Document:

ex104.htm

    THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE LAWS, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR
ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR
(iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO
COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
APPLICABLE STATE LAW IS AVAILABLE.

    

    PNG
VENTURES, INC.

    

    CONVERTIBLE
PROMISSORY NOTE

    

    
      	
              Principal
      Amount:      $171,000

            	 
      	
              Issuance
      Date:                                
      June ___ ,2008

            
	 
      	 
      	 
      
	
              Interest
      Rate:                   12%

            	 
      	
              Maturity
      Date:                                  June
      ___, 2009

            

    

    

    PNG
VENTURES, INC., a Nevada corporation (the “Company”) hereby
promises to pay to the order of EARTH BIOFUELS, INC., a Delaware corporation
(the “Noteholder”), at such
place as Noteholder may from time to time designate, in lawful money of the
United States of America, ONE HUNDRED SEVENTY ONE THOUSAND DOLLARS ($171,000)
due and payable on June ___, 2009. This Note is issued pursuant to a Settlement
Agreement and Release (the “Settlement Agreement”
a copy of which has been attached hereto as Exhibit
A), and is subject to other terms as set forth in the Settlement
Agreement.

    

    1.           INTEREST.  Beginning
on the issuance date of this Note (the “Issuance Date”), the
outstanding principal balance of this Note shall bear interest, in arrears, at a
rate per annum equal to twelve percent (12%). Interest shall be computed on the
basis of a 360-day year of twelve (12) 30-day months and shall accrue commencing
on the Issuance Date.

    

    2.           PREPAYMENT.  This
Note may be prepaid, in whole or in part, by the Company only upon the prior
written consent of the Noteholder.

    

    3.           TRANSFER
AND ASSIGNMENT.  This Note shall be freely transferable and
assignable by the Noteholder provided such transfer is in compliance with
applicable federal and state securities laws.

    

    4.           CONVERSION
OF
NOTE.                                                                The
Noteholder shall have the right from and after the date of the issuance of this
Note and then at any time until this Note is fully paid, to convert any
outstanding and unpaid principal portion of this Note, into fully paid and
non-assessable shares of the common stock of the Company (the “Common Stock”) as
such stock exists on the date of issuance of this Note, or is hereafter be
changed or reclassified, at a conversion price of $0.09 per share (the “Conversion Price”).
The Conversion Price shall be subject to proportional adjustment for
reclassification, Stock Splits, Combinations and Dividends. The Company shall
issue 1,900,000 shares of Common Stock into escrow with the Company’s escrow
agent (the “Escrow
Agent”) pursuant to an escrow agreement (the “Escrow Agreement”) a
copy of which has been attached hereto as Exhibit
B), which shares shall be held in escrow in the event the Noteholder
elects to convert any unpaid balance of the Note pursuant to the terms contained
herein. Any such conversion shall be effected by, and subject to the terms of
the Escrow Agreement.

    5.           NOTICES.  Notices
to be given hereunder shall be in writing and shall be deemed to have been
sufficiently given if delivered personally or sent by overnight courier or
messenger or sent by registered or certified mail (air mail if overseas), return
receipt requested, or by telex, facsimile transmission, telegram or similar
means of communication.  Notice shall be deemed to have been received
on the date of personal delivery, telex, facsimile transmission, telegram or
similar means of communication, or if sent by overnight courier or messenger,
shall be deemed to have been received on the next delivery day after deposit
with the courier or messenger, or if sent by certified or registered mail,
return receipt requested, shall be deemed to have been received on the third
business day after the date of mailing and shall be addressed to:

    

    
      	
              PNG
      Ventures, Inc.

              Attn:
      Kevin Markey

              3001
      Knox Street, Suite 303

              Houston,
      Texas 75205

              Fax:     (214)
      520-0507

            	
              Earth
      Biofuels, Inc.

              Attn:
      Dennis G. McLaughlin, III

              3001
      Knox Street, Suite 303

              Dallas,
      Texas 75202

              Fax:     (214)
      520-0507

            

    

    

    6.           GOVERNING LAW.  THIS
NOTE HAS BEEN DELIVERED IN THE STATE OF FLORIDA AND SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA
APPLICABLE TO CONTRACT MADE AND TO BE PERFORMED ENTIRELY THEREIN, WITHOUT GIVING
EFFECT TO THE RULES AND CONFLICTS OF LAW.

