THIS AGREEMENT (this “Agreement”), dated December 6, 2011 is entered into by and
between CARBONICS CAPITAL CORPORATION, a Delaware corporation (the “Company”),
and YA GLOBAL INVESTMENTS, L.P. (the “Investor”).
 
WHEREAS:
 
 
A.
Reference is made to certain financing arrangements entered into by and between
the Company and certain of its subsidiaries (collectively, the “Obligors”) and
the Investor, evidenced by, among other things, the documents, instruments, and
agreements listed on Exhibit B attached hereto and incorporated herein by
reference (collectively, together with all other documents, instruments, and
agreements executed in connection therewith or related thereto, the “Existing
Financing Documents”).

 
 
B.
Reference is also made to the Securities Purchase Agreement (the “Securities
Purchase Agreement”) dated as of August 17, 2010, between the Company and the
Investor pursuant to which the Company has issued and the Investor has purchased
certain convertible debentures.  All capitalized terms used but not defined
herein shall have the meaning ascribed thereto in the Securities Purchase
Agreement.

 
 
C.
The parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Investor, as provided herein,
and the Investor shall purchase up to $1,545,000 in face amount of secured
convertible debentures, each in the form attached hereto as “Exhibit A” (the
“Series C Convertible Debentures” and together with this Agreement, the Existing
Financing Documents, and all other documents, instruments and agreements
executed in connection therewith or related thereto, the “Financing Documents”),
which shall be convertible into Common Stock (as converted such shares of Common
Stock, shall be Conversion Shares).

 
 
D.
The issuance and sale of the $1,545,000 in face amount of Series C Convertible
Debentures shall take place at three separate closings (each a “Series C
Closing”) as follows:  (i) $910,000 (the “Initial Funding”) shall take place on
the date hereof; (ii) $160,000 (the “Second Funding”) shall take place after the
satisfaction of certain conditions precedent set forth below and at the
discretion of the Investor, and (iii) $475,000 (the “Third Funding”) shall take
place after the satisfaction of certain conditions precedent set forth below and
at the discretion of the Investor, for a total purchase price of up to
$1,545,000.

 
 
E.
In order to induce the Company to issue and the Investor to purchase the Series
C Convertible Debentures, the parties desire to enter into this Agreement.

 
NOW, THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement the Company and the Investor hereby agree as
follows:
 
 
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1.           Purchase and Sale of Series C Convertible Debentures.
 
(a)   Subject to the satisfaction (or waiver) of the terms and conditions of
this Agreement, the Investor agrees to purchase at each Series C Closing and the
Company agrees to sell and issue to the Investor at the Series C Closing the
applicable face amount of Series C Convertible Debentures for a purchase price
equal to the face amount issued.
 
(b)   The first Series C Closing with respect to the Initial Funding shall take
place on the date hereof, subject to the terms and conditions set forth in this
Agreement (or such other date as is mutually agreed to by the Company and the
Investor).  Subsequent Series C Closings with respect to the Second Funding and
Third Funding shall take place within five Business Days of the date that the
Company notifies the Investor that it has satisfied all of the applicable
conditions to such Series C Closing, subject to the express consent of the
Investor in its sole discretion. The Series C Closing with respect to the Third
Funding shall not take place prior to May 1, 2012, unless otherwise agreed by
the parties. Each Closing shall occur at the offices of Yorkville Advisors, LLC,
101 Hudson Street, Suite 3700, Jersey City, New Jersey 07302 (or such other
place as is mutually agreed to by the Company and the Investor).
 
(c)   Subject to the satisfaction (or waiver) of the terms and conditions of
this Agreement, on the date of the Series C Closing with respect to the Initial
Funding, (i) the Investor shall deliver to the Company the Initial Funding for
the Series C Convertible Debentures to be issued and sold to it at such Series C
Closing and (ii) the Company shall deliver to the Investor the Series C
Convertible Debentures duly executed on behalf of the Company in the face amount
equal to the Initial Funding. Subject to the satisfaction (or waiver) of the
terms and conditions of this Agreement (including the conditions precedent with
respect to the Series C Closing with respect to the Second Funding and the Third
Funding, and subject to the express consent of the Investor in its sole
discretion), the Investor shall promptly thereafter deliver to the Company the
Second Funding and the Third Funding upon issuance of Series C Convertible
Debentures in the face amounts equal to the Second Funding and Third Funding.
 
