Exhibit 10.1


 


STOCK PURCHASE AGREEMENT


 


                THIS STOCK PURCHASE AGREEMENT is made
effective as of October 1, 2005, by and among the parties listed below:


 


	
  SELLER:

  	
   

  	
  The Wing Sail Company

  
	
   

  	
   

  	
  A Texas corporation

  
	
   

  	
   

  	
  14707 Le Grande Dr.

  
	
   

  	
   

  	
  Addison, TX 75001

  
	
   

  	
   

  	
  Telephone No: (972) 948-8355

  
	
   

  	
   

  	
  Facsimile No: (484) 993-1713

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Benton Barton, Esq.

  
	
   

  	
   

  	
  Hall & Evans, LLC

  
	
   

  	
   

  	
  1125 Seventeenth Street, Suite 600

  
	
   

  	
   

  	
  Denver, Colorado 80202

  
	
   

  	
   

  	
  Telephone No: 303 628 3300

  
	
   

  	
   

  	
  Facsimile No: 303 628 3368

  
	
   

  	
   

  	
   

  
	
  BUYER:

  	
   

  	
  EARTH BIOFUELS, INC.

  
	
   

  	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
  Address:

  	
  c/o Mr. Tommy Johnson

  
	
   

  	
   

  	
   

  	
  3001 Knox

  
	
   

  	
   

  	
   

  	
  Suite 407

  
	
   

  	
   

  	
   

  	
  Dallas, Texas 75205

  
	
   

  	
   

  	
  Telephone:

  	
  (214) 389-9800

  
	
   

  	
   

  	
  Facsimile No.:

  	
  (214) 389-9806

  
	
   

  	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  George Lowrance

  
	
   

  	
   

  	
  Chappell, Hill & Lowrance, L.L.P.

  
	
   

  	
   

  	
  2501 Parkview, Suite 220

  
	
   

  	
   

  	
  Fort Worth, Texas 76102

  
	
   

  	
   

  	
  Telephone No.: (817) 332-1800

  
	
   

  	
   

  	
  Facsimile No.:  (817) 332-1956

  
					



 


 


RECITALS


WHEREAS, The
Wing Sail Company (“Wing Sail” or “Seller”) is a corporation
organized under the laws of the State of Texas; and


 


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WHEREAS, Wing Sail has
elected to do business under the assumed name, “Distribution Drive” (“Distribution
Drive”); and


WHEREAS, Peter Bell (“Bell”),
a citizen of the State of Texas and with a legal address at 14707 Le Grande
Dr., Addison, TX 75001 owns 100% of the total issued and outstanding shares of
stock in Wing Sail (the “Stock”); and


WHEREAS, Earth Biofuels,
Inc. ““EBOF” or “Buyer”), doing business is a corporation
organized under the laws of the State of Delaware; and


WHEREAS, Buyer
wishes to acquire the Stock and Seller wishes to sell the Stock (hereinafter,
Buyer and Seller may be referred to jointly as the “Parties”).


NOW, THEREFORE, subject
to the terms and conditions herein expressed, the Parties agree as follows:


 


 


AGREEMENT


The
parties to this Agreement, intending to be legally bound, agree as follows:


 


1.                                      AGREEMENT
FOR PURCHASE AND SALE OF STOCK.


1.1          Purchase
and Sale of Stock.  Upon the terms and subject to the conditions
set forth in this Agreement, the Seller shall sell to Buyer, and Buyer shall
purchase from Seller  the Stock for an
aggregate purchase price  equal to Two
Million shares (2,000,000) shares of common stock in Buyer (the “Buyer
Shares”) subject to Rule 144 of the Securities Act of 1934 and which shares
shall constitute the purchase price (the “Base Price”), which Base Price
is subject to adjustment at Closing as provided in Section 1.3(a) hereof
and after Closing as provided in Section 1.3(b) hereof. (The buyer
contemplates a forward split of shares. It is agreed that at the time of
issuance, if after the forward split, the Buyer shall issue Twelve Million
shares (12,000,000) and subject to Section 2.1 hereof.)


(a)           The Seller shall sell, assign,
transfer and deliver to Buyer the Stock representing 100% of the outstanding
common stock of Seller and shall represent to Buyer that there are no
additional shares of stock in Seller of any nature or of any category and shall
deliver the certificates representing such Stock accompanied by stock powers
duly executed in blank; and


 


(b)           Buyer shall accept and purchase the Stock
from the Seller and in payment thereof shall deliver to the Seller the Buyer
Shares, as may be herein adjusted in Section 1.3(a) hereof and by Section
1.3(b) hereof.


 


1.2         
Deliveries at the Closing.  Subject to the conditions set forth in
this Agreement, at the Closing:


 


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(a)            The Seller shall deliver to Buyer (i)
certificates representing the Stock bearing the restrictive legend customarily
placed on securities that have not been registered under applicable federal and
state securities laws and accompanied by stock powers as required by Section
1.1(a) hereof, and any other documents that are necessary to transfer to
Buyer good title to all the Stock, and (ii) all opinions, certificates, and
other instruments and documents required to be delivered by the Seller at or
prior to the Closing or otherwise required in connection herewith;


(b)               Buyer shall deliver to Seller (i) certificates
representing the Buyer Shares and accompanied by stock powers as required by Section
1.1(b) hereof, and any other documents that are necessary to transfer to
Seller good title to all the Buyer Shares, and (ii) all opinions, certificates,
and other instruments and documents required to be delivered by Buyer at or
prior to the Closing or otherwise required in connection herewith;


 


1.3          Net Worth Adjustment.  (a) If the Closing date is on or before the fifteenth
(15th) of any month, as soon as practicable after the Closing date,
but, in no event, more than five (5) days after the Closing, the Seller shall
deliver to Buyer a balance sheet of Wing Sail (the “Closing Date Balance
Sheet”) dated as of the last day of the month immediately preceding the
Closing date, and if the Closing date is after the fifteenth (15th)
of any month, as soon as practicable after the Closing, but, in no event after
the third (3rd) Business Day, as that term is hereinafter defined, of
the first month after the Closing, the Seller shall deliver to Buyer a Closing
Date Balance Sheet dated as of the last day of the month in which the Closing
occurred. The Closing Date Balance Sheet shall be prepared in good faith on the
same basis and in accordance with the accounting principles, methods and
practices used in preparing Wing Sail’s financial statements, financial reports
and statements of financial condition, which shall include the audited balance
sheet of Wing Sail as of December 31, 2004 and the related statements of
income, stockholders’ equity and cash flow for the fiscal year ended December
31, 2004, together with the notes thereto, in each case examined by and
accompanied by the report of independent certified public accountants and the
audited balance sheet of Wing Sail as of September 30, 2005 and the related
statements of income, stockholders’ equity and cash flow for the period ended September
30, 2005, together with the notes thereto, in each case examined by and
accompanied by the report of independent certified public accountants (All of
the foregoing financial statements, including the notes thereto, being referred
to herein collectively as the “Wing Sail Financial Statements”). The
preparation and presentment of the Wing Sail Financial Statements  shall be subject to the modifications,
adjustments and exceptions to such accounting principles, methods and practices
as may be agreed upon by the parties within five (5) days hereof (or such other
number of days as the parties shall agree upon) and set forth in Schedule
1.3(a) hereto. Seller does hereby specifically represent, warrant and
pledge to Buyer that the Wing Sail Financial Statements do not fail to clearly
indicate any or all debts, obligations, liabilities or other potential claims,
either known or reasonably expected, against Wing Sail including, but not
limited to, claims for taxes, environmental spills or remediations, debts,
employee matters or legal actions.  In
the event that Wing Sail shall not have completed its audit for the period ending
September 30, 2005 in time for it to be included in the Closing Date Balance
Sheet, Seller shall deliver Wing Sail’s audit for the period ending September
30, 2005 to Buyer not later than January 2, 2006 (the “January Delivery”).
In the event that Seller shall, for any reason, fail to make the January
Delivery, Buyer shall have the right to thereafter cause the


 


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audit to be performed and
Seller shall promptly reimburse Buyer for the costs, fees and expenses of such
audit. In the event of a January Delivery, the Closing Date Balance Sheet,
inclusive of the data and reports included in the January Delivery, shall be
delivered to Buyer not later than January 2, 2006.


