Falcon Oil & Gas has entered into a definitive agency agreement with Salman Partners Inc. to sell, on a commercially reasonable
efforts basis, up to $55,000,000 of units (the "Units"), at an offering price of $1,000 per Unit (the "Offering"). Each Unit consists of $900 worth of 11% convertible unsecured debentures (each a "Debenture") in the principal amount of $1,000 due on the date that is four years following the closing of the Offering (the "Maturity Date") and 250 common shares in the capital of the Company. The Debentures will be issued in $1,000 principal amount increments only and in no circumstances will the principal amount of any Debenture issued
be less than $1,000.
Each Debenture will be convertible into common shares of the Company at the option of the Debentureholder at any time prior to the close of business on the earlier of the Maturity Date and the business day immediately preceding the date fixed by the Company for redemption of the Debentures at a conversion price of $0.60 per share, subject to adjustment in certain events (the "Conversion Price").
If during the two year period following the closing the volume weighted average trading price of the common shares of the Company is
$0.85 or greater for 20 consecutive trading days, the Debentures will automatically be converted at the Conversion Price and Debentureholders will be entitled to receive accrued and unpaid interest, in cash, to the end of the first 12 month period or 24 month period after the closing, as the case may be. To ensure that the Company is able to meet its interest payment obligations to July 1, 2010 and to otherwise assist the Company in meeting its obligations to the Debentureholders, an amount equal to the first two interest
payments payable under the Debentures will be deposited in escrow at closing. The TSX Venture Exchange (the "TSXV") has conditionally accepted for filing the Company's short form prospectus qualifying the distribution of the Units. Listing of the Debentures is subject to Falcon fulfilling all of the requirements of the TSXV, including the distribution of the Debentures to a minimum number of public securityholders.
The net proceeds from the Offering will be used for development activities on the areas covered by the Company's Hungarian exploration and production licenses, as more particularly described in the final prospectus. Closing of the Offering is expected to occur on or about June 23, 2009 and is subject to certain conditions, including but not limited to, receipt of all necessary securities regulatory approvals, including the final approval of the TSXV.