information may only be used as part of an assessment of the merits of the Offer. By accepting this document, the Recipient acknowledges and represents to Martin Place Securities Pty Limited (MPS) and Falcon Australia that it has read, understood and accepted the terms set out in this Offer Memorandum. The sole purpose of this Offer Memorandum is to provide Recipients with certain information regarding the Company and a possible issue of Shares and attaching options to investors who are entitled to be offered and issued Shares and attaching options pursuant to sections 708(8) and 708(11) of the Corporations Act. It is not intended for, and should not be distributed to, any persons other than sophisticated and/or professional investors. Applications from any other persons will not be accepted. This Offer Memorandum is not a Prospectus, Offer Information Statement or any other Disclosure Document within the meaning of the Corporations Act and this Offer Memorandum has not been lodged or registered with the Australian Securities and Investments Commission (ASIC). As such neither this Offer Memorandum nor its contents are governed by the rules relating to Disclosure Documents. The provision of this Offer Memorandum or of any other Information in connection with the Offer by any person (including without limitation any employee, agent or representative of Falcon, including without limitation MPS) is not and should not be taken to be either advice or a recommendation (express or implied) in relation to an investment in Falcon. This Offer Memorandum may not be distributed nor may any Shares or Options be offered for sale in any jurisdiction in which it would be unlawful to do so. Neither the Directors of the Company nor MPS have sought to independently verify all Information contained in this Offer Memorandum. Each Recipient must investigate and make its own independent assessment and seek such facts as it considers necessary or desirable before making an investment in the Company and should not rely on any statement or the adequacy and accuracy of any Information and should obtain independent and specific advice from appropriate professional advisers. This Offer Memorandum provides general information only on the business of the Company. It does not contain any legal, business, tax or other advice and does not consider individual investors' investment objectives, financial situation or particular needs. Recipients should note that the Information is subject to change and development and may have changed since the date of preparation of this Offer Memorandum. Falcon Australia, Falcon, MPS and their Directors, officers, employees, agents and consultants: make no representation, guarantee or warranty or undertaking, express or implied, of any kind as to the accuracy, reliability, or completeness of the Information, or that any

3 3 intentions, expectations or plans will be achieved either totally or partially or that any particular rate of return will be achieved; and will have no liability to any person or entity for any statements, opinions, information, or matters, express or implied, direct or indirect, arising out of, contained in or derived from, or any omissions from the Information, except liability under statute that cannot be excluded. Neither ASIC nor any of its officers take any responsibility for the contents of this Offer Memorandum. The Information contains references to certain intentions, expectations, and plans of Falcon Australia that may or may not be achieved. They are based on certain assumptions that may not be met or on which views may differ. The performance and operations of Falcon Australia may be influenced by a number of factors, many of which are outside the control of Falcon Australia. Nothing in the Information is or should be relied upon as a promise, guarantee or representation as to the future. There is no representation, warranty, or other assurance that any of the forecasts, projections, or 'forward looking statements' will be realised. Recipients are reminded that a company's or industry's past operating or financial performance is not necessarily an indicator of its future performance. This investment is speculative and has significant risks as no assurance can be given that the Company will be successful in its endeavors. The Information is confidential to Falcon Australia and/or MPS. By its acceptance, the Recipient agrees that it will not transmit, reproduce or make available the Information to anyone other than its professional advisers without the prior written consent of Falcon Australia or MPS. Any disclosure to the advisers of the Recipient must be on a confidential basis for the purpose only of assessing the Information as adviser to the Recipient. Falcon Australia (through MPS) reserves the right to: (c) withdraw this Offer Memorandum at any time without giving notice to Recipients; amend, update or replace the Information at any time and without providing the Recipient with prior notice and without an obligation to give amendments, updates or replacements from time to time; and change any of the terms of this Offer, or withdraw the Offer completely. Any issue of Shares and attaching options made as a result of an application will only be made in compliance with one or other of the exclusions contained in section 708(8), section 708(11) and 708(10) of the Corporations Act or as MPS (on behalf of the Company) in its sole discretion decides.

