EXHIBIT
        10.12

       

       

      AMENDED
        AND RESTATED SECURITIES PURCHASE AGREEMENT

       

      THIS
        AMENDED AND RESTATED SECURITIES
        PURCHASE AGREEMENT
        (this
“Agreement”),
        dated
        as of June 20, 2005, by and among FALCON
        NATURAL GAS CORP.,
        a Nevada
        corporation, with headquarters located at Westchase Center, 2500 Citywest
        Blvd -
        Suite 300, Houston, Texas 77019 (the “Company”),
        and
        the Buyers listed on Schedule I attached hereto (individually, a
“Buyer”
or
        collectively “Buyers”).

       

       

      WITNESSETH:

       

      WHEREAS,
        the
        Company and the Buyer(s) are executing and delivering this Agreement in reliance
        upon an exemption from securities registration pursuant to Section 4(2) and/or
        Rule 506 of Regulation D (“Regulation
        D”)
        as
        promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
        under
        the Securities Act of 1933, as amended (the “1933
        Act”);

       

      WHEREAS,
        the
        parties desire that, upon the terms and subject to the conditions contained
        herein, the Company shall issue and sell to the Buyer(s), as provided herein,
        and the Buyer(s) shall purchase up to One Million Dollars ($1,000,000) of
        secured convertible debentures (the “Convertible
        Debentures”),
        which
        shall be convertible into shares of the Company’s common stock, par value
        $0.00001 (the “Common
        Stock”)
        (as
        converted, the “Conversion
        Shares”),
        of
        which One
        Million Dollars $1,000,000 has
        been
        funded
(the
        “Closing”),
        for a
        total purchase price of One
        Million Dollars $1,000,000,
        (the
“Purchase
        Price”)
        in the
        respective amounts set forth opposite each Buyer(s) name on Schedule I (the
        “Subscription
        Amount”).

       

      WHEREAS,
        the
        parties hereto executed and delivered a Registration Rights Agreement
        substantially in the form attached hereto as Exhibit
        A
        (the
“Investor
        Registration Rights Agreement”)
        on
        April 19, 2005, pursuant to which the Company has agreed to provide certain
        registration rights under the 1933 Act and the rules and regulations promulgated
        there under, and applicable state securities laws; and

       

      WHEREAS,
        the
        aggregate proceeds of the sale of the Convertible Debentures contemplated
        were
        held in escrow pursuant to the terms of an escrow agreement substantially
        in the
        form of the Escrow Agreement attached hereto as Exhibit
        B
        (the
“Escrow
        Agreement”).

       

      WHEREAS,
        the
        parties hereto executed and delivered Irrevocable Transfer Agent Instructions
        substantially in the form attached hereto as Exhibit
        C
        (the
“Irrevocable
        Transfer Agent Instructions”)
        on
        April 19, 2005. 

       

      WHEREAS,
        the
        parties hereto executed and delivered a Security Agreement substantially
        in the
        form attached hereto as Exhibit
        D
        (the
“Security
        Agreement”)
        on
        April 19, 2005, pursuant to which the Company has agreed to provide the Buyer
        a
        security interest in Pledged Collateral (as this term is defined in the Security
        Agreement dated the date hereof) to secure Company’s obligations under this
        Agreement, the Convertible Debenture, the Investor Registration Rights
        Agreement, the Irrevocable Transfer Agent Instructions, the Security Agreement
        or any other obligations of the Company to the Buyer; 

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      


       

      WHEREAS,
        contemporaneously with the execution and delivery of this Agreement, the
        parties
        hereto have expressly agreed to amend and restate that certain Secured Debenture
        issued to the Buyer in the principal amount of $1,000,000 on April 19, 2005
        (the
“Original
        Debenture”);

       

      WHEREAS,
        contemporaneously
        with the execution and delivery of this Agreement, the Company has executed
        and
        delivered an Amended and Restated Secured Debenture issued to the Buyer
        substantially in the form attached hereto as Exhibit
        E
        (the
“Amended
        and Restated Debenture”);

       

      WHEREAS,
        the
        parties hereto expressly agree that the Amended and Restated Debenture shall
        amend and supersede the Original Debenture (for purchases of this Agreement,
        references to the “Convertible Debentures” shall include the “Amended and
        Restated Debenture”);

       

      WHEREAS,
        the
        parties hereto expressly agree that all of the terms and conditions contained
        in
        the following documents, shall remain unchanged and in full force and effect:
        the Investor Registration Rights Agreement, the Escrow Agreement, the
        Irrevocable Transfer Agent Instructions and the Security Agreement, all of
        which
        are dated April 19, 2005; and 

       

      NOW,
        THEREFORE,
        in
        consideration of the mutual covenants and other agreements contained in this
        Agreement the Company and the Buyer(s) hereby agree as follows:

       

      1. PURCHASE
        AND SALE OF CONVERTIBLE DEBENTURES.

       

      (a) Purchase
        of Convertible Debentures.
        Subject
        to the satisfaction (or waiver) of the terms and conditions of this Agreement,
        each Buyer agrees, severally and not jointly, to purchase at Closing (as
        defined
        herein below) and the Company agrees to sell and issue to each Buyer, severally
        and not jointly, at Closing, Convertible Debentures in amounts corresponding
        with the Subscription Amount set forth opposite each Buyer’s name on Schedule I
        hereto. Upon execution hereof by a Buyer, the Buyer shall wire transfer the
        Subscription Amount set forth opposite his name on Schedule I in same-day
        funds
        or a check payable to “David Gonzalez, Esq., as Escrow Agent for Falcon Natural
        Gas Corp./Cornell Capital Partners, LP”, which Subscription Amount shall be held
        in escrow pursuant to the terms of the Escrow Agreement (as hereinafter defined)
        and disbursed in accordance therewith. Notwithstanding the foregoing, a Buyer
        may withdraw his Subscription Amount and terminate this Agreement as to such
        Buyer at any time after the execution hereof and prior to Closing (as
        hereinafter defined). The parties acknowledge that these Subscription Amounts
        have already been funded.

       

      (b) Closing
        Date.
        The
        Closing
        of the purchase and sale of the Convertible Debentures shall take place
on
        or
        before the fifth (5th)
        business day following the date hereof (the “Closing
        Date”).
        The
        Closing shall occur at the offices of Yorkville Advisors, LLC, 3700 Hudson
        Street, Suite 3700, Jersey City, New Jersey 07302 (or such other place as
        is
        mutually agreed to by the Company and the Buyer(s)).

       


      
        
          
          

        

        
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      (c) Escrow
        Arrangements; Form of Payment.
        Upon
        execution hereof by Buyer(s) and pending the Closing, the aggregate proceeds
        of
        the sale of the Convertible Debentures to Buyer(s) pursuant hereto shall
        be
        deposited in a non-interest bearing escrow account with David Gonzalez, Esq.,
        as
        escrow agent (the “Escrow
        Agent”),
        pursuant to the terms of and
        escrow agreement between the Company, the Buyer(s) and the Escrow Agent in
        the
        form attached hereto as Exhibit
        B
        (the
“Escrow
        Agreement”).
        Subject to the satisfaction of the terms and conditions of this Agreement,
        on
        the Closing
        Date,
        (i) the Escrow Agent shall deliver to the Company in accordance with the
        terms
        of the Escrow Agreement such aggregate proceeds for the Convertible Debentures
        to be issued and sold to such Buyer(s), minus the fees
        pursuant to Section 4(g) hereof, which
        shall be
        paid directly from the gross proceeds
        of the
        Closing
        held in
        escrow by
        wire
        transfer of immediately available funds in accordance with the
        Company’s
        written
        wire instructions, and (ii) the Company shall deliver to each Buyer, Convertible
        Debentures which such Buyer(s) is purchasing in amounts indicated opposite
        such
        Buyer’s name on Schedule I, duly executed on behalf of the Company.