(b)           Within ten (10) days after delivery of the Closing Date
Balance Sheet, (i) Buyer (the “Reviewer”) shall audit or otherwise
review the Closing Date Balance Sheet in such manner as it deems appropriate,
and (ii) Buyer shall deliver such reviewed balance sheet (the “Reviewed
Balance Sheet”), together with the Reviewer’s reports thereon, to Seller.
The Reviewed Balance Sheet (x) shall be prepared on the same basis and in
accordance with United States GAAP and (y) shall include a schedule clearly
showing any adjustments to the net worth or obligations of Wing Sail.


 


(c)           Seller shall have a period of five (5) days after the
delivery to the Seller of the Reviewed Balance Sheet to present in writing to Buyer
all objections that it may have to the matters set forth or reflected therein,
which objections shall be set forth in reasonable detail. If no objections are
raised within such 5 day period, the Reviewed Balance Sheets shall be
conclusively deemed to have been accepted by the Seller and a supplemental
closing (the “Supplemental Closing”) shall take place within five (5)
Business Days following the expiration of the 5 day period.


 


(d)           If Seller shall raise any objection within the 5 day
period, Buyer and the Seller shall attempt to resolve the dispute and, if
resolved, the Supplemental Closing shall take place within five (5) Business
Days following such resolution.


 


(e)           If such dispute cannot be resolved within ten (10) days
after the delivery of the Reviewed Balance Sheets, then the specific matters in
dispute shall be submitted to a firm of independent public accountants mutually
acceptable to the Parties, whose determination shall be conclusive and shall be
final. The fees and expenses of any such independent public accountant shall be
borne equally by Buyer and by Seller.


 


(f)            Buyer and Seller agree to cooperate with one another and
with one another’s authorized representatives and with any accounting firm
selected pursuant to Section 1.3(e) hereof in order that any and all
matters in dispute shall be resolved as soon as practicable.


 


(g)           If the net worth of Wing Sail as shown on the Reviewed
Balance Sheet as finally determined through the operation of Sections 1.3
(a) through (e) hereof (such amount being referred to herein as the “Final
Net Worth”) shall be less than the required net worth (the “Required Net
Worth”) in Section 1.4 (the amount of any such deficiency being
referred to herein as the “Net Worth Deficiency”) the Buyer shall issue
to Seller the adjusted amount.


 


(h)           “Net Worth” computed in connection with the Closing Date
Balance Sheet and the Reviewed Balance Sheet shall mean the amount by which the
total assets exceed the total liabilities reflected, in each case, on the
balance sheet of Wing Sail comprising the Closing Date Balance Sheet or the
Reviewed Balance Sheet, as the case may be.


 


 


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(i)            Except as disclosed on Schedule 1.3(i) hereto,
which shall be delivered to Buyer within five (5) days of this Agreement, at
the Closing there shall be no inter-company payables or inter-company receivables
due and/or owing between the Seller, Bell, any company, corporation,
partnership or other entity owned (more than 25%) or controlled by Bell (either
directly or indirectly, either for his own account or for the account of
others, either directly or in trust), or between or among any one, or more of
them, and any third party, other than those incurred in the ordinary course of
business and generally disclosed in Wing Sail’s audited financial statements.


 


1.4          Net
Worth of Wing Sail.  The Net Worth of Wing Sail, as determined in
accordance with Section 1.3 hereof, shall not be less than $                 .


1.5          Liabilities Excluded. 
Except as expressly set forth on Schedule 1.5 herein, or as have
been clearly and fully disclosed on the Wing Sail Financial Statements, Buyer
is not assuming any debt, obligation, duty or liability of any nature
(including any unknown, undisclosed, unmatured, unaccrued, unasserted,
contingent, indirect, conditional, implied, vicarious, derivative, joint,
several or secondary liability) of Seller (each individually referred to herein
as a “Liability”), including, without limitation: any Liability in
respect of any employees or former employees of Wing Sail; any Liability of Wing
Sail in respect of any tax; any Liability or obligation of Wing Sail arising
out of any environmental law, rule or regulation; any indebtedness of Seller or
of Wing Sail; or any Liability of Wing Sail under any contract other than the
Assumed Leases and Contracts (as defined herein below).


2.                                      CLOSING


2.1          Closing and Preparation
Therefor.  The closing of the transaction contemplated
by this Agreement (“Closing”) shall be transacted on the date five (5)
days after all conditions set forth in Sections 4.2 and 4.3 have
been satisfied or waived, or such other date as may be mutually agreed to by
Seller and Buyer,  but, in no event,
after November       , 2005 (“the “Closing
Date”) and shall occur at the offices of Buyer at 3001 Knox Avenue, Suite
403, Dallas, Texas or such other location as the Parties may agree.


2.2          Closing Obligations of Buyer. 
At or before the Closing, Buyer shall deliver to Seller the following:


(a)           The Buyer Shares determined under Section 1.1.


 


(b)           A
certified resolution of the board of directors of Buyer authorizing or
ratifying the execution, delivery and performance of this Agreement and all
related instruments, duly certified by the secretary of Buyer.


 


(c)         A
settlement statement, for execution by the parties, reflecting the Base Price,
including any fees and prorations determined pursuant to Section 2.6
below, together with the supporting schedules and other information utilized in
the computation of the Base Price and any adjustments to the Base Price as
determined pursuant to Section 1.3 above.


 


 


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(d)           Such other documents as Seller’s counsel may
reasonably request to evidence Buyer’s compliance with the terms hereof.


 


2.3          Closing Obligations of
Seller.  At or before the Closing, Seller shall
deliver to Buyer the following:


(a)           The Stock.


(b)           Certified resolutions of the board of
directors of the Seller authorizing or ratifying the execution, delivery and
performance of this Agreement and all related instruments.


(c)           Certificates of clearance from the taxing
authority of Dallas County, and the City of Grand Prairie, as applicable, dated
within a reasonable period prior to the Closing Date addressed to Wing Sail,
verifying the timely filing of and required transaction privilege, sales,
and/or use tax, income tax and unemployment and withholding tax returns by Wing
Sail, and payment by Wing Sail of all amounts due.


(d)           A Certificate from the Texas Secretary of
State confirming that Wing Sail is a corporation in good standing dated within
five (5) Business Days prior to the Closing Date. For purposes of this
Agreement, “Business Days” shall mean any day during which the Citibank, NA
office at 53rd and Park Avenue, New York, New York is open for
business.


(e)           The Assignment of Leases and Contracts as
reflected on Schedule 5.1(j) hereto, executed by Seller, along with the
applicable vendor and lessor consents to such assignments.


(f)            Releases of any liens or encumbrances
against any of the Stock, or the assets of Wing Sail, other than any expressly
permitted by this Agreement.


(g)           Copies of letters from Seller to all
vendors and suppliers advising them of the sale, which letters will be mailed
by Seller promptly following the Closing to all of their vendors and suppliers.


(h)           Such other documents as Buyer’s counsel
may reasonably request to evidence of compliance with the terms hereof.


2.4          Prepaid
Expenses/Prorations/Fees.  Each of the following shall be
prorated based upon the applicable number of calendar days prior to, and on and
following the Closing Date and based on a 365 day year: (a) personal property
taxes levied or assessed against Wing Sail, (b) utility charges for
electricity, water, gas and telephones, (c) equipment rent or service contract
expense on any Assumed Leases and Contracts, and (d) other ordinary or
necessary operating expenses (prepaid or currently due).  The Buyer Shares due to Seller, each share of
which shall, for purposes of this Section 2.4, be valued at $0.67 per
share, shall be adjusted for the total prorations calculated above and Buyer
shall thereafter be responsible for the full


 


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payment of all
such prorated expenses, taxes and fees. 
All parties to this Agreement shall bear their own attorneys’ fees and
related costs incurred in connection with this transaction.


2.5          Risk of Loss.  Pending
the Closing, Seller shall bear all risk of loss, damage or destruction.  In the event of any material loss, damage or
destruction prior to the Closing, which cannot be repaired prior to the
Closing, Buyer may, in the exercise of its sole judgment (a) collect the
insurance proceeds due from any such loss, damage or destruction and reduce the
Purchase Price by the amount of the uninsured portion; (b) declare the
Agreement to be null and void; or (c) waive the loss, damage or destruction and
accept the assets of Wing Sail in an “as is, how is, where is” condition.


3.                                      OTHER
AGREEMENTS


3.1          Access to Records. 
Upon the mutual execution of this Agreement, Seller shall give Buyer,
its counsel, accountants, lenders, and other designated agents full access, at
reasonable times and on reasonable notice but without any unreasonable disruption
to Wing Sail’s business, to all records pertaining to Wing Sail, and to the
Assumed Leases and Contracts.


