Document:

Exhibit 10.1

 

 

 

MIRANT CORPORATION

2006 NON-EMPLOYEE DIRECTORS COMPENSATION PLAN

 

 

 

 

MIRANT CORPORATION

2006 NON-EMPLOYEE DIRECTORS COMPENSATION PLAN

 

	
  ARTICLE 1 PURPOSE

  	
   

  	
  2

  
	
  1.1

  	
   

  	
  Purpose

  	
   

  	
  2

  
	
  1.2

  	
   

  	
  Eligibility

  	
   

  	
  2

  
	
  ARTICLE 2 DEFINITIONS

  	
   

  	
  2

  
	
  2.1

  	
   

  	
  Definitions

  	
   

  	
  2

  
	
  ARTICLE 3 ADMINISTRATION

  	
   

  	
  4

  
	
  3.1

  	
   

  	
  Administration

  	
   

  	
  4

  
	
  3.2

  	
   

  	
  Reliance

  	
   

  	
  4

  
	
  ARTICLE 4 SOURCE OF SHARES

  	
   

  	
  5

  
	
  4.1

  	
   

  	
  Source of Shares for the Plan

  	
   

  	
  5

  
	
  ARTICLE 5 CASH COMPENSATION

  	
   

  	
  5

  
	
  5.1

  	
   

  	
  Base Quarterly Retainer

  	
   

  	
  5

  
	
  5.2

  	
   

  	
  Supplemental Quarterly Retainer

  	
   

  	
  5

  
	
  5.3

  	
   

  	
  Meeting Fees

  	
   

  	
  6

  
	
  5.4

  	
   

  	
  Travel Expense Reimbursement

  	
   

  	
  6

  
	
  5.5

  	
   

  	
  Education Expense Reimbursement

  	
   

  	
  6

  
	
  ARTICLE 6 EQUITY COMPENSATION

  	
   

  	
  7

  
	
  6.1

  	
   

  	
  Restricted Stock Units

  	
   

  	
  7

  
	
  6.2

  	
   

  	
  Stock Options

  	
   

  	
  8

  
	
  6.3

  	
   

  	
  Special Grants in first Plan Year

  	
   

  	
  9

  
	
  ARTICLE 7 DEFERRAL OF COMPENSATION

  	
   

  	
  9

  
	
  7.1

  	
   

  	
  Election to Defer under the Mirant
  Deferred Compensation Plan

  	
   

  	
  10

  
	
  ARTICLE 8 AMENDMENT, MODIFICATION AND TERMINATION

  	
   

  	
  11

  
	
  8.1

  	
   

  	
  Amendment, Modification and
  Termination

  	
   

  	
  11

  
	
  ARTICLE 9 GENERAL PROVISIONS

  	
   

  	
  11

  
	
  9.1

  	
   

  	
  Adjustments

  	
   

  	
  11

  
	
  9.2

  	
   

  	
  Duration of the Plan

  	
   

  	
  11

  
	
  9.3

  	
   

  	
  Expenses of the Plan

  	
   

  	
  11

  
	
  9.4

  	
   

  	
  Status of the Plan

  	
   

  	
  12

  
	
  9.5

  	
   

  	
  Effective Date

  	
   

  	
  12

  

 

 

MIRANT CORPORATION

2006 NON-EMPLOYEE DIRECTORS COMPENSATION PLAN

 

ARTICLE 1

PURPOSE

 

1.1.                              PURPOSE. The purpose of the Mirant Corporation 2006 Non-Employee
Directors Compensation Plan is to retain, compensate, and attract
highly-qualified individuals who are not employees of Mirant Corporation or any
of its subsidiaries or affiliates for service as members of the Board by
providing them with competitive compensation and an ownership interest in the
Common Stock of the Company. The Company intends that the Plan will benefit the
Company and its stockholders by allowing Non-Employee Directors to have a
personal financial stake in the Company through an ownership interest in the
Common Stock and will closely associate the interests of Non-Employee Directors
with that of the Company’s stockholders.

 

1.2.                              ELIGIBILITY.
Non-Employee Directors of the Company who are Eligible Participants, as defined
below, shall automatically be participants in the Plan.

 

ARTICLE 2

DEFINITIONS

 

2.1.                              DEFINITIONS. Unless the context clearly indicates otherwise, the
following terms shall have the following meanings:

 

“Quarterly Retainer” means the Base Quarterly Retainer and
the Supplemental Quarterly Retainers.

 

“Base Quarterly Retainer” means the quarterly retainer
(excluding meeting fees and expenses) payable by the Company to a Non-Employee
Director pursuant to Section 5.1 hereof for service as a director of the
Company (i.e., excluding any Supplemental Quarterly
Retainer); as such amount may be changed from time to time.

 

“Board” means the Board of Directors of the Company.

 

“Calendar Year” means the twelve month period ending on December 31
of each year.

 

“Common Stock” means the common stock, par value $0.01 per
share, of the Company.

 

“Company” means Mirant Corporation, a Delaware corporation.

 

“Disability” means any illness or other physical or mental
condition of a Non-Employee Director that renders him or her incapable of
performing as a director of the Company, or any medically determinable illness
or other physical or mental condition

 

 

resulting from a bodily
injury, disease or mental disorder which, in the judgment of the Board, is
permanent and continuous in nature. The Board may require such medical or
other evidence as it deems necessary to judge the nature and permanency of a
Non-Employee Director’s condition.

 

“Effective Date” means January 3, 2006.

 

“Election Form” means a form (electronic or otherwise),
in the form prescribed by the Corporate Secretary from time to time,
pursuant to which a Non-Employee Director elects to defer some or all of his or
her Quarterly Retainer and meeting fees pursuant to the Mirant Deferred
Compensation Plan.

 

“Eligible Participant” means any person who is a Non-Employee
Director on the Effective Date or becomes a Non-Employee Director while this
Plan is in effect; except that during any period a director is prohibited from
participating in the Plan by his or her employer or otherwise waives
participation in the Plan, such director shall not be an Eligible Participant.

 

“Fair Market Value” means the closing price of the Common
Stock reported on the principal exchange on which the Common Stock is then
listed or admitted for trading, on the applicable date (or, if the Common Stock
was not traded on such date, then on the last preceeding date on which the
Common Stock was traded).

 

“Lead Independent Director” means the Non-Employee Director
who has been designated by the Board as the Lead Independent Director for the
Plan Year in question. The Board may change the designation of Lead
Independent Director from time to time.

 

“Non-Employee Director” means a director of the Company who
is not an employee of the Company or of any of its subsidiaries or affiliates.

 

“Omnibus Incentive Plan” means the Mirant Corporation 2005
Omnibus Incentive Plan, or any subsequent omnibus compensation plan approved by
the Company’s stockholders Board and designated as the Omnibus Incentive Plan
for purposes of this Plan.

 

“Plan” means this Mirant Corporation 2006 Non-Employee
Directors Compensation Plan, as amended from time to time.

 

“Plan Year” means the twelve-month period ending on June 30
of each year; provided that the first Plan Year shall be a short year beginning
January 3, 2006, and ending June 30, 2006.

 

“Restricted
Stock” means shares of Common Stock of the Company that are
subject to forfeiture and transfer restrictions. Awards of Restricted Stock
granted under this Plan to Eligible Participants are subject to forfeiture and
transfer restrictions set forth in Section 6.3.

 

3

 

“Restricted Stock Units” represent the right to receive
shares of Common Stock, on a one-for one basis, upon termination of service
from the Board; provided that applicable vesting provisions are satisfied. Restricted
Stock Units granted under this Plan to Eligible Participants will be subject to
forfeiture and transfer restrictions set forth in Article 6.

 

“Stock
Options” represent the right to purchase shares of Common
Stock in the future at a pre-determined exercise price. Stock Options granted
under this Plan to Eligible Participants will be subject to the terms and
conditions set forth in Article 6.

 

“Supplemental Quarterly Retainer” means the quarterly retainer
(excluding meeting fees and expenses) payable by the Company to a Non-Employee
Director pursuant to Section 5.2 hereof for service as Lead Independent
Director or as a chair of a committee of the Board, as such amount may be
changed from time to time.

 

ARTICLE 3

ADMINISTRATION

 

3.1.                              ADMINISTRATION. The Plan is intended to reflect the program for
compensation of the Company’s Non-Employee Directors as determined from time to
time by the Board. The Plan shall be administered by the Compensation Committee
of the Board (“Compensation Committee”). Subject to the provisions of the Plan,
the Compensation Committee shall be authorized to interpret the Plan, to
establish, amend and rescind any rules and regulations relating to the
Plan, and to make all other determinations necessary or advisable for the
administration of the Plan. The Compensation Committee’s interpretation of the
Plan, and all actions taken and determinations made by the Compensation
Committee pursuant to the powers vested in it hereunder, shall be conclusive
and binding upon all parties concerned including the Company, its stockholders
and persons granted awards under the Plan. The Compensation Committee hereby
appoints the Corporate Secretary to carry out the ministerial functions of the
Plan, but the Corporate Secretary shall have no other authority or powers of
the Compensation Committee.

 

3.2.                              RELIANCE.
In administering the Plan, the Compensation Committee may rely upon any
information furnished by the Company, its public accountants and other experts.
No individual will have personal liability by reason of anything done or
omitted to be done by the Company or the Board, or the Compensation Committee
in connection with the Plan. This limitation of liability shall not be
exclusive of any other limitation of liability to which any such person may be
entitled under the Company’s certificate of incorporation or otherwise.

 

4

 

ARTICLE 4

SOURCE OF SHARES

 

4.1.                              SOURCE
OF SHARES FOR THE PLAN. The Stock
Options, Restricted Stock, Restricted Stock Units and shares of Common Stock
that may be issued pursuant to the Plan shall be issued under the Omnibus
Incentive Plan, subject to all of the terms and conditions of the Omnibus Incentive
Plan. The terms contained in the Omnibus Incentive Plan are incorporated into
and made a part of this Plan with respect to Stock Options, Restricted
Stock or Restricted Stock Units granted pursuant hereto and any such awards
shall be governed by and construed in accordance with the Omnibus Incentive
Plan. In the event of any actual or alleged conflict between the provisions of
the Omnibus Incentive Plan and the provisions of this Plan, the provisions of
the Omnibus Incentive Plan shall be controlling and determinative. This Plan
does not constitute a separate source of shares for the grant of the equity
awards described herein.

 

ARTICLE 5

CASH COMPENSATION

 

5.1.                              BASE
QUARTERLY RETAINER. Each Eligible
Participant shall be paid a Base Quarterly Retainer for service as a director
during each Plan Year. The amount of the Base Quarterly Retainer shall be
established from time to time by the Board. Until changed by the Board, the
Base Quarterly Retainer shall be $15,000 for each Non-Employee Director. A pro-rata
Base Quarterly Retainer will be paid to any Eligible Participant who joins the
Board on a date other than the beginning of a calendar quarter, based on the
number of full or partial calendar months between the date such Non-Employee
Director joined the Board and the first day of the following quarter (with
credit for a full month being given where the Non-Employee Director served for
more than 15 days in such month). The Base Quarterly Retainer shall be paid quarterly
in arrears in January, April, July and October of each Calendar Year.

 

5.2.                              SUPPLEMENTAL
QUARTERLY RETAINER.

 

(a)                                  Supplemental Quarterly Retainer for Committee Chairs. Any
Non-Employee Director who serves as the chair of a committee of the Board shall
be paid a Supplemental Quarterly Retainer, payable quarterly in arrears in
January, April, July and October of each Plan Year. The amount of the
Supplemental Quarterly Retainer shall be established from time to time by the
Board. Until changed by the Board, the Supplemental Quarterly Retainer for a
full Plan Year shall be as follows:

 

	
  Committee

  	
   

  	
  Amount

  	
   

  
	
  Audit Committee

  	
   

  	
  $

  	
  5,000

  	
   

  
	
  Compensation Committee

  	
   

  	
  $

  	
  2,500

  	
   

  
	
  Nominating and Governance Committee

  	
   

  	
  $

  	
  2,500

  	
   

  

 

A prorata Supplemental Quarterly
Retainer will be paid to any Non-Employee Director who becomes the chair of a
committee of the Board on a date other than the beginning of

 

5

 

a calendar quarter, based
on the number of full or partial calendar months served in such position during
the quarter (with credit for a full month being given where the Non-Employee
Director served in such position for more than 15 days in such month).