       

      2. BUYER’S
        REPRESENTATIONS AND WARRANTIES.

       

      Each
        Buyer represents and warrants, severally and not jointly, that:

       

      (a) Investment
        Purpose.
        Each
        Buyer is acquiring the Convertible Debentures and, upon conversion of
        Convertible Debentures, the Buyer will acquire the Conversion Shares then
        issuable, for its own account for investment only and not with a view towards,
        or for resale in connection with, the public sale or distribution thereof,
        except pursuant to sales registered or exempted under the 1933 Act; provided,
        however, that by making the representations herein, such Buyer reserves the
        right to dispose of the Conversion Shares at any time in accordance with
        or
        pursuant to an effective registration statement covering such Conversion
        Shares
        or an available exemption under the 1933 Act.

       

      (b) Accredited
        Investor Status.
        Each
        Buyer is an “Accredited
        Investor”
as
        that
        term is defined in Rule 501(a)(3) of Regulation D.

       

      (c) Reliance
        on Exemptions.
        Each
        Buyer understands that the Convertible Debentures are being offered and sold
        to
        it in reliance on specific exemptions from the registration requirements
        of
        United States federal and state securities laws and that the Company is relying
        in part upon the truth and accuracy of, and such Buyer’s compliance with, the
        representations, warranties, agreements, acknowledgments and understandings
        of
        such Buyer set forth herein in order to determine the availability of such
        exemptions and the eligibility of such Buyer to acquire such
        securities.

       

      (d) Information.
        Each
        Buyer and its advisors (and his or, its counsel), if any, have been furnished
        with all materials relating to the business, finances and operations of the
        Company and information he deemed material to making an informed investment
        decision regarding his purchase of the Convertible Debentures and the Conversion
        Shares, which have been requested by such Buyer. Each Buyer and its advisors,
        if
        any, have been afforded the opportunity to ask questions of the Company and
        its
        management. Neither such inquiries nor any other due diligence investigations
        conducted by such Buyer or its advisors, if any, or its representatives shall
        modify, amend or affect such Buyer’s right to rely on the Company’s
        representations and warranties contained in Section 3 below. Each Buyer
        understands that its investment in the Convertible Debentures and the Conversion
        Shares involves a high degree of risk. Each Buyer is in a position regarding
        the
        Company, which, based upon employment, family relationship or economic
        bargaining power, enabled and enables such Buyer to obtain information from
        the
        Company in order to evaluate the merits and risks of this investment. Each
        Buyer
        has sought such accounting, legal and tax advice, as it has considered necessary
        to make an informed investment decision with respect to its acquisition of
        the
        Convertible Debentures and the Conversion Shares.

       


      
        
          
          

        

        
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      (e) No
        Governmental Review.
        Each
        Buyer understands that no United States federal or state agency or any other
        government or governmental agency has passed on or made any recommendation
        or
        endorsement of the Convertible Debentures or the Conversion Shares, or the
        fairness or suitability of the investment in the Convertible Debentures or
        the
        Conversion Shares, nor have such authorities passed upon or endorsed the
        merits
        of the offering of the Convertible Debentures or the Conversion
        Shares.

       

      (f) Transfer
        or Resale.
        Each
        Buyer understands that except as provided in the Investor Registration Rights
        Agreement: (i) the Convertible Debentures have not been and are not being
        registered under the 1933 Act or any state securities laws, and may not be
        offered for sale, sold, assigned or transferred unless (A) subsequently
        registered thereunder, or (B) such Buyer shall have delivered to the Company
        an
        opinion of counsel, in a generally acceptable form, to the effect that such
        securities to be sold, assigned or transferred may be sold, assigned or
        transferred pursuant to an exemption from such registration requirements;
        (ii)
        any sale of such securities made in reliance on Rule 144 under the 1933 Act
        (or
        a successor rule thereto) (“Rule 144”)
        may be
        made only in accordance with the terms of Rule 144 and further, if Rule 144
        is
        not applicable, any resale of such securities under circumstances in which
        the
        seller (or the person through whom the sale is made) may be deemed to be an
        underwriter (as that term is defined in the 1933 Act) may require compliance
        with some other exemption under the 1933 Act or the rules and regulations
        of the
        SEC thereunder; and (iii) neither the Company nor any other person is under
        any
        obligation to register such securities under the 1933 Act or any state
        securities laws or to comply with the terms and conditions of any exemption
        thereunder. The Company reserves the right to place stop transfer instructions
        against the shares and certificates for the Conversion Shares.

       

      (g) Legends.
        Each
        Buyer understands that the certificates or other instruments representing
        the
        Convertible Debentures and or the Conversion Shares shall bear a restrictive
        legend in substantially the following form (and a stop transfer order may
        be
        placed against transfer of such stock certificates):

       

      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 SOLELY FOR INVESTMENT PURPOSES AND NOT WITH
        A VIEW
        TOWARD RESALE 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 GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS
        NOT
        REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.

       


      
        
          
          

        

        
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      The
        legend set forth above shall be removed and the Company within two (2) business
        days shall issue a certificate without such legend to the holder of the
        Conversion Shares upon which it is stamped, if, unless otherwise required
        by
        state securities laws, (i) in connection with a sale transaction, provided
        the
        Conversion Shares are registered under the 1933 Act or (ii) in connection
        with a
        sale transaction, after such holder provides the Company with an opinion
        of
        counsel, which opinion shall be in form, substance and scope customary for
        opinions of counsel in comparable transactions, to the effect that a public
        sale, assignment or transfer of the Conversion Shares may be made without
        registration under the 1933 Act.

       

      (h) Authorization,
        Enforcement.
        This
        Agreement has been duly and validly authorized, executed and delivered on
        behalf
        of such Buyer and is a valid and binding agreement of such Buyer enforceable
        in
        accordance with its terms, except as such enforceability may be limited by
        general principles of equity or applicable bankruptcy, insolvency,
        reorganization, moratorium, liquidation and other similar laws relating to,
        or
        affecting generally, the enforcement of applicable creditors’ rights and
        remedies.

       

      (i) Receipt
        of Documents.
        Each
        Buyer and his or its counsel has received and read in their entirety: (i)
        this
        Agreement and each representation, warranty and covenant set forth herein,
        the
        Security Agreement, the Investor Registration Rights Agreement, the Escrow
        Agreement, and the Irrevocable transfer Agent Instructions; (ii) all due
        diligence and other information necessary to verify the accuracy and
        completeness of such representations, warranties and covenants; (iii) the
        Company’s Form 10-KSB for the fiscal year ended December 31, 2003; (iv) the
        Company’s Form 10-QSB for the fiscal quarter ended June 30, 2004; and
        (v) answers to all questions each Buyer submitted to the Company regarding
        an investment in the Company; and each Buyer has relied on the information
        contained therein and has not been furnished any other documents, literature,
        memorandum or prospectus.

       

      (j) Due
        Formation of Corporate and Other Buyers.
        If the
        Buyer(s) is a corporation, trust, partnership or other entity that is not
        an
        individual person, it has been formed and validly exists and has not been
        organized for the specific purpose of purchasing the Convertible Debentures
        and
        is not prohibited from doing so.

       

      (k) No
        Legal Advice From the Company.
        Each
        Buyer acknowledges, that it had the opportunity to review this Agreement
        and the
        transactions contemplated by this Agreement with his or its own legal counsel
        and investment and tax advisors. Each Buyer is relying solely on such counsel
        and advisors and not on any statements or representations of the Company
        or any
        of its representatives or agents for legal, tax or investment advice with
        respect to this investment, the transactions contemplated by this Agreement
        or
        the securities laws of any jurisdiction. 

       

      3. REPRESENTATIONS
        AND WARRANTIES OF THE COMPANY.

       

      The
        Company represents and warrants to each of the Buyers that, except as set
        forth
        in the SEC Documents (as defined herein):

       


      
        
          
          

        

        
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      (a) Organization
        and Qualification.
        The
        Company and its subsidiaries are corporations duly organized and validly
        existing in good standing under the laws of the jurisdiction in which they
        are
        incorporated, and have the requisite corporate power to own their properties
        and
        to carry on their business as now being conducted. Each of the Company and
        its
        subsidiaries is duly qualified as a foreign corporation to do business and
        is in
        good standing in every jurisdiction in which the nature of the business
        conducted by it makes such qualification necessary, except to the extent
        that
        the failure to be so qualified or be in good standing would not have a material
        adverse effect on the Company and its subsidiaries taken as a
        whole.