4 4 Table of Contents Disclaimer and confidentiality notice...2 Investment highlights...5 Proposed placement...5 Placement terms...6 Purpose of capital raising...6 Company background...6 Beetaloo Basin Project...7 How to apply...7 Glossary...8 Corporate Directory Falcon Oil & Gas Australia Pty Ltd...9 Appendix A Terms of Offer...10 Appendix B Share Subscription Application...19

5 5 Investment highlights Falcon Australia s investment highlights are as follows: Two thermally mature, thick source rocks (each up to 800 metres thick) Large unconventional resource complex (oil and gas) Large untested structures for conventional resources Active hydrocarbon system More than 3,000 metres of sediment in basin centre Over 1,400 million years old Peak oil generation is less than 200 million years ago Early rift basin with later compressional (tranpressional) structures Six potential sandstone reservoir units with shows and light oil recoveries Good fiscal regime in a stable country Proposed placement MPS is pleased to act as broker to the Offer, which will comprise the placement of up to 50 million fully paid Shares in Falcon Australia at an issue price of US$1.00 to raise a minimum of US$10 million. Each Share has one attaching option, exercisable at US$1.25. For full terms of the Offer please refer to the Term Sheet attached at Appendix A. The proposed placement of Shares and options will only be made in compliance with sections 708(8) or 708(11) of the Corporations Act and in accordance with section 708(10) of the Corporations Act. These sections provide for capital raisings without a prospectus to sophisticated and professional investors. You should be aware that under section 707 of the Corporations Act, companies issuing securities without a Disclosure Document and investors accepting the issue of securities without a Disclosure Document recognise that such securities cannot be on-sold without a Disclosure Document within a period of 12 months unless the sale is to another investor who fits within the criteria set out in section 708 of the Corporations Act. You will need to execute the Terms Sheet at the end of this document to confirm your acceptance of these terms. Section 708 of the Corporations Act permits an offer of securities to be made to you through a licensed dealer (such as MPS) without a Disclosure Document if it is satisfied that your previous experience in investing in securities allows you to assess: (c) (d) (e) the merits of the offer; the value of the securities; the risks involved in accepting the offer; your own information needs; and the adequacy of the information given by the person making the offer.

6 If MPS is satisfied that you have securities investment experience that allows you to assess the merits of an offer then it is required to give you a written statement of its reasons for being satisfied. MPS is also required to obtain a written acknowledgement from you (before or at the time of the Offer) that you have not been given under the relevant part of the Corporations Act, a Disclosure Document that relates to the Offer. In this regard, where you are an authorized recipient of this Offer Memorandum, MPS is satisfied that your previous experience in investing in securities allows you to assess the matters referred to in respect of this Offer. MPS hereby gives you a written statement that it is satisfied that: 6 you possess the financial capacity to make such an investment appropriate for your particular needs; you have sufficient knowledge of financial markets including an understanding of the associated risks; you have the ability to independently gain access to information sufficient for you to assess the relative merit of this investment opportunity; and you possess sufficient investment experience to evaluate the merit of the Offer. If there is any alteration in your circumstances that may mean that you are no longer in a position to assess the matters referred to above, you should advise MPS immediately. You should not accept any offer to you if you do not believe that you can assess the issues as set out in points to (e) above. Placement terms The full terms and conditions of the Offer are set out in the Term Sheet (attached as Appendix A). The rights attaching to the Shares and Options are subject to the provisions set out in the Company s constitution, a copy of which is available on request, and the Corporations Act. Purpose of capital raising The purpose of the capital raising is to fund Falcon Australia s work programme in respect of petroleum exploration permits EP 76, 98, 99 and 117 for the calendar year 2010 and for working capital purposes. Company background On 21 August 2008, Falcon Australia was incorporated under the law of Victoria, Australia, as a wholly owned subsidiary of Falcon Oil & Gas Ltd. (Falcon). Falcon is an international oil and gas exploration and production company, headquartered in Denver, Colorado, incorporated in British Columbia, Canada, and trading on the TSX Venture Exchange under the symbol "FO. Falcon has reporting obligations in the jurisdictions of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland. Falcon specialises in the business of conventional and unconventional oil and gas exploration and production and holds interests in prospective properties in Hungary and Australia. Falcon is focused on discovering, acquiring, and maturing a globally diversified portfolio of drilling opportunities with a goal of maximizing shareholder value through strategic relationships.