 

(b)                                 Supplemental Quarterly Retainer for Service as Lead Independent
Director. In addition to the Base Quarterly Retainer and any
Supplemental Quarterly Retainer for service as chair of a Board committee, the
Lead Independent Director shall be paid an additional Supplemental Quarterly
Retainer for service as Lead Independent Director during each Plan Year,
payable at the same times as the Supplemental Quarterly Retainer is paid
pursuant to Section 5.2(a). The amount of such Supplemental Quarterly
Retainer shall be established from time to time by the Board. Until changed by
the Board, the special additional Supplemental Quarterly Retainer for the Lead
Independent Director for a full Plan Year shall be $5,000. A prorata payment
will be paid to any Non-Employee Director who becomes the Lead Independent
Director on a date other than the beginning of a calendar quarter, based on the
number of full or partial calendar months served in such position during the quarter
(with credit for a full month being given where the Non-Employee Director
served as Lead Independent Director for more than 15 days in such month).

 

5.3.                              MEETING
FEES. Each Non-Employee Director shall be
paid a meeting fee for each meeting of the Board or committee or for any other
orientation or Company provided education session thereof he or she attends. If
a Board or Committee meeting continues for two consecutive days, two meeting
fees will be paid for attendance at such meeting. The amount of the meeting
fees shall be established from time to time by the Board. Until changed by the
Board, the meeting fee shall be $1,500 which will be paid at the same times as
the Supplemental Quarterly Retainer is paid pursuant to Section 5.2(a).

 

5.4.                              TRAVEL
EXPENSE REIMBURSEMENT. All
Non-Employee Directors shall be reimbursed for reasonable travel expenses in
connection with attendance at meetings of the Board and its committees, or
other Company functions at which the Chief Executive Officer requests the
Non-Employee Director to participate.

 

5.5                                 EDUCATION
EXPENSE REIMBURSEMENT. All Non-Employee Directors shall be reimbursed for
reasonable travel and tuition expenses in connection with attendance at
director educational seminars; provided that such seminars are accredited by
Institutional Shareholders Services and directors shall limit these educational
expenses to $5,000.00 per Plan Year.

 

6

 

ARTICLE 6

EQUITY COMPENSATION

 

6.1.                              RESTRICTED
STOCK UNITS.

 

(a)                                  Annual Grant of Restricted Stock Units. Subject to share
availability under the Omnibus Incentive Plan, on the day following the 2006
annual meeting of the Company’s stockholders, and on the day following each
subsequent annual meeting of the Company’s stockholders, each Eligible
Participant in service on that date will receive an award of $25,000 in value
of Restricted Stock Units. The number of Restricted Stock Units so awarded to
each Eligible Participant shall be determined by dividing $25,000 by the Fair
Market Value of the Common Stock on the date of grant and rounding up to the
nearest whole share.

 

(b)                                 Terms and Conditions of Restricted Stock Units. Restricted
Stock Units granted under this Section 6.1 shall be subject to the terms
and conditions described below and of the Omnibus Incentive Plan.

 

(i)                                     Crediting and Settlement of Restricted Stock Units. The
Restricted Stock Units shall be credited to a bookkeeping account maintained by
the Company on behalf of the Non-Employee Director and, to the extent then
vested, shall be settled in (converted to) shares of Common Stock on the date
of the Non-Employee Director’s termination of service as a director of the
Company (in any capacity). No shares of Common Stock will be issued until the
settlement date, at which time the Company agrees to issue shares of Common
Stock to the Non-Employee Director (at the conversion rate of one share of
Common Stock for each vested Restricted Stock Unit).

 

(ii)                                  Transfer Restrictions. The Restricted Stock Units may not
be sold, transferred, exchanged, assigned, pledged, hypothecated or otherwise
encumbered to or in favor of any party other than the Company, or be subjected
to any lien, obligation or liability of the grantee to any other party other
than the Company.

 

(iii)                               Award
Agreement. Restricted Stock Unit awards shall be evidenced by a written
Award Agreement between the Company and the Non-Employee Director, which shall
include a vesting schedule, and such other terms and conditions, not
inconsistent with the Plan or the Omnibus Incentive Plan, as may be
specified by the Compensation Committee.

 

(iv)                              Rights as Stockholder. A Non-Employee Director shall not
have voting, dividend or any other rights as a stockholder of the Company with
respect to the Restricted Stock Units. Upon conversion of the Restricted Stock
Units into shares of Common Stock, the Non-Employee Director will obtain full
voting, dividend and other rights as a stockholder of the Company.

 

7

 

6.2.                              STOCK
OPTIONS.

 

(a)                                  Annual Grant of Stock Options. Subject to share availability
under the Omnibus Incentive Plan, on the day following the 2006 annual meeting
of the Company’s stockholders, and on the day following each subsequent annual
meeting of the Company’s stockholders, each Eligible Participant in service on
that date will receive Stock Options to purchase $50,000 in value of Common
Stock. The number of Stock Options so awarded to each Eligible Participant
shall be determined by dividing $50,000 by the assumed average Black-Scholes
value of Mirant Corporation employee and director stock options as of such Plan
Year, as determined by the Compensation Committee, and rounding up to the
nearest whole share.

 

(b)                                 Terms and Conditions of Stock Options. Stock Options granted
under this Section 6.2 shall be subject to the terms and conditions
described below and of the Omnibus Incentive Plan.

 

(i)                                     Exercise Price. The exercise price per share of a Stock
Option shall be the Fair Market Value of the Common Stock on the date of grant.

 

(ii)                                  Option Term. Subject to earlier termination as provided
herein, the Stock Option shall expire on the tenth (10th)
anniversary of the date of grant.

 

(iii)                               Vesting. Subject
to any earlier vesting under the provisions of the Omnibus Incentive Plan in
the case of a Change of Control, each Stock Option granted under this Section 6.2
shall vest and become exercisable on the earlier of (A) the one year
anniversary of the date of grant, or (B) the termination of the optionee’s
service as a director of the Company due to his or her death or Disability (the
“Vesting Date”). If the optionee’s service as a director of the Company
(whether or not in a Non-Employee Director capacity) terminates other than due
to his or her death or Disability prior to the one year anniversary of the date
of grant, the optionee shall forfeit all of his or her right, title and
interest in and to any unvested Stock Options as of the date of such
termination from the Board.

 

(iv)                              Restrictions on Transfer. Stock Options granted under Section 6.2
are not assignable or transferable other than by will or the laws of descent
and distribution or pursuant to a qualified domestic relations order, and may not
be pledged, hypothecated or otherwise encumbered to or in favor of any party
other than the Company or an affiliate, or be subjected to any lien, obligation
or liability of grantee to any other party other than the Company or an
affiliate. Such Stock Options may be exercised, during the lifetime of the
Non-Employee Director, only by the Non-Employee Director. 

 

(v)                                 Award Agreement. Stock Options shall be evidenced by a
written Award

 

8

 

Agreement
between the Company and the Non-Employee Director, which shall include such
other terms and conditions, not inconsistent with the Plan or the Omnibus
Incentive Plan, as may be specified by the Compensation Committee.

 

(vi)                              Stockholder Rights. A Non-Employee Director shall not have
voting, dividend or any other rights as a stockholder of the Company with
respect to the Stock Options granted under the Plan. Upon exercise of the Stock
Option, the optionee will obtain full voting, dividend and other rights as a
stockholder of the Company with respect to such shares.

 

6.3.                              SPECIAL
GRANTS IN FIRST PLAN YEAR.

 

(a)                                  Restricted Stock or Restricted Stock Units. For the first
Plan Year only, each Eligible Participant was given a choice of receiving on January 13,
2006, an award of $25,000 in value of Restricted Stock or $25,000 in value of
Restricted Stock Units.

 

(i)                                     The
number of shares awarded to each Eligible Participant who elected to receive
Restricted Stock was determined by dividing $25,000 by the Fair Market Value of
the Common Stock on the date of grant and rounding up to the nearest whole
share. Subject to any earlier vesting under the provisions of the Omnibus
Incentive Plan in the case of a Change of Control, the Restricted Stock will
vest and become non-forfeitable as to one-third of the shares on the first,
second and third anniversaries of the date of grant, or, if earlier, upon the
termination of the grantee’s service as a director of the Company due to his or
her death or Disability (the period prior to such vesting date being the “Restricted
Period”). During the Restricted Period, the Restricted Stock may not be
sold, transferred, exchanged, assigned, pledged, hypothecated or otherwise
encumbered, or be subjected to any lien, obligation or liability of the grantee.
As beneficial owner of the shares, a Non-Employee Director shall have full
voting, dividend and other rights as a stockholder of the Company with respect
to the shares of Restricted Stock during and after the Restricted Period.

 

(ii)                                  The
number of Restricted Stock Units awarded to each Eligible Participant who
elected to receive Restricted Stock Units was determined by dividing $25,000 by
the Fair Market Value of the Common Stock on the date of grant and rounding up
to the nearest whole share. Subject to any earlier vesting under the provisions
of the Omnibus Incentive Plan in the case of a Change of Control, these
Restricted Stock Units shall vest and become non-forfeitable as to one-third of
the units on the first, second and third anniversaries of the date of grant,
or, if earlier, upon the termination of the grantee’s service as a director of
the Company due to his or her death or Disability. Such Restricted Stock Units
were credited to a bookkeeping account maintained by the Company on behalf of
the Non-Employee

 

9

 

Director
and, to the extent then vested, shall be settled in (converted to) shares of
Common Stock on the date of the Non-Employee Director’s termination of service
as a director of the Company (in any capacity). No shares of Common Stock will
be issued until the settlement date, at which time the Company agrees to issue
shares of Common Stock to the Non-Employee Director (at the conversion rate of
one share of Common Stock for each vested Restricted Stock Unit). The
Restricted Stock Units may not be sold, transferred, exchanged, assigned,
pledged, hypothecated or otherwise encumbered to or in favor of any party other
than the Company, or be subjected to any lien, obligation or liability of the grantee
to any other party other than the Company.

 

(b)                                 Stock Options. For the first Plan Year only, each Eligible
Participant received an award of $50,000 in value of Stock Options on January 13,
2006. The number of such Stock Options was determined as provided in Section 6.2(a) above
and the Stock Options have the same terms and conditions as described in Section 6.2(b) above,
except that, subject to any earlier vesting under the provisions of the Omnibus
Incentive Plan in the case of a Change in Control, the such Stock Options will
vest and become exercisable as to one-third of the shares on the first, second
and third anniversaries of the date of grant or, if earlier, the termination of
the optionee’s service as a director of the Company due to his or her death or
Disability.

 

ARTICLE 7

DEFERRAL OF COMPENSATION

 

7.1.                              ELECTION
TO DEFER UNDER THE MIRANT CORPORATION DEFERRED COMPENSATION PLAN.

 

(a)                                  Annual Election to Defer.      A Non-Employee Director may elect to defer (i) any
portion of his or her Base Quarterly Retainer, (ii) any portion of his or
her Supplemental Quarterly Retainer for service as a Committee Chair, (iii) any
portion of his or her Supplemental Quarterly Retainer for service as Lead
Independent Director, and (iv) any portion of his or her meeting fees
pursuant to the Mirant Corporation Deferred Compensation Plan. A Non-Employee
Director who wishes to defer compensation under this Section 7.1 must
irrevocably elect to do so by delivering a valid Election Form (which
delivery may be by electronic or other means approved by the Corporate
Secretary) by the December 31 preceding the commencement of the applicable
Calendar Year (or within 30 days after a Non-Employee Director first joins the
Board). For example, in order to defer compensation payable for the Calendar Year
beginning January 1, 2007, the Election Form must be received on or
before December 31, 2006. A Non-Employee Director’s participation in this Section 7.1
of the Plan will be effective as of the first day of the quarter beginning
after the Non-Employee Director’s Election Form has been effectively
delivered (or immediately, in the case of a Non-Employee Director making such
election within 30 days after first joining the Board). The deferral Election Form delivered
by the Non-Employee Director will become irrevocable as of December 31 for
the coming Calendar Year (or immediately when made, in the case of a Non-

 

10

 

Employee Director making
such election within 30 days after first joining the Board).

 

(b)                                 Deferral of Compensation for 2006. For 2006, each Eligible
Participant was allowed to defer the items listed in Section 7.1(a) (i),
(ii), (iii), and (iv) above pursuant to the Mirant Corporation Deferred
Compensation Plan by irrevocably electing to do so by delivering a valid
Election Form by March 31, 2006. A Non-Employee Directors’ deferral
for 2006 was effective as of April 1, 2006 for the remainder of 2006.

 

(c)                                  Deferral Election. If an Eligible Participant fails to
deliver a new Deferral Election prior to December 31 of a Calendar Year indicating
an election to change or cease deferrals for the next Calendar Year, the
Deferral Election in effect during the current Calendar Year shall become
irrevocable as of December 31 of that year and continue in effect during
the next Calendar Year.