       

      (b) Authorization,
        Enforcement, Compliance with Other Instruments.
        (i) The Company has the requisite corporate power and authority to enter
        into and perform this Agreement, the Security Agreement, the Investor
        Registration Rights Agreement, the Escrow Agreement, the Irrevocable Transfer
        Agent Instructions, and any related agreements, and to issue the Convertible
        Debentures and the Conversion Shares in accordance with the terms hereof
        and
        thereof, (ii) the execution and delivery of this Agreement, the Security
        Agreement, the Investor Registration Rights Agreement, the Escrow Agreement,
        the
        Irrevocable Transfer Agent Instructions (as defined herein) and any related
        agreements by the Company and the consummation by it of the transactions
        contemplated hereby and thereby, including, without limitation, the issuance
        of
        the Convertible Debentures the Conversion Shares and the reservation for
        issuance and the issuance of the Conversion Shares issuable upon conversion
        or
        exercise thereof, have been duly authorized by the Company’s Board of Directors
        and no further consent or authorization is required by the Company, its Board
        of
        Directors or its stockholders, (iii) this Agreement, the Security Agreement,
        the
        Investor Registration Rights Agreement, the Escrow Agreement, the Irrevocable
        Transfer Agent Instructions and any related agreements have been duly executed
        and delivered by the Company, (iv) this Agreement, the Security Agreement,
        the
        Investor Registration Rights Agreement, the Escrow Agreement, the Irrevocable
        Transfer Agent Instructions and any related agreements constitute the valid
        and
        binding obligations of the Company enforceable against the Company in accordance
        with their terms, except as such enforceability may be limited by general
        principles of equity or applicable bankruptcy, insolvency, reorganization,
        moratorium, liquidation or similar laws relating to, or affecting generally,
        the
        enforcement of creditors’ rights and remedies. The authorized officer of the
        Company executing this Agreement, the Security Agreement, the Investor
        Registration Rights Agreement, the Escrow Agreement, the Irrevocable Transfer
        Agent Instructions and any related agreements knows of no reason why the
        Company
        cannot file the registration statement as required under the Investor
        Registration Rights Agreement or perform any of the Company’s other obligations
        under such documents.

       

      (c) Capitalization.
        The
        authorized capital stock of the Company consists of 200,000,000 shares of
        Common
        Stock, par value $0.00001 per share and no shares of Preferred Stock. As
        of the
        date hereof, the Company has 62,262,000 shares of Common Stock issued and
        outstanding. All of such outstanding shares have been validly issued and
        are
        fully paid and nonassessable. Except as disclosed in the SEC Documents (as
        defined in Section 3(f)), no shares of Common Stock are subject to
        preemptive rights or any other similar rights or any liens or encumbrances
        suffered or permitted by the Company. Except as disclosed in the SEC Documents,
        as of the date of this Agreement, (i) there are no outstanding options,
        warrants, scrip, rights to subscribe to, calls or commitments of any character
        whatsoever relating to, or securities or rights convertible into, any shares
        of
        capital stock of the Company or any of its subsidiaries, or contracts,
        commitments, understandings or arrangements by which the Company or any of
        its
        subsidiaries is or may become bound to issue additional shares of capital
        stock
        of the Company or any of its subsidiaries or options, warrants, scrip, rights
        to
        subscribe to, calls or commitments of any character whatsoever relating to,
        or
        securities or rights convertible into, any shares of capital stock of the
        Company or any of its subsidiaries, (ii) there are no outstanding debt
        securities and (iii) there are no agreements or arrangements under which
        the
        Company or any of its subsidiaries is obligated to register the sale of any
        of
        their securities under the 1933 Act (except pursuant to the Registration
        Rights
        Agreement) and (iv) there are no outstanding registration statements and
        there
        are no outstanding comment letters from the SEC or any other regulatory agency.
        There are no securities or instruments containing anti-dilution or similar
        provisions that will be triggered by the issuance of the Convertible Debentures
        as described in this Agreement. The Company has furnished to the Buyer true
        and
        correct copies of the Company’s Articles of Incorporation, as amended and as in
        effect on the date hereof (the “Articles
        of Incorporation”),
        and
        the Company’s By-laws, as in effect on the date hereof (the “By-laws”),
        and
        the terms of all securities convertible into or exercisable for Common Stock
        and
        the material rights of the holders thereof in respect thereto other than
        stock
        options issued to employees and consultants.

       


      
        
          
          

        

        
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      (d) Issuance
        of Securities.
        The
        Convertible Debentures are duly authorized and, upon issuance in accordance
        with
        the terms hereof, shall be duly issued, fully paid and nonassessable, are
        free
        from all taxes, liens and charges with respect to the issue thereof. The
        Conversion Shares issuable upon conversion of the Convertible Debentures
        have
        been duly authorized and reserved for issuance. Upon conversion or exercise
        in
        accordance with the Convertible Debentures the Conversion Shares will be
        duly
        issued, fully paid and nonassessable.

       

      (e) No
        Conflicts.
        Except
        as disclosed in the SEC Documents, the execution, delivery and performance
        of
        this Agreement, the Security Agreement, the Investors Registration Rights
        Agreement, the Escrow Agreement and the Irrevocable Transfer Agent Instructions
        by the Company and the consummation by the Company of the transactions
        contemplated hereby will not (i) result in a violation of the Articles of
        Incorporation, any certificate of designations of any outstanding series
        of
        preferred stock of the Company or the By-laws or (ii) conflict with or
        constitute a default (or an event which with notice or lapse of time or both
        would become a default) under, or give to others any rights of termination,
        amendment, acceleration or cancellation of, any agreement, indenture or
        instrument to which the Company or any of its subsidiaries is a party, or
        result
        in a violation of any law, rule, regulation, order, judgment or decree
        (including federal and state securities laws and regulations and the rules
        and
        regulations of The National Association of Securities Dealers Inc.’s OTC
        Bulletin Board on which the Common Stock is quoted) applicable to the Company
        or
        any of its subsidiaries or by which any property or asset of the Company
        or any
        of its subsidiaries is bound or affected. Except as disclosed in the SEC
        Documents, neither the Company nor its subsidiaries is in violation of any
        term
        of or in default under its Articles of Incorporation or By-laws or their
        organizational charter or by-laws, respectively, or any material contract,
        agreement, mortgage, indebtedness, indenture, instrument, judgment, decree
        or
        order or any statute, rule or regulation applicable to the Company or its
        subsidiaries. The business of the Company and its subsidiaries is not being
        conducted, and shall not be conducted in violation of any material law,
        ordinance, or regulation of any governmental entity. Except as specifically
        contemplated by this Agreement and as required under the 1933 Act and any
        applicable state securities laws, the Company is not required to obtain any
        consent, authorization or order of, or make any filing or registration with,
        any
        court or governmental agency in order for it to execute, deliver or perform
        any
        of its obligations under or contemplated by this Agreement or the Registration
        Rights Agreement in accordance with the terms hereof or thereof. Except as
        disclosed in the SEC Documents, all consents, authorizations, orders, filings
        and registrations which the Company is required to obtain pursuant to the
        preceding sentence have been obtained or effected on or prior to the date
        hereof. The Company and its subsidiaries are unaware of any facts or
        circumstance, which might give rise to any of the foregoing.