(d)   The Company shall pay the Investor a structuring fee in connection with
this transaction of $5,000, which fee shall be paid out of the Initial
Funding.  The Company shall be responsible for all of its own fees and expenses
incurred in connection with the documentation and closing of this transaction.
 
2.           Representations and Warranties of Investor.
 
(a)   The representations and warranties of the Investor set forth in Section 2
of the Securities Purchase Agreement are hereby incorporated by reference with
such changes necessary to relate to this Agreement as if set forth in their
entirety herein (the “Investor Representations and Warranties”).  For the
avoidance of doubt, in the Investor Representations and Warranties references to
“Securities” shall be deemed references to the Series C Convertible Debentures
and the shares of Common Stock issuable upon conversion thereof, references to
“Conversion Shares” shall be deemed to reference the shares of Common Stock
issuable upon conversion of the Series C Convertible Debentures, and references
to “Transaction Documents” shall be deemed to include a reference to this
Agreement and the Series C Convertible Debentures.
 
 
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(b)   The Investor hereby represents and warrants that except as may otherwise
be disclosed on a disclosure schedule attached hereto, the Investor
Representations and Warranties are true and correct on the date hereof (except
for Investor Representations and Warranties that speak as of a specific date).
 
3.           Representations and Warranties of the Company.
 
(a)   The representations and warranties of the Company set forth in Section 3
of the Securities Purchase Agreement are hereby incorporated by reference with
such changes necessary to relate to this Agreement as if set forth in their
entirety herein (the “Company Representations and Warranties”).  For the
avoidance of doubt, in the Company Representations and Warranties references to
“Securities” shall be deemed references to the Series C Convertible Debentures,
and the shares of Common Stock issuable upon conversion thereof, references to
“Conversion Shares” shall be deemed to reference the shares of Common Stock
issuable upon conversion of the Series C Convertible Debentures, and references
to “Transaction Documents” shall be deemed to include a reference to this
Agreement and the Series C Convertible Debentures.
 
(b)   The Company hereby represents and warrants that except as may otherwise be
disclosed on a disclosure schedule attached hereto or as set forth in the SEC
Documents, such Company Representations and Warranties are true and correct on
the date hereof (except for Company Representations and Warranties that speak as
of a specific date).
 
4.           Conditions to Second Funding and Third Funding.
 
(a)   The Series C Closing of the purchase and sale of the Series C Convertible
Debentures with respect to the Second Funding shall be subject to satisfaction
of the following conditions precedent (in addition to other conditions set forth
herein), satisfaction of which shall be determined at the discretion of
Investor:
 

 
(i)
Successful installation of a pump and water disposal system at one well; and

 

 
(ii) 
Flaring of the one well for three weeks.

 
(b)  The Series C Closing of the purchase and sale of the Series C Convertible
Debentures with respect to the Third Funding shall be subject to satisfaction of
the following conditions precedent (in addition to other conditions set forth
herein), satisfaction of which shall be determined at the discretion of
Investor:
 
 
(i)
The completion of the installation of the water disposal system and new pump and
flaring of gas from one well;

 
 
(ii)
The Company remaining current on all required SEC filings;

 
 
(iii)
The Company completing a reverse stock split; and

 
 
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(iv)
Satisfaction of each of the covenants set forth in Section 5 below.

 
5.           Covenants.
 
The Company shall:
 
(a)   use the proceeds from the sale of the Series C Convertible Debentures for
expenses set forth in a 12-month budget approved by Investor (the “Approved
Budget”), subject to a deviation of up to 10% in line items of the Approved
Budget, and subject to Section 5(e), (f) and (g) below.  The Company shall use
its best efforts to cause actual expenditures to come in below the amounts
allotted in the Approved Budget wherever practical and use any amounts saved to
extend the Approved Budget as a whole by additional periods.
 
(b)   maintain all required water disposal permits.
 