    

    7.           CONFORMITY
WITH LAW. It is the intention of
the Company and of the Noteholder to conform strictly to applicable usury and
similar laws.  Accordingly, notwithstanding anything to the contrary
in this Note, it is agreed that the aggregate of all charges which constitute
interest under applicable usury and similar laws that are contract for,
chargeable or receivable under or in respect of this Note, shall under no
circumstances exceed the maximum amount of interest permitted by such laws, and
any excess, whether occasioned by acceleration or maturity of this Note or
otherwise, shall be canceled automatically, and if theretofore paid, shall be
either refunded to the Company or credited on the principal amount of this
Note.

    

    8.           MISCELLANEOUS. This
Note may only be changed, modified or amended in writing by the mutual consent
of Noteholder and the Company.  The provisions of this Note may only
be waived in or by a writing signed by the party against whom enforcement of any
waiver is sought.  This Note embodies the entire understanding between
Noteholder and the Company and merges all prior discussions or communications
between them.  Time is of the essence in this Note and of each and
every provision thereof.

    

    IN
WITNESS WHEREOF, the Company has signed and sealed this Note and delivered it as
of the date first set forth above.

    

    PNG VENTURES, INC.

    A Nevada corporation

    

    

    _______________________________________ex105.htm

    

     

    ESCROW
AGREEMENT

     

    THIS ESCROW AGREEMENT (the “Agreement”) is dated
as of June___, 2008 among (i) PNG Ventures, Inc., a Nevada corporation ("PNGX" and
individually a “Party”), (ii) Earth
Biofuels, Inc., a Delaware limited liability company (“EBOF” and
individually a “Party”), and (iii)
Madison Stock Transfer, Inc. (the “Escrow Agent” and
individually a “Party”). PNGX, EBOF
and the Escrow Agent may hereinafter be referred to collectively as the “Parties.”

    

    RECITALS

    

    WHEREAS,
on or about June ____, 2008, EBOF and PNGX were named as defendants in an action
entitled Earth Biofuels, Inc.
v. Earth Biofuels, Inc. et al. Case No: 2008 CA 008514 NC (the “Action”) in the
Circuit Court of the Twelfth Judicial Circuit, Sarasota County, Florida (the
“Court”),
whereby certain parties (the “Plaintiffs”) asserted
claims against EBOF and PNGX alleging that EBOF and PNGX failed to pay these
parties certain monies due and owing;

    

    WHEREAS,
on or about June ___, 2008, PNGX and EBOF entered into a Settlement Agreement
and Release (the “Settlement Agreement”
attached hereto as Exhibit A)
whereby EBOF agreed to resolve certain bona fide claims with PNGX in connection
with the monies due and owing to the Plaintiff and release PNGX from all such
claims with such settlement consideration being a $171,000 convertible
promissory note (the “EBOF Note” attached
hereto as Exhibit
B). Capitalized terms used and not otherwise defined herein that are
defined in the Settlement Agreement or EBOF Note shall have the meanings given
to such terms in such agreements;

    

    WHEREAS,
pursuant to the terms of the Settlement Agreement, PNGX is required to deposit
into escrow 1,900,000 shares of PNGX’s common stock (the “Settlement Shares
Pool”) which shall be disbursed to EBOF pursuant to the terms of this
Agreement and the Settlement Agreement;

    

    WHEREAS,
pursuant to the Settlement Agreement and only upon the Closing of the Merger (as
defined in the Settlement Agreement), the EBOF Note may be converted, in whole
or in part, at the sole discretion of EBOF, into freely tradable non-legend
bearing shares of PNGX common stock (the “Settlement Shares”),
which shall be delivered from the Settlement Shares Pool, the number of which
shall be derived by dividing a dollar amount of the EBOF Note to be converted by
..09;

    

    WHEREAS,
pursuant to the terms of the Settlement Agreement, PNGX and EBOF have agreed,
pursuant to 15 U.S.C. §77(3)(a)(10), to immediately submit the terms and
conditions of the Settlement Agreement to the Court for a hearing on the
fairness of such terms and conditions, for the issuance of an exemption from
registration of the Settlement Shares Pool and an order approving the
Agreement;