       

      (f) SEC
        Documents: Financial Statements.
        Since
        January 1, 2003, the Company has filed all reports, schedules, forms, statements
        and other documents required to be filed by it with the SEC under of the
        Securities Exchange Act of 1934, as amended (the “1934
        Act”)
        (all
        of the foregoing filed prior to the date hereof or amended after the date
        hereof
        and all exhibits included therein and financial statements and schedules
        thereto
        and documents incorporated by reference therein, being hereinafter referred
        to
        as the “SEC
        Documents”).
        The
        Company has delivered to the Buyers or their representatives, or made available
        through the SEC’s website at http://www.sec.gov., true and complete copies of
        the SEC Documents. As of their respective dates, the financial statements
        of the
        Company disclosed in the SEC Documents (the “Financial
        Statements”)
        complied as to form in all material respects with applicable accounting
        requirements and the published rules and regulations of the SEC with respect
        thereto. Such financial statements have been prepared in accordance with
        generally accepted accounting principles, consistently applied, during the
        periods involved (except (i) as may be otherwise indicated in such Financial
        Statements or the notes thereto, or (ii) in the case of unaudited interim
        statements, to the extent they may exclude footnotes or may be condensed
        or
        summary statements) and, fairly present in all material respects the financial
        position of the Company as of the dates thereof and the results of its
        operations and cash flows for the periods then ended (subject, in the case
        of
        unaudited statements, to normal year-end audit adjustments). No other
        information provided by or on behalf of the Company to the Buyer which is
        not
        included in the SEC Documents, including, without limitation, information
        referred to in this Agreement, contains any untrue statement of a material
        fact
        or omits to state any material fact necessary in order to make the statements
        therein, in the light of the circumstances under which they were made, not
        misleading.

       


      
        
          
          

        

        
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      (g) 10(b)-5.
        The SEC
        Documents do not include any untrue statements of material fact, nor do they
        omit to state any material fact required to be stated therein necessary to
        make
        the statements made, in light of the circumstances under which they were
        made,
        not misleading.

       

      (h) Absence
        of Litigation.
        Except
        as disclosed in the SEC Documents, there is no action, suit, proceeding,
        inquiry
        or investigation before or by any court, public board, government agency,
        self-regulatory organization or body pending against or affecting the Company,
        the Common Stock or any of the Company’s subsidiaries, wherein an unfavorable
        decision, ruling or finding would (i) have a material adverse effect on the
        transactions contemplated hereby (ii) adversely affect the validity or
        enforceability of, or the authority or ability of the Company to perform
        its
        obligations under, this Agreement or any of the documents contemplated herein,
        or (iii) except as expressly disclosed in the SEC Documents, have a material
        adverse effect on the business, operations, properties, financial condition
        or
        results of operations of the Company and its subsidiaries taken as a
        whole.

       

      (i) Acknowledgment
        Regarding Buyer’s Purchase of the Convertible Debentures.
        The
        Company acknowledges and agrees that the Buyer(s) is acting solely in the
        capacity of an arm’s length purchaser with respect to this Agreement and the
        transactions contemplated hereby. The Company further acknowledges that the
        Buyer(s) is not acting as a financial advisor or fiduciary of the Company
        (or in
        any similar capacity) with respect to this Agreement and the transactions
        contemplated hereby and any advice given by the Buyer(s) or any of their
        respective representatives or agents in connection with this Agreement and
        the
        transactions contemplated hereby is merely incidental to such Buyer’s purchase
        of the Convertible Debentures or the Conversion Shares. The Company further
        represents to the Buyer that the Company’s decision to enter into this Agreement
        has been based solely on the independent evaluation by the Company and its
        representatives.

       

      (j) No
        General Solicitation.
        Neither
        the Company, nor any of its affiliates, nor any person acting on its or their
        behalf, has engaged in any form of general solicitation or general advertising
        (within the meaning of Regulation D under the 1933 Act) in connection with
        the
        offer or sale of the Convertible Debentures or the Conversion
        Shares.

       

      (k) No
        Integrated Offering.
        Neither
        the Company, nor any of its affiliates, nor any person acting on its or their
        behalf has, directly or indirectly, made any offers or sales of any security
        or
        solicited any offers to buy any security, under circumstances that would
        require
        registration of the Convertible Debentures or the Conversion Shares under
        the
        1933 Act or cause this offering of the Convertible Debentures or the Conversion
        Shares to be integrated with prior offerings by the Company for purposes
        of the
        1933 Act.

       

      (l) Employee
        Relations.
        Neither
        the Company nor any of its subsidiaries is involved in any labor dispute
        nor, to
        the knowledge of the Company or any of its subsidiaries, is any such dispute
        threatened. None of the Company’s or its subsidiaries’ employees is a member of
        a union and the Company and its subsidiaries believe that their relations
        with
        their employees are good.

       


      
        
          
          

        

        
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      (m) Intellectual
        Property Rights.
        The
        Company and its subsidiaries own or possess adequate rights or licenses to
        use
        all trademarks, trade names, service marks, service mark registrations, service
        names, patents, patent rights, copyrights, inventions, licenses, approvals,
        governmental authorizations, trade secrets and rights necessary to conduct
        their
        respective businesses as now conducted. The Company and its subsidiaries
        do not
        have any knowledge of any infringement by the Company or its subsidiaries
        of
        trademark, trade name rights, patents, patent rights, copyrights, inventions,
        licenses, service names, service marks, service mark registrations, trade
        secret
        or other similar rights of others, and, to the knowledge of the Company there
        is
        no claim, action or proceeding being made or brought against, or to the
        Company’s knowledge, being threatened against, the Company or its subsidiaries
        regarding trademark, trade name, patents, patent rights, invention, copyright,
        license, service names, service marks, service mark registrations, trade
        secret
        or other infringement; and the Company and its subsidiaries are unaware of
        any
        facts or circumstances which might give rise to any of the
        foregoing.

       

      (n) Environmental
        Laws.
        The
        Company and its subsidiaries are (i) in compliance with any and all applicable
        foreign, federal, state and local laws and regulations relating to the
        protection of human health and safety, the environment or hazardous or toxic
        substances or wastes, pollutants or contaminants (“Environmental
        Laws”),
        (ii)
        have received all permits, licenses or other approvals required of them under
        applicable Environmental Laws to conduct their respective businesses and
        (iii)
        are in compliance with all terms and conditions of any such permit, license
        or
        approval.

       

      (o) Title.
        Any
        real property and facilities held under lease by the Company and its
        subsidiaries are held by them under valid, subsisting and enforceable leases
        with such exceptions as are not material and do not interfere with the use
        made
        and proposed to be made of such property and buildings by the Company and
        its
        subsidiaries.

       

      (p) Insurance.
        The
        Company and each of its subsidiaries are insured by insurers of recognized
        financial responsibility against such losses and risks and in such amounts
        as
        management of the Company believes to be prudent and customary in the businesses
        in which the Company and its subsidiaries are engaged. Neither the Company
        nor
        any such subsidiary has been refused any insurance coverage sought or applied
        for and neither the Company nor any such subsidiary has any reason to believe
        that it will not be able to renew its existing insurance coverage as and
        when
        such coverage expires or to obtain similar coverage from similar insurers
        as may
        be necessary to continue its business at a cost that would not materially
        and
        adversely affect the condition, financial or otherwise, or the earnings,
        business or operations of the Company and its subsidiaries, taken as a
        whole.

       

      (q) Regulatory
        Permits.
        The
        Company and its subsidiaries possess all material certificates, authorizations
        and permits issued by the appropriate federal, state or foreign regulatory
        authorities necessary to conduct their respective businesses, and neither
        the
        Company nor any such subsidiary has received any notice of proceedings relating
        to the revocation or modification of any such certificate, authorization
        or
        permit.

       


      
        
          
          

        

        
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      (r) Internal
        Accounting Controls.
        The
        Company and each of its subsidiaries maintain a system of internal accounting
        controls sufficient to provide reasonable assurance that (i) transactions
        are
        executed in accordance with management’s general or specific authorizations,
        (ii) transactions are recorded as necessary to permit preparation of financial
        statements in conformity with generally accepted accounting principles and
        to
        maintain asset accountability, and (iii) the recorded amounts for assets
        is
        compared with the existing assets at reasonable intervals and appropriate
        action
        is taken with respect to any differences.