(c)   remain current with all required SEC filings;
 
(d)   cause the Company’s common shares to be quoted on the OTCBB or listed on a
higher exchange, and remain quoted or listed while any Series C Convertible
Debentures remain outstanding.
 
(e)   utilize the proceeds from the Initial Funding for the following expenses:
 
 
(i)
$110,000 for the procurement and installation of a water disposal system and
well pump;

 
 
(ii)
$725,000 for 6 months of public company costs, general & administrative
expenses, gas lease and permit payments, and other expenses as set forth in more
detail in the Approved Budget; and

 
 
(iii)
$75,000 for payment of outstanding 2011 accounts payable.

 
(f)       utilize the proceeds from the Second Funding for the pumping of 4
additional wells.
 
(g)       utilize the proceeds from the Third Funding for the following
expenses:
 
 
(i)
$400,000 for 6 months of additional public company costs, general &
administrative expenses, gas lease and permit payments, and other expenses as
set forth in more detail in the Approved Budget; and

 
 
(ii)
$75,000 for payment of outstanding 2011 accounts payable.

 
 
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6.           Ratification of Financing Documents; Confirmation of Collateral;
Cross-Default; Cross-Collateralization; Further Assurances.
 
(a)   The Company hereby ratifies, confirms, and reaffirms all and singular the
terms and conditions of the Existing Financing Documents, and acknowledges and
agrees that, subject to the terms and conditions of this Agreement, all terms
and conditions of the Existing Financing Documents shall remain in full force
and effect and the Company remains liable to the Investor for the payment and
performance of all amounts due under the Existing Documents, without offset,
defense or counterclaim of any kind, nature or description whatsoever.
 
(b)   The Company hereby ratifies, confirms, and reaffirms that (i) the
obligations secured by the Financing Documents include, without limitation, all
amounts hereafter owed or due under the  Series C Convertible Debentures and/or
the Financing Documents (the “Obligations”), and any future modifications,
amendments, substitutions, or renewals thereof, (ii) all collateral, whether now
existing or hereafter acquired, granted to the Investor pursuant to the
Financing Documents, or otherwise, shall secure all of the Obligations until the
full, final, and indefeasible payment of the Obligations, and (iii) the
occurrence of a default and/or event of default under any Financing Document
shall constitute a default and an event of default under all of the Financing
Documents, it being the express intent of the Company that all of the
Obligations be fully cross-collateralized, cross-guaranteed, and
cross-defaulted.
 
(c)   The Company has previously granted the Investor security interests in all
of its assets, and to confirm the same the Company hereby grants the Investor a
security interest in all of its assets, whether now existing or hereafter
acquired, including, without limitation, all accounts, inventory, goods,
equipment, software and computer programs, securities, investment property,
financial assets, deposit accounts, chattel paper, electronic chattel paper,
instruments, patents, patent applications, copyrights, trademarks, trademark
applications, trade names, domain names, documents, letter-of-credit rights,
health-care-insurance receivables, supporting obligations, notes secured by real
estate, commercial tort claims, and general intangibles including payment
intangibles, to secure the Obligations free and clear of all liens and
encumbrances, except those in favor of the Investor.
 
(d)   The Company shall, from and after the execution of this Agreement, execute
and deliver to the Investor whatever additional documents, instruments, and
agreements that the Investor may require in order to correct any document
deficiencies, or to vest or perfect the Financing Documents and the collateral
granted therein more securely in the Investor and/or to otherwise give effect to
the terms and conditions of this Agreement and/or any documents, instruments and
agreement required in connection with, related to, or contemplated by this
Agreement, and hereby irrevocably authorizes the Investor to file any financing
statements (including financing statements with a generic description of the
collateral such as “all assets”), and take any other normal and customary steps,
the Investor deems necessary to perfect or evidence the Investor’s security
interests and liens in any such collateral.
 
(e)   The Company acknowledges and agrees that this Agreement shall constitute
an authenticated record as such term is defined in the Uniform Commercial Code.
 