    

    

    

    WHEREAS, the Escrow Agent is willing to
serve as escrow agent pursuant to the terms and conditions of this Agreement and
the Settlement Agreement;

    

    AGREEMENT

    

    NOW,
THEREFORE, in consideration of the mutual covenants and other agreements
described in this Agreement, and for good and valuable consideration, receipt of
which is hereby acknowledged, the Parties hereby agree as follows:

    

    ARTICLE
I

    

    DELIVERIES
TO THE ESCROW AGENT

    

    1.1           PNGX
Deliveries.  Simultaneously or before an entry of an order by
the Court in connection with the Action described herein, PNGX shall
deliver the Settlement Shares Pool to the Escrow Agent.

    

    1.2           Intention to Create
Escrow.  PNGX and EBOF intend that Settlement Shares Pool shall
be held in escrow by the Escrow Agent pursuant to this Agreement and the
Settlement Agreement for EBOF’s sole benefit as set forth herein.

    

    1.3           Escrow Agent
Deliveries.  The Escrow Agent shall hold and release the
Settlement Shares Pool only in accordance with the terms and conditions of this
Agreement.

    

    1.4           Ownership and Dispositive
Rights. All shares of the Settlement Shares Pool shall be deemed owned
and under the dispositive and voting control of PNGX until released (and, once
released, deemed owned by the person to whom released) from escrow, for purposes
of Section 13 and Section 16 of the Securities Exchange Act of 1934, as
amended.

    

    ARTICLE
II

    

    RELEASE
OF ESCROWED ITEMS

    

    2.1           Disbursement of Settlement
Shares.  Only upon the Closing of the Merger, the Escrow Agent
shall release to EBOF or any of its assignees the Settlement Shares from the
Settlement Shares Pool upon EBOF’s delivery to the Escrow Agent of a notice of
conversion (a “Conversion Demand” a
form of which has been attached hereto as Exhibit C)
which shall state: (i) the amount of the EBOF Note being converted; (ii) the
number of Settlement Shares being converted from the Settlement Shares Pool; and
(iii) the current balance of the EBOF Note remaining after each Conversion
Demand.

    

    

    

    2.3           Instructions to Release
Escrow.   Notwithstanding the above and with no notice to
or confirmation by PNGX, upon receipt by the Escrow Agent of written
instructions by EBOF, the Escrow Agent shall deliver the Settlement Shares Pool
in accordance with the terms of such instructions.

    

    2.4           Court Order to Release
Escrow.    Notwithstanding the above, upon receipt by
the Escrow Agent of a final and non-appealable judgment, order, decree or award
of a court of competent jurisdiction (a "Court Order"), the
Escrow Agent shall deliver the Settlement Shares Pool in accordance with the
Court Order. Any Court Order shall be accompanied by an opinion of counsel for
the Party presenting the Court Order to the Escrow Agent (which opinion shall be
satisfactory to the Escrow Agent) to the effect that the court issuing the Court
Order has competent jurisdiction and that the Court Order is final and
non-appealable.

    

    2.5           Acknowledgement of EBOF,
PNGX and Escrow Agent; Disputes.     The Parties
acknowledge that the only terms and conditions upon which the Settlement Shares
Pool is to be released are set forth in this Agreement.  The Parties
reaffirm their agreement to abide by the terms and conditions of this Agreement
with respect to the release of the Settlement Shares Pool. Any dispute with
respect to the release of Settlement Shares Pool shall be resolved pursuant to
Section 3.2 or by agreement between EBOF and PNGX.