3.2          Conduct of Business. 
Seller, from date of execution hereof through the Closing Date, (a) will
not enter into any equipment lease, operating service contract, or other long
term agreement affecting its businesses, which would become an obligation of
Buyer, without the prior written consent of Buyer, (b) shall not acquire or
dispose of any fixtures or equipment, nor acquire inventory greater than the
level normally carried without the prior written consent of Buyer, (c) shall
maintain insurance on the assets and operations of the businesses in amounts
and with coverage at least as great as the amounts and coverage maintained by Wing
Sail over an historic period and not less than other affiliated operations of
Seller or Bell, (d) shall not create or suffer to be created any mortgage,
lien, charge or encumbrance of any kind with respect to the assets of the
business or the business, itself, which will not either be discharged prior to
or at Closing or will not be assumed by Buyer hereunder, (e) shall not do any
act or omit to do any act, or permit any act or omission to act, which would
cause a breach of any contract, commitment or obligation for which Buyer would
be liable or which would materially and adversely affect the business of Wing
Sail, and (f) shall take no action which would have a materially adverse effect
on the existence or operation of the business. 
Seller will not take or permit any action to be taken which would result
in any representation or warranty of Seller or Wing Sail herein becoming untrue
or incorrect in any material respect.


3.3          Seller’s Business Wind
Down.  For a period of up to sixty (60) days
following the Closing, Buyer shall provide Seller, at no charge, access during
normal business hours to an office to work from, and telephone service in order
to allow for Seller’s final closing of the books of Wing Sail.  Buyer shall not be responsible to provide
Seller with computer access, or for the collection of any of Seller’s
outstanding receivables or any other of Seller’s business wind down matters but
agrees to promptly turn over to Seller the proceeds of all such outstanding
receivables as may be collected by Buyer in the normal course of its business
and that is due to Seller. Seller agrees to indemnify Buyer against any and all
Claims of any nature whatsoever related to or arising from their assistance
herein, and shall not disrupt their normal conduct of their business.


 


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4.                                      CONDITIONS
PRECEDENT TO THE PARTIES’ OBLIGATIONS TO CLOSE


4.1          Asset List. 
No later than five (5) days prior to the Closing, Seller shall furnish
to Buyer current lists of the assets of Wing Sail including, where possible,
manufacturers’ names, models and serial numbers.  Such lists shall be updated and provided to Buyer
five (5) days prior to the Closing Date.


4.2          Contingencies of Buyer.  Buyer’s
obligation to purchase the Stock and to take the other actions required to be
taken by Buyer at the Closing is subject to the satisfaction, at or prior to
the Closing, of each of the following conditions (any of which may be waived by
Buyer, in whole or in part, in writing).


(a)           Representations and Warranties; Agreements; Covenants.  Each
of the representations and warranties of the Seller shall be true and correct
on the date made and shall be true and correct in all material respects as of
the Closing. Each of the obligations of the Seller required by this Agreement
to be performed by it at or prior to the Closing shall have been duly performed
and complied with in all material regards as of the Closing. At the Closing, Buyer
shall receive a certificate, dated the Closing date and duly executed by the Seller
and the chief financial officer of Wing Sail to the effect that the conditions
set forth in this Section 4.2(a) have been satisfied excerpt as
specified in such certificate


(b)           Authorizations; Consents.  (i)
All corporate action necessary to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby shall have been duly and validly taken by Wing Sail. (ii)
All notices to, and declarations, filings and registrations with, and consents,
authorizations, approvals and waivers from, governmental and regulatory bodies
and third persons required to consummate the transactions contemplated hereby
and all consents or waivers shall have been made or obtained.


(c)           Absence of Litigation.  No order,
stay, injunction or decree of any court of competent jurisdiction in the United
States shall be in effect (i) that prevents or delays the consummation of any of
the transactions contemplated hereby; or (ii) would impose any limitation on
the ability of Buyer effectively to exercise full rights of ownership of the
Stock. No action, suit or proceeding before any court or any governmental or
regulatory entity shall be pending (or threatened by any governmental or
regulatory entity), and no investigation by any governmental or regulatory
entity shall have been commenced (and be pending), seeking to restrain or
prohibit (or questioning and validity or legality of) the consummation of the
transactions contemplated by this Agreement or seeking damages in connection
therewith which Buyer, in good faith and with the advice of counsel, believes
makes it undesirable to proceed with the consummation of the transactions contemplated
hereby.


(d)           Buyer’s Investigation.  For a period
ending at 12:00 o’clock midnight (central standard time) on the fifth (5th)
day following the execution of this Agreement (the “Inspection Period”),
Buyer may cancel this Agreement for any reason whatsoever, in Buyer’s sole and
absolute discretion.  However, until Buyer
cancels, Buyer will


 


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proceed in good faith with Buyer’s preliminary
investigatory steps with respect to this transaction.  Unless Buyer gives written notice of
cancellation to Seller prior to the expiration of the Inspection Period, then Buyer
will be deemed to have elected not to cancel the Agreement under this
provision.


(e)           No Material Adverse Effect.  During
the period from October 15, 2005 to the Closing, there shall not have been any
material adverse change in the assets, properties, business, operations,
prospects, net income or financial condition of Wing Sail. For purposes of this
Agreement, “Material Adverse Effect” shall mean any change in, or effect
on Buyer or Wing Sail (including the businesses thereof) which is, or
reasonably could be expected to be, materially adverse to the business,
operations, assets, condition (financial or otherwise) or prospects of such of Wing
Sail or of Buyer.


(f)            Completion of Due Diligence.  Buyer
shall have completed its due diligence examination of Wing Sail and the results
of such examinations, including, if then completed, any Phase I or Phase II
environmental audits of Wing Sail, shall be satisfactory to Buyer. Any Phase I
or Phase II environmental audits may be completed not later than the
Supplemental Closing Date.


(g)           Board Approval.  The Board of
Directors of Buyer shall have approved the consummation of all of the
transactions contemplated by this Agreement.


(h)           Certificates.  The Seller
and Wing Sail shall have furnished Buyer with such certificates of its officers
and others as Buyer may reasonably request to evidence compliance with all of
the conditions set forth in this Section 4.2.


(i)            Legal Matters.  All
certificates, instruments, opinions and other documents required to be executed
or delivered by or on behalf of the Seller or of Wing Sail under the provisions
of this Agreement, and all other actions and proceedings required to be taken
by or on behalf of the Seller or of Wing Sail in furtherance of the
transactions contemplated hereby, shall be reasonably satisfactory in form and
substance to counsel for Buyer.


(j)            Schedules.  Wing Sail and
the Seller shall have delivered to Buyer all schedules referred to in this
Agreement and required to be delivered by the Seller or Wing Sail and such
schedules shall be acceptable in form and substance to Buyer.


(k)           Net Worth of Wing Sail.  The Net Worth
of Wing Sail shall be not less than $                           .


4.3          Contingencies of Seller.  Seller’s
obligation to sell the Stock and to take the other actions required to be taken
by Seller and Wing Sail at the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may be
waived by Seller, in whole or in part, in writing).


(a)           Representations and Warranties; Agreements; Covenants. 
Each of the representations and warranties of Buyer shall be true and
correct on the date made and shall be true and correct in all material respects
as of the Closing. Each of the obligations


 


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of Buyer required by this Agreement to be performed by
it at or prior to the Closing shall have been duly performed and complied with
in all material regards as of the Closing. At the Closing, Seller shall receive
a certificate, dated the Closing date and duly executed by the chairman and the
chief financial officer of Buyer to the effect that the conditions set forth in
this Section 4.3(a) have been satisfied except as specified in such
certificate.


(b)           Authorizations; Consents. 
(i) All corporate action necessary to authorize the execution, delivery
and performance of this Agreement and the consummation of the transactions contemplated
hereby shall have been duly and validly taken by Buyer. (ii) All notices to,
and declarations, filings and registrations with, and consents, authorizations,
approvals and waivers from, governmental and regulatory bodies and third persons
required to consummate the transactions contemplated hereby and all consents or
waivers shall have been made or obtained.