7 7 Beetaloo Basin Project The scale and scope of Falcon Australia s business activities are restricted to the Beetaloo Basin Project. Falcon Australia s interest in the Beetaloo Basin consists of four petroleum exploration permits (the Permits) comprising approximately 28,200 square kilometres (7 million gross acres), covering the majority of the Beetaloo Basin and basin margin highs. Falcon Australia owns an undivided 75% working interest in the Permits and is the operator of the Permits. Falcon Australia and Falcon have entered into a binding heads of agreement with PetroHunter Energy Corporation and its wholly owned subsidiary, Sweetpea Petroleum Pty Ltd, to acquire Sweetpea Petroleum Pty Ltd s remaining 25% interest in the Permits (Sale Agreement). In consideration for the assignment to Falcon Australia of the undivided 25% working interest in the Permits, Sweetpea Petroleum Pty Ltd will be issued 25% of the shares in Falcon Australia (prior to the issue of Shares under the Offer). The Beetaloo Basin, part of the larger MacArthur Basin, is a Pre Cambrian Basin in the Northern Territory, approximately 600 kilometres south of Darwin. Multiple conventional and unconventional oil and gas opportunities have been identified. The Beetaloo Basin has more than 3,000 metres of sediment column in which two world class source rocks have been identified, the oil and gas generating Kyalla Shale and the gas generating Velkerri Shale. The main hydrocarbon plays in this large basin are in the shale reservoirs and in the sandstones adjacent to them. Each source rock is widespread with thickness up to 800 metres. Some of the sandstones have conventional porosities and permeabilities and numerous conventional structures have been mapped from over 2000km of 2D seismic. Eleven wells have already been drilled in the Beetaloo Basin in the 1990s. All of the wells showed presence of oil and gas. How to apply If you agree with the terms of this Offer and wish to take up this Offer, please: (c) Complete (by signing and dating) and fax back the Term Sheet (Appendix A). Sign and fax back the attached Share Subscription Application (Appendix B). Deliver the associated funds by cheque made payable to Martin Place Securities Pty Ltd or as an electronic transfer. If remitting is US Dollars, please remit funds to: Account Name : Bank: Account Number: Swift Code: Martin Place Securities Pty Ltd National Australia Bank MARTPUSD01 nata au 3302s If remitting is Australian Dollars, the closing exchange rate of the day prior to remitting funds will be the exchange rate applied to funds transfers. This rate can be gained from MPS or any Bank. Funds should be remitted to: Account Name: Martin Place Securities <Professional Funds Account> Bank: National Australia Bank BSB: Account No: MPS reserves the right to accept or reject any application for Shares and attaching options without specifying reasons and to issue Shares and attaching options pro-rata to applicants in such a manner as MPS may determine. Falcon Australia may call for any qualifying evidence for demonstrating compliance with section 708(8) or section 708(11) of the Corporations Act. Where there is an excess number of applications

8 8 such excess monies will be returned to the unsuccessful applicants without interest and at the risk of the applicant. MPS decision will be final in determining any matters regarding the issue of Shares and attaching options, however applicants will not be issued more Shares and attaching options than the number indicated on the Share Subscription Application. Glossary In this Offer Memorandum unless the context otherwise requires: ASIC means the Australian Securities and Investments Commission; Company or Falcon Australia means Falcon Oil & Gas Australia Pty Ltd; Director means a director of the Company; Disclosure Document means a document described in section 705 of the Corporations Act; Falcon means Falcon Oil & Gas Ltd.; Offer Memorandum means this document, including any appendices; MPS means Martin Place Securities Pty Ltd (ABN and AFSL ); Offer means the offer of up to 50 million Shares at an issue price of US$1.00 with a attaching Option in respect of each issued Share exercisable at US$1.25 each to raise between US$10 million and US$50 million; Offer Information Statement means an offer information statement that is lodged with ASIC; Prospectus means a prospectus that is lodged with ASIC; Shares means fully paid ordinary shares in the Company; Share Subscription Application means the application form attached to this document at Appendix B; and Term Sheet means the term sheet attached to this document at Appendix A.