 

ARTICLE 8

AMENDMENT, MODIFICATION AND TERMINATION

 

8.1.                              AMENDMENT,
MODIFICATION AND TERMINATION. The Board or
the Compensation Committee may terminate or suspend the Plan at any time,
without stockholder approval. The Board or the Compensation Committee may amend
the Plan at any time and for any reason without stockholder approval; provided,
however, that the Board or Committee may condition any amendment on the
approval of stockholders of the Company if such approval is necessary or deemed
advisable with respect to tax, securities or other applicable laws, policies or
regulations. Except as provided in Section 9.1, no termination,
modification or amendment of the Plan may, without the consent of a Non-Employee
Director, adversely affect a Non-Employee Director’s rights under an award
granted prior thereto.

 

ARTICLE 9

GENERAL PROVISIONS

 

9.1.                              ADJUSTMENTS.
The adjustment provisions of the Omnibus Incentive Plan shall apply with
respect to awards of Restricted Stock, Stock Options and Restricted Stock Units
outstanding or to be granted pursuant to this Plan.

 

9.2.                              DURATION
OF THE PLAN. The Plan shall remain in effect through the Plan Year ending
in 2015, unless terminated earlier by the Board or the Compensation Committee.

 

9.3.                              EXPENSES
OF THE PLAN. The expenses of administering
the Plan shall be borne by the Company.

 

11

 

9.4.                              STATUS
OF THE PLAN. The provisions of Article 7
of the Plan are intended to be a nonqualified, unfunded plan of deferred
compensation under the Internal Revenue Code of 1986, as amended. Plan benefits
shall be paid from the general assets of the Company or as otherwise directed
by the Company. A participant shall have the status of a general unsecured
creditor of the Company with respect to his or her right to receive Common
Stock or other payment upon settlement of the Restricted Stock Units granted
under the Plan. No right or interest in the Restricted Stock Units shall be
subject to the claims of creditors of the Non-Employee Director or to liability
for the debts, contracts or engagements of the Non-Employee Director, or shall
be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect;
provided, however, that nothing in this Plan shall prevent transfers by will or
by the applicable laws of descent and distribution. To the extent that any
participant acquires the right to receive payments under the Plan (from
whatever source), such right shall be no greater than that of an unsecured
general creditor of the Company. Participants and their beneficiaries shall not
have any preference or security interest in the assets of the Company other
than as a general unsecured creditor.

 

9.5.                              EFFECTIVE
DATE. The Plan was originally adopted by the
Compensation Committee on May 8, 2006, to be effective as of January 3,
2006.

 

	
   

  	
  MIRANT
  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Elizabeth B.
  Chandler

  
	
   

  	
   

  	
  Vice President,
  Assistant General Counsel and Secretary

  

 

12Exhibit 4.1

 

SECURITIES PURCHASE AGREEMENT

 

SECURITIES
PURCHASE AGREEMENT (the “Agreement”), dated as of April 28, 2006, by and among Earth
Biofuels, Inc., a Delaware corporation, with headquarters located at 3001 Knox Street, Suite 403, Dallas, Texas 75205 (the “Company”), and the investors listed on the
Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”).

 

WHEREAS:

 

A.            The Company and each Buyer is
executing and delivering this Agreement in reliance upon the exemption from
securities registration afforded by Section 4(2) of the Securities Act of 1933,
as amended (the “1933 Act”), and
Rule 506 of Regulation D (“Regulation D”)
as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.

 

B.            Each Buyer wishes to purchase, and
the Company wishes to sell, upon the terms and conditions stated in this
Agreement, that aggregate number of shares of the Common Stock, par value
$0.001 per share, of the Company (the “Common
Stock”), set forth opposite such Buyer’s name in column (3) on the
Schedule of Buyers (which aggregate amount for all Buyers together shall be
6,400,000 shares of Common Stock and shall collectively be referred to herein
as the “Common Shares”).

 

C.            Upon the terms and subject to the
conditions set forth in this Agreement, the Company may be required to issue to
each Buyer that number of additional shares of Common Stock set forth opposite
such Buyer’s name in column (4) on the Schedule of Buyers (which aggregate
amount for all Buyers together shall be 6,400,000 shares of Common Stock and
shall collectively be referred to herein as the “Additional Shares”).

 

D.            Contemporaneously with the execution
and delivery of this Agreement, the parties hereto are executing and delivering
a Registration Rights Agreement, substantially in the form attached hereto as Exhibit
A (the “Registration Rights Agreement”)
pursuant to which the Company has agreed to provide certain registration rights
with respect to the Common Shares, and the Additional Shares under the 1933 Act
and the rules and regulations promulgated thereunder, and applicable state
securities laws.

 

E.             The Common Shares and the
Additional Shares collectively are referred to herein as the “Securities”.

 

NOW,
THEREFORE, the Company and each Buyer hereby agree as
follows:

 

1.                                       PURCHASE AND SALE OF COMMON SHARES.

 

(a)           Purchase of Common Shares.  Subject to the satisfaction (or waiver) of
the conditions set forth in Sections 6 and 7 below, the Company shall issue and
sell to each Buyer, and each Buyer severally, but not jointly, agrees to
purchase from the Company on the Closing Date (as defined below), the number of
Common Shares as is set forth opposite such Buyer’s name in column (3) on the
Schedule of Buyers (the “Closing”).  The Closing shall occur on the

 

 

Closing Date at the offices of
Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022 or may
be conducted at such other locations or remotely by facsimile transmission or
other electronic means as agreed upon by the Company and the Buyers.

 

(b)           Purchase Price.  The purchase price for the Common Shares to
be purchased by each Buyer at the Closing shall be the amount set forth
opposite such Buyer’s name in column (5) of the Schedule of Buyers (the “Purchase Price”) which shall be equal to
the amount of $0.50 per Common Share (the “Purchase Price Per Common
Share”).

 

(c)           Closing Date.  The date and time of the Closing (the “Closing Date”) shall be 10:00 a.m., New
York City Time, on the date hereof (or such other date and time as is mutually
agreed to by the Company and each Buyer).

 

(d)           Form of Payment.  On the Closing Date, (i) each Buyer shall pay
its respective Purchase Price to the Company for the Common Shares to be issued
and sold to such Buyer at the Closing, by wire transfer of immediately
available funds in accordance with the Company’s written wire instructions, and
(ii) the Company shall deliver to each Buyer one or more stock
certificates, free and clear of all restrictive and other legends (except as
expressly provided in Section 2(g) hereof), evidencing the number of Common
Shares such Buyer is purchasing as is set forth opposite such Buyer’s name in
column (3) of the Schedule of Buyers, in all cases duly executed on behalf of
the Company and registered in the name of such Buyer.

 

2.                                       BUYER’S REPRESENTATIONS AND WARRANTIES.

 

Each Buyer
represents and warrants with respect to only itself that: 

 

(a)           No Public Sale or Distribution.  Such Buyer (i) is acquiring the Common Shares
and (ii) will acquire the Additional Shares, if any, in the ordinary course of
business for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act.  Such Buyer does not presently have any
agreement, arrangement or understanding, directly or indirectly, with any
Person to distribute or effect any distribution of any of the Securities (or
any securities which are derivatives thereof) to or through any person or
entity; provided, however, that by making the representations
herein, such Buyer does not agree to hold any of the Securities for any minimum
or other specific term and reserves the right to dispose of the Securities at
any time in accordance with or pursuant to a registration statement or an
exemption under the 1933 Act.  

 

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

 

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

 

2

 

(d)           Information.  Such Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by such Buyer.  Such Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company.  Neither such inquiries nor any other due
diligence investigations conducted by such Buyer or its advisors, if any, or
its representatives shall modify, amend or affect such Buyer’s right to rely on
the Company’s representations and warranties contained herein.  Such Buyer understands that its investment in
the Securities involves a high degree of risk and is able to afford a complete
loss of such investment.  Such Buyer has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Securities.

 

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

 

(f)            Transfer or Resale.  Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a form reasonably acceptable to the Company,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) such Buyer provides the Company with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule
144A promulgated under the 1933 Act, as amended (or a successor rule thereto)
(collectively, “Rule 144”); (ii)
any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the
seller (or the Person (as defined below) through whom the sale is made) may be
deemed to be an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933 Act or the rules
and regulations of the SEC thereunder; and (iii) neither the Company nor any
other Person is under any obligation to register the Securities under the 1933
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder. 
Notwithstanding the foregoing, the Securities may be pledged in
connection with a bona fide margin account or other loan secured by the
Securities and such pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Buyer effecting a pledge
of Securities shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document, including, without limitation, this Section 2(f);
provided that in order to make any sale, transfer or assignment of Securities,
such Buyer and its pledgee makes such disposition in accordance with or
pursuant to a registration statement or an exemption under the 1933 Act.

 

(g)           Legends.  Such Buyer understands that the certificates
or other instruments representing the Securities and, until such time as the
resale of the Common Shares or the Additional Shares, as applicable, have been
registered under the 1933 Act as contemplated

 

3

 

by the Registration Rights
Agreement or this Agreement, the stock certificates representing the
Securities, except as set forth below, shall bear any legend as required by the
“blue sky” laws of any state and a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of
such stock certificates):

 

THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

The legend set
forth above shall be removed and the Company shall issue a certificate without
such legend to the holder of the Securities upon which it is stamped or issue
to such holder by electronic delivery at the applicable balance account at DTC,
if (i) such Securities are registered for resale under the 1933 Act, (ii) in
connection with a sale, assignment or other transfer other than to an affiliate
or partner, shareholder or member of such holder, such holder provides the
Company with an opinion of counsel reasonably satisfactory to the Company, in a
customary and acceptable form, to the effect that such sale, assignment or
transfer of the Securities may be made without registration under the
applicable requirements of the 1933 Act, or (iii) such holder provides the
Company with reasonable assurance that the Securities can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A.

 

If the Company
shall fail for any reason or for no reason to issue to the holder of the
Securities within three (3) Trading Days (as defined in Section 4(m) below)
after the occurrence of any of (i) through (iii) above, a certificate without
such legend to the holder or to issue such Securities to such holder by
electronic delivery at the applicable balance account at DTC, and if on or
after such Trading Day the holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
holder of such Securities that the holder anticipated receiving without legend
from the Company (a “Buy-In”),
then the Company shall, within three (3) Business Days after such three (3)
Business Day period, and at the holder’s request and in the holder’s
discretion, either (i) pay cash to the holder in an amount equal to the holder’s
total purchase price (including brokerage commissions, if any) for the shares
of Common Stock so purchased (the “Buy-In
Price”), at which point the Company’s obligation to deliver such
unlegended Securities shall terminate, or (ii) promptly honor its obligation to
deliver to the holder such unlegended Securities as provided above and pay cash
to the holder in an amount equal to the excess (if any) of the Buy-In Price
over the product of (A) such number of shares of Common Stock, times (B) the
closing sales price of the Common Stock on the date of exercise.  As used herein, “Business Day” means any day other than Saturday, Sunday or
other

 

4

 

day on which
commercial banks in The City of New York are authorized or required by law to
remain closed.

 

(h)           Validity; Enforcement.  This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of such Buyer and shall constitute the legal, valid and binding
obligations of such Buyer enforceable against such Buyer in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors’ rights and remedies. 

 

(i)            No Conflicts.  The execution, delivery and performance by
such Buyer of this Agreement and the Registration Rights Agreement and the
consummation by such Buyer of the transactions contemplated hereby and thereby
will not (i) result in a violation of the organizational documents of such
Buyer or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which such Buyer is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment  or decree (including federal and state
securities laws) applicable to such Buyer, except in the case of clauses (ii)
and (iii) above, for such conflicts, defaults, rights or violations which would
not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the ability of such Buyer to perform its obligations
hereunder.

 

(j)            Residency.  Such Buyer is a resident of that jurisdiction
specified below its address on the Schedule of Buyers.

 

3.                                       REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company
represents and warrants to each of the Buyers that:

 

(a)           Organization and Qualification.  Each of the Company and its “Subsidiaries” (which for purposes of this Agreement
means any entity in which the Company, directly or indirectly, owns capital
stock or holds an equity or similar interest) are corporations duly organized
and validly existing in good standing under the laws of the jurisdiction in
which they are incorporated, and have the requisite corporate power and
authorization to own their properties and to carry on their business as now
being conducted.  Each of the Company and
its Subsidiaries is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which its ownership of property or
the nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. 
As used in this Agreement, “Material
Adverse Effect” means any material adverse effect on the business,
properties, assets, operations, results of operations, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, taken as a whole,
or on the transactions contemplated hereby and the other Transaction Documents
or by the agreements and instruments to be entered into in connection herewith
or therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below).  The Company has no Subsidiaries except as set
forth on Schedule 3(a).  