(c)           Absence of Litigation.  No order,
stay, injunction or decree of any court of competent jurisdiction in the United
States shall be in effect (i) that prevents or delays the consummation of any
of the transactions contemplated hereby; or (ii) would impose any limitation on
the ability of Seller effectively to exercise full rights of ownership of the
Buyer Shares. No action, suit or proceeding before any court or any
governmental or regulatory entity shall be pending (or threatened by any
governmental or regulatory entity), and no investigation by any governmental or
regulatory entity shall have been commenced (and be pending), seeking to
restrain or prohibit (or questioning and validity or legality of) the
consummation of the transactions contemplated by this Agreement or seeking
damages in connection therewith which Seller, in good faith and with the advice
of counsel, believes makes it undesirable to proceed with the consummation of
the transactions contemplated hereby.


(d)           Certificates.  Buyer shall
have furnished the Seller with such certificates of its officers and others as
the Seller may reasonably request to evidence compliance with all of the
conditions set forth in this Section 4.3.


(e)           Legal Matters.  All
certificates, instruments, opinions and other documents required to be executed
or delivered by or on behalf of Buyer under the provisions of this Agreement,
and all other actions and proceedings required to be taken by or on behalf of Buyer
in furtherance of the transactions contemplated hereby, shall be reasonably
satisfactory in form and substance to counsel for the Seller.


(f)            No Material Adverse Effect. 
During the period from October 15, 2005 to the Closing, there shall not
have been any material adverse change in the assets, properties, business,
operations, prospects, net income or financial condition of Buyer.


(g)           Board Approval.  The Board of
Directors of Seller shall have approved the consummation of all of the
transactions contemplated by this Agreement.


(h)           Schedules.  Buyer shall
have delivered to the Seller all schedules referred to in this Agreement and
required to be delivered by Buyer and such schedules shall be acceptable in
form and substance to the Seller.


 


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5.                                      REPRESENTATIONS
AND WARRANTIES


5.1          Warranties and
Representations of Seller.  In order to induce Buyer to enter
into this Agreement, Seller warrants and represents to Buyer that each of the
following representations and warranties are materially true as of the date of
this Agreement and will be materially true on and as of the Closing Date:


(a)           Organization and Licensing.  Wing
Sail is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Texas and has the power to own, lease and use
the properties used in its businesses and to carry on its businesses as now
being conducted. Wing Sail is duly qualified to do business and is in good
standing as a foreign corporation in each state and jurisdiction where
qualification as a foreign corporation is required, except to the extent that
any variation or failure thereof shall not be material in its effect.  Schedule 5.1(a) lists (a) the states
and other jurisdictions where Wing Sail is so qualified; and (ii) the assumed
names under which Wing Sail conducts business or has conducted business during
the past five (5) years. Seller has full power and authority to enter into this
Agreement, to consummate the transactions contemplated hereby and to perform,
or to cause Wing Sail to perform, its obligations hereunder.  The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein by Seller
have been duly authorized by all requisite corporate action on the part of Seller.  This Agreement has been duly executed and
delivered by Seller and is a valid and binding obligation of Seller and Wing
Sail, enforceable against them in accordance with its terms.  All permits, licenses and certificates
required by any governmental agency or body having jurisdiction over Seller or Wing
Sail or their operations, are now and will be current and valid as of the date
of Closing. Seller previously delivered or made available to Buyer complete and
correct copies of its articles of incorporation or documents of formation,
bylaws and other corporate and membership documents as amended and presently in
effect.


(b)           Subsidiaries.  Wing Sail has
no subsidiaries.


(c)           Capitalization.  The
authorized stock of Seller and the number of shares of capital stock that are
issued and outstanding is set forth in Schedule 5.1(c) hereto. The
shares listed on Schedule 5.1(c) hereto constitute all the issued and
outstanding shares of capital stock of Seller and have been validly authorized
and issued, are fully paid and nonassessable, have not been issued in violation
of any preemptive rights or of any federal or state securities law and no
personal liability attached to the ownership thereof. There is no security,
option, warrant, right, call, subscription, agreement, commitment or
understanding of any nature whatsoever, fixed or contingent, that directly or
indirectly (i) calls for the issuance, sale, pledge or other disposition of any
shares of capital stock of Seller, or any securities convertible into, or other
rights to acquire, any shares of capital stock of Seller; or (ii) obligates Seller
to grant, offer or enter into any of the foregoing; or (iii) relates to the
voting or control of such capital stock, securities or rights, except as
provided in this Agreement. Seller has not agreed to register any securities
under the Securities Act.


 


11





















 


(d)           Approvals; Consents.  Except as set
forth on Schedule 5.1(d) hereto, no permits or approval of, or notice to
any governmental, administrative or judicial authority is necessary to be obtained
or made by Wing Sail to enable Wing Sail to continue to continue to conduct its
businesses and operations and use its properties after the Closing in a manner
which is in all material respects consistent with that in which they are
currently conducted except for the renewal of any permits in the ordinary
course of business (the renewal of which is purely administrative in nature and
does not call for a discretionary review by any granting authority) and for
which Seller has no reason to believe will not be routinely renewed.


(e)           Financial Statements.  Except as
otherwise indicated below, attached as Schedule 5.1(f) are true and
complete copies of:


(i) the audited balance sheets of Wing Sail as of
December 31, 2004 and the related statements of income, stockholders’ equity
and cash flow for the calendar year ended December 31, 2004, together with the
notes thereto, in each case examined by and accompanied by the report of
independent certified public accountants; and (ii) the audited balance sheets
of Wing Sail as of September 30, 2005 and the related statements of income,
stockholders’ equity and cash flow for the period ended September 30, 2005,
together with the notes thereto, in each case examined by and accompanied by
the report of independent certified public accountants (the Wing Sail Financial
Statements, as previously defined in Section 1.3 hereinabove). Notwithstanding the foregoing, in the event that Seller has
not completed its audit for the period ending September 30, 2005, Seller shall
hereafter deliver such audit in accordance with the terms of Section 1.4(a)
hereto.


The Wing Sail Financial Statements are in accordance
with the books and records of Wing Sail, fairly present the consolidated
financial positions and results of operations of Wing Sail as of the dates and
for the periods indicated, are stated in conformity with GAAP, consistently
applied, except as otherwise clearly and conspicuously stated, and can be
legitimately reconciled with the financial statements and with the financial
records maintained and the accounting methods applied by Wing Sail for federal
income tax purposes. The statements of income included in the Wing Sail
Financial Statements do not contain any items of special or non-recurring
income except as expressly specified therein, and the balance sheets included
in the Wing Sail Financial Statements do not reflect any write-up or
revaluation increasing the book value of any assets except as otherwise clearly
and conspicuously stated therein. The books and accounts of Wing Sail are
complete and correct in all material respects and fairly reflect all of the transactions,
items of income and expense and all assets and liabilities of the businesses of
Wing Sail consistent with prior practices of Wing Sail, including past
accounting treatments utilized by Wing Sail.


(f)            Absence of Undisclosed Liabilities.  Wing
Sail has no liability of any nature whatsoever (whether known or unknown, due
or to become due, accrued, absolute, contingent or otherwise), including,
without limitation, any unfunded obligation under employee benefits plans or
arrangements as described in Section 5.1(e) or liabilities for Taxes (as
defined in Section 5.1(i) hereof), except for (i) liabilities reflected
or reserved


 


12





















 


against in Wing Sail’s most recent financial
statements provided to Buyer; (ii) current liabilities incurred in the ordinary
course of business and consistent with past practice after the date of the Closing
Date Balance Sheets which, individually and in the aggregate, do not have and
cannot reasonably be expected to have a Material Adverse Effect; and (iii)
liabilities exposed in Schedule 5.1(g) hereto.


(g)           Absence of Material Adverse Effect; Conduct of
Business.  (a) Since October 15, 2005, except as set
forth on Schedule 5.1(h) hereto, Wing Sail has operated in the ordinary
course of business consistent with past practice and there has not been:


(i) any material adverse
change in the assets, properties, business, operations, prospects, net income
or financial condition of Wing Sail and, to the knowledge of the Seller, no
factor, event, condition, circumstance or prospective development exists which
could reasonably be expected to have a Material Adverse Effect;


(ii) any material loss,
damage, destruction or other casualty to the property or other assets of Wing
Sail, whether or not covered by insurance;


(iii) any change in any
method of accounting or accounting practice of either of Wing Sail; or


(iv) any loss of the
employment, services or benefits of any key employee of Wing Sail.