9 Corporate Directory Falcon Oil & Gas Australia Pty Ltd Directors Marc Bruner (Executive Director) Evan Wasoff (Executive Director) Carmen Lotito (Executive Director) John Lea Blue (Non Executive Director) Company Secretary Stephen Peterson Principal Place of Business 89 Fox Valley Road Wahroonga NSW 2076 Australia Broker to the Offer Martin Place Securities Pty Limited ABN AFSL Level 3, 14 Martin Place Sydney NSW 2000 Australia Telephone (6 12) Facsimile (6 12) Lawyers - Australia Gadens Lawyers 77 Castlereagh Street Sydney NSW 2000 Australia Telephone (61 2) Lawyers Canada Aird & Berlis LLP Brookfield Place, 181 Bay Street Suite 1800, Box 754 Toronto ON M5J 2T9 Canada 9

10 10 Appendix A Terms of Offer TERM SHEET 1. Terms and conditions of the Offer 1.1 Company Falcon Oil & Gas Australia Pty Ltd (Company). 1.2 Investor Sophisticated or professional investor within the meaning of sections 708(8) and 708(11) of the Corporations Act 2001 (Cth) (Corporations Act) or as determined by MPS pursuant to section 708(10) of the Corporations Act (Investor). 1.3 Financial services licensee Martin Place Securities Pty Limited (ABN and AFSL ) (MPS). 1.4 Offer The number of ordinary shares (Shares) applied for by the Investor in the Share Subscription Application, to be issued to the Investor on payment of the Placement Commitment and on acceptance by the Company and satisfaction of the conditions precedent in clause 1.8. One attaching option (Option) for every Share subscribed for and accepted by the Company, to be issued to the Investor on payment of the Placement Commitment and on satisfaction of the conditions precedent in clause 1.8. The Company (through MPS) may reject an application at its absolute discretion, without being required to give any reason. 1.5 Issue Price for Shares US$1.00 per Share (Issue Price). 1.6 Payment of Issue Price The Issue Price per Share (Placement Commitment) is to be paid at the time of application (Subscription Date). The Placement Commitment is to be paid as cheque made payable to Martin Place Securities Pty Ltd or as an electronic transfer. Cheques should be delivered with the Application Form to Martin Place Securities Pty Ltd Level 3, 14 Martin Place Sydney NSW 2000 If remitting is US Dollars, please remit funds to: Account Name : Bank: Account Number: Swift Code: Martin Place Securities Pty Ltd National Australia Bank MARTPUSD01 nata au 3302s If remitting is Australian Dollars, the closing exchange rate of the

11 11 day prior to remitting funds will be the exchange rate applied to funds transfers. This rate can be gained from MPS or any Bank. Funds should be remitted to: Account Name: Martin Place Securities <Professional Funds Account> Bank: National Australia Bank BSB: Account No: The Placement Commitment will be held on trust in the above account until such a time as the conditions precedent set out in clause 1.8 (Conditions Precedent) are fulfilled. Where the Conditions Precedent are not met by 31 March 2010 (Capital Raising Date), the Placement Commitment will be refunded to the Investor without interest. Where the Conditions Precedent have been met or waived, as advised to MPS by the Company in writing, and as notified by MPS to the Investor, MPS will immediately be entitled to withdraw the funds so held from its trust account and disburse such funds to the Company. 1.7 Currency conversion The Issue Price and Option Exercise Price are currently stated and payable in US dollars. Where the Company considers it necessary or desirable to do so (for example but without limitation, to achieve a listing of its Shares and Options in Australia), the Company may convert such amounts to Australian dollars by reference to an internationally published rate of exchange selected by the Company acting reasonably. Any amounts subsequently due by an Investor shall be payable in the Australian dollar equivalent of the amounts stated in this Offer Memorandum, converted at the selected exchange rate. The Company shall notify Investors of its decision to convert payments to Australian dollars. 1.8 Conditions Precedent Investment is subject to the following conditions precedent being met, satisfied or waived by the Company by the Capital Raising Date: (c) (d) the Company raising a minimum of US$10 million under the placement to sophisticated and professional investors; passing of resolutions at a general meeting of the Company to approve the issue of the Shares and Options to the Investors on the proposed terms, if and as required by any applicable laws; the issue of 50,000,000 ordinary shares in the Company to Sweetpea Petroleum Pty Ltd; the issue of 149,999,999 ordinary shares in the Company to Falcon Oil & Gas Ltd being consideration for the acquisition of an aggregate 75% working interest in Sweetpea s petroleum