 

5

 

(b)           Authorization; Enforcement;
Validity.  The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 5) and each of
the other agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the “Transaction Documents”) and to issue the
Securities in accordance with the terms hereof. 
The execution and delivery of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby, including, without limitation, the issuance of the Common Shares and
the Additional Shares, if applicable, and the reservation for issuance and the
issuance of the Additional Shares have been duly authorized by the Company’s
Board of Directors and no further consent or authorization is required by the
Company, its Board of Directors or its stockholders.  This Agreement and the other Transaction
Documents have been duly executed and delivered by the Company, and constitute
the legal, valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies.

 

(c)           Issuance of Securities.  The Common Shares and the Additional Shares
are duly authorized and, upon issuance in accordance with the terms hereof,
shall be validly issued and free from all taxes, liens and charges with respect
to the issue thereof and the Common Shares and the Additional Shares, if and
when issued, shall be fully paid and nonassessable with the holders being
entitled to all rights accorded to a holder of Common Stock.  As of the Closing Date, the Company shall
have duly authorized and reserved for issuance a number of shares of Common
Stock which equals the number of Additional Shares.  Until such time as the Company has effected
the Acquisition (as defined below), the Company take all action necessary to
reserve and keep available out of its authorized and unissued Capital Stock,
solely for the purpose of issuing Additional Shares pursuant hereto, 6,400,000
shares of Common Stock (which number shall be adjusted as set forth
below).  The issuance by the Company of
the Securities is exempt from registration under the 1933 Act.

 

(d)           No Conflicts.  The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Common Shares and the reservation for issuance
and issuance of the Additional Shares) will not (i) result in a violation of
the Certificate of Incorporation (as defined below) or Bylaws (as defined
below) of the Company or any of its Subsidiaries or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture
or instrument to which the Company or any of its Subsidiaries is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and the
rules and regulations of the OTC Bulletin Board as reported on Bloomberg
Financial Markets LP (the “Principal Market”))
applicable to the Company or any of its Subsidiaries or by which any property
or asset of the Company or any of its Subsidiaries is bound or affected.

 

6

 

(e)           Consents.  Except for filings and approvals required by
the Principal Market and Form D filings by the Company, to be made with the SEC
and with state securities regulatory authorities, the Company is not required
to obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction
Documents, in each case in accordance with the terms hereof or thereof.  The Company and its Subsidiaries are unaware
of any facts or circumstances that might prevent the Company from obtaining or
effecting any of the registration, application or filings pursuant to the
preceding sentence.  The Company is not
in violation of the listing requirements of the Principal Market and has no
knowledge of any facts that would reasonably lead to delisting or suspension of
the Common Stock in the foreseeable future.

 

(f)            Acknowledgment Regarding Buyer’s
Purchase of Securities.  The Company
acknowledges and agrees that each Buyer is acting solely in the capacity of arm’s
length purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and that no Buyer is (i) an officer or director
of the Company, (ii) an “affiliate” of the Company (as defined in Rule 144) or
(iii) to the knowledge of the Company, a “beneficial owner” of more than 10% of
the Common Stock (as defined for purposes of Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the “1934
Act”)).  The Company further
acknowledges that no Buyer is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby, and any advice given by a
Buyer or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to such Buyer’s purchase of the Securities.  The Company further represents to each Buyer
that the Company’s decision to enter into the Transaction Documents has been
based solely on the independent evaluation by the Company and its representatives.

 

(g)           No General Solicitation; Placement
Agent’s Fees.  Neither the Company,
nor any of its affiliates, nor any Person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offer or sale of the
Securities.  The Company shall be
responsible for the payment of any placement agent’s fees, financial advisory
fees, or brokers’ commissions (other than for Persons engaged by any Buyer or
its investment advisor, if any) relating to or arising out of the transactions
contemplated hereby.  The Company shall
pay, and hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, attorney’s fees and out-of-pocket expenses)
arising in connection with any such claim. 
The Company has not engaged any placement agent or other agent in
connection with the sale of the Securities.

 

(h)           No Integrated Offering.  None of the Company, its Subsidiaries, any of
their affiliates, and any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of the 1933 Act
in a manner that would make unavailable the exemption from registration
afforded by Section 4(2) of the Securities Act or Rule 506 of Regulation D
promulgated under the Securities Act, or

 

7

 

any applicable stockholder
approval provisions, including, without limitation, under the rules and
regulations of any exchange or automated quotation system on which any of the
securities of the Company are listed or designated.  None of the Company, its Subsidiaries, their
affiliates and any Person acting on their behalf will take any action or steps
referred to in the preceding sentence that would require registration of any of
the Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.

 

(i)            Dilutive Effect.  The Company understands and acknowledges that
its obligation to issue any Additional Shares hereunder, shall be, should it be
required by reason of this Agreement, absolute and unconditional regardless of
the dilutive effect that such issuance may have on the ownership interests of
other stockholders of the Company.

 

(j)            Application of Takeover Protections;
Rights Agreement.  The Company and
its board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation or the laws of
the State of Delaware which is or could become applicable to any Buyer as a
result of the transactions contemplated by this Agreement, including, without
limitation, the Company’s issuance of the Securities and any Buyer’s ownership
of the Securities.  The Company has not
adopted a shareholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change in control of
the Company.

 

(k)           SEC Documents; Financial
Statements.  Except as set forth on
Schedule 3(k), since September 13, 2005, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the 1934 Act (all
of the foregoing filed prior to the date hereof or prior to the date of the
Closing, and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the “SEC Documents”).  There are no SEC Documents which are not
available on the SEC’s EDGAR system.  As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.  As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto.  Such financial statements have been prepared
in accordance with generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise indicated
in such financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results
of its operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).  No other information provided by or on behalf
of the Company to the Buyers which is not included in the SEC Documents,
including, without limitation,

 

8

 

information referred to in
Section 2(d) of this Agreement, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstance under which they are or
were made, not misleading.

 

(l)            Absence of Certain Changes.  Except as disclosed in Schedule 3(l), since
December 31, 2005, there has been no material adverse change and no material
adverse development in the business, properties, operations, condition
(financial or otherwise), results of operations or prospects of the Company or
its Subsidiaries.  Except as disclosed in
Schedule 3(1), since December 31, 2005, the Company has not (i) declared
or paid any dividends, (ii) sold any assets, individually or in the aggregate,
in excess of $100,000 outside of the ordinary course of business or (iii) had
capital expenditures, individually or in the aggregate, in excess of
$100,000.  The Company has not taken any
steps to seek protection pursuant to any bankruptcy law nor does the Company
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact which
would reasonably lead a creditor to do so. 
The Company is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing, will not be Insolvent
(as defined below).  For purposes of this
Section 3(l), “Insolvent” means
(i) the Company is unable to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured, (ii) the Company intends to incur or believes that it will incur debts
that would be beyond its ability to pay as such debts mature or (iii) the Company
has unreasonably small capital with which to conduct the business in which it
is engaged as such business is now conducted or is about to be conducted.

 

(m)          No Undisclosed Events, Liabilities,
Developments or Circumstances.  No
event, liability, development or circumstance has occurred or exists with
respect to the Company or its Subsidiaries or their respective business,
properties, prospects, operations or financial condition, that would be
required to have been disclosed by the Company as of the date hereof under
applicable securities laws and which has not been publicly announced.

 

(n)           Conduct of Business; Regulatory
Permits.  Neither the Company nor any
of its Subsidiaries is in violation of any term of or in default under the
Certificate of Incorporation or Bylaws or their organizational charter or
bylaws, respectively.  To the best
knowledge of the Company, neither the Company nor any Subsidiary is in
violation of any judgment, decree or order or any statute, ordinance, rule or
regulation applicable to the Company or its Subsidiaries, and neither the
Company nor any of its Subsidiaries will conduct its business in violation of
any of the foregoing, except in each case for possible violations which would
not, individually or in the aggregate, have a Material Adverse Effect.  Without limiting the generality of the
foregoing, the Company is not in violation of any of the rules, regulations or
requirements of the Principal Market and has no knowledge of any facts or
circumstances that would reasonably lead to delisting or suspension of the
Common Stock by the Principal Market in the foreseeable future.  Since December 31, 2005, (i) the Common Stock
has been designated for quotation or listed on the Principal Market, (ii)
trading in the Common Stock has not been suspended by the SEC or the Principal
Market and (iii) the Company has received no communication, written or oral,
from the SEC or the Principal Market regarding the suspension or delisting of
the Common Stock from the Principal Market. 
The Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, except
where the

 

9

 

failure to possess such
certificates, authorizations or permits would not have, individually or in the
aggregate, a Material Adverse Effect, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.

 

(o)           Foreign Corrupt Practices.  Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other Person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.

 

(p)           Sarbanes-Oxley Act.  The Company is in compliance with any and all
requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the
date hereof and applicable to the Company, and any and all applicable rules and
regulations promulgated by the SEC thereunder that are effective as of the date
hereof, except where such noncompliance would not have, individually or in the
aggregate, a Material Adverse Effect.

 

(q)           Transactions With Affiliates.  Except as set forth in the Company’s Annual
Report on Form 10-KSB for the year ended December 31, 2005, none of the officers, directors or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for ordinary course services as
employees, officers or directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any such officer, director or employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any such
officer, director, or employee has a substantial interest or is an officer,
director, trustee or partner.

 

(r)            Equity Capitalization.  As
of the date hereof, the authorized capital stock of the Company consists of (x)
250,000,000 shares of Common Stock, of which as of the date hereof, 194,609,739
shares are issued, 194,609,739 shares are outstanding; 3,444,444 shares are
reserved (or to be reserved) for issuance pursuant to the Company’s employee
incentive plan and other options and warrants outstanding and  800,000 shares are reserved (or to be
reserved) for issuance pursuant to securities exercisable or exchangeable for,
or convertible into, shares of Common Stock and (y) 15,000,000 shares of
preferred stock, of which as of the date hereof, no shares are issued and
outstanding.  All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully paid
and nonassessable.  Except as set forth
above in this Section 3(r) or on Schedule 3(r): (i) no shares of the
Company’s capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company; (ii)
there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, or exercisable or exchangeable for, any shares of
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of

 

10

 

the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital
stock of the Company or any of its Subsidiaries; (iii) there are no outstanding
debt securities, notes, credit agreements, credit facilities or other
agreements, documents or instruments evidencing Indebtedness (as defined below)
of the Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either singly or in the
aggregate, filed in connection with the Company; (v) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act (except the
Registration Rights Agreement); (vi) there are no outstanding securities or
instruments of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) the Company does not have any stock appreciation rights
or “phantom stock” plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents (as defined herein) but not so
disclosed in the SEC Documents, other than those incurred in the ordinary
course of the Company’s or any Subsidiary’s respective businesses and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect.  The Company has furnished or
made available to each Buyer upon such Buyer’s request, true, correct and
complete copies of the Company’s Certificate of Incorporation, as amended and
as in effect on the date hereof (the “Certificate
of Incorporation”), and the Company’s Bylaws, as amended and as in
effect on the date hereof (the “Bylaws”),
and the terms of all securities convertible into, or exercisable or exchangeable
for, shares of Common Stock and the material rights of the holders thereof in
respect thereto.  Schedule 3(r)
sets forth the shares of Common Stock owned beneficially or of record and
Common Stock Equivalents (as defined below) held by each director and executive
officer.

 

(s)           Indebtedness and Other Contracts.  Except as disclosed in Schedule 3(s),
neither the Company nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument would result in a Material
Adverse Effect, (iii) is in violation of any term of or in default under any
contract, agreement or instrument relating to any Indebtedness, except where
such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
agreement or instrument relating to any Indebtedness, the performance of which,
in the judgment of the Company’s officers, has or is expected to have a
Material Adverse Effect.  For purposes of
this Agreement: (x) “Indebtedness”
of the Company means, without duplication (A) all indebtedness for borrowed
money, (B) all obligations issued, undertaken or assumed as the deferred
purchase price of property or services (other than trade payables entered into
in the ordinary course of business), (C) all reimbursement or payment
obligations with respect to letters of credit, surety bonds and other similar
instruments, (D) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses, (E) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in

 

11

 

either case with respect to any
property or assets acquired with the proceeds of such indebtedness (even though
the rights and remedies of the seller or bank under such agreement in the event
of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in connection
with generally accepted accounting principles, consistently applied for the
periods covered thereby, is classified as a capital lease, (G) all indebtedness
referred to in clauses (A) through (F) above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any mortgage, lien, pledge, charge, security interest or other
encumbrance upon or in any property or assets (including accounts and contract
rights) owned by any Person, even though the Person which owns such assets or
property has not assumed or become liable for the payment of such indebtedness,
and (H) all Contingent Obligations in respect of indebtedness or obligations of
others of the kinds referred to in clauses (A) through (G) above; (y) “Contingent Obligation” means, as to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to any indebtedness, lease, dividend or other obligation of
another Person if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance to the
obligee of such liability that such liability will be paid or discharged, or
that any agreements relating thereto will be complied with, or that the holders
of such liability will be protected (in whole or in part) against loss with
respect thereto; and (z) “Person”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof.