(b)                                 Since October
15, 2005, except as set forth in Schedule 5.1(h)(b) hereto, Wing Sail
has not:


(i) incurred any material
obligation or liability (whether absolute, accrued, contingent or otherwise),
except in the ordinary course of business consistent with past practice;


(ii) mortgaged, pledged or
subjected to any lien any of its property or other assets except in the
ordinary course of business, and except for mechanics and materialmen’s liens
and liens for taxes not yet due and payable;


(iii) sold or transferred
any assets or cancelled any debts or claims or waived any rights, except in the
ordinary course of business consistent with past practice;


(iv) defaulted on any
material obligation;


(v) entered into any
material transaction, except in the ordinary course of business consistent with
past practice;


(vi) written down the value
of any inventory or written off as uncollectible any accounts receivable or any
portion thereof not reflected in the Wing Sail Financial Statements except in
the ordinary course of business;


 


13





















 


(vii) granted any increase
in the compensation or benefits of employees other than the increases in
accordance with past practice not exceeding 10% or entered into any employment
or severance agreement or arrangement with any of them;


(viii) incurred any
obligation or liability to any employee for the payment of severance benefits
of more than $1,000; or


(ix) entered into any
agreement or made any commitment to do any of the foregoing.


(h)           Taxes.  Wing Sail and,
for any period during all or part of which, the tax liability of any other
corporation or entity was determined on a combined or consolidated basis with Wing
Sail, any such other corporation or entity, have filed timely all federal,
state, local and foreign tax returns, reports and declarations required to be
filed (or have obtained or timely applied for an extension with respect to such
filing) currently reflecting the Taxes (as defined below) and all other
information required to be reported thereon, and have paid, or made adequate
provision for the payment of, all Taxes which are due pursuant to such returns
or are pursuant to any assessments received by Wing Sail or any such other
corporation or entity. As used herein, “Taxes” shall mean all taxes,
fees levies or other assessments, including but not limited to income, excise,
property (including property taxes paid by Wing Sail pursuant to any lease),
sales, franchise, withholding, social security and unemployment taxes imposed
by the United States, or any state, county, local or foreign government, or any
subdivision or agency thereof, or taxing authority therein, and any interest,
penalties or additions to tax relating to such taxes, charges, fees, levies or
other assessments. Copies of all tax returns for each fiscal year since the
formation of Wing Sail have been furnished or made available to Buyer or to its
representatives and such copies are accurate and complete as of the date
thereof.  Wing Sail has also furnished or
made available to Buyer or its representatives correct and complete copies of
all notices and correspondence sent or received since the formation of Wing
Sail by Wing Sail to or from any federal, state or local tax authorities. Wing
Sail has adequately reserved for the payment of all Taxes with respect to periods
ended on, prior to or through the date of the Wing Sail Balance Sheet for which
tax returns have not yet been filed. In the ordinary course, Wing Sail makes
adequate provision on its books for the payment of all Taxes (including for the
current fiscal period) owed by Wing Sail. Except to the extent reserves
therefore are reflected on the Wing Sail Balance Sheet, Wing Sail is not liable
or will not become liable, for any Taxes for any period ending on, prior to or
through the dates of the Wing Sail Balance Sheets. Except as disclosed on Schedule
5.1(i), Wing Sail has not been subject to a federal or state tax audit of
any kind and no adjustment has been proposed by the Internal Revenue Service (“IRS”)
with respect to any return for any subsequent year. With respect to the audits
referred to on Schedule 5.1(i) hereto, no such audit has resulted in an
adjustment in excess of $25,000. Seller knows of no basis for an assertion of a
deficiency for Taxes against Wing Sail.


(i)            Assumed Leases and Contracts.  Schedule
5.1(j) hereto contains a true and complete copy of all leases and all
contracts, of any nature whatsoever that are in force and in full effect as of
the date of this Agreement and that shall be in force and full


 


14





















 


effect as of the date of the Closing and that are to
be assumed by Buyer. Seller has, or will prior to the Closing, notified each
party to each such Assumed Lease or Contract and has secured the written
permission, authority or consent for Buyer, on the same terms and subject to
the same conditions as Seller to assume all such Assumed Leases and Contracts. Each
Assumed Lease and Contract is valid and enforceable in accordance with its
terms; is not now, and will not be at Closing, in default; is current in all
respects, and no facts have occurred that either create a default, or with the
giving of notice or the passage of time, or both, would constitute a default.  Seller has not received notice of any claim
from the vendors or lessors with respect to any of the Assumed Leases and
Contracts.


Any lease or contract not
reflected on Schedule 5.1(j) shall not be assumed by Buyer and Seller
agrees to indemnify and hold Buyer harmless from all causes of action of any
nature, including the costs of defense and reasonable attorney fees, that may
arise out of Buyer’s rejection or failure to perform according to any such
non-assumed lease or contract.


(j)            Legal Matters.  (a) Except as
set forth on Schedule 5.1(k) hereto, Seller is not subject to any
judgment, decree, writ, injunction ruling or order (collectively, “Judgments”)
of any governmental, administrative or judicial authority, domestic or foreign.
Schedule 5.1(k) identifies each Judgment disclosed thereon, each of
which is fully covered by an insurance policy and Seller hereby represents and
warrants to Buyer it shall be financially responsible for the full satisfaction
of any such Judgment, including costs of defense and costs of court and
attorney fees, to the extent that (i) any such Judgment, including costs of
defense and costs of court including attorney fees, is not covered by
insurance; and (ii) to the extent that any such Judgment, including costs of
defense and costs of court and attorney fees, is not fully satisfied by
insurance proceeds.


(i)                                     The businesses of Wing Sail are being
conducted in compliance with all laws, ordinances, codes, rules, regulations,
standards, judgments and other requirements of all governmental, administrative
or judicial entities (collectively, “Legal Requirements”) applicable to Wing
Sail or any of its businesses or properties, except for where the failure to be
in such compliance could not reasonably be expected to have a Material Adverse
Effect. Wing Sail holds, and is in compliance with, all franchises, licenses, permits,
registrations, certificates, consents, approvals or authorizations
(collectively, “Permits”) required by all applicable Legal Requirements.


(ii)                                  Wing Sail owns or holds all Permits
material to the conduct of its business. No event has occurred and is
continuing which permits, or after notice or the lapse of time, or both, would
permit, any modification or termination of any Permit.


(l)            Property.  (i) Schedule
5.1(l) hereto is a list of all real property owned by or leased to Wing
Sail (including all real property owned by or leased to the Seller and used in
the businesses of Wing Sail) and of all options or other contracts to acquire
any such interest (collectively, the “Real Property”). All improvements
to the Real Property


 


15





















 


(“Improvements”) and all machinery, equipment
and other tangible property owned or leased to or by Wing Sail are fit for the
particular purposes for which they are used by Wing Sail, subject only to
normal wear and tear. Such tangible properties and all Improvements owned or
leased by Wing Sail conform in all material respects with all applicable laws,
ordinances, rules and regulations and other Legal Requirements and such
Improvements do not encroach in any respect in property of others.


(ii)                                The Real Property is zoned to permit the
conduct of the respective businesses of Wing Sail as presently conducted and a
Certificate of Occupancy or other similar governmental authority to conduct its
business has been issued and is in good standing by Wing Sail to conduct their
businesses on all or any part of their Real Property.


(m)          Inventories.  The values at which inventories
are carried on the Wing Sail Balance Sheets reflect the normal inventory
valuation policies of Wing Sail.


(n)           Contracts, Etc.  As used in
this Agreement, the term “Company Agreements” shall mean all mortgages,
indenture notes, agreements, contracts, leases, licenses, franchises,
obligations, instruments or other commitments, arrangements or understandings
of any kind, whether written or oral, binding or non-binding (including all
leases and other agreements referred to on Schedule 5.1(l) hereto) to
which Wing Sail is a party or by which Wing Sail or any of its properties may
be bound or affected, including all amendments, modifications, extensions or
renewals of any of the foregoing. Set forth on Schedule 5.1(n) is a
complete and accurate list of each Company Agreement which is material to the
business, operations, assets, condition (financial or otherwise) or prospects of
Wing Sail and involves more than $25,000 over the life of such Company
Agreement. True and correct copies of all Company Agreements have been provided
to Buyer and an accurate, complete and written description of all such verbal
Company Agreements has been submitted to Buyer. To the knowledge of Wing Sail
and of the Seller, Wing Sail is not in breach of or default under any of the
Company Agreements and no event has occurred which (after notice or lapse of
time, or both) would become a default or breach under, or would permit
modification, cancellation, acceleration, or termination of, any Company
Agreement, or result in the creation of any security interest upon, or any
person obtaining any right to acquire, any properties, assets or rights of Wing
Sail.