 
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(f)    The Company acknowledges and agrees that nothing contained in this
Agreement, the  Series C Convertible Debentures, or in any document, instrument
or agreement required in connection with, related to or contemplated thereby
shall be deemed to constitute (1) a waiver of any defaults or events of default
now existing or hereafter arising, (2) an agreement to forbear by the Investor
with respect to such defaults or events of default, or (3) an amendment,
modification, extension or waiver of any of the terms of the Financing Documents
or of any of the Investor’s rights and remedies thereunder.
 
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of date first above written.
 

 
COMPANY:
 
CARBONICS CAPITAL CORPORATION
     
By:
/s/ Stephen Schoepfer
 
Name:  Stephen J. Schoepfer
 
Title:    Chief Financial Officer
     
INVESTOR:
 
YA GLOBAL INVESTMENTS, L.P.
 
By:  Yorkville Advisors, LLC
 
         its Investment Manager
     
By:
/s/ Mark Angelo  
Name:  Mark Angelo
 
Title:    Portfolio Manager

 
 
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Disclosure Schedule
 
 
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Exhibit A

Form of  Series C Convertible Debentures
 
See Exhibit 10.1
 
 
 

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Exhibit B
(Financing Documents)
 
DEBENTURES
 
 
1.
Secured Convertible Debenture dated February 8, 2008 issued by the Company to
the Investor in the original principal amount of $3,050,369 (Debenture No.
CCP-4);

 
 
2.
Secured Convertible Debenture dated December 12, 2005 issued by the Company to
the Investor in the original principal amount of $1,475,000 (Debenture No.
CCP-3);

 
 
3.
Secured Convertible Debenture dated June 26, 2007 issued by the Company to the
Investor in the original principal amount of $570,000 (Debenture No. GSHF-3-1);

 
 
4.
Secured Convertible Debenture dated June 30, 2009 issued by the Company to the
Investor in the original principal amount of $4,000,000 (Debenture No. CICS-5);

 
 
5.
Secured Convertible Debenture dated August 17, 2010 issued by the Company to the
Investor in the original principal amount of $650,000 (Debenture No. CICS-7);

 
 
6.
Secured Convertible Debenture dated May 26, 2011 issued by the Company to the
Investor in the original principal amount of $120,000 (Debenture No. CICS-8);

 
SECURITIES PURCHASE AGREEMENTS
 
 
7.
Securities Purchase Agreement dated as of August 17, 2010 entered into by and
between the Company and the Investor as supplemented by the agreement between
the Company and the Investor dated May 26, 2011

 
SECURITY DOCUMENTS
 
 
8.
Security Agreement dated as of August 17, 2010 by and among the Company and each
subsidiary or affiliate of the Company listed on Schedule 1 attached thereto, in
favor of the Investor;

 
 
9.
Guaranty Agreement dated as of August 17, 2010 by and among each of the entities
listed on Schedule 1 attached thereto, in favor of the Investor;

 
 
10.
Pledge and Escrow Agreement dated as of August 17, 2010 by and among by Four
Sea-Sons LLC a Delaware limited liability company, Westport Energy, Acquisition,
Inc., a Delaware corporation, the Company, and each subsidiary, direct and
indirect, of the listed on Schedule I attached thereto or joined thereto in the
future in favor of the Investor;

 
 
 

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11.
Leashold Deed of Trust and Security Agreement dated August 17, 2010 by an among
the Company and Chicago Title Insurance Company, for the benefit of the
Investor;

 
 
12.
Intercreditor and Subordination Agreement dated August 17, 2010 by and between
the Investor, New Earthshell Corporation, and acknowledged and agreed to by the
Company, Westport Acquisition, Inc., Westport Energy, LLC, and Four Sea-Sons
LLC;

 
 
13.
Ratification and Amendment Agreement dated August 17, 2010 by and among the
Investor and the parties listed on Schedule 1 attached thereto;

 
 
14.
Guaranty Agreement dated as of August 17, 2010 given by Viridis Capital LLC in
favor of the Investor;

 
 
15.
Security Agreement dated as of August 17, 2010 given by Viridis Capital LLC in
favor of the Investor;

 
 
16.
Subordination Agreement dated August 17, 2010 by and among the Investor, YA Corn
Oil Systems, LLC, the Company and Greenshift Corporation;

 
 
 

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