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):

(a) 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;

(b) 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

(c) 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).