    

    ARTICLE
III

    

    CONCERNING
THE ESCROW AGENT

    

    3.1           Duties and Responsibilities
of the Escrow Agent.  The Escrow Agent's duties and
responsibilities shall be subject to the following terms and
conditions:

    

    3.1.1                      EBOF
and PNGX acknowledge and agree that the Escrow Agent (i) once in receipt of a
Conversion Demand from EBOF, shall not be responsible for or bound by, and shall
not inquire into whether EBOF is entitled to receipt of Settlement Shares
pursuant to, any other agreement or otherwise; (ii) shall be obligated only for
the performance of such duties as are specifically assumed by the Escrow Agent
pursuant to this Agreement; (iii) may rely on and shall be protected in acting
or refraining from acting upon any written notice, instruction, instrument,
statement, request or document furnished to it hereunder and believed by the
Escrow Agent in good faith to be genuine and to have been signed or presented by
the proper person or Party, without being required to determine the authenticity
or correctness of any fact stated therein or the propriety or validity or the
service thereof; and (iv) may assume that any person believed by the Escrow
Agent in good faith to be authorized to give notice or make any statement or
execute any document in connection with the provisions hereof is so
authorized.

    

    3.1.2                      In
the event of the Escrow Agent’s resignation and/or termination, EBOF and only
EBOF will issue to the Escrow Agent instructions authorizing delivery of the
Settlement Shares Pool to a substitute Escrow Agent selected by the
EBOF.  If no successor Escrow Agent is named by EBOF, the Escrow Agent
may apply to a court of competent jurisdiction in Florida for appointment of a
successor Escrow Agent, and to deposit the Settlement Shares Pool with the clerk
of any such court.

    

    3.1.3                      The
provisions of this Section shall survive the resignation of the Escrow Agent or
the termination of this Agreement.

    

    3.2           Dispute Resolution:
Judgments.   If any dispute shall arise with respect to
the delivery, ownership, right of possession or disposition of the Settlement
Shares Pool, the Escrow Agent shall continue to follow the terms of the Escrow
Agreement and issue shares of PNGX’s common stock pursuant to a Conversion
Demand unless the Transfer Agent (i) receives instructions otherwise from EBOF,
or (ii) deposits the Settlement Shares Pool with any court of competent
jurisdiction in Florida, in which event the Escrow Agent shall give 20 days
advance written notice thereof to the PNGX and EBOF and shall thereupon be
relieved and discharged from all further obligations pursuant to this
Agreement.

    

    3.3           Maximum
Conversion.  The Escrow Agent shall not issue to EBOF, upon a
Conversion Demand, a number of shares of PNGX’s Common Stock which would result
in beneficial ownership by EBOF and its affiliates of more than 4.99% of the
outstanding shares of Common Stock of PNGX on the date of such a Conversion
Demand. For the purposes of the provision to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder.

    

    ARTICLE
IV

    

    GENERAL
MATTERS

    

    4.1           Termination.  This
escrow shall terminate upon the release of all of the shares in the Settlement
Shares Pool or at any time upon the agreement in writing of PNGX and
EBOF.

    

    4.2           Notices.   All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such Party shall have specified most recently
by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile at the address or number designated below (if delivered
on a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.  The
addresses for such communications shall be: 

    

    
      	
              If to PNGX, to:

              PNG
      Ventures, Inc.

              Attn:
      Kevin Markey

              3001
      Knox Street, Suite 303

              Houston,
      Texas 75205

              Fax:
      (214) 520-0507

            	
              If to EBOF, to:

               

              Earth
      Biofuels, Inc.

              Attn:
      Dennis G. McLaughlin, III

              3001
      Knox Street, Suite 303

              Dallas,
      Texas 75205

              Fax:
      (214) 520-0507

            
	
              If to the Escrow Agent, to:

               

            	 
      

    

    

    4.3           Assignment; Binding
Agreement.  Neither this Agreement nor any right or obligation
hereunder shall be assignable by any Party without the prior written consent of
EBOF.  This Agreement shall inure to the benefit of and be binding
upon the Parties hereto and their respective legal representatives, successors
and assigns.

    

    4.4           Severability.  In
the event that any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal, or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the Parties hereto shall be
enforceable to the fullest extent permitted by law.

    

    4.5           Counterparts/Execution.  This
Agreement may be executed in any number of counterparts and by different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but one
and the same instrument.  This Agreement may be executed by facsimile
transmission and delivered by facsimile transmission.

    

    4.6           Agreement.  Each
of the undersigned states that he has read the foregoing Agreement and
understands and agrees to it.