12 12 exploration permits; and (e) the transfer of Sweetpea Petroleum Pty Ltd s 25% working interest in petroleum exploration permits EP 76, 98, 99 and 117 situated in the Beetaloo Basin of the Northern Territory of Australia (Permits) to the Company, such that the Company will hold a 100% interest in the Permits. 1.9 Events subsequent to investment It is acknowledged by the Investor that the following events may occur subsequent to Investment occurring (unless otherwise varied or waived by the Company): (c) the conversion of US$10 million debt owed by the Company to Falcon Oil & Gas Ltd. to equity in the Company at US$1.00 per share, unless the debt is paid out prior to any subsequent capital raising; the Company purchasing up to $US10 million of drill pipe and oil and gas equipment from Falcon Oil & Gas Ltd. at fair market value, which debt will be converted to equity in the Company at $US1.00 per share, unless the debt is paid out prior to any subsequent capital raising; and the Company entering into a Master Services Agreement with Falcon Oil & Gas Ltd. for a period of 12 months with a monthly management fee of between US$200,000 and US$500,000 per month (exclusive of GST). 2. Rights attaching to Shares 2.1 Shares Shares will rank equally in all respects with all existing ordinary shares issued by the Company. Shares are issued subject to the terms set out in the Constitution. 3. Rights attaching to Options 3.1 Options Subject to these terms and conditions, each Option will entitle the Investor to subscribe for one fully paid ordinary share in the Company at an exercise price of US$1.25 (Exercise Price). All Options are exercisable immediately upon issue and will expire three years from the date of issue at 4pm (Sydney time) (Expiry Date). Options not exercised on or before the Expiry Date will automatically lapse. In order to exercise the Options, the Investor must, no later than the close of business (Sydney time) on the Expiry Date, give written notice to the Company of its intention to exercise the Options in whole or in part, such notice to be accompanied by cash or certified cheque, or evidence of cleared bank funds payable to the Company s share registry in the appropriate

13 13 amount. Cheques must be made payable to Falcon Oil & Gas Australia Pty Ltd and marked not negotiable. After receipt of such notice, the Company s share registry will within the time determined by the ASX Listing Rules (whether the Company is admitted to the official list of the ASX or not) allot and issue the required number of ordinary shares. The notice is only effective (and only becomes effective) when the Company s share registry has received value for the full amount of the Exercise Price (for example, if the Exercise Price is paid by cheque, by clearance of that cheque). All shares issued upon the exercise of Options in accordance with these terms will rank equally in all respects with issued ordinary shares of the Company. If the Company is listed on the ASX at the time of issue, the Company will apply for quotation of the shares allotted pursuant to the exercise of Options within the time required by the Listing Rules after the date of allotment. If the Company is listed on the ASX, it will apply to have the Options not then exercised listed and quoted. There are no participating rights, voting rights or entitlements inherent in Options and the Investor will not necessarily be of right or be entitled to participate in new issues of capital that may be offered to shareholders of the Company. Subject to the rights above, the Investor will have the right to exercise the Options prior to the date for determining entitlements to any capital issues to the then existing shareholders of the Company made during the term of the Options, and will be granted a period of at least seven business days before the record date to exercise the Options. If: shares are issued pro rata to shareholders by way of bonus issue or a rights issue; or any re-organisation, including reconstruction, consolidation, subdivision, reduction or return of capital (whether the distribution is of cash or securities) of the issued capital of the Company occurs, the Options will be re-organised as determined by the ASX Listing Rules (whether the Company is admitted to the official list of the ASX or not), but in all other respects the terms of the exercise will remain unchanged. 4. Other provisions 4.1 Representations and warranties The Investor represents, warrants and agrees for the benefit of MPS and the Company that: if the Investor is in Australia, the Investor is one of the following:

14 14 (i) (ii) a Sophisticated Investor under section 708(8) of the Corporations Act; or a Professional Investor under section 708(11) of the Corporations Act; (c) (d) (e) (f) (g) (h) if the Investor is outside Australia, the Investor is a person to whom an invitation or offer to subscribe for Shares in the manner contemplated by this document is permitted by the laws of the jurisdiction in which the Investor is situated and to whom the Shares can lawfully be issued under all applicable laws, without the need for any registration, filing or lodgement; the Investor is not a U.S. Investor, being for the purposes of this share subscription a person who is in the United States or who is a U.S. person (as defined in Regulation S under the U.S. Securities Act 1933) (U.S. Person), or who is acting for the account or benefit of a U.S. Person; the Investor is aware that no disclosure or offer document has been prepared in connection with the offer and issue of the Shares and Options; the Investor has read and fully understood the Offer Memorandum; the Investor is in compliance with all relevant laws and regulations (including, without limitation, the requirements of the Corporations Act and the Foreign Acquisitions and Takeovers Act 1975 (Cth)) and will not cease to be in compliance if the Investor accepts their allocation of Shares; it is the Investor s present intention to be an investor in the Shares and to remain so for at least the medium term (i.e. longer than 12 months). This confirmation is understood to be a statement by the Investor of its present intention only but not an undertaking not to sell, particularly where the Investor s investment objectives or market conditions change, and if the Investor subsequently chooses to sell within that period, he will ensure that the sale will comply with section 708 of the Corporations Act; the Investor has such knowledge and experience in financial and business matters that the Investor is capable of evaluating the merits and risks of a purchase of the Shares and the Investor acknowledges that an investment in the Shares involves a degree of risk;

15 15 (i) (j) (k) (l) (m) (n) (o) (p) (q) (r) the Investor has the financial ability to bear the economic risk of the investment in the Shares; except to the extent that liability cannot by law be excluded, the Investor acknowledges that the Company or any of its related bodies corporate, or any directors, officers, agents, employees or advisers of the Company, or any of their respective related bodies corporate, do not accept any responsibility in relation to the Offer; the Investor is not a Related Party (as defined in section 228 of the Corporations Act) of the Company and the Investor is not an Associate (as defined in Division 2 of Part 1.2 of the Corporations Act) of the Company; the Investor acts and has acted entirely on the basis of the Investor s own investigations and decisions and the Investor s own independent evaluation of the Company and not in reliance on any act or representation made by any other person, whether express or implied; the Investor has access to all information that the Investor believes is necessary or appropriate in connection with the purchase of the Shares and Options; the representations and warranties made by the Investor in the Share Subscription Application are true and correct as at the date of that letter and will be true and correct as at the Subscription Date; the Investor will obtain independent advice regarding the tax consequences in any jurisdiction of purchasing, owning or disposing of any Shares and Options and the consequences and effect on the Investor generally as a result of the Company listing on the ASX; the Investor is bound by the constitution of the Company; the Investor will not resell or otherwise dispose of any of the Shares or Options in a manner which would cause the Company to be in breach of the laws, rules or regulations of any applicable jurisdiction; the Investor has full power and authority to enter into and perform its obligations under this document and has taken all necessary corporate and other action to enable it to do so and its obligations under this Term Sheet;

16 16 (s) (t) (u) (v) (w) (x) (y) the Investor will comply with any obligations it may have at any time to issue a Substantial Security Holder Notice under section 671B of the Corporations Act; the Investor is not aware of any inside information as defined in the Corporations Act regarding the Company; the Investor will do all things reasonably required by the Company to assist the Company to successfully achieve an initial public offering (IPO), if the board of the Company determines that an IPO is in the best interests of the Company, including voting in favour of the Company changing its status to a public company under the Corporations Act and the Company adopting a constitution acceptable to the ASX for the purpose of the IPO; if the Investor is acquiring any Shares and Options for or on account of one or more Sophisticated Investors or Professional Investors, the Investor has full power to make the foregoing acknowledgements, representations, warranties and agreements on behalf of each such Sophisticated Investor or Professional Investor as the case may be; the Investor will do all things reasonably required by the Company, including voting in favour of a resolution put to the general meeting of the Company, to allow the Company to enter into a Master Services Agreement with Falcon Oil & Gas Ltd. for a period of 12 months with a monthly management fee of between US$200,000 and US$500,000 (exclusive of GST); the Investor will make no objection to the terms on which ASX agrees to make official quotation on the Australian Securities Exchange or such other obligations or terms that may be required by ASX in order for official quotation to occur, including but not limited to, entering into a restriction agreement in respect of the Investor s Shares in the Company; and the Investor acknowledges that the Company and MPS will rely upon the truth and accuracy of the foregoing acknowledgements, representations, warranties and agreements. The Investor indemnifies the Company and MPS against any loss, damage or costs incurred arising out of or in relation to any breach by the Investor of the acknowledgements, representations, warranties