(o)           Transactions with Insiders.  Except
as set forth on Schedule 5.1(o), since January 1, 2003 there have been
no transactions between Seller and any Insider. For purposes of this Agreement:


(a)           “Insider” shall mean the Seller,
any director, partner or officer of Seller or of any other company, limited
liability company, partnership or joint venture owned 25% or more by the Seller
and/or any Affiliate, Associate or Relative of any of the foregoing persons;


(b)           the term “Associate” used to indicate
a relationship with any person means (A) any corporation, partnership, joint
venture or other entity of which such person is an officer or partner or is,
directly or indirectly, through one


 


16





















 


or more intermediaries, the beneficial owner of 25% or
more of (1) any class or type of equity securities or of other profits or
interests; or (2) the combined voting power of interests ordinarily entitled to
vote for management or otherwise; and (B) any trust or other estate in which
such person has a substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity.


(c)           A “Relative” of a person shall mean
such person’s spouse, such person’s parents, sisters, brothers, children and
the spouses of the foregoing, and any member of the immediate household of such
person.


(p)           Disclosure.  Neither Seller,
nor anyone acting with its knowledge and on its behalf has made any material
misrepresentation to Buyer relating to Wing Sail or the Stock and Seller has not
omitted to state to Buyer any material fact relating to Wing Sail or the Stock
which is necessary in order to make the information given by or on behalf of
the Seller to Buyer not misleading or which if disclosed would reasonably
affect the decision of a person considering the acquisition of the Stock.


5.2          Warranties and
Representations of Buyer.  In order to induce Seller to
enter into this Agreement, Buyer covenants, warrants and represents to Seller
that each of the following representations and warranties is true as of the
date of this Agreement and will be true on and as of the Closing Date.


(a)           Organization and Licensing.  Buyer
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has the power to own, lease and use the
properties used in its businesses and to carry on its businesses as now being
conducted. It is duly qualified to do business and is in good standing as a
foreign corporation in each state and jurisdiction where qualification as a
foreign corporation is required, except to the extent that any variation or
failure thereof shall not be material in its effect.  Schedule 5.2(a) lists (a) the states
and other jurisdictions where Buyer is so qualified; and (ii) the assumed names
under which it conducts business or has conducted business during the past five
(5) years. Buyer has full power and authority to enter into this Agreement, to
consummate the transactions contemplated hereby and to perform its obligations
hereunder.  The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein by Buyer have been duly authorized by all requisite
corporate action on the part of Buyer. 
This Agreement has been duly executed and delivered by Buyer and is a
valid and binding obligation of Buyer enforceable against it in accordance with
its terms.  All permits, licenses and
certificates required by any governmental agency or body having jurisdiction
over Buyer and its operations, are now and will be current and valid as of the
date of Closing. Buyer has previously delivered or made available to Seller
complete and correct copies of their articles of incorporation or documents of
formation, bylaws and other corporate documents as amended and presently in
effect.


(b)           Approvals; Consents.  Except as set
forth on Schedule 5.2(b) hereto, no permits or approval of, or notice to
any governmental, administrative or judicial authority is necessary to be
obtained or made by Buyer to enable it to continue to continue to


 


17





















 


conduct its businesses and operations and use its
properties after the Closing in a manner which is in all material respects
consistent with that in which they are currently conducted except for the
renewal of any permits in the ordinary course of business (the renewal of which
is purely administrative in nature and does not call for a discretionary review
by any granting authority) and for which Buyer has no reason to believe will
not be routinely renewed.


(c)           Financial Statements.  Except as
otherwise indicated below, attached as Schedule 5.2(c) are true and
complete copies of:


(i) the audited balance sheets of Buyer as of December
31, 2004 and the related statements of income, stockholders’ equity and cash flow
for the fiscal year ended December 31, 2004, together with the notes thereto,
in each case examined by and accompanied by the report of independent certified
public accountants (the “Buyer Financial Statements”).


(ii) The Buyer Financial Statements are in accordance
with the books and records of Buyer, fairly present the consolidated financial
positions and results of operations of Buyer as of the dates and for the
periods indicated, are stated in conformity with GAAP, consistently applied,
except as otherwise clearly and conspicuously stated, and can be legitimately
reconciled with the financial statements and with the financial records
maintained and the accounting methods applied by Buyer for federal income tax
purposes. The statements of income included in the Buyer Financial Statements
do not contain any items of special or non-recurring income except as expressly
specified therein, and the balance sheets included in the Buyer Financial
Statements do not reflect any write-up or revaluation increasing the book value
of any assets except as otherwise clearly and conspicuously stated therein. The
books and accounts of Buyer are complete and correct in all material respects
and fairly reflect all of the transactions, items of income and expense and all
assets and liabilities of the businesses of Buyer consistent with prior
practices of Buyer, including past accounting treatments utilized by Buyer.


(d)           Absence of Undisclosed Liabilities.  Buyer
has no liability of any nature whatsoever (whether known or unknown, due or to
become due, accrued, absolute, contingent or otherwise), including, without
limitation, any unfunded obligation under employee benefits plans or
arrangements or liabilities for Buyer Taxes (as defined in Section 5.2(i)
hereof), except for (i) liabilities reflected or reserved against Buyer in the
most recent financial statements provided to the Seller; (ii) current
liabilities incurred in the ordinary course of business and consistent with
past practice after the date of the last Buyer balance sheet supplied to Seller
which, individually and in the aggregate, do not have and cannot reasonably be
expected to have a Material Adverse Effect; and (iii) liabilities exposed in Schedule
5.2(d) hereto.


(e)           Absence of Material Adverse Effect; Conduct of
Business.  (a) Since October 15, 2005, except as set
forth on Schedule 5.2(e) hereto, Buyer has operated in the ordinary
course of business consistent with past practice and there has not been:


 


18





















 


(i) any material adverse
change in the assets, properties, business, operations, prospects, net income
or financial condition of Buyer and no factor, event, condition, circumstance
or prospective development exists which could reasonably be expected to have a Material
Adverse Effect;


(ii) any material loss,
damage, destruction or other casualty to the property or other assets of Buyer,
whether or not covered by insurance;


(iii) any change in any
method of accounting or accounting practice of Buyer; or


(iv) any loss of the
employment, services or benefits of any key employee of Buyer.


(b)   Since October 15, 2005, except as set forth
in Schedule 5.2(e) (b) hereto, Buyer has not:


(i) incurred any material
obligation or liability (whether absolute, accrued, contingent or otherwise),
except in the ordinary course of business consistent with past practice;


(ii) mortgaged, pledged or
subjected to any lien any of its property or other assets except in the
ordinary course of business, and except for mechanics and materialmen’s liens
and liens for taxes not yet due and payable;


(iii) sold or transferred
any assets or cancelled any debts or claims or waived any rights, except in the
ordinary course of business consistent with past practice;


(iv) defaulted on any
material obligation;


(v) entered into any
material transaction, except in the ordinary course of business consistent with
past practice;


(vi) written down the value
of any inventory or written off as uncollectible any accounts receivable or any
portion thereof not reflected in the Buyer Financial Statements except in the
ordinary course of business;


(vii) granted any increase
in the compensation or benefits of employees other than the increases in
accordance with past practice not exceeding 10% or entered into any employment
or severance agreement or arrangement with any of them;


(viii) incurred any
obligation or liability to any employee for the payment of severance benefits
of more than $1,000; or


(ix) entered into any agreement
or made any commitment to do any of the foregoing.


 


19





















 


(f)            Legal Matters.  (i) Except as
set forth on Schedule 5.2(f) hereto, Buyer is not subject to any
judgment, decree, writ, injunction ruling or order (collectively, “Buyer
Judgments”) of any governmental, administrative or judicial authority,
domestic or foreign. Schedule 5.2(f) identifies each Buyer Judgment
disclosed thereon, each of which is fully covered by an insurance policy and
Buyer hereby represents and warrants to Seller that it shall be financially
responsible for the full satisfaction of any such Buyer Judgment, including
costs of defense and costs of court and attorney fees, to the extent that (i)
any such Buyer Judgment, including costs of defense and costs of court
including attorney fees, is not covered by insurance; and (ii) to the extent
that any such Buyer Judgment, including costs of defense and costs of court and
attorney fees, is not fully satisfied by insurance proceeds.