 

(t)            Absence of Litigation.  Except as set forth on Schedule 3(t)
there is no action, suit, proceeding, inquiry or investigation before or by the
Principal Market, any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, the Common Stock or any of its Subsidiaries
or any of the Company’s or the Company’s Subsidiary’s officers or directors,
whether of a civil or criminal nature or otherwise.  The matters set forth on Schedule 3(t)
would not have a Material Adverse Effect. 

 

(u)           Insurance.  The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged.  Neither the
Company nor any Subsidiary has been refused any insurance coverage sought or
applied for.  Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.

 

(v)           Employee Relations.  (i) Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union.  The Company and its
Subsidiaries believe that their relations with their employees are good.  No executive officer of the Company (as
defined in Rule 501(f) of the 1933 Act) has notified the Company that such
officer intends to leave the Company or otherwise terminate such officer’s
employment with the Company.  No
executive officer of the Company, to the knowledge of the Company, is, or is
now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition

 

12

 

agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing matters.

 

(ii)         The Company and its Subsidiaries are in
compliance with all federal, state, local and foreign laws and regulations
respecting labor, employment and employment practices and benefits, terms and
conditions of employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.

 

(w)          Title.  The Company and its Subsidiaries have good
and marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except as disclosed on Schedule 3(w) and for
such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and any of its Subsidiaries.  Any
real property and facilities held under lease by the Company and any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.

 

(x)            Intellectual Property Rights.  The Company and its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and other intellectual property rights (“Intellectual Property Rights”) necessary to conduct their respective
businesses as now conducted.  None of the
Company’s Intellectual Property Rights have expired or terminated, or are
expected to expire or terminate within three years from the date of this
Agreement.  The Company does not have any
knowledge of any infringement by the Company or its Subsidiaries of
Intellectual Property Rights of others. 
There is no claim, action or proceeding being made or brought, or to the
knowledge of the Company, being threatened, against the Company or any of its
Subsidiaries regarding its Intellectual Property Rights.  The Company is unaware of any facts or
circumstances which might give rise to any of the foregoing infringements or
claims, actions or proceedings.  The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their Intellectual Property
Rights.

 

(y)           Environmental Laws.  The Company and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect. 
The term “Environmental Laws”
means all federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes

 

13

 

(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.

 

(z)            Subsidiary Rights.  The Company or one of its Subsidiaries has
the unrestricted right to vote, and (subject to limitations imposed by
applicable law) to receive dividends and distributions on, all capital
securities of its Subsidiaries as owned by the Company or such Subsidiary.

 

(aa)         Tax Status.  The Company and each of its Subsidiaries (i)
has made or filed all federal and state income and all other tax returns, reports
and declarations (or extensions thereof) required by any jurisdiction to which
it is subject, (ii) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and (iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. 
There are no unpaid taxes in any material amount claimed to be due by
the taxing authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim.

 

(bb)         Internal Accounting and Disclosure Controls.  The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset and liability
accountability, (iii) access to assets or incurrence of liabilities is
permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets and liabilities
is compared with the existing assets and liabilities at reasonable intervals
and appropriate action is taken with respect to any difference.  Other than as described in the Annual Report
on Form 10-KSB filed with the SEC for the fiscal year ended December 31, 2005,
the Company does not currently maintain disclosure controls and procedures (as
such term is defined in Rule 13a-14 under the 1934 Act) that are effective in
ensuring that information required to be disclosed by the Company in the
reports that it files or submits under the 1934 Act is recorded, processed,
summarized and reported, within the time periods specified in the rules and
forms of the SEC, including, without limitation, controls and procedures
designed in to ensure that information required to be disclosed by the Company
in the reports that it files or submits under the 1934 Act is accumulated and
communicated to the Company’s management, including its principal executive
officer or officers and its principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure. Specifically, the independent auditors
for the Company identified deficiencies in the Company’s controls related to
valuation and recording of fixed assets.

 

(cc)         Off Balance Sheet Arrangements.  There is no transaction, arrangement, or
other relationship between the Company and an unconsolidated or other off
balance sheet entity that is required to be disclosed by the Company in its
Exchange Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.

 

14

 

(dd)         Manipulation of Price.  The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of any of
the Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any person any compensation for soliciting another to purchase any other
securities of the Company.

 

(ee)         Transfer Taxes.  On the Closing Date, all stock transfer or
other taxes (other than income or similar taxes) which are required to be paid
in connection with the sale and transfer of the Securities to be sold to each
Buyer hereunder will be, or will have been, fully paid or provided for by the
Company, and all laws imposing such taxes will be or will have been complied
with.

 

(ff)           Disclosure.  The Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Buyers or their
respective agents or counsel with any information that constitutes or could
reasonably be expected to constitute material, nonpublic information.  The Company understands and confirms that each
of the Buyers will rely on the foregoing representations in effecting
transactions in securities of the Company. 
All disclosure provided to the Buyers regarding the Company, its
business and the transactions contemplated hereby, including the Schedules to
this Agreement, furnished by or on behalf of the Company are true and correct
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.  Each press release issued by the Company
since September 13, 2005 did not at the time of release contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading.  No event or circumstance has occurred or
information exists with respect to the Company or any Subsidiary or either of
its or their respective business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed (assuming for this purpose that the Company’s
reports filed under the Exchange Act of 1934, as amended, are being
incorporated into an effective registration statement filed by the Company
under the 1933 Act).  The Company
acknowledges and agrees that no Buyer makes or has made any representations or
warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 2.

 

4.                                       COVENANTS, ACKNOWLEDGEMENTS AND ADDITIONAL
AGREEMENTS OF THE PARTIES.

 

(a)           Best Efforts.  Each party shall use its best efforts timely
to satisfy each of the covenants and the conditions to be satisfied by it as
provided in Sections 5, 6 and 7 of this Agreement.

 

(b)           Form D and Blue Sky; Other Filings
and Consents.  The Company agrees to
file a Form D in respect of the Securities as required under Regulation D and
to provide a copy thereof to each Buyer promptly after such filing.  The Company, as promptly as reasonably
practicable after the date hereof, shall take such action as the Company shall
reasonably

 

15

 

determine is necessary in order
to obtain an exemption for or to qualify the Securities for sale to the Buyers
at the Closing pursuant to this Agreement under applicable securities or “Blue
Sky” laws of the states of the United States (or to obtain an exemption from
such qualification), and shall promptly thereafter provide evidence of any such
action so taken to the Buyers.  The
Company shall make all filings and reports relating to the offer and sale of
the Securities required under applicable securities or “Blue Sky” laws of the
states of the United States following the Closing Date.  The Company undertakes as promptly as
reasonably practicable after the date hereof to (i) file all other filings and
registrations, or (ii) use its reasonable best efforts to obtain, as
applicable, all consents, authorizations, orders, in each case, which are
required of the Company pursuant to Section 3(e) hereof.

 

(c)           Reporting Status.  Until the date on which the Investors (as
defined in the Registration Rights Agreement) shall have sold all the Common
Shares and Additional Shares, if applicable (the “Reporting Period”), the Company shall timely file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.

 

(d)           Use of Proceeds.  The Company will use the proceeds from the
sale of the Common Shares to acquire that certain ethanol production plant (the
“Acquisition”) more specifically
described on the letter of intent attached hereto as Exhibit B; provided
however that if the Acquisition has not occurred prior to August 31, 2006, the
Company may use the proceeds from the sale of the Common Shares for general and
administrative expenses, including the repayment of any outstanding
Indebtedness of the Company or any of its Subsidiaries, but not for the
redemption or repurchase of any of its equity securities.

 

(e)           Financial Information.  The Company agrees to send the following to
each Investor during the Reporting Period (i) unless the following are filed
with the SEC through EDGAR and are available to the public through the EDGAR system,
within one (1) Business Day after the filing thereof with the SEC, a copy of
its Annual Reports on Form 10-KSB, its Quarterly Reports on Form 10-QSB, any
Current Reports on Form 8-K and any registration statements (other than on Form
S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as the
release thereof, facsimile copies of all press releases issued by the Company
or any of its Subsidiaries, and (iii) copies of any notices and other
information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.  

 

(f)            Listing.  The Company shall promptly secure the listing
of all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national securities exchange and automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Registrable Securities
from time to time issuable under the terms of the Transaction Documents.  The Company shall maintain the Common Stock’s
authorization for listing on the Principal Market.  Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock on the Principal Market. The

 

16

 

Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(f).

 

(g)           Fees.  Subject to Section 8 below, at the Closing,
the Company shall reimburse up to $30,000 of the fees and expenses in connection with the preparation, execution
and performance of this Agreement and the transactions contemplated hereunder,of Kamunting Street Master Fund, Ltd. (a
Buyer) or its designee(s) (in addition to any other expense amounts paid to any
Buyer prior to the date of this Agreement), which amount shall be withheld by
such Buyer from its Purchase Price at the Closing.  The Company shall be responsible for the
payment of any placement agent’s fees, financial advisory fees, or broker’s
commissions (other than for Persons engaged by any Buyer) relating to or arising
out of the transactions contemplated hereby. 
The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, reasonable attorney’s
fees and out-of-pocket expenses) arising in connection with any claim relating
to any such payment.  Except as otherwise
set forth in the Transaction Documents, each party to this Agreement shall bear
its own expenses in connection with the sale of the Securities to the Buyers.

 

(h)           Pledge of Securities.  The Company acknowledges and agrees that the
Securities may be pledged by an Investor in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities.  The pledge of Securities
shall not be deemed to be a transfer, sale or assignment of the Securities
hereunder, and no Investor effecting a pledge of Securities shall be required
to provide the Company with any notice thereof or otherwise make any delivery
to the Company pursuant to this Agreement or any other Transaction Document,
including, without limitation, Section 2(f) of this Agreement; provided that an
Investor and its pledgee shall be required to comply with the provisions of
Section 2(f) of this Agreement in order to effect a sale, transfer or assignment
of Securities to such pledgee.  The
Company hereby agrees to execute and deliver such documentation as a pledgee of
the Securities may reasonably request in connection with a pledge of the
Securities to such pledgee by an Investor.

 

(i)            Disclosure of Transactions and
Other Material Information.  The
Company shall, on or before 8:30 a.m., New York City Time, on the first
Business Day after the date of this Agreement, issue a press release (the “Press Release”) reasonably acceptable to the Buyers
disclosing all material terms of the transactions contemplated hereby.  On or before 8:30 a.m., New York City Time,
on the first Business Day following the Closing Date, the Company shall file a
Current Report on Form 8-K describing the terms of the transactions contemplated
by the Transaction Documents in the form required by the 1934 Act, and
attaching the material Transaction Documents (including, without limitation,
this Agreement (and all schedules to this Agreement) and the Registration
Rights Agreement) as exhibits to such filing (including all attachments, the “8-K Filing”).  From
and after the issuance of the Press Release, no Buyer shall be in possession of
any material, nonpublic information received from the Company, any of its
Subsidiaries or any of its respective officers, directors, employees or agents,
that is not disclosed in the Press Release. 
The Company shall not, and shall cause each of its Subsidiaries and each
of their respective officers, directors, employees and agents, not to, provide
any Buyer with any material, nonpublic information regarding the Company or any
of its Subsidiaries from and after the filing of the Press Release without the
express written consent of such Buyer. 
In the event of a breach of the foregoing covenant by the Company, and
provided that the Company shall have

 

17

 

failed (following proper
written request therefor) to make an appropriate public disclosure consistent
with the requirements of Regulation FD, any Subsidiary, or its each of
respective officers, directors, employees and agents, in addition to any other
remedy provided herein or in the Transaction Documents, a Buyer shall have the
right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information without the
prior approval by the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents.  No Buyer shall have any liability to the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, shareholders or agents for any such disclosure.  Subject to the foregoing, neither the Company
nor any Buyer shall issue any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however,
that the Company shall be entitled, without the prior approval of any Buyer, to
make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations, including the applicable rules and regulations of the Principal
Market (provided that in the case of clause (i) each Buyer shall be consulted by
the Company in connection with any such press release or other public
disclosure prior to its release).  

 

(j)            Additional Registration
Statements.  Until the date that is
90 calendar days from the date the Registration Statement (as defined in the
Registration Rights Agreement) is first declared effective by the SEC (the “Effective Date”), the Company will use its
reasonable best efforts to not file a registration statement under the 1933 Act
relating to securities that are not the Securities.

