Exhibit 10.1


 





 


 


February 28, 2006


 


Mr. Peter Bell


c/o The Wing Sail Company


14707 Le Grande Drive


Addison, TX 75001


 


Re:    October 1, 2005 Stock Purchase Agreement (“Agreement”) with Earth Biofuels,
Inc.


 


Dear Mr. Bell:


 


This letter agreement (herein so called) is intended to supplement the
provisions of the referenced Agreement.


 


In order to effect a closing of the transaction contemplated by the
Agreement, the parties agree to the following:


 


1.               The Wing Sail
Company (“Wing Sail”) has provided
financial statements which are deemed sufficient for purposes of effecting a
closing of the transaction contemplated by the Agreement (the “Financial Statements”).


 


2.               The net worth of
Wing Sail (as reflected in the Financial Statements) for purposes of determining
the number of restricted shares of Earth Biofuels, Inc. (“Buyer”)
to be delivered to Mr. Peter Bell, as seller (“Seller”),
is agreed to be $333,390. Accordingly, the net worth is 55.56% of the target
net worth of $600,000 (calculated as $333,390 ÷ $600,000 = .5556).


 


3.               The number of
shares of Buyer (the “Closing Shares”)
to be delivered to Seller at closing is 6,667,800 (calculated as 12,000,000 x
..5556 = 6,667,800).


 


4.               Provided that the
remaining terms of this letter agreement have been satisfied, as acknowledged
in a writing to such effect executed by Buyer, Buyer shall deliver the Closing
Shares to Seller within 2 business thereafter.


 


5.               The Wing Sail
payable to Colin Bell (in the amount of approximately $140,000) shall have been
paid in full and Colin Bell shall have delivered to Buyer a writing to the
effect that such amount has been “paid in full.”  Also, the Wing Sail payable to Peter Bell (in
the amount of approximately $60,000) shall have been paid in full and Peter
Bell shall have delivered to Buyer a writing to the effect that such amount has
been “paid in full.”


 


6.               All Wing Sail
accounts payable that are more than 90 days past due, as reflected in the
Financial Statements as of September 30, 2005 and/or other records of Wing Sail
since the date of such Financial Statements, shall have been paid in full. If
such accounts payable have not paid in full, the amount of such accounts


 


3001 knox street • suite 403 • dallas texas
75205


214.389.9800 • 214.389.9805 facsimile


 

















 


payable shall be offset against amounts due under the promissory note
set forth in the following numbered paragraph. Wing Sail shall provide a full
accounting of all expenses from January 1, 2006 to date (that are not reflected
in the Financial Statements), which have been charged to Wing Sail. The full
amount of such expenses shall be offset against amounts due under the
promissory note set forth in the following numbered paragraph. Wing Sail shall
have properly accounted (in the sole discretion of Buyer) for disposition of
the $277,000 amount paid to Wing Sail by the United States Treasury. Any amount
of such payment which has not been properly so accounted for, shall be offset
against amounts due under the promissory note set forth in the following
numbered paragraph.


 


7.               Wing Sail shall
have prepared and executed a promissory note payable to Seller in the principal
amount of $150,000, upon terms satisfactory to Buyer.


 


8.               Wing Sail shall
have opened a new bank account with JP Morgan Chase, for which the sole
signatories shall be Dennis McLaughlin, as Chairman, and Tommy Johnson, as
Director.


 


9.               The signatories for
all Wing Sail bank accounts (including those at NetBank) shall have been
changed to include only Dennis McLaughlin, as Chairman, and Tommy Johnson, as
Director.


 


10.         The balances in all Wing
Sail bank accounts (including those at NetBank) shall have been transferred to
the new JP Morgan Chase account. Following a transition period determined by
Dennis McLaughlin and Tommy Johnson, the NetBank account shall be closed.


 


11.         Wing Sail shall provide
to Buyer, a “snapshot” of NetBank account balances as of February 10, 2006, and
as of February 13, 2006.


 


12.         Wing Sail shall have
executed and delivered to all Wing Sail creditors, written notice that all
future payments from such creditors are to be directed to the new JP Morgan
Chase account, accompanied by wire transfer instructions.


 


13.         This letter agreement
shall serve as the form of settlement statement contemplated by section 2.2(c)
of the Agreement.


 


14.         Section 3.3 of the
Agreement is deleted in its entirety.


 


15.         Peter Bell hereby resigns
as an officer and director of Wing Sail.


 


16.         The parties agree that
within a reasonable time following the execution of this letter agreement (but
no later than March 1, 2006), Wing Sail will offer an employment agreement to
Peter Bell on substantially the following terms:  two-year term commencing October 1, 2005, at
an annual salary of $80,000; commission structure premised upon growth in
annual net profits of Wing Sail; noncompetition provision appropriate for a
sale of Wing Sail to Buyer.


 


This letter agreement shall be governed by the laws of the State of
Texas.


 

















 


If the foregoing represents the substance of our agreement, please so
indicate by signing in the space provided below and providing an executed copy
to my attention.


 


 


	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tommy Johnson

  
	
   

  	
  Earth Biofuels, Inc.

  



 


 


AGREED:


 


 


 


	
   

  	
   

  
	
  Peter Bell, individually

  
	
   

  
	
   

  
	
  The Wing Sail Company

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Peter Bell

  
	
   

  	
  Chief Executive Officer