(i)            The
business of Buyer is being conducted in compliance with all laws, ordinances,
codes, rules, regulations, standards, judgments and other requirements of all
governmental, administrative or judicial entities (collectively, “Buyer
Legal Requirements”) applicable to either Buyer or any of its businesses or
properties, except for where the failure to be in such compliance could not
reasonably be expected to have a Material Adverse Effect. Buyer holds, and is
in compliance with, all franchises, licenses, permits, registrations,
certificates, consents, approvals or authorizations (collectively, “Buyer Permits”)
required by all applicable Buyer Legal Requirements.


(ii)           Buyer
owns or holds all Buyer Permits material to the conduct of its business. No
event has occurred and is continuing which permits, or after notice or the
lapse of time, or both, would permit, any modification or termination of any Buyer
Permit.


 (g)          Inventories.  The values at which
inventories are carried by Buyer on its balance sheets reflect the normal
inventory valuation policies of Buyer.


(h)           Disclosure.  Neither Buyer
nor anyone acting with its knowledge and on its behalf has made any material
misrepresentation to the Seller relating to Buyer or the Buyer Shares and Buyer
has not omitted to state to the Seller any material fact relating to either Buyer
or the Buyer Shares which is necessary in order to make the information given by
or on behalf of Buyer to the Seller not misleading or which if disclosed would
reasonably affect the decision of a person considering the acquisition of the Buyer
Shares.


(i)            Taxes.  Buyer and, for
any period during all or part of which, the tax liability of any other
corporation or entity was determined on a combined or consolidated basis with Buyer
any such other corporation or entity, have filed timely all federal, state,
local and foreign tax returns, reports and declarations required to be filed
(or have obtained or timely applied for an extension with respect to such
filing) currently reflecting the Buyer Taxes (as defined below) and all other
information required to be


 


20





















 


reported thereon, and have paid, or made adequate
provision for the payment of, all Buyer Taxes which are due pursuant to such
returns or are pursuant to any assessments received by Buyer or any such other
corporation or entity. As used herein, “Buyer  Taxes” shall mean
all taxes, fees levies or other assessments, including but not limited to
income, excise, property (including property taxes paid by Buyer pursuant to
any lease), sales, franchise, withholding, social security and unemployment
taxes imposed by the United States, or any state, county, local or foreign
government, or any subdivision or agency thereof, or taxing authority therein,
and any interest, penalties or additions to tax relating to such taxes,
charges, fees, levies or other assessments. Copies of all tax returns for each
fiscal year since the formation of Buyer have been furnished or made available
to the Seller or to his representatives and such copies are accurate and
complete as of the date thereof. Buyer has also furnished or made available to the
Seller or his representatives correct and complete copies of all notices and
correspondence sent or received since the formation of Buyer by Buyer to or
from any federal, state or local tax authorities. Buyer has adequately reserved
for the payment of all Buyer Taxes with respect to periods ended on, prior to
or through the date Buyer’s balance sheets for which tax returns have not yet
been filed. In the ordinary course, Buyer makes adequate provision on its books
for the payment of all Buyer Taxes (including for the current fiscal period)
owed by Buyer. Except to the extent reserves therefore are reflected on its
balance sheet, Buyer is not liable or will not become liable, for any Buyer Taxes
for any period ending on, prior to or through the dates of those balance sheets.
Except as disclosed on Schedule 5.2(i), Buyer has not been subject to a
federal or state tax audit of any kind and no adjustment has been proposed by
the IRS with respect to any return for any subsequent year. With respect to the
audits referred to on Schedule 5.2(i) hereto, no such audit has resulted
in an adjustment in excess of $25,000. Buyer knows of no basis for an assertion
of a deficiency for Buyer Taxes against Buyer.


5.3          Nature and Duration of
Warranties and Representations. 
Notwithstanding any investigation or examination conducted before or
after the Closing or the decision of any party to complete the Closing, each
party shall be entitled to rely upon the representations and warranties set
forth in this Agreement. All warranties and representations of the parties as
described in Section 5.1 and as described in Section 5.2 shall
survive the Closing for a period of two (2) years, except for warranties and
representations regarding Taxes, which shall survive the Closing for a period
of seven (7) years.


6.                                      TERMINATION


6.1          Termination Events. 
The transactions contemplated herein may be terminated and/or abandoned
prior to the Closing:


(a)           by the mutual consent of Buyer and Seller;


(b)           by Buyer, if any of the conditions provided in Section 4.2 of
this Agreement shall not have been met or waived in writing by Buyer by the
Closing date; or


(c)           by Seller, if any of the conditions provided for in Section 4.3
of this Agreement shall not have been met or waived in writing by Seller by the
Closing date.


 


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6.2          Procedure Upon
Non-Default Termination.  In the event of termination
and/or abandonment by Buyer or by Seller, or both, pursuant to Section 6.1
hereof, written notice thereof shall be given to the other party, and the
transactions contemplated by this Agreement shall be terminated without further
action by Buyer or by Seller.  If the
transactions contemplated by this Agreement are terminated as provided herein:


(a)           each party, upon request by the other party, shall redeliver all
documents, work papers and other material, including all copies thereof,
provided by the other party, to the party furnishing the same; and


(b)           no party hereto shall have any liability or further obligation to any other
party to this Agreement.


7.                                      DEFAULT
AND REMEDIES


7.1          Default and Remedies. 
In the event of any breach of this Agreement by any party hereto, or if
the Closing fails to timely occur due to the wrongful action or failure to act
of either party hereto, then that party shall be deemed to be in default of
this Agreement, and the non-defaulting or non-breaching party may avail itself of
the following remedies.


7.2          Seller’s Remedies. 
If Buyer fails to perform when due any act required by this Agreement,
or otherwise breaches this Agreement, Seller’s sole and exclusive remedy will
be to cancel this Agreement, such cancellation to be effective immediately upon
Seller giving written notice of cancellation to Buyer.


7.3          Buyer’s Remedies. 
If Seller fails to perform when due any act required by this Agreement
to be performed, or otherwise breaches this Agreement, then, Buyer, at its sole
option may elect to (a)  cancel this Agreement,
such cancellation to be effective immediately upon Buyer giving written notice
of cancellation to Seller; or (b) have specific performance of this Agreement.


8.                                      INDEMNIFICATION


8.1          Survival of
Representations and Warranties.  The
representations and warranties made by the parties hereunder shall survive the
making of this Agreement and the Closing hereunder for a period of two (2)
years except for warranties and representations regarding Taxes, which shall
survive the Closing for a period of seven (7) years.


8.2          Indemnification by Seller.  Seller
shall indemnify, defend and hold Buyer and each of Buyer’s officers, directors,
shareholders (and the respective spouses of each) harmless, from and against,
and shall reimburse Buyer (or, as the case may be, each of Buyer’s officers,
directors, shareholders and the respective spouses of each) on demand for any
liabilities, payments, losses, suits, claims, costs, or expenses (including
attorney’s fees and costs of investigation incurred in defending against such
liabilities, payments, losses, suits, claims, costs or expenses) made against
or incurred by or asserted against Buyer (and/or each of Buyer’s officers,
directors, shareholders and the respective spouses of each) at any time on or
after the Closing in respect of (a) any breach of any representation, warranty,
covenant or agreement made by the Seller in this Agreement or any certificate
or other instrument furnished pursuant to


 


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this Agreement,
(b) the failure of Seller to convey to Buyer good and marketable title to the
Stock, free and clear of all liens and encumbrances except as expressly assumed
by Buyer under this Agreement, or (c) any liabilities of any nature including,
but not by way of limitation, any tax obligations of Wing Sail, which are a
charge against Wing Sail, not expressly assumed by Buyer under this Agreement,
or (d) the operation of the Wing Sail’s businesses by Seller prior to the
Closing Date.


8.3          Indemnification by Buyer.  Buyer
shall indemnify, defend and hold Seller and each of Seller’s officers,
directors, shareholders (and the respective spouses of each) harmless, from and
against, and shall reimburse Seller (or, as the case may be, each of Seller’s
officers, directors, shareholders and the respective spouses of each) on demand
for any liabilities, payments, losses, suits, claims, costs, or expenses
(including attorney’s fees and costs of investigation incurred in defending
against such liabilities, payments, losses, suits, claims, costs or expenses)
made against or incurred by or asserted against Seller (and/or each of Seller’s
officers, directors, shareholders and the respective spouses of each) at any
time on or after the Closing in respect of (a) any breach of any
representation, warranty, covenant or agreement made by the Buyer in this
Agreement or any certificate or other instrument furnished pursuant to this
Agreement, (b) the failure of Buyer to convey to Seller good and marketable
title to the Buyer Shares, free and clear of all liens and encumbrances except
as expressly assumed by Seller under this Agreement, or (c) the operation of
the Wing Sail’s businesses by Buyer after the Closing Date.