       

      (s) No
        Material Adverse Breaches, etc.
        Except
        as set forth in the SEC Documents, neither the Company nor any of its
        subsidiaries is subject to any charter, corporate or other legal restriction,
        or
        any judgment, decree, order, rule or regulation which in the judgment of
        the
        Company’s officers has or is expected in the future to have a material adverse
        effect on the business, properties, operations, financial condition, results
        of
        operations or prospects of the Company or its subsidiaries. Except as set
        forth
        in the SEC Documents, neither the Company nor any of its subsidiaries is
        in
        breach of any contract or agreement which breach, in the judgment of the
        Company’s officers, has or is expected to have a material adverse effect on the
        business, properties, operations, financial condition, results of operations
        or
        prospects of the Company or its subsidiaries.

       

      (t) Tax
        Status.
        Except
        as set forth in the SEC Documents, the Company and each of its subsidiaries
        has
        made and filed all federal and state income and all other tax returns, reports
        and declarations required by any jurisdiction to which it is subject and
        (unless
        and only to the extent that the Company and each of its subsidiaries has
        set
        aside on its books provisions reasonably adequate for the payment of all
        unpaid
        and unreported taxes) has paid all taxes and other governmental assessments
        and
        charges that are material in amount, shown or determined to be due on such
        returns, reports and declarations, except those being contested in good faith
        and has set aside on its books provision reasonably adequate for the payment
        of
        all taxes for periods subsequent to the periods to which such returns, reports
        or declarations apply. There are no unpaid taxes in any material amount claimed
        to be due by the taxing authority of any jurisdiction, and the officers of
        the
        Company know of no basis for any such claim.

       

      (u) Certain
        Transactions.
        Except
        as set forth in the SEC Documents, and except for arm’s length transactions
        pursuant to which the Company makes payments in the ordinary course of business
        upon terms no less favorable than the Company could obtain from third parties
        and other than the grant of stock options disclosed in the SEC Documents,
        none
        of the officers, directors, or employees of the Company is presently a party
        to
        any transaction with the Company (other than for services as employees, officers
        and directors), including any contract, agreement or other arrangement providing
        for the furnishing of services to or by, providing for rental of real or
        personal property to or from, or otherwise requiring payments to or from
        any
        officer, director or such employee or, to the knowledge of the Company, any
        corporation, partnership, trust or other entity in which any officer, director,
        or any such employee has a substantial interest or is an officer, director,
        trustee or partner.

       

      (v) Fees
        and Rights of First Refusal.
        The
        Company is not obligated to offer the securities offered hereunder on a right
        of
        first refusal basis or otherwise to any third parties including, but not
        limited
        to, current or former shareholders of the Company, underwriters, brokers,
        agents
        or other third parties.

       


      
        
          
          

        

        
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      4. COVENANTS.

       

      (a) Best
        Efforts.
        Each
        party shall use its best efforts timely to satisfy each of the conditions
        to be
        satisfied by it as provided in Sections 6 and 7 of this Agreement.

       

      (b) Form
        D.
        The
        Company agrees to file a Form D with respect to the Conversion Shares as
        required under Regulation D and to provide a copy thereof to each Buyer promptly
        after such filing. The Company shall, on or before the Closing Date, take
        such
        action as the Company shall reasonably determine is necessary to qualify
        the
        Conversion Shares, or obtain an exemption for the Conversion Shares for sale
        to
        the Buyers at the Closing pursuant to this Agreement under applicable securities
        or “Blue Sky” laws of the states of the United States, and shall provide
        evidence of any such action so taken to the Buyers on or prior to the Closing
        Date.

       

      (c) Reporting
        Status.
        Until
        the earlier of (i) the date as of which the Buyer(s) may sell all of the
        Conversion Shares without restriction pursuant to Rule 144(k) promulgated
        under
        the 1933 Act (or successor thereto), or (ii) the date on which (A) the Buyer(s)
        shall have sold all the Conversion Shares and (B) none of the Convertible
        Debentures are outstanding (the “Registration
        Period”),
        the
        Company shall file in a timely manner all reports required to be filed with
        the
        SEC pursuant to the 1934 Act and the regulations of the SEC thereunder, and
        the
        Company shall not terminate its status as an issuer required to file reports
        under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
        would otherwise permit such termination.

       

      (d) Use
        of
        Proceeds.
        The
        Company will use the proceeds from the sale of the Convertible Debentures
        for
        general corporate and working capital purposes.

       

      (e) Reservation
        of Shares.
        The
        Company shall take all action reasonably necessary to at all times have
        authorized, and reserved for the purpose of issuance, such number of shares
        of
        Common Stock as shall be necessary to effect the issuance of the Conversion
        Shares. If at any time the Company does not have available such shares of
        Common
        Stock as shall from time to time be sufficient to effect the conversion of
        all
        of the Conversion Shares of the Company shall call and hold a special meeting
        of
        the shareholders within thirty (30) days of such occurrence, for the sole
        purpose of increasing the number of shares authorized. The Company’s management
        shall recommend to the shareholders to vote in favor of increasing the number
        of
        shares of Common Stock authorized. Management shall also vote all of its
        shares
        in favor of increasing the number of authorized shares of Common
        Stock.

       

      (f) Listings
        or Quotation.
        The
        Company shall promptly secure the listing or quotation of the Conversion
        Shares
        upon each national securities exchange, automated quotation system or The
        National Association of Securities Dealers Inc.’s Over-The-Counter Bulletin
        Board (“OTCBB”)
        or
        other market, if any, upon which shares of Common Stock are then listed or
        quoted (subject to official notice of issuance) and shall use its best efforts
        to maintain, so long as any other shares of Common Stock shall be so listed,
        such listing of all Conversion Shares from time to time issuable under the
        terms
        of this Agreement. The Company shall maintain the Common Stock’s authorization
        for quotation on the OTCBB.

       


      
        
          
          

        

        
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      (g) Fees
        and Expenses.
        Each of
        the Company and the Buyer(s) shall pay all costs and expenses incurred by
        such
        party in connection with the negotiation, investigation, preparation, execution
        and delivery of this Agreement, the Escrow Agreement, the Investor Registration
        Rights Agreement, the Security Agreement and the Irrevocable Transfer Agent
        Instructions. 

       

      (h) The
        parties
        agree that the costs
        and
        expenses of the Buyer(s) and the structuring fee of Yorkville Advisors
        Management, LLC of Ten Thousand Dollars ($10,000) already
        been paid
        and the
        retainer of Kirkpatrick&
        Lockhart Nicholson
        Graham LLP has already been paid. 

       

      (i) The
        Company shall issue to the Buyer(s) a warrant to purchase One Million
        (1,000,000) shares of Common Stock of the Company. The warrants shall have
        an
        exercise price equal to $0.60. In the event the Registration Statement is
        not
        declared effective by the SEC within twelve months of the filing of such
        Registration Statement, the warrants shall have a cashless exercise price.
        The
        shares underlying the warrants shall be included on the Registration Statement
        to be filed by the Company in accordance with the Investor Registration Rights
        Agreement of even date herewith. The warrants shall have “piggy-back” and demand
        registration rights and shall survive for two (2) years from the date
        hereof.

       

      (j) Corporate
        Existence.
        So long
        as any of the Convertible Debentures remain outstanding, the Company shall
        not
        directly or indirectly consummate any merger, reorganization, restructuring,
        reverse stock split consolidation, sale of all or substantially all of the
        Company’s assets or any similar transaction or related transactions (each such
        transaction, an “Organizational
        Change”)
        unless, prior to the consummation an Organizational Change, the Company obtains
        the written consent of each Buyer. In any such case, the Company will make
        appropriate provision with respect to such holders’ rights and interests to
        insure that the provisions of this Section 4(h) will thereafter be applicable
        to
        the Convertible Debentures.