 

(k)           Corporate Existence.  So long as the Company may be obligated to
issue Additional Shares hereunder, it shall maintain its corporate existence
and shall not sell all or substantially all of the Company’s assets, except in
the event of a merger or consolidation or sale of all or substantially all of
the Company’s assets, where the surviving or successor entity in such
transaction (i) assumes the Company’s obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a publicly
traded corporation whose common stock is quoted on or listed for trading on the
Principal Market, The Nasdaq National Market, the New York Stock Exchange or
the American Stock Exchange.

 

(l)            Reservation of Shares.  Until the Company either issues the
Additional Shares as required hereby or makes the Acquisition, the Company
shall take all action necessary to at all times have authorized, and reserved
for the purpose of issuance of Additional Shares no less than 6,400,000 shares
of Common Stock.

 

(m)          Additional Issuances of Securities.

 

(i)            For purposes of this Section 4, the
following definitions shall apply.

 

(1)           “Approved Stock Plan” means any employee benefit plan
which has been approved by the Board of Directors of the Company, pursuant to
which the Company’s securities may be issued to any employee, officer, director
or consultant for services provided to the Company.

 

18

 

(2)           “Common Stock Equivalents”
means, collectively, Options and Convertible Securities.

 

(3)           “Convertible Securities”
means any stock or securities (other than Options) of the Company convertible
into or exercisable or exchangeable for Common Stock.

 

(4)           “Excluded
Securities” means Additional Shares or Common Stock issued or issuable:
(i) in connection with any Approved Stock Plan; (ii) upon exercise of any
Options or conversion of any Convertible Securities which are outstanding on
the day immediately preceding the Closing Date, provided that the terms of such
Options or Convertible Securities are not amended, modified or changed on or
after the Closing Date; (iii) pursuant to a bona fide firm commitment
underwritten public offering with a nationally recognized underwriter which
generates gross proceeds to the Company in excess of $10,000,000 (other than an
“at-the-market offering” as defined in Rule 415(a)(4) under the 1933 Act and “equity
lines”); (iv) upon exercise of any Options or conversion of any Convertible
Securities that are outstanding on the day immediately preceding the Closing
Date, provided that the price and number of shares issuable under such Options
or Convertible Securities are not amended, modified or changed on or after the
Closing Date; (v) in connection with any acquisition by the Company, whether
through an acquisition of stock or a merger of any business, assets or
technologies the primary purpose of which is not to raise equity capital in an
amount not to exceed, in the aggregate, 10% of the outstanding shares of Common
Stock in any calendar year; and (vi) an anticipated issuance of no more than 10
million shares of Common Stock to an agricultural conglomerate. 

 

(5)           “Options”
means any rights, warrants or options to subscribe for or purchase Common Stock
or Convertible Securities.

 

(6)           “Trading
Day” means any day on which the Common Stock is traded on the
Principal Market, or, if the Principal Market is not the principal trading
market for the Common Stock, then on the principal securities exchange or
securities market on which the Common Stock is then traded; provided that “Trading
Day” shall not include any day on which the Common Stock is scheduled to trade
on such exchange or market for less than 4.5 hours or any day that the Common
Stock is suspended from trading during the final hour of trading on such exchange
or market (or if such exchange or market does not designate in advance the
closing time of trading on such exchange or market, then during the hour ending
at 4:00 p.m., New York City Time).

 

(ii)         From the date hereof until the date
that is 120 calendar days following the Effective Date until the date that is
the two year anniversary of the Closing Date, the Company will not, directly or
indirectly, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition of) any of its or its Subsidiaries’ equity or equity equivalent
securities, including without limitation any debt, preferred stock or other
instrument or security that is, at any time

 

19

 

during its life and under any
circumstances, convertible into or exchangeable or exercisable for Common Stock
or Common Stock Equivalents (any such offer, sale, grant, disposition or
announcement being referred to as a “Subsequent
Placement”) unless the Company shall have first complied with this
Section 4(m)(ii).

 

(1)           The Company shall
deliver to each Buyer a written notice (the ”Offer Notice”) of any proposed or intended issuance or sale or
exchange (the ”Offer”) of the
securities being offered (the “Offered
Securities”) in a Subsequent Placement, which Offer Notice shall (w)
identify and describe the Offered Securities, (x) describe the price and
other terms upon which they are to be issued, sold or exchanged, and the number
or amount of the Offered Securities to be issued, sold or exchanged,
(y) identify the persons or entities (if known) to which or with which the
Offered Securities are to be offered, issued, sold or exchanged and (z) offer
to issue and sell to or exchange with such Buyers a pro rata portion of 25% of
the Offered Securities, allocated among such Buyers (a) based on such Buyer’s
pro rata portion of the aggregate shares of Common Stock purchased hereunder
(the “Basic Amount”), and (b) with
respect to each Buyer that elects to purchase its Basic Amount, any additional
portion of the Offered Securities attributable to the Basic Amounts of other
Buyers as such Buyer shall indicate it will purchase or acquire should the
other Buyers subscribe for less than their Basic Amounts (the “Undersubscription Amount”).

 

(2)           To accept an Offer,
in whole or in part, such Buyer must deliver a written notice to the Company
prior to the end of the seventh (7th) Business Day after such Buyer’s
receipt of the Offer Notice (the “Offer Period”),
setting forth the portion of such Buyer’s Basic Amount that such Buyer elects
to purchase and, if such Buyer shall elect to purchase all of its Basic Amount,
the Undersubscription Amount, if any, that such Buyer elects to purchase (in
either case, the “Notice of Acceptance”).  If the Basic Amounts subscribed for by all
Buyers are less than the total of all of the Basic Amounts, then each Buyer who
has set forth an Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however,
that if the Undersubscription Amounts subscribed for exceed the difference
between the total of all the Basic Amounts and the Basic Amounts subscribed for
(the “Available Undersubscription Amount”),
each Buyer who has subscribed for any Undersubscription Amount shall be
entitled to purchase only that portion of the Available Undersubscription
Amount as the Basic Amount of such Buyer bears to the total Basic Amounts of
all Buyers that have subscribed for Undersubscription Amounts, subject to
rounding by the Company to the extent its deems reasonably necessary. 

 

(3)           The Company shall
have twenty (20) Business Days from the expiration of the Offer Period above to
offer, issue, sell or exchange all or any part of such Offered Securities as to
which a Notice of Acceptance has not been given by the Buyers (the “Refused Securities”), but only to the
offerees described in the Offer Notice (if so described therein) and only upon
terms and conditions (including, without limitation, unit prices and interest
rates) that are not more favorable to the acquiring person or persons or less
favorable to the Company than those set forth in the Offer Notice. 

 

20

 

(4)           In the event the
Company shall propose to sell less than all the Refused Securities (any such
sale to be in the manner and on the terms specified in Section 4(m)(ii)(3)
above), then each Buyer may, at its sole option and in its sole discretion,
reduce the number or amount of the Offered Securities specified in its Notice
of Acceptance to an amount that shall be not less than the number or amount of
the Offered Securities that such Buyer elected to purchase pursuant to Section
4(m)(ii)(2) above multiplied by a fraction, (i) the numerator of which shall be
the number or amount of Offered Securities the Company actually proposes to
issue, sell or exchange (including Offered Securities to be issued or sold to
Buyers pursuant to Section 4(m)(ii)(3) above prior to such reduction) and (ii)
the denominator of which shall be the original amount of the Offered
Securities.  In the event that any Buyer
so elects to reduce the number or amount of Offered Securities specified in its
Notice of Acceptance, the Company may not issue, sell or exchange more than the
reduced number or amount of the Offered Securities unless and until such
securities have again been offered to the Buyers in accordance with
Section 4(m)(ii)(1) above.

 

(5)           Upon the closing of
the issuance, sale or exchange of all or less than all of the Refused
Securities, the Buyers shall acquire from the Company, and the Company shall
issue to the Buyers, the number or amount of Offered Securities specified in
the Notices of Acceptance, as reduced pursuant to Section 4(m)(ii)(3) above if
the Buyers have so elected, upon the terms and conditions specified in the
Offer.  The purchase by the Buyers of any
Offered Securities is subject in all cases to the preparation, execution and
delivery by the Company and the Buyers of a purchase agreement relating to such
Offered Securities reasonably satisfactory in form and substance to the Buyers
and their respective counsel.

 

(6)           Any Offered
Securities not acquired by the Buyers or other persons in accordance with
Section 4(m)(ii)(3) above may not be issued, sold or exchanged until they are
again offered to the Buyers under the procedures specified in this Agreement.

 

(iii)          The restrictions contained in
subsection (ii) of this Section 4(m) shall not apply in connection with any
Excluded Securities.

 

(n)           Certain Adjustments. Except in respect of Excluded Securities,
if, at any time until the six month anniversary of the Effective Date (as defined in the Registration
Rights Agreement), the Company
shall issue or sell, or agree to issue or sell (if the Company shall issue or
sell after such period pursuant to such agreement), shares of Common Stock
(other than the Additional Shares) or Common Stock Equivalents to any Person or
Persons for a price per share (less than the Purchase Price Per Common Share (a
“Trigger Issuance”), then, and in each
such case, the Company shall, at each Buyer’s sole option, without payment of
additional consideration in connection with the Trigger Issuance: 

 

(i)            if such Trigger Issuance is in connection with a
Common Stock financing, issue to such Buyer, in cash or shares of Common Stock
(in the Company’s discretion), an amount of shares of Common Stock (the “Dilution Shares”) (determined by dividing the Cash Amount by
the price at which such Common Stock or Common Stock

 

21

 

Equivalents are being sold) or
cash equal to the value of the product of (i) the number of Common Shares (as
the same shall be adjusted for any previous adjustments pursuant to this
Section 4(n)) purchased by such Buyer and (ii) the Purchase Price Per Common
Share minus the price at which such Common Stock or Common Stock
Equivalents are being sold (the product of (i) and (ii), the “Cash Amount”), or

 

(ii)           if such Trigger Issuance is in connection with a
preferred stock, convertible debt or other Convertible Security financing,
exchange for such Buyer the Common Shares received by such Buyer into the
amount of such preferred stock or convertible debt or other Convertible
Security (the “Convertible Dilution Shares”) that
such Buyer could purchase at the Purchase Price Per Common Share on the same
terms and conditions as the Trigger Issuance.

 

(iii)        Any Dilution Shares or Convertible Dilution Shares
issued to such Buyer pursuant to this Section 4(n) shall be deemed to be
Registrable Securities subject to the same registration rights, mutatis mutandis, as set forth in the Registration Rights
Agreement, with the Closing Date being deemed the date of issuance of the
applicable Dilution Shares or Convertible Dilution Shares, as applicable, for
purposes of determining applicable dates thereunder.

 

(o)           Opinion of Counsel.  The Company shall use its reasonable best
efforts to cause Scheef & Stone, LLP, the Company’s outside counsel (“Company Counsel”) to deliver to each Buyer
the opinion of Company Counsel, dated as of and delivered no later that the
fifth (5th) Business
Day following the Closing Date, in substantially the form of Exhibit C
attached hereto.   

 

(p)           Consummation of Acquisition or
Issuance of Additional Shares; Registration Rights.  If the Company shall not have effected the
Acquisition by August 31, 2006, then within three Business Days of such date
(the “Deadline Date”), the Company
shall issue to the Buyers those numbers of Additional Shares set forth next to
each such Buyer’s name in column (5) of Schedule A; provided that (i) such
number shall be appropriately adjusted for any stock split, reverse stock
split, stock combination, reclassification, reorganization or similar event
after the date of this Agreement, and (ii) each such Buyer shall tender in
exchange therefor that amount obtained by multiplying the number of Additional
Shares being issued pursuant to this Section 4(p) by the par value of the
Common Stock (such amount, the “Additional Purchase Price”).  The issuance date of any such Additional
Shares shall be August 31, 2006.  Any
Additional Shares issued to such Buyer pursuant to this Section 4(p) shall be
deemed to be Registrable Securities subject to the same registration rights, mutatis mutandis, as set forth in the Registration Rights
Agreement, with the Closing Date being deemed the date of issuance of the
Additional Shares for purposes of determining applicable dates thereunder.  If the Company shall fail for any reason or
for no reason to issue to such holder certificates representing Additional
Shares by the Deadline Date, then, in addition to all other remedies available
to the holder, if on or after the Trading Day (as defined in Section 4(m))
immediately following such three Business Day period, the holder purchases (in
an open market transaction or otherwise) shares of Common Stock that the holder
anticipated receiving from the Company (an “Additional
Share Buy-In”), then the Company shall, within three Business Days
after the holder’s request and in the holder’s discretion, either (i) pay cash
to the holder in an amount equal to the holder’s total purchase price

 

22

 

(including
brokerage commissions, if any) for the shares of Common Stock so purchased (the
“Additional Share Buy-In Price”),
at which point the Company’s obligation to deliver such certificate (and to
issue such Additional Shares) shall terminate, or (ii) promptly honor its
obligation to deliver to the holder a certificate or certificates representing
such Additional Shares and pay cash to the holder in an amount equal to the
excess (if any) of the Additional Share Buy-In Price over the product of (A)
such number of shares of Common Stock, times (B) the closing sale price of the
Common Stock on the Deadline Date. 