8.4          Claims Subject to
Indemnification.  Each party shall promptly notify the other of
any claim for which indemnification may be sought under this Agreement, shall
give the indemnifying party the opportunity to defend the claim with counsel of
its choice, subject to the reasonable approval of the party against whom the
claim is being brought, at its sole cost and expense, and shall not settle or
compromise such claim without the prior written consent of the prospective
indemnitor, which shall not be unreasonably withheld or delayed.  Notwithstanding the foregoing, in the event
the subject matter underlying such claim is reasonably determined by the
indemnitee to be or potentially be precedent setting, or may adversely effect
the indemnitee’s future operations, indemnitee may, in its sole judgment,
withhold its consent to indemnitor defending the claim with its own counsel, or
settling the claim, and upon written notice to indemnitor, indemnitee shall
proceed with its defense of the claim. 
Indemnitor’s liability when indemnitee is defending the claim shall not
exceed that which indemnitor would have incurred had indemnitor provided the
claim defense.


9.                                      GENERAL
PROVISIONS


9.1          Further
Assurances.  Each party hereto shall execute and/or cause
to be delivered to each other party hereto such instruments and other
documents, and shall take such other actions, as such other party may
reasonably request (prior to, at or after the Closing) for the purpose of
carrying out or evidencing any of the transactions contemplated pursuant to
this Agreement.


9.2          Waiver. 
Any waiver of any term or condition of this Agreement shall not operate
as a waiver of any prior or subsequent breach of such term or condition other
than the breach specifically intended to be waived, nor shall any failure to
enforce any provision hereof operate


 


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as a waiver of
such provision or of any other provision hereof.  Prior to this Agreement being terminated as a
result of the failure of a contingency or condition to be met, the party in
whose favor such failed condition or contingency exists shall have the sole and
exclusive right, by written notice to the other, to waive any such condition or
contingency, and if waived, said condition or contingency shall be deemed
satisfied.


9.3          Notices. 
Any notices required or capable of being rendered under the provisions
of this Agreement shall be in writing and (a) hand delivered, (b) sent by
United States Postal Service certified mail, postage prepaid, (c) sent by a
recognized national overnight delivery service, or local same day delivery or
courier service, addressed as shown on page 1 of this Agreement, or (d)
sent by facsimile machine.  Any notice
sent by United States Postal Service certified mail shall be deemed to be
effective the earlier of the actual delivery or three (3) Business Days after
deposit in a post office operated by the United States Postal Service.  Any notice sent by a recognized national
overnight delivery service shall be deemed effective one (1) Business Day after
deposit with such service.  Any notice
personally delivered or delivered through a same-day delivery/courier service
shall be deemed effective upon its receipt or refusal to accept receipt by the
addressee.  Any notice sent by facsimile
machine shall be deemed effective upon confirmation of the successful
transmission by the sender’s facsimile machine. 
Notices shall be addressed to the parties in accordance with the
information provided on page 1 of this Agreement or to such other
addresses as may be designated in writing from time to time pursuant hereto.


9.4          Time is of the Essence. 
Time is of the essence with respect to all matters in this
Agreement.  Except as expressly provided
for in this Agreement, the time for performance of any obligation or taking any
action under this Agreement will be deemed to expire at 12:00 o’clock midnight
(central standard time) on the last day of the applicable time period provided
for in this Agreement.  If the time for
the performance of any obligation or taking any action under this Agreement
expires on a Saturday, Sunday or legal holiday, the time for performance or
taking such action will be extended to the next succeeding day which is not a
Saturday, Sunday or legal holiday.


9.5          Binding Effect. 
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, personal representatives,
successors and assigns.


9.6          No Third Party
Beneficiaries.  Nothing in this Agreement or the attachments
attached hereto, express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons other than the
parties to it, nor is anything in this Agreement intended to relieve or
discharge the obligations or liabilities of any third person to any party to
this Agreement.


9.7          Texas Law and
Jurisdiction.  This Agreement shall be construed pursuant to
the laws of the State of Texas.  The
parties hereby consent to the exclusive personal jurisdiction of the courts in
and for the State of Texas in the event of litigation pertaining hereto, with
venue to lie in Dallas County.


 


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9.8          Attorneys’ Fees. 
If any action at law or in equity is brought to enforce or interpret the
terms of this Agreement, the prevailing party shall be entitled to attorneys’
fees, costs and disbursements from the non-prevailing party, in addition to any
other relief to which the prevailing party may be entitled pursuant to the
court’s ruling.


9.9          Counterparts and
Facsimile Execution.  This Agreement may be executed in any number
of counterparts, and by facsimile signature, each of which will be an original
but all of which will constitute one and the same instrument.


9.10        Severability. 
If any provision or provisions of this Agreement shall be held to be wholly
or partially invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.


9.11        Headings. 
The headings of the several Sections of this Agreement are inserted
solely for convenience of reference and are not a part of and are not intended
to govern, limit or aid in the construction of any term or provision hereof.


9.12        Other Offers. 
From and after the mutual execution of this Agreement, and until its
closure or termination as herein provided, Seller shall not entertain any
offers from any third party with respect to the sale (outside the ordinary
course of business) of the assets or the stock of Wing Sail.


9.13        Right of
Nomination/Assignment.  Buyer is granted the right to nominate
and/or assign, as its successor in interest under this Agreement, any
corporation, partnership, trust, or limited liability company owned or
controlled by Buyer, or under common ownership or control with another entity
owned or controlled by Buyer, for the purpose of consummating the transactions
contemplated herein.  In the event of a
permitted assignment, all documents to be executed by Buyer at Closing may be
executed by Buyer’s nominee hereunder, and thereupon Buyer shall have no further
liability hereunder or with respect to such documents and the assignee shall
thereafter be bound by all of the terms and conditions of this agreement
without reservation as fully as Buyer is so bound as of the date of the full
execution of this agreement and as of the Closing.  The words “nominee” and “assignee” are used
interchangeably in this Agreement.


9.14        No Brokers.  There
are no broker fees or finder’s fees due to any person or entity as a result of
the consummation of the transactions contemplated herein. Buyer represents and
warrants that Buyer has not dealt with any sales agents, finders, brokers or
other consultants in connection with this transaction and has no financial
obligation to any such sales agents, finders, brokers or other consultants in
connection with this transaction.  Seller
represents and warrants that Seller has not dealt with any sales agents,
finders, brokers or other consultants in connection with this transaction.  If any person asserts a claim to a finder’s
fee, brokerage commission or other compensation on account of alleged
employment as a finder or broker, or the performance of services as a finder or
broker in connection with this transaction, the party under whom the finder or
broker is claiming will indemnify, defend and hold the other party and the
other party’s affiliates harmless for, from, and against any claims related
thereto.  This indemnity will survive the
Closing or the cancellation of this Agreement.


 


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9.15        Confidential Information. 
Prior to the Closing Date and thereafter if the Closing fails to occur, Buyer
and its representatives and Seller and his representatives will hold in strict
confidence the existence of this Agreement, all data and information obtained
regarding the other, their assets, the operations, and financial status
obtained in connection with this transaction and the terms of this
Agreement.  Except as may be required by
law or any governmental authority, or to obtain any consents or approvals
required by this Agreement, or to their respective attorneys, accountants,
lenders, insurers, utility providers and consultants, Seller and Buyer will
not, without the prior written consent of the other party, make any disclosure
to third persons or parties of the existence of this Agreement, the parties to
this Agreement, the terms of this Agreement or any other matter related to the
transactions contemplated by this Agreement. 
Buyer and Seller will use their best efforts to avoid such publicity in
any newspaper or magazine, or on any radio or television station, or through
any other medium of publication.


9.16        Entire Agreement. 
This Agreement constitutes the entire agreement between the parties
pertaining to the subject matter contained in this Agreement.  All prior and contemporaneous agreements,
representations and understandings of the parties, oral or written, are
superseded by and merged in this Agreement. 
No supplement, modification or amendment of this Agreement will be
binding unless in writing and executed by Buyer and Seller.


9.17        Acceptance. 
This Agreement will be of no force and effect unless the Parties hereto
have executed and delivered it to one another on or before                          ,
2005.


WITNESS WHEREOF,
the parties hereto have executed this Agreement as of the day first above
written.


 


 


	
  Earth Biofuels, Inc.

  
	
   

  
	
  By:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  The Wing Sail Company

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  



 


 


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