       

      (k) Transactions
        With Affiliates.
        So long
        as any Convertible Debentures are outstanding, the Company shall not, and
        shall
        cause each of its subsidiaries not to, enter into, amend, modify or supplement,
        or permit any subsidiary to enter into, amend, modify or supplement any
        agreement, transaction, commitment, or arrangement with any of its or any
        subsidiary’s officers, directors, person who were officers or directors at any
        time during the previous two (2) years, stockholders who beneficially own
        five
        percent (5%) or more of the Common Stock, or Affiliates (as defined below)
        or
        with any individual related by blood, marriage, or adoption to any such
        individual or with any entity in which any such entity or individual owns
        a five
        percent (5%) or more beneficial interest (each a “Related
        Party”),
        except for (a) customary employment arrangements and benefit programs on
        reasonable terms, (b) any investment in an Affiliate of the Company, (c)
        any
        agreement, transaction, commitment, or arrangement on an arms-length basis
        on
        terms no less favorable than terms which would have been obtainable from
        a
        person other than such Related Party, (d) any agreement transaction, commitment,
        or arrangement which is approved by a majority of the disinterested directors
        of
        the Company, for purposes hereof, any director who is also an officer of
        the
        Company or any subsidiary of the Company shall not be a disinterested director
        with respect to any such agreement, transaction, commitment, or arrangement.
        “Affiliate”
for
        purposes hereof means, with respect to any person or entity, another person
        or
        entity that, directly or indirectly, (i) has a ten percent (10%) or more
        equity
        interest in that person or entity, (ii) has ten percent (10%) or more common
        ownership with that person or entity, (iii) controls that person or entity,
        or
        (iv) shares common control with that person or entity. “Control”
or
        “controls”
for
        purposes hereof means that a person or entity has the power, direct or indirect,
        to conduct or govern the policies of another person or entity.

       


      
        
          
          

        

        
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      (l) Transfer
        Agent.
        The
        Company covenants and agrees that, in the event that the Company’s agency
        relationship with the transfer agent should be terminated for any reason
        prior
        to a date which is two (2) years after the Closing Date, the Company shall
        immediately appoint a new transfer agent and shall require that the new transfer
        agent execute and agree to be bound by the terms of the Irrevocable Transfer
        Agent Instructions (as defined herein).

       

      (m) Restriction
        on Issuance of the Capital Stock.
        So long
        as any Convertible Debentures are outstanding, the Company shall not, without
        the prior written consent of the Buyer(s), issue or sell shares of Common
        Stock
        or Preferred Stock (i) without consideration or for a consideration per share
        less than the Bid Price of the Common Stock determined immediately prior
        to its
        issuance, (ii) issue any warrant, option, right, contract, call, or other
        security instrument granting the holder thereof, the right to acquire Common
        Stock without consideration or for a consideration less than such Common
        Stock’s
        Bid Price value determined immediately prior to it’s issuance, (iii) enter into
        any security instrument granting the holder a security interest in any and
        all
        assets of the Company, or (iv) file any registration statement on Form
        S-8.

       

      5. TRANSFER
        AGENT INSTRUCTIONS.

       

      The
        Company shall issue the Irrevocable Transfer Agent Instructions to its transfer
        agent irrevocably appointing David Gonzalez, Esq. as its agent for purpose
        of
        having certificates issued, registered in the name of the Buyer(s) or its
        respective nominee(s), for the Conversion Shares representing such amounts
        of
        Convertible Debentures as specified from time to time by the Buyer(s) to
        the
        Company upon conversion of the Convertible Debentures, for interest owed
        pursuant to the Convertible Debenture, and for any and all Liquidated Damages
        (as this term is defined in the Investor Registration Rights Agreement).
        Yorkville Advisors Management, LLC shall be paid a cash fee of Fifty Dollars
        ($50) for every occasion they act pursuant to the Irrevocable Transfer Agent
        Instructions. The Company shall not change its transfer agent without the
        express written consent of the Buyer(s), which may be withheld by the Buyer(s)
        in its sole discretion. Prior to registration of the Conversion Shares under
        the
        1933 Act, all such certificates shall bear the restrictive legend specified
        in
        Section 2(g) of this Agreement. The Company warrants that no instruction
        other
        than the Irrevocable Transfer Agent Instructions referred to in this Section
        5,
        and stop transfer instructions to give effect to Section 2(g) hereof (in
        the
        case of the Conversion Shares prior to registration of such shares under
        the
        1933 Act) will be given by the Company to its transfer agent and that the
        Conversion Shares shall otherwise be freely transferable on the books and
        records of the Company as and to the extent provided in this Agreement and
        the
        Investor Registration Rights Agreement. Nothing in this Section 5 shall affect
        in any way the Buyer’s obligations and agreement to comply with all applicable
        securities laws upon resale of Conversion Shares. If the Buyer(s) provides
        the
        Company with an opinion of counsel, in form, scope and substance customary
        for
        opinions of counsel in comparable transactions to the effect that registration
        of a resale by the Buyer(s) of any of the Conversion Shares is not required
        under the 1933 Act, the Company shall within two (2) business days instruct
        its
        transfer agent to issue one or more certificates in such name and in such
        denominations as specified by the Buyer. The Company acknowledges that a
        breach
        by it of its obligations hereunder will cause irreparable harm to the Buyer
        by
        vitiating the intent and purpose of the transaction contemplated hereby.
        Accordingly, the Company acknowledges that the remedy at law for a breach
        of its
        obligations under this Section 5 will be inadequate and agrees, in the event
        of
        a breach or threatened breach by the Company of the provisions of this
        Section 5, that the Buyer(s) shall be entitled, in addition to all other
        available remedies, to an injunction restraining any breach and requiring
        immediate issuance and transfer, without the necessity of showing economic
        loss
        and without any bond or other security being required.

       


      
        
          
          

        

        
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      6. CONDITIONS
        TO THE COMPANY’S OBLIGATION TO SELL.

       

      The
        obligation of the Company hereunder to issue and sell the Convertible Debentures
        to the Buyer(s) at the Closings is subject to the satisfaction, at or before
        the
        Closing Dates, of each of the following conditions, provided that these
        conditions are for the Company’s sole benefit and may be waived by the Company
        at any time in its sole discretion:

       

      (a) Each
        Buyer shall have executed this Agreement, the Security Agreement, the Escrow
        Agreement and the Investor Registration Rights Agreement and the Irrevocable
        Transfer Agent Instructions and delivered the same to the Company.

       

      (b) The
        Buyer(s) shall have delivered to the Escrow Agent the Purchase Price for
        Convertible Debentures in respective amounts as set forth next to each Buyer
        as
        outlined on Schedule I attached hereto and the Escrow Agent shall have delivered
        the net proceeds to the Company by wire transfer of immediately available
        U.S.
        funds pursuant to the wire instructions provided by the Company.

       

      (c) The
        representations and warranties of the Buyer(s) shall be true and correct
        in all
        material respects as of the date when made and as of the Closing Dates as
        though
        made at that time (except for representations and warranties that speak as
        of a
        specific date), and the Buyer(s) shall have performed, satisfied and complied
        in
        all material respects with the covenants, agreements and conditions required
        by
        this Agreement to be performed, satisfied or complied with by the Buyer(s)
        at or
        prior to the Closing Dates.

       

      (d) The
        Company shall have filed a form UCC-1 with regard to the Pledged Property
        and
        Pledged Collateral as detailed in the Security Agreement dated the date hereof
        and provided proof of such filing to the Buyer(s). 

       

      7. CONDITIONS
        TO THE BUYER’S OBLIGATION TO PURCHASE.

       

      The
        obligation of the Buyer(s) hereunder to purchase the Convertible Debentures
        at
        the Closing is subject to the satisfaction, at or before the Closing Date,
        of
        each of the following conditions:

       

      (a) The
        Company shall have executed this Agreement, the Security Agreement, the
        Convertible Debenture, the Escrow Agreement, the Irrevocable Transfer
        Instructions and the Investor Registration Rights Agreement, and delivered
        the
        same to the Buyer(s).

       

      (b) The
        Common Stock shall be authorized for quotation on the OTCBB, trading in the
        Common Stock shall not have been suspended for any reason and all of the
        Conversion Shares issuable upon conversion of the Convertible Debentures
        shall
        be approved the OTCBB. 