 

5.                                       TRANSFER RESTRICTIONS; TRANSFER AGENT INSTRUCTIONS.

 

(a)           Transfer Restrictions.  The legend set forth in Section 2(g) shall be
removed and the Company shall issue a certificate without such legend or any
other legend to the holder of the applicable Securities upon which it is
stamped, if (i) such Securities are registered for resale under the 1933 Act,
(ii) in connection with a sale, assignment or other transfer, such holder
provides the Company with an opinion of counsel, in a form reasonably
acceptable to the Company, to the effect that such sale, assignment or transfer
of such Securities may be made without registration under the applicable requirements
of the 1933 Act, or (iii) such holder provides the Company with reasonable
assurance that such Securities can be sold, assigned or transferred pursuant to
Rule 144.  The Company shall cause
General Counsel (as defined below) to issue the legal opinion included in the
Irrevocable Transfer Agent Instructions to the Company’s transfer agent on the
Effective Date.  Following the Effective
Date or at such earlier time as a legend is no longer required for certain
Securities, the Company will no later than three Business Days following the
delivery by a Buyer to the Company or the Company’s transfer agent of a
legended certificate representing such Securities, deliver or cause to be
delivered to such Buyer a certificate representing such Securities that is free
from all restrictive and other legends. 
Following the Effective Date and upon the delivery to any Buyer of any
certificate representing Securities that is free from all restrictive and other
legends, such Buyer agrees that any sale of such Securities shall be made
pursuant to the Registration Statement and in accordance with the plan of
distribution described therein or pursuant to an available exemption from the
registration requirements of the 1933 Act. 
The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in Section 2(g). 
The Company will not effect or publicly announce its intention to effect
any exchange, recapitalization or other transaction that effectively requires
or rewards physical delivery of certificates evidencing the Common Stock.

 

(b)           The Company shall issue irrevocable instructions to
its transfer agent, and any subsequent transfer agent, to issue certificates or
credit shares to the applicable balance accounts at The Depository Trust
Company (“DTC”), registered in the name of each
Buyer or its respective nominee(s), for the Common Shares, and the Additional
Shares in such amounts as specified from time to time by each Buyer to the
Company in the form of Exhibit D attached hereto (the “Irrevocable Transfer
Agent Instructions”).  The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(g) hereof, will be given by the Company to its
transfer agent in connection with this Agreement, and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the other Transaction
Documents.  If a Buyer effects a sale,
assignment or transfer of the Securities in accordance with Section 2(g), the
Company shall permit the transfer

 

23

 

and shall promptly instruct its
transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or assignment.  In the event that such sale, assignment or
transfer involves Common Shares or Additional Shares sold, assigned or
transferred pursuant to an effective registration statement or pursuant to Rule
144, the transfer agent shall issue such Securities to the Buyer, assignee or
transferee, as the case may be, without any restrictive legend.  The Company acknowledges that a breach by it
of its obligations under this Section 5 will cause irreparable harm to a Buyer.  Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that a Buyer shall be entitled, in
addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required. 

 

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

 

The obligation
of the Company hereunder to issue and sell the Common Shares to each Buyer at
the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:

 

(i)          Such Buyer shall have executed each of
the Transaction Documents to which it is a party and delivered the same to the
Company.

 

(ii)         Such Buyer shall have delivered to the
Company the Purchase Price (less, in the case of Kamunting Street Master Fund, Ltd. the
amounts withheld pursuant to Section 4(g)) for the Common Shares being
purchased by such Buyer and each other Buyer at the Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided by the
Company.

 

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

 

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

 

The obligation
of each Buyer hereunder to purchase the Common Shares and at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer’s sole
benefit and may be waived by such Buyer at any time in its sole discretion by
providing the Company with prior written notice thereof:

 

24

 

(i)          The Company shall have executed and
delivered to such Buyer (i) each of the Transaction Documents and (ii) the
Common Shares being purchased by such Buyer at the Closing pursuant to this
Agreement.

 

(ii)         The Company shall have delivered to
such Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form
of Exhibit C attached hereto, which instructions shall have been delivered
to and acknowledged in writing by the Company’s transfer agent.

 

(iii)        The Company shall have delivered to such
Buyer a certificate evidencing the incorporation and good standing of the
Company and each of its operating Subsidiaries in such corporation’s state of
incorporation issued by the Secretary of State of such state of incorporation
as of a date within 10 days of the Closing Date.

 

(iv)        The Common Stock (A) shall be listed on
the Principal Market and (B) shall not have been suspended, as of the Closing
Date, by the SEC or the Principal Market from trading on the Principal Market
nor shall suspension by the SEC or the Principal Market have been threatened,
as of the Closing Date, either (x) in writing by the SEC or the Principal
Market or (y) by falling below the minimum listing maintenance requirements of
the Principal Market.

 

(v)          
[intentionally left blank]

 

(vi)        The Company shall have delivered to such
Buyer a certificate, executed by the Secretary of the Company and dated as of
the Closing Date, as to (i) the resolutions consistent with Section 3(b) as
adopted by the Company’s Board of Directors in a form reasonably acceptable to
such Buyer, (ii) the Certificate of Incorporation and (iii) the Bylaws, each as
in effect at the Closing, in the form attached hereto as Exhibit E. 

 

(vii)       The representations and warranties of the
Company shall be true and correct as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all respects with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date.  Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as
of the Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by such Buyer in the form attached hereto as Exhibit
F. 

 

(viii)      The Company shall have delivered to such
Buyer a letter from the Company’s transfer agent certifying the number of
shares of Common Stock outstanding as of a date within five days of the Closing
Date.

 

(ix)         The Company shall have obtained all
governmental, regulatory or third party consents and approvals, if any,
necessary for the sale of the Common Shares.

 

25

 

(x)          The Company shall have delivered to
such Buyer such other documents relating to the transactions contemplated by
this Agreement as such Buyer or its counsel may reasonably request.

 

8.             TERMINATION.  In the event that the Closing shall not have
occurred with respect to a Buyer on or before five (5) days from the date
hereof due to the Company’s or such Buyer’s failure to satisfy the conditions
set forth in Sections 6 and 7 above (and the nonbreaching party’s failure to
waive such unsatisfied condition(s)), the nonbreaching party shall have the
option to terminate this Agreement with respect to such breaching party at the
close of business on such date without liability of any party to any other
party.

 

9.             MISCELLANEOUS.

 

(a)           Governing Law; Jurisdiction; Jury
Trial.  All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of
the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New
York.  Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting
in The City of New York, Borough of Manhattan for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address for
such notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by
law.  EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.

 

(b)           Counterparts.  This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original,
not a facsimile signature.

 

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

 

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

 

26

 

or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.

 

(e)           Entire Agreement; Amendments.  This Agreement supersedes all other prior
oral or written agreements between the Buyers, the Company, their affiliates
and Persons acting on their behalf with respect to the matters discussed
herein, and this Agreement and the instruments referenced herein contain the
entire understanding of the parties with respect to the matters covered herein
and therein and, except as specifically set forth herein or therein, neither
the Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. 
No provision of this Agreement may be amended other than by an
instrument in writing signed by the Company and the holders of Common Shares
representing at least a majority of the amount of the Common Shares, or, if
prior to the Closing Date, the Buyers listed on the Schedule of Buyers as being
obligated to purchase at least a majority of the amount of the Common
Shares.  No provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought.  No such amendment
shall be effective to the extent that it applies to less than all of the
holders of the Common Shares then outstanding. 
No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration also is offered to all of the parties
to the Transaction Documents, holders of Common Shares.  The Company has not, directly or indirectly,
made any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents.

 

(f)            Notices.  Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the
same.  The addresses and facsimile
numbers for such communications shall be:

 

	
  If to the Company:

  
	
   

  	
   

  	
   

  
	
   

  	
  Earth Biofuels, Inc.

  
	
   

  	
  3001 Knox
  Street, Suite 403,

  
	
   

  	
  Dallas,
  Texas 75205

  
	
   

  	
  Telephone:

  	
  214.389.9800

  
	
   

  	
  Facsimile:

  	
  214.389.9806

  
	
   

  	
  Attention:

  	
  Dennis McLaughlin

  
	
   

  	
   

  	
   

  
	
  with a copy (for informational purposes only) to:

  
	
   

  	
   

  	
   

  
	
   

  	
  Scheef & Stone, LLP

  
	
   

  	
  Telephone:

  	
  214.706.4200

  
	
   

  	
  Facsimile:

  	
  214.706.4242

  
	
   

  	
  Attention:

  	
  Roger A. Crabb, Esq.

  

 

27

 

If to a Buyer,
to its address and facsimile number set forth on the Schedule of Buyers, with
copies to such Buyer’s representatives as set forth on the Schedule of Buyers,

 

	
  with a copy (for informational purposes only) to:

  
	
   

  	
   

  	
   

  
	
   

  	
  Schulte Roth & Zabel LLP

  
	
   

  	
  919 Third Avenue

  
	
   

  	
  New York, New York 10022

  
	
   

  	
  Telephone:

  	
  (212) 756-2000

  
	
   

  	
  Facsimile:

  	
  (212) 593-5955

  
	
   

  	
  Attention:

  	
  Eleazer N. Klein, Esq.

  

 

or to such
other address and/or facsimile number and/or to the attention of such other
Person as the recipient party has specified by written notice given to each
other party five (5) days prior to the effectiveness of such change.  Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by an overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt
from an overnight courier service in accordance with clause (i), (ii) or (iii)
above, respectively.

 

(g)           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Common Shares.  The Company shall not assign this Agreement
or any rights or obligations hereunder without the prior written consent of the
holders of Common Shares representing at least a majority of the number of the
Common Shares, including by merger or consolidation.  A Buyer may assign some or all of its rights
hereunder without the consent of the Company, in which event such assignee
shall be deemed to be a Buyer hereunder in respect of such assigned rights.

 

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

 

(i)            Survival.  Unless this Agreement is terminated under
Section 8, the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9 shall survive the Closing and the delivery and exercise of
Securities, as applicable.  Each Buyer
shall be responsible only for its own representations, warranties, agreements and
covenants hereunder.

 

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

 

28

 

(k)           Indemnification.

 

(i)            In consideration of each Buyer’s
execution and delivery of the Transaction Documents and acquiring the
Securities thereunder and in addition to all of the Company’s other obligations
under the Transaction Documents, and except in each case as provided for in
Section 4(p) hereof, the Company shall defend, protect, indemnify and hold
harmless each Buyer and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons’ agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Buyer  Indemnitees”) from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys’ fees and disbursements
(the “Indemnified Liabilities”),
incurred by any Buyer Indemnitee as a result of, or arising out of, or relating
to (a) any misrepresentation or breach of any representation or warranty made
by the Company in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby or (c) any cause of action, suit or claim brought or made against
such Buyer Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company) and arising out of or
resulting from (i) the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Securities, or (iii) the status of such Buyer or holder of the
Securities as an investor in the Company.

 

(ii)           If the indemnification provided for in
Sections 9(k)(i) is judicially determined to be unavailable to a Buyer
Indemnitee in respect of any Indemnified
Liabilities incurred by them,
then, in lieu of indemnifying such Buyer Indemnitee hereunder, the Person from
whom indemnification is sought hereunder shall contribute to the amount paid or
payable by such Buyer Indemnitee as a result of such Indemnified Liabilities (and expense relating thereto): (A) in such
proportion as is appropriate to reflect the relative benefits to the applicable
Buyer Indemnitee, on the one hand, and the Person providing indemnification
hereunder, on the other hand, of transactions contemplated by this Agreement or
(B) if the allocation provided by clause (A) above is not available, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in such clause (A) but also the relative fault of each of the applicable
Persons, as well as any other relevant equitable considerations.

 

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

 

(m)          Remedies.  The Company and each Buyer and its permitted
successors and assigns shall have all rights and remedies set forth in this
Agreement and the Transaction Documents and all rights and remedies which they
may have under any law or in equity.  The
Company and each Buyer and its permitted successors and assigns shall be
entitled to enforce

 

29

 

such rights specifically, to
recover damages by reason of any breach of any provision of this Agreement or
the Transaction Documents and to exercise all other rights granted by law or in
equity, if available.  Furthermore, the
Company recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the Buyers.  The Company therefore agrees that the Buyers
shall be entitled to seek temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages and without posting a bond
or other security.