    

    4.7           Entire
Agreement.  This Agreement along with Settlement Agreement
constitute the entire agreement between the Parties hereto pertaining to the
Settlement Shares Pool and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the Parties. There are
no warranties, representations and other agreements made by the Parties in
connection with the subject matter hereof except as specifically set forth in
this Agreement and the Settlement Agreement.

    

    4.8           Waivers and
Amendments.  This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by all Parties, or, in the
case of a waiver, by the Party waiving compliance.  Except as
expressly stated herein, no delay on the part of any Party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any Party of any right, power or privilege hereunder
preclude any other or future exercise of any other right, power or privilege
hereunder.

    

    4.9           Headings.  The
division of this Agreement into articles, sections, subsections and paragraphs
and the insertion of headings are for convenience of reference only and shall
not affect the construction or interpretation of this Agreement.

    

    4.10           Law Governing this
Agreement.  This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida without regard to principles
of conflicts of laws.  Any action brought by any Party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of Florida or in the federal courts located in
the state of Florida. All
Parties and the individuals executing this Agreement agree to submit to the
jurisdiction of such courts and waive trial by jury. The prevailing Party
(which shall be the Party which receives an award most closely resembling the
remedy or action sought) shall be entitled to recover from the other Party its
reasonable attorney's fees and costs.  In the event that any provision
of this Agreement or any other agreement delivered in connection herewith is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law.  Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision of any agreement.

    

    4.11           Specific Enforcement,
Consent to Jurisdiction.  The Parties acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached.  It is accordingly agreed that the Parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof or thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.  The Parties
hereby waive, and agree not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper.  Nothing in
this Section shall affect or limit any right to serve process in any other
manner permitted by law.

    

    

    ***SIGNATURE
PAGE FOLLOWS***

    

    

    

    

    SIGNATURE
PAGE

    

    IN WITNESS WHEREOF, the Parties have
duly executed this Agreement as of the day and year first written
above.

     

    

    
      	
              PNGX:

               

              PNG
      VENTURES, INC.

               

               

              ___________________________

              By:
      Kevin Markey

              Its:
      Interim Chief Executive Officer

               

            	
              EBOF:

               

              EARTH
      BIOFUELS, INC.

               

               

              ___________________________

              By:
      Dennis G. McLaughlin, III

              Its:
      Chief Executive Officer

               

            
	
              ESCROW
      AGENT

               

               

               

               

            	 
      

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    EXHIBIT
A

    

    Settlement
Agreement and Release

    

    

    

    

    

    
      
        
          

          ______EBOF                                                            ______Escrow
Agent                                                                 ______PNGX

          

          EBPN.PNEBescrow.v.2
                                                     
Page of [INSERT PAGE NUMBER]

          

        

         

      

      
         

        
          

        

      

      
         

      

    

     EXHIBIT
B

    

    EBOF
Note

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    EXHIBIT
C

    

    Form
of Conversion Demand

    

    Dated
_______________

    

    Pursuant
to the terms of the Settlement Agreement and Release and Escrow Agreement by
between Earth Biofuels, Inc. (“EBOF”), PNG Ventures,
Inc. (“PNGX”)
and Madison Stock Transfer, Inc. (the “Transfer Agent”),
EBOF hereby demands the issuance of _____________________ shares of PNGX’s
common stock (the “Settlement Shares”)
to be issued in the name of Earth Biofuels, Inc. and delivered as
follows:

    

    Earth
Biofuels, Inc.

    Attn:
Dennis G. McLaughlin, III

    3001 Knox
Street, Suite 303

    Dallas,
Texas 75205

    

    
      	
              Amount
      of EBOF Note converted........................

            	 
      
	
               

              Number
      of Settlement Shares to be Issued................................

            	 
      
	
               

              Remaining
      EBOF Note.....................................

            	 
      

    

    

    Please
send the certificate representing the Settlement Shares via Federal Express
overnight delivery using Federal Express Account
No.________________.

    

    Very
truly yours,

    

    EARTH
BIOFUELS, INC.

    

    

    ___________________________

    By:
Dennis G. McLaughlin, III

    Its:
Chief Executive Officer

    

    

    
      
        
          

          ______EBOF                                                            ______Escrow
Agent                                                                 ______PNGX

          

          EBPN.PNEBescrow.v.2
                                                     
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