       

      (c) The
        representations and warranties of the Company shall be true and correct in
        all
        material respects (except to the extent that any of such representations
        and
        warranties is already qualified as to materiality in Section 3 above, in
        which
        case, such representations and warranties shall be true and correct without
        further qualification) as of the date when made and as of the Closing Dates
        as
        though made at that time (except for representations and warranties that
        speak
        as of a specific date) and the Company shall have performed, satisfied and
        complied in all material respects with the covenants, agreements and conditions
        required by this Agreement to be performed, satisfied or complied with by
        the
        Company at or prior to the Closing Dates. If requested by the Buyer, the
        Buyer
        shall have received a certificate, executed by the President of the Company,
        dated as of the Closing Dates, to the foregoing effect and as to such other
        matters as may be reasonably requested by the Buyer including, without
        limitation an update as of the Closing Dates regarding the representation
        contained in Section 3(c) above.

       


      
        
          
          

        

        
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      (d) The
        Company shall have executed and delivered to the Buyer(s) the Convertible
        Debentures in the respective amounts set forth opposite each Buyer(s) name
        on
        Schedule I attached hereto.

       

      (e) The
        Buyer(s) shall have received an opinion of counsel from counsel to the Company
        in a form satisfactory to the Buyer(s).

       

      (f) The
        Company shall have provided to the Buyer(s) a certificate of good standing
        from
        the secretary of state from the state in which the company is
        incorporated.

       

      (g) As
        of the
        Closing Date, the Company shall have reserved out of its authorized and unissued
        Common Stock, solely for the purpose of effecting the conversion of the
        Convertible Debentures, shares of Common Stock to effect the conversion of
        all
        of the Conversion Shares then outstanding.

       

      (h) The
        Irrevocable Transfer Agent Instructions, in form and substance satisfactory
        to
        the Buyer, shall have been delivered to and acknowledged in writing by the
        Company’s transfer agent.

       

      (i) The
        Company shall have provided to the Buyer an acknowledgement, to the satisfaction
        of the Buyer, from Williams & Webster, P.S. as to its ability to provide all
        consents required in order to file a registration statement in connection
        with
        this transaction.

       

      (j) The
        Company shall have filed a form UCC-1 or such other forms as may be required
        to
        perfect the Buyer’s interest in the Pledged Property and Pledged Collateral as
        detailed in the Security Agreement dated the date hereof and provided proof
        of
        such filing to the Buyer(s).

       

      8. INDEMNIFICATION.

       

      (a) In
        consideration of the Buyer’s execution and delivery of this Agreement and
        acquiring the Convertible Debentures and the Conversion Shares hereunder,
        and in
        addition to all of the Company’s other obligations under this Agreement, the
        Company shall defend, protect, indemnify and hold harmless the Buyer(s) and
        each
        other holder of the Convertible Debentures and the Conversion Shares, and
        all of
        their officers, directors, employees and agents (including, without
        limitation, those retained in connection with the transactions contemplated
        by
        this Agreement) (collectively, the “Buyer
        Indemnitees”)
        from
        and against any and all actions, causes of action, suits, claims, losses,
        costs,
        penalties, fees, liabilities and damages, and expenses in connection therewith
        (irrespective of whether any such Buyer Indemnitee is a party to the action
        for
        which indemnification hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified
        Liabilities”),
        incurred by the Buyer Indemnitees or any of them as a result of, or arising
        out
        of, or relating to (a) any misrepresentation or breach of any representation
        or
        warranty made by the Company in this Agreement, the Convertible Debentures
        or
        the Investor Registration Rights Agreement or any other certificate, instrument
        or document contemplated hereby or thereby, (b) any breach of any covenant,
        agreement or obligation of the Company contained in this Agreement, or the
        Investor Registration Rights Agreement or any other certificate, instrument
        or
        document contemplated hereby or thereby, or (c) any cause of action, suit
        or
        claim brought or made against such Indemnitee and arising out of or resulting
        from the execution, delivery, performance or enforcement of this Agreement
        or
        any other instrument, document or agreement executed pursuant hereto by any
        of
        the Indemnities, any transaction financed or to be financed in whole or in
        part,
        directly or indirectly, with the proceeds of the issuance of the Convertible
        Debentures or the status of the Buyer or holder of the Convertible Debentures
        the Conversion Shares, as a Buyer of Convertible Debentures in the Company.
        To
        the extent that the foregoing undertaking by the Company may be unenforceable
        for any reason, the Company shall make the maximum contribution to the payment
        and satisfaction of each of the Indemnified Liabilities, which is permissible
        under applicable law.

       


      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      


      


       

      (b) In
        consideration of the Company’s execution and delivery of this Agreement, and in
        addition to all of the Buyer’s other obligations under this Agreement, the Buyer
        shall defend, protect, indemnify and hold harmless the Company and all of
        its
        officers, directors, employees and agents (including, without limitation,
        those
        retained in connection with the transactions contemplated by this Agreement)
        (collectively, the “Company
        Indemnitees”)
        from
        and against any and all Indemnified Liabilities incurred by the Indemnitees
        or
        any of them as a result of, or arising out of, or relating to (a) any
        misrepresentation or breach of any representation or warranty made by the
        Buyer(s) in this Agreement, instrument or document contemplated hereby or
        thereby executed by the Buyer, (b) any breach of any covenant, agreement
        or
        obligation of the Buyer(s) contained in this Agreement, the Investor
        Registration Rights Agreement or any other certificate, instrument or document
        contemplated hereby or thereby executed by the Buyer, or (c) any cause of
        action, suit or claim brought or made against such Company Indemnitee based
        on
        material misrepresentations or due to a material breach and arising out of
        or
        resulting from the execution, delivery, performance or enforcement of this
        Agreement, the Investor Registration Rights Agreement or any other instrument,
        document or agreement executed pursuant hereto by any of the Company
        Indemnities. To the extent that the foregoing undertaking by each Buyer may
        be
        unenforceable for any reason, each Buyer shall make the maximum contribution
        to
        the payment and satisfaction of each of the Indemnified Liabilities, which
        is
        permissible under applicable law.

       

      9. GOVERNING
        LAW: MISCELLANEOUS.

       

      (a) Governing
        Law.
        This
        Agreement shall be governed by and interpreted in accordance with the laws
        of
        the State of Nevada without regard to the principles of conflict of laws.
        The
        parties further agree that any action between them shall be heard in Hudson
        County, New Jersey, and expressly consent to the jurisdiction and venue of
        the
        Superior Court of New Jersey, sitting in Hudson County and the United States
        District Court for the District of New Jersey sitting in Newark, New Jersey
        for
        the adjudication of any civil action asserted pursuant to this
        Paragraph.

       

      (b) Counterparts.
        This
        Agreement may be executed in two or more identical counterparts, all of which
        shall be considered one and the same agreement and shall become effective
        when
        counterparts have been signed by each party and delivered to the other party.
        In
        the event any signature page is delivered by facsimile transmission, the
        party
        using such means of delivery shall cause four (4) additional original executed
        signature pages to be physically delivered to the other party within five
        (5)
        days of the execution and delivery hereof.

       

      (c) Headings.
        The
        headings of this Agreement are for convenience of reference and shall not
        form
        part of, or affect the interpretation of, this Agreement.

       

      (d) Severability.
        If any
        provision of this Agreement shall be invalid or unenforceable in any
        jurisdiction, such invalidity or unenforceability shall not affect the validity
        or enforceability of the remainder of this Agreement in that jurisdiction
        or the
        validity or enforceability of any provision of this Agreement in any other
        jurisdiction.

       


      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      


      


       

      (e) Entire
        Agreement, Amendments.
        This
        Agreement supersedes all other prior oral or written agreements between the
        Buyer(s), the Company, their affiliates and persons acting on their behalf
        with
        respect to the matters discussed herein, and this Agreement and the instruments
        referenced herein contain the entire understanding of the parties with respect
        to the matters covered herein and therein and, except as specifically set
        forth
        herein or therein, neither the Company nor any Buyer makes any representation,
        warranty, covenant or undertaking with respect to such matters. No provision
        of
        this Agreement may be waived or amended other than by an instrument in writing
        signed by the party to be charged with enforcement.