17 17 and agreements. 4.2 Confidentiality The parties (each a Recipient): must keep confidential the details in, and existence of, this Term Sheet and any confidential information of the other party (Supplier) disclosed by the Supplier to the Recipient or of which the Recipient becomes aware, (whether before or after the date of this Term Sheet); and may disclose any confidential information in respect of which the Recipient has an obligation of confidentiality under clause 4.2 only: (i) to those of the Recipient's officers or employees or advisers who: (A) (B) have a need to know for the purposes of this Term Sheet and the transactions contemplated by it; and undertake to the Recipient (and, where required by the Supplier, to the Supplier also) a corresponding obligation of confidentiality to that undertaken by the Recipient under clause 4.2; (ii) (iii) if required to do so by law or the Listing Rules of ASX or a foreign exchange; or with the prior written approval of the Supplier. 4.3 Public Announcements The Investor must not make or authorise a press release or public announcement relating to the negotiations of the parties or the subject matter or provisions of this Term Sheet (Announcement) unless: it is required to be made by law or the Listing Rules of ASX or a foreign exchange and before it is made, the Investor has: (i) (ii) notified the other parties; and given the other parties a reasonable opportunity to comment on the contents of, and the requirement for, the Announcement; or it has the prior written approval of the other parties.

18 Nature of Term Sheet An Investor is not obliged to pay the Issue Price unless or until the Investor signs and returns the Application Form. Until that occurs, nothing in this Term Sheet (other than the provisions relating to Confidentiality in clause 4.2 and Public Announcements in clause 4.3) will be binding on the Investor. 4.5 Costs Nothing in this Term Sheet is or can be construed as a commitment of the Company to proceed to issue Shares or Options unless or until each of the conditions precedent in clause 1.8 are satisfied. Upon the Conditions Precedent being satisfied or waived by the Company, all provisions of this Term Sheet will be binding on all parties to it. The Company and the Investor will bear their own costs in relation to the Offer. MPS's costs associated with the Offer will be borne by the Company. In addition, MPS is entitled to a brokerage fee (payable by the Company) comprising 6.5% on funds raised from the Offer (plus GST where applicable) together with a number of Options (on the same terms as those issued to Investors) calculated as being 6.5% of the number of Shares issued under the Offer. 4.6 Jurisdiction This Term Sheet shall be governed by and construed in accordance with the law in the State of New South Wales, Australia. To confirm your acceptance of the terms and conditions of the Offer, please sign and date this Term Sheet and return it by fax or , together with the Share Subscription Application to Martin Place Securities. Please sign and date Date: If you are a company: Name of company and ACN: Secretary/Director Director Print name Print name If you are an individual: Your name: Signature

19 Appendix B Share Subscription Application Placement Participation Subject to the terms and conditions set out in the Term Sheet (see Appendix A), MPS is pleased to act as broker in the offer to you of the following allocation of Shares in Falcon Australia. Placement Participation: Shares Placement Commitment US$: For this application to be valid, you must fill out all sections of this Share Subscription Application. Before completing this Share Subscription Application, please ensure you have carefully read the Offer Memorandum and attached Term Sheet (see Appendix A). 1.2 Application and acknowledgment Date To: Martin Place Securities, Level 3, 14 Martin Place, SYDNEY NSW 2000 Fax number: (612) From: Full name/ company name ACN/ABN (if applicable) Address Telephone Facsimile address I apply for the Shares as set out above under Placement Participation. I undertake to pay the Placement Commitment as follows: Martin Place Securities Pty Ltd Cheque in A$ Level 3, 14 Martin Place Sydney NSW 2000 Account Name: Martin Place Securities Pty Ltd Electronic Transfer in US$ Bank: National Australia Bank Account Number: MARTPUSD01 Swift Code: nata au 3302s Account Name: Martin Place Securities <Professional Funds Account> Electronic transfer in A$ Bank: National Australia Bank BSB: Account No: I (the Applicant): declare that all details in this Share Subscription Application are true and correct; agree to be bound by the terms and conditions set out in the Term Sheet (set out in Appendix A) and the Constitution of the Company; (c) authorize the Company and/ or its agents or representatives (including MPS) to do all things reasonably necessary to issue the Shares and Options to me; (d) acknowledge I am not relying on the Information in making this application; and. (e) acknowledge that MPS has not given me a disclosure document under Part 6D of the Corporations Act in relation to the Offer. Please sign: If you are a company: Secretary/Director Director Print name Print name If you are an individual: Signature