 

(n)           Rescission and Withdrawal Right.  Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Buyer exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its
related obligations within the periods therein provided, then such Buyer may
rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights

 

(o)           Payment Set Aside.  To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to any of the other
Transaction Documents or the Buyers enforce or exercise their rights hereunder
or thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a
trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

 

(p)           Independent Nature of Buyers’
Obligations and Rights.  The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be
responsible in any way for the performance of the obligations of any other
Buyer under any Transaction Document. 
Nothing contained herein or in any other Transaction Document, and no
action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents and the Company
acknowledges that the Buyers are not acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents.  Each Buyer confirms that it
has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors.  Each Buyer shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights
arising out of this Agreement or out of any other Transaction Documents, and it
shall not be necessary for any other Buyer to be joined as an additional party
in any proceeding for such purpose.

 

[Signature Page Follows]

 

30

 

IN WITNESS WHEREOF,
each Buyer and the Company have caused its respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.

 

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
  EARTH BIOFUELS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

 

[Signature Page to Securities Purchase
Agreement]

 

 

IN
WITNESS WHEREOF, each Buyer and the Company have
caused their respective signature page to this Securities Purchase Agreement to
be duly executed as of the date first written above.

 

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  KAMUNTING STREET MASTER

  FUND, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:  Christopher Falsetta

  
	
   

  	
   

  	
  Title:  Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  K STREET EMERALD FUND, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:  Christopher Falsetta

  
	
   

  	
   

  	
  Title:  Director

  

 

[Signature Page to Securities Purchase
Agreement]

 

 

SCHEDULE OF BUYERS

 

	
  (1)

  	
   

  	
  (2)

  	
   

  	
  (3)

  	
   

  	
  (4)

  	
   

  	
  (5)

  	
   

  	
  (6)

  	
   

  
	
  Buyer

  	
   

  	
  Address and Facsimile

  Number

  	
   

  	
  Number of

  Common

  Shares

  	
   

  	
  Maximum

  Number of

  Additional

  Shares

  	
   

  	
  Purchase Price

  	
   

  	
  Legal Representative’s

  Address and Facsimile Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kamunting
  Street

  Master Fund, Ltd.

  	
   

  	
  140
  East 45th Street

  15th Floor

  New York, NY 10017

  Attention:  Christopher Falsetta

  

  Fax: (212) 490-4360

  	
   

  	
  6,000,000

  	
   

  	
  6,000,000

  	
   

  	
  $

  	
  0.50

  	
   

  	
  Schulte Roth & Zabel LLP

  919 Third Avenue

  New York, New York 10022

  Attention: Eleazer Klein, Esq.

  Facsimile: (212) 593-5955

  Telephone: (212) 756-2376

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  K Street Emerald

  Fund, LLC

  	
   

  	
  c/o
  Kamunting Street Master Fund, Ltd.

  140 East 45th Street

  15th Floor

  New York, NY 10017

  Attention:  Christopher Falsetta

  

  Fax: (212) 490-4360

  	
   

  	
  400,000

  	
   

  	
  400,000

  	
   

  	
  $

  	
  0.50

  	
   

  	
  Schulte Roth & Zabel LLP 919 Third Avenue New York, New York
  10022 Attention: Eleazer Klein, Esq. Facsimile: (212) 593-5955 Telephone:
  (212) 756-2376

  	
   

  

 

 

EXHIBITS

 

	
  Exhibit A

  	
   

  	
  Form of Registration Rights Agreement

  
	
  Exhibit B

  	
   

  	
  Letter of Intent in Respect of Acquisition

  
	
  Exhibit C

  	
   

  	
  Form of Company Counsel Opinion

  
	
  Exhibit D

  	
   

  	
  Form of Irrevocable Transfer Agent Instructions

  
	
  Exhibit E

  	
   

  	
  Form of Secretary’s Certificate

  
	
  Exhibit F

  	
   

  	
  Form of Officer’s Certificate

  

 

 

SCHEDULES

 

Schedule 3(a) - List of Subsidiaries

Schedule 3(k) - SEC Documents; Financial Statements

Schedule 3(l) - Absence of Certain Changes

Schedule 3(r) - Equity Capitalization

Schedule 3(s) - Indebtedness and Other Contracts

Schedule 3(t) - Absence of Litigation

Schedule 3(w) - Title

 

 

Schedule 3(a)

Earth Biofuels Operating, Inc., a Mississippi corporation

Durant Biofuels, LLC, an Oklahoma limited liability company

The Wing Sail Company dba Distribution Drive, a Texas corporation

Earth Biofuels Technology Company, LLC, a Texas limited liability
company

 

Schedule 3(k)

None.

 

Schedule 3(l)

 

Since December 31, 2005, the Company has

(iii) had capital expenditures, individually or in the aggregate, in
excess of $100,000.

Durant Biofuels, LLC expended: $243,449.24 for the building;
$240,003.50 for land; and

$4,567,547.27 (half of which through a stock issuance) for equipment.
Approximately

$275,000.00 was expended to acquire land adjacent to the property.

 

Schedule 3(r)

	
  Authorized:

  	
   

  	
  250,000,000

  
	
  Issued:

  	
   

  	
  194,609,739 (as of April 28, 2006)

  

Shares reserved for issuance pursuant to the Company’s employee
incentive plan and other options and warrants

outstanding:         Peter
Bell 3,000,000 shares

Shares reserved for issuance pursuant to securities exercisable or
exchangeable for, or convertible into, shares of common stock:

Mark Weill, Tom Gross, Joshua Cohen: for an aggregate of 2,000,000
shares.

 

Shares not fully paid for and nonassessable:
none

 

(i) shares of the Company’s capital stock are subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or
permitted by the Company: none

 

(iii) outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing
Indebtedness of the Company or any of its Subsidiaries or by which the Company
or any of its Subsidiaries is or may become bound:

Marc Weill, January 25, 2006 Confidential Term Sheet for Convertible
Promissory Note

Tom Gross, January 25, 2006 Confidential Term Sheet for Convertible
Promissory Note

Marc Weill, March 29, 2006 Confidential Term Sheet for Convertible
Promissory Note

Joshua Cohen, March 29, 2006 Confidential Term Sheet for Convertible
Promissory Note

Tom Gross, March 29, 2006 Confidential Term Sheet for Convertible
Promissory Note

 

 

(v) agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act:

Marc Weill, January 25, 2006 Confidential Term Sheet for Convertible
Promissory Note

Tom Gross, January 25, 2006 Confidential Term Sheet for Convertible
Promissory Note

Marc Weill, March 29, 2006 Confidential Term Sheet for Convertible
Promissory Note

Joshua Cohen, March 29, 2006 Confidential Term Sheet for Convertible
Promissory Note

Tom Gross, March 29, 2006 Confidential Term Sheet for Convertible
Promissory Note

 

(vii) securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities

Marc Weill, January 25, 2006 Confidential Term Sheet for Convertible
Promissory Note

Tom Gross, January 25, 2006 Confidential Term Sheet for Convertible
Promissory Note

Marc Weill, March 29, 2006 Confidential Term Sheet for Convertible
Promissory Note

Joshua Cohen, March 29, 2006 Confidential Term Sheet for Convertible
Promissory Note

Tom Gross, March 29, 2006 Confidential Term Sheet for Convertible
Promissory Note

 

Common Stock owned beneficially or of record held by each director and
executive officer:

 

	
  Title of Class

  	
   

  	
  Name and Title

  	
   

  	
  Number of Shares (1)

  	
   

  
	
  Common
  Stock

  	
   

  	
  Dennis
  McLaughlin, CEO and Chairman

  	
   

  	
  2,389,927

  	
   

  
	
  Common
  Stock

  	
   

  	
  Darren
  Miles, CFO

  	
   

  	
  0

  	
   

  
	
  Common
  Stock

  	
   

  	
  Kit
  Chambers, Corporate Secretary

  	
   

  	
  0

  	
   

  
	
  Common
  Stock

  	
   

  	
  Tommy
  Johnson, Director

  	
   

  	
  1,507,659

  	
   

  
	
  Common
  Stock

  	
   

  	
  Bruce
  Blackwell, Director

  	
   

  	
  1,500,000

  	
   

  
	
  Common
  Stock

  	
   

  	
  William
  O. Luckett, Jr., Director

  	
   

  	
  1,500,989

  	
   

  
	
  Common
  Stock

  	
   

  	
  Morgan
  Freeman, Director

  	
   

  	
  3,000,000

  	
   

  
	
  Common
  Stock

  	
   

  	
  Willie
  Nelson, Director

  	
   

  	
  6,000,000

  	
   

  

 

Schedule 3(s)

 

Company and its subsidiaries

(i) has outstanding Indebtedness

 

	
  Southern Bio Fuels (biodiesel refinery)

  	
   

  	
  $

  	
  1,100,053.93

  	
   

  
	
  Bruce
  Blackwell

  	
   

  	
  $

  	
  142,000.00

  	
   

  
	
  Peter Bell

  	
   

  	
  $

  	
  96,033.24

  	
   

  
	
  Miguel
  Dabdoub

  	
   

  	
  $

  	
  170,000.00

  	
   

  
	
  HPS
  Development, LLC

  	
   

  	
  $

  	
  4,000,000.00

  	
   

  
	
  Apollo
  Resources International, Inc.

  	
   

  	
  $

  	
  1,251,160.14

  	
   

  
	
  Marc Weill

  	
   

  	
  $

  	
  350,000.00

  	
   

  
	
  Tom Gross

  	
   

  	
  $

  	
  600,000.00

  	
   

  
	
  Joshua Cohen

  	
   

  	
  $

  	
  50,000.00

  	
   

  

 

Schedule 3(t)

None.

 

 

Schedule 3(w)

Lien on property in Grenada, MS in favor of BancorpSouth, to secure
indebtedness of Bruce Blackwell in the amount of $750,000.

 

Schedule 3(aa)

Extensions were filed for Earth Biofuels, Inc. and its subsidiaries, as
follows:

 

	
  Entity

  	
   

  	
  Type

  	
   

  	
  Description

  
	
  Durant
  Biofuels, LLC

  	
   

  	
  OK
  514

  	
   

  	
  Oklahoma
  Partnership Income Tax Return

  
	
  Earth
  Biofuels Operating, Inc.

  	
   

  	
  NM
  CIT-1

  	
   

  	
  NM
  Corporate Income and Franchise Tax Return

  
	
  Earth
  Biofuels, Inc.

  	
   

  	
  DE
  AFTR

  	
   

  	
  DE
  Annual Franchise Tax Return

  
	
  Earth
  Biofuels, Inc. & Subsidiaries

  	
   

  	
  MS83-105

  	
   

  	
  MS
  Corporate Income Tax Return

  
	
  Earth
  Biofuels, Inc. & Subsidiaries

  	
   

  	
  1120C

  	
   

  	
  US
  Corporation Income Tax Return

  
	
  Earth
  Biofuels, Inc. & Subsidiaries

  	
   

  	
  1120ES-1

  	
   

  	
  Corporation
  Quarterly Estimated Tax

  
	
  Earth
  Biofuels Operating, Inc.

  	
   

  	
  MS83-300
  ES1

  	
   

  	
  MS
  Corporate Income Tax Estimate 1st Payment

  
	
  Earth
  Biofuels Operating, Inc.

  	
   

  	
  MS83-300
  ES2

  	
   

  	
  MS
  Corporate Income Tax Estimate 2nd Payment

  
	
  Earth
  Biofuels, Inc. & Subsidiaries

  	
   

  	
  1120Es-2

  	
   

  	
  Corporation
  Quarterly Estimated Tax

  
	
  Earth
  Biofuels Operating, Inc.

  	
   

  	
  MS83-300
  ES3

  	
   

  	
  MS
  Corporate Income Tax Estimate 3rd Payment

  
	
  Earth
  Biofuels, Inc. & Subsidiaries

  	
   

  	
  1120Es-3

  	
   

  	
  Corporation
  Quarterly Estimated Tax

  
	
  Earth
  Biofuels, Inc. & Subsidiaries

  	
   

  	
  1120ES-4

  	
   

  	
  Corporation
  Quarterly Estimated Tax

  
	
  Earth
  Biofuels Operating, Inc.

  	
   

  	
  MS83-300
  ES4

  	
   

  	
  MS
  Corporate Income Tax Estimate 4th Payment

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00103-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00103-of-00352.parquet"}]]