       

      (f) Notices.
        Any
        notices, consents, waivers, or other communications required or permitted
        to be
        given under the terms of this Agreement must be in writing and will be deemed
        to
        have been delivered (i) upon receipt, when delivered personally; (ii) upon
        confirmation of receipt, when sent by facsimile; (iii) three (3) days after
        being sent by U.S. certified mail, return receipt requested, or (iv) one
        (1) day
        after deposit with a nationally recognized overnight delivery service, in
        each
        case properly addressed to the party to receive the same. The addresses and
        facsimile numbers for such communications shall be:

       

      
        	
                If
                  to the Company, to:

              	
                Falcon
                  Natural Gas Corp.

              
	 	
                Westchase
                  Center

              
	 	
                2500
                  Citywest Blvd - Suite 300

              
	 	
                Houston,
                  Texas 77019

              
	 	
                Attention: Massimiliano
                  Pozzoni

              
	 	
                Telephone: (832)
                  476-8699

              
	 	
                Facsimile: (713)
                  456-2581

              
	 	 
	
                With
                  a copy to:

              	
                Kirkpatrick
                  & Lockhart Nicholson Graham LLP

              
	 	
                201
                  South Biscayne Boulevard - Suite 2000

              
	 	
                Miami,
                  Florida 33131-2399

              
	 	
                Attention: Clayton
                  E. Parker, Esq.

              
	 	
                Telephone: (305)
                  539-3300

              
	 	
                Facsimile: (305)
                  358-7095

              
	 	 
	
                If
                  to the Transfer Agent, to:

              	
                Pacific
                  Stock Transfer Company

              
	 	
                500
                  East Warm Springs Road, Suite 240

              
	 	
                Las
                  Vegas, Nevada 89119

              
	 	
                Attention: Ms.
                  Edith Vasquez

              
	 	
                Telephone: (702)
                  361-3033

              
	 	
                Facsimile: (702)
                  433-1979

              
	 	 
	
                With
                  Copy to:

              	
                David
                  Gonzalez, Esq.

              
	 	
                101
                  Hudson Street - Suite 3700

              
	 	
                Jersey
                  City, New Jersey 07302

              
	 	
                Attention: David
                  Gonzalez, Esq.

              
	 	
                Telephone: (201)
                  985-8300

              
	 	
                Facsimile: (201)
                  985-8266

              
	 	 


      

      


       


      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      


      If
        to the
        Buyer(s), to its address and facsimile number on Schedule I, with copies
        to the
        Buyer’s counsel as set forth on Schedule I. Each party shall provide five (5)
        days’ prior written notice to the other party of any change in address or
        facsimile number.

       

      (g) Successors
        and Assigns.
        This
        Agreement shall be binding upon and inure to the benefit of the parties and
        their respective successors and assigns. Neither the Company nor any Buyer
        shall
        assign this Agreement or any rights or obligations hereunder without the
        prior
        written consent of the other party hereto.

       

      (h) No
        Third Party Beneficiaries.
        This
        Agreement is intended for the benefit of the parties hereto and their respective
        permitted successors and assigns, and is not for the benefit of, nor may
        any
        provision hereof be enforced by, any other person.

       

      (i) Survival.
        Unless
        this Agreement is terminated under Section 9(l), the representations and
        warranties of the Company and the Buyer(s) contained in Sections 2 and 3,
        the
        agreements and covenants set forth in Sections 4, 5 and 9, and the
        indemnification provisions set forth in Section 8, shall survive the Closing
        for
        a period of two (2) years following the date on which the Convertible Debentures
        are converted in full. The Buyer(s) shall be responsible only for its own
        representations, warranties, agreements and covenants hereunder.

       

      (j) Publicity.
        The
        Company and the Buyer(s) shall have the right to approve, before issuance
        any
        press release or any other public statement with respect to the transactions
        contemplated hereby made by any party; provided, however, that the Company
        shall
        be entitled, without the prior approval of the Buyer(s), to issue any press
        release or other public disclosure with respect to such transactions required
        under applicable securities or other laws or regulations (the Company shall
        use
        its best efforts to consult the Buyer(s) in connection with any such press
        release or other public disclosure prior to its release and Buyer(s) shall
        be
        provided with a copy thereof upon release thereof).

       

      (k) Further
        Assurances.
        Each
        party shall do and perform, or cause to be done and performed, all such further
        acts and things, and shall execute and deliver all such other agreements,
        certificates, instruments and documents, as the other party may reasonably
        request in order to carry out the intent and accomplish the purposes of this
        Agreement and the consummation of the transactions contemplated
        hereby.

       

      (l) Termination.
        In the
        event that the Closing shall not have occurred with respect to the Buyers
        on or
        before five (5) business days from the date hereof due to the Company’s or the
        Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7 above
        (and the non-breaching party’s failure to waive such unsatisfied condition(s)),
        the non-breaching party shall have the option to terminate this Agreement
        with
        respect to such breaching party at the close of business on such date without
        liability of any party to any other party; provided, however, that if this
        Agreement is terminated by the Company pursuant to this Section 9(l), the
        Company shall remain obligated to reimburse the Buyer(s) for the fees and
        expenses of Yorkville Advisors Management, LLC described in Section 4
        above.

       

      (m) No
        Strict Construction.
        The
        language used in this Agreement will be deemed to be the language chosen
        by the
        parties to express their mutual intent, and no rules of strict construction
        will
        be applied against any party.

       

      [REMAINDER
        PAGE INTENTIONALLY LEFT BLANK]

       


      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      


      


      IN
        WITNESS WHEREOF,
        the
        Buyers and the Company have caused this Amended and Restated Securities Purchase
        Agreement to be duly executed as of the date first written above.

       

      
        	 	
                COMPANY:

              
	 	
                FALCON
                  NATURAL GAS CORP.

              
	 	 
	 	
                By: /s/
                  Massimiliano Pozzoni  

              
	 	
                Name: Massimiliano
                  Pozzoni

              
	 	
                Title: Vice-President

              
	 	 


      

      


       

      


      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       


      EXHIBIT
        A

       

       

      FORM
        OF INVESTOR REGISTRATION RIGHTS AGREEMENT

       

      


       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      



      EXHIBIT
        B

       

       

      FORM
        OF ESCROW AGREEMENT

       

      


       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      



      EXHIBIT
        C

       

      IRREVOCABLE
        TRANSFER AGENT INSTRUCTIONS

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      



      EXHIBIT
        D

      


      SECURITY
        AGREEMENT


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      



      EXHIBIT
        E

      


      AMENDED
        AND RESTATED SECURED DEBENTURE


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      



       

      SCHEDULE
        I

       

      SCHEDULE
        OF BUYERS 

       

      


      
        	
                Name

              	 	
                Signature

              	 	
                Address/Facsimile
                  

                Number
                  of Buyer

              	 	
                Amount
                  of Subscription

              
	 	 	 	 	 	 	 
	
                Cornell
                  Capital Partners, LP

              	 	
                By: Yorkville
                  Advisors, LLC

              	 	
                101
                  Hudson Street - Suite 3700

              	 	
                $
                  1,000,000

              
	 	 	
                Its: General
                  Partner

              	 	
                Jersey
                  City, NJ 07303

              	 	 
	 	 	 	 	
                Facsimile: (201)
                  985-8266

              	 	 
	 	 	 	 	 	 	 
	 	 	
                By:
                  /s/ Mark A. Angelo   

              	 	 	 	 
	 	 	
                Name: Mark
                  A. Angelo

              	 	 	 	 
	 	 	
                Its: Portfolio
                  Manager

              	 	 	 	 
	 	 	 	 	 	 	 
	
                With
                  a copy to: 

              	 	
                David
                  Gonzalez, Esq.

              	 	
                101
                  Hudson Street - Suite 3700

              	 	 
	 	 	 	 	
                Jersey
                  City, NJ 07302

              	 	 
	 	 	 	 	
                Facsimile:
                  (201